Deliver to our beneficiaries

 

The nature of the shareholders of the group is important in a highly visible and regulated industry such as gaming. Popular misconceptions about the industry make it a target for attacks through excessive taxation and regulation. While the group spends significant money and time on engaging with stakeholders to ensure that the true facts around issues such as problem gaming are presented, the strongest protection for the business is to ensure that a significant portion of the economic benefits of ownership flow to community, charitable or socially beneficial organisations. This is achieved through meaningful Citizenship programmes and also through direct and indirect equity ownership and employment.

Key performance indicators

  2016   2015
Black ownership 62%   79%  
Value added contribution to black economic empowered
businesses, PDIs and government
R8.9 billion   R8.1 billion  
BBBEE level Level 2   Level 2  
CSI outcomes Tsogo Sun Sports, Arts and Learning Academies support 43 945 learners   Tsogo Sun Sports, Arts and Learning Academies support 39 751 learners  
ESD outcomes Tsogo Sun Entrepreneurs programme supports 180 beneficiaries   Tsogo Sun Entrepreneurs programme supports 133 beneficiaries  

2016 performance

Shareholders
As mentioned in the group overview on page 3 the nature of the HCI shareholding is of particular importance as it provides the bulk of the 62% broad-based empowered ownership at group level. HCI has provided a stable shareholder base for a number of years that has allowed the group to grow and take advantage of opportunities. The reduction in measured black ownership is as a result of the measurement against the DTI's Revised Codes of Good Practice tourism sector scorecard.

The sale by SABMiller of its shares during the prior year has allowed for a more diverse shareholder base and has significantly increased the shares liquidity.

Community
Tsogo Sun is committed to the upliftment and development of local communities. We are further committed to leveraging our resources, experience and geographic spread within the hospitality and entertainment industry to provide the foundation for initiatives that achieve lasting results in the communities where we are present. A portion of our profits is spent annually on social investment and, through our Tsogo Sun Citizenship programme, we are able to deliver effective social initiatives that seek to create shared value with the broader society. Tsogo Sun Citizenship comprises three areas, being community development, entrepreneurial development and the natural environment.

Community development
During the year, the group's combined social investment in community development amounted to R52 million. Of this, verified spend on BBBEE socio-economic development amounted to R48 million which is the equivalent of 2.7% of net profit after tax and represents 1.7pp more than the tourism sector code target.

While our casinos and hotels provide substantial support towards a wide range of projects and initiatives designed to uplift people in their local communities, Tsogo Sun's national community development takes place through the Tsogo Sun Sports, Arts and Learning Academies, which collectively reach 43 945 learners who participate in our full-year programmes.

  Academy Schools   Teachers   Learners   Adults  
  Tsogo Sun Sports Academy 157   1 209   28 606   373  
  – Rugby 30   460   2 064   229  
  – Soccer 44   112   1 276   57  
  – Athletics 11   12   1 076   13  
  – Chess 57   569   23 766   22  
  – Other sports 15   56   424   52  
  Tsogo Sun Arts Academy 16   24   540   9  
  Tsogo Sun Learning Academy 228   286   14 799   980  
  Total 401   1 519   43 945   1 362  

Tsogo Sun Sports Academy
The Tsogo Sun Sports Academy uses sport as a medium to deliver life skills, leadership and healthcare training, as well as to reinforce the importance of education to young learners, with the ultimate goal of nurturing children's wellbeing. To achieve this, Tsogo Sun partners with relevant local government departments, sporting industry bodies, associated school sports bodies, service providers and schools in local communities.

During the year, the Tsogo Sun Sports Academy continued to deliver on projects including soccer, rugby, athletics, softball, netball, golf and cricket through the support of 4 840 South African children and youths between the ages of 7 and 17. In addition, training and accreditation was provided to the coaches, trainers, mentors and referees in these programmes.

The Tsogo Sun Moves For Life national chess programme has continued to successfully expand within the foundation phase at schools across South Africa. The programme reaches 23 766 learners and 569 educators across 57 schools, with the objective of improving maths, science and literacy skills through the medium of chess. A three-year research study continues with the University of Johannesburg to document the impact of chess in maths education.

Tsogo Sun Arts Academy
Our Arts Academy develops the artistic talent of learners from underprivileged backgrounds to provide them with essential life skills. The programme enables learners to participate in a curriculum that uses the arts as a catalyst to give young people a chance to bring about change in their lives. The programmes vary in their offerings across disciplines within the arts, including theatre, drama, singing, poetry, creative arts and literature and make use of the Teatro at Montecasino, the Gold Reef City Lyric Theatre and arts studio at Hemingways Casino to support 540 learners from 16 schools in Diepsloot, Mayfair and East London.

Tsogo Sun Learning Academy
The Tsogo Sun Learning Academy provides peer-driven leadership programmes, early childhood educator support, school visits to the Apartheid Museum and the Olwazini Discovery Science Centre, various types of bursaries and learnerships and venues at our properties for events hosted by schools. During the year, Tsogo Sun contributed to more than 228 schools across the country, through fundraising assistance and via the group's community academies.

Caring across communities
In addition to Tsogo Sun's national programmes, our casinos and hotels are involved in a wide range of caring initiatives and they provide substantial support towards various projects designed to uplift people in their local communities. Our hotels contribute furniture and equipment to non-profit organisations such as the community chest, local rotary clubs, shelters and children's homes. Our casinos contribute financially to numerous welfare organisations in support of children, the elderly and animals, and the Gold Reef City Theme Park and the Montecasino Bird Gardens provide free entrance to children from orphanages, shelters and primary school learners who otherwise would not have the opportunity to experience these parks.

The group's Tsogo Sun Volunteers programme was successfully introduced during the year, with a focus on active citizenship and significant participation in supporting charitable initiatives by employees.

Enterprise and supplier development
Tsogo Sun is committed to the development of small, medium and micro-enterprises ('SMMEs') as a solution to creating employment and as a contributor towards the growth of the South African economy. We deliver enterprise and supplier development through our national programme, 'Tsogo Sun Entrepreneurs', which comprehensively supports emerging businesses in the tourism sector and other industries throughout the country.

The group's combined spend on enterprise and supplier development for the year is R84 million, R14 million of which was spent on enterprise development beneficiaries and R70 million of which was spent on supplier development beneficiaries, representing a total of 4.7% of net profit after tax, which is 1.5pp above the tourism sector code target.

Tsogo Sun Entrepreneurs provides a practical range of offerings that have proven to contribute to the growth and success of emerging businesses, placing emphasis on skills development and the provision of preferential procurement opportunities to qualifying small enterprises and emerging micro-enterprises that are predominantly black-owned. Applications to participate in the programme are open to all South African businesses with an annual turnover of less than R50 million.

The benefits provided to all beneficiaries of the programme include:

  • value-added benefits (endorsement, memberships, marketing, advertising and publicity);
  • shared services (extranet, call centre, preferential discounts and business support);
  • business tools (risk assessment and recommendations, software systems and equipment);
  • an integrated supply chain (supplier showcase exhibitions, market access and networking opportunities); and
  • recognition (entrepreneur rewards delivered through the HCI Supplier Club, certification and awards).

Of the 180 beneficiaries supported nationally by the programme, 152 are enrolled in development, which delivers business foundation skills, coaching and mentorship to the business owners and key members of their management teams.

Tsogo Sun Entrepreneurs is endorsed by government and regional tourism agencies, with its key objectives being to support entrepreneurs to develop professionally operated, compliant, sustainable businesses and to facilitate job creation (direct and indirect) by ensuring that small businesses thrive. The development portion of the programme harnesses decades of the group's experience and expertise in the hospitality industry and delivers this to small business owners through the support of our management and employees in the provinces. As the only programme of its kind in South Africa, 82% of the entrepreneurs developed by Tsogo Sun Entrepreneurs are black South African women.

Seventy four percent of the entrepreneurs have graduated to the Alumni phase and have undergone training to become mentors to the new entrepreneurs that enter the programme and 39 were inducted into the programme during the year. A total of 47 businesses in the Alumni phase have expanded their operations as a result of the programme, and each employs between one and 50 staff and reaches up to 30 people in the value chain. A total of 126 entrepreneurs have successfully completed the UCT Business Management Course funded by the programme, with 39 having done so during the year under review.

The impact on the beneficiaries is being monitored and evaluated, and adjustments will be made to the model where necessary. Presently in phase one of a five-year implementation, the plan is designed to connect to Tsogo Sun's supply chain, creating a pipeline of promising suppliers and enable the group's hotels and casinos to support their local entrepreneurs, in order to address the need for wealth creation and employment in South Africa.

Transformation
Tsogo Sun is a pioneer in transformation and a leader in the empowerment of previously disadvantaged people, businesses and communities in South Africa. The group currently holds a level 2 BBBEE contributor status, measured against the DTI's Revised Codes of Good Practice – tourism sector scorecard, and complies with the related guidelines. The group's casinos and hotels are in addition individually measured against the same scorecard. The formal verification audits are performed annually by Empowerdex (an accredited economic empowerment rating agency), with the results for the year ended 31 March being as follows:

Target score
on Revised Codes - tourism
  2016   Previous target score on 2007 codes generic   2015  
Ownership 27   27.0   23   23.0  
Management and control 19   10.0   10   7.3  
Employment equity n/a   n/a   15   11.0  
Skills development 20   16.0   15   12.8  
Preferential procurement n/a   n/a   20   18.9  
Enterprise development n/a   n/a   15   15.0  
Enterprise and supplier development 40   35.3   n/a   n/a  
Socio-economic development 5   8.0   5   5.0  
Overall 111   96.3   103   93.0  
Rating level   2   2  

The group's 2016 rating is the first undertaken against the Revised Codes of Good Practice tourism sector scorecard and we have responded well to the changes presented by the new framework, receiving level 2 contributor status with a 125% procurement recognition level. The group received 96.3 out of a total available points of 111 and has empowering supplier status. Tsogo Sun's black ownership is verified at 61.8% and black women ownership is 33.4%. Aligning with the Revised Codes of Good Practice saw the group expand existing empowerment programmes and develop new ones and improve systems and processes in response to the code changes in areas such as enterprise and supplier development, preferential procurement and skills development.

Tsogo Sun operates a BBBEE council as one of the group's governance structures whose purpose is to ensure that the priority of empowerment is consistently managed and monitored. The BBBEE council sets BBBEE strategy and direction for the group. It ensures that the group is compliant with legislation and it monitors group-wide performance measured against the scorecard. It sets internal targets and oversees the annual ratings process for the group. The bi-annual BBBEE council meetings are chaired by the group Human Resources Director and are attended by the group's senior leadership, including the Chief Executive Officer and Chief Financial Officer.

Responsible gambling
Tsogo Sun acknowledges that gambling can be an issue of concern for some people with a predisposition to addictive behaviour in communities where we operate. We engage these concerns by educating our employees and customers about responsible gaming and seek to avoid the misuse of gambling. Tsogo Sun contributes to, and actively promotes, the National Responsible Gambling Programme.

To ensure an environment of responsible gambling, close attention is paid to the exclusion of:
  • underaged persons from gambling areas in accordance with legislation;
  • visibly intoxicated people from gambling according to legislation;
  • problem gamblers from gambling areas – by executing Tsogo Sun's self-exclusion policies;
  • money lenders from gambling areas; and
  • criminal elements and persons prone to bad behaviour.

The group monitors and manages the number of complaints and code violations.

Industry bodies
Tsogo Sun participates actively in industry bodies such as the TBCSA, the SATB, Fedhasa and CASA through the provision of time, effort and intellectual contributions from management. It also forms close relationships with national and regional gaming and tourism associations.

Tenants
The delivery of quality hospitality, gaming, dining and entertainment experiences is important to retaining footfall at our properties and satisfying our customers' diverse requirements. The delivery of these experiences is through a combination of owned and outsourced businesses to provide our customers with a range of differentiated products and services.

With a total of 334 tenants across Tsogo Sun's various properties, tenanting is one of the group's core focus areas to ensure that our consumers have access to the best restaurant and entertainment-related outlets. In addition to the retail tenanting, the group also owns 32 000 m2 of office space, which it partially self-occupies and rents the balance to third parties.

Our group's real estate department manages this important element of our business, as well as ensuring that our buildings are appropriately tenanted, maintained, refurbished, upgraded and renovated on an ongoing basis to ensure that our offerings remain fresh and current. Our philosophy with regard to selecting tenanting partners is centred on owner-run outlets that will deliver the required experiences at appropriate prices.

Suppliers
The group has developed long-term, mutually beneficial relationships with our suppliers of goods and services. Through these supplier relationships many more indirect jobs are created and wealth is generated in the economy. A growing portion of our procurement is centrally managed which allows for enhanced consistency in standards and pricing and closer relationships with our suppliers. We ensure that, as far as is practically and commercially possible, our hotels and casinos procure products from vendors who are located in the areas where they are situated.

Tsogo Sun encourages diversity within its commercial associations, particularly through the involvement of previously disadvantaged persons and local businesses where it operates. The group supports black businesses in South Africa through a focused procurement strategy. Veri?ed total procurement spend on black economically empowered businesses amounted to R4.1 billion during the year. The group's BBBEE score for preferential procurement, which is measured within the Enterprise and Supplier Development element is 18.3 out of 25. Procurement from black women-owned businesses and further opportunities to establish and support enterprise and supplier development initiatives through procurement are focus areas of the group.

An additional procurement consideration is the environmental performance of our suppliers, which is taken into account as part of our procurement criteria during the supplier selection process.

Third-party owners
The group leases hotel properties and manages hotel businesses on behalf of third-party owners where it is not possible to own the property or the business. The most signifcant relationship is with Liberty for whom Tsogo Sun manages five hotel properties and with whom Tsogo Sun jointly owns an additional eight hotel properties and from whom the group leases the Sandton Convention Centre. The relationships are mutually beneficial with ?nancial returns and access to additional properties for Tsogo Sun and enhanced returns to the owners through our skills and distribution.

The acquisition of a controlling stake in HPF during the next financial year will significantly increase the importance of this group of stakeholders due to the minority interests in that business.

Environment
While our main business activities pose limited risk to the environment due to the service nature of the industry, environmental management practices have been integrated as part of our operations. Tsogo Sun has made the commitment to reduce the impact that the business has on the environment and to encourage guests to embrace greener behaviour for the wellbeing of the environment. The group reports to the Carbon Disclosure Project and Water Disclosure Project as a subsidiary of HCI.

Our efforts to manage our business sustainably serves the interests of our company and the community and in achieving this our stated policy and commitment is to:

  • ensure that at all times, we identify, evaluate and comply with local, regional or national environmental laws and regulations applicable to our operations within the areas where we conduct business;
  • continually evaluate and manage our environmental risks, targets and objectives;
  • actively seek to minimise pollution, emissions and effluents emanating from our operations;
  • work towards minimising waste by reducing, reusing and recycling programmes and adopting a 'zero waste' policy;
  • strive to reduce consumption of natural resources by the responsible use of energy, gas and water and the identification and implementation of sustainable energy solutions;
  • manage biodiversity through the protection of flora, fauna and land associated with, or impacted by, our operations;
  • communicate our policies and achievements openly and transparently to our stakeholders;
  • collaborate with our suppliers and business partners to actively reduce the environmental impact of our business activities;
  • continually improve and innovate on our environmental performance standards;
  • report annually on our environmental performance; and
  • provide support for the sustainable development of our communities.

To ensure the objectives of our environmental programme are met, a property-specific environmental management system has been developed at all of our casinos and hotels aimed specically at energy, water, waste management and responsible procurement. The system is managed holistically as part of the in-house Organisational Resilience Management Standard audit process and is verified by the German quality body, DQS-UL Group.

Scope and boundaries of emissions measurement
The scope and boundaries of measurement are consistent with the prior year. Scope 1 and scope 2 emissions are reported for all owned businesses located at properties, owned or leased by the group, in South Africa and offshore, excluding emissions relating to tenants. Tenant emissions at owned or leased properties, emissions at properties not owned but managed by the group, emissions from outside laundry services provided to the group and business travel emissions are reported in scope 3. Fugitive emissions, mainly from refrigerants, have not been measured as they are not significant and there are no other emissions that are considered material. Comparatives have been restated to ensure consistent reporting. The restatements are not significant and result mainly from a correction between energy consumed in owned businesses and energy consumed by tenants and the inclusion of LPG consumption omitted by business units in the prior year.

Emissions measurement
Total emissions (tCO2e) 2016   2015
Restated
  2015
Reported
  %
change on
2015
Restated
Scope 1 5 735   5 715   5 443  
Petrol and diesel (owned company vehicles) 572   482   476   19
Diesel consumed (owned businesses) 2 677   2 455   2 419   9
LPG and natural gas usage (owned businesses) 2 486   2 778   2 548   (10)
Scope 2 216 416   212 337   209 937   2
Energy consumed (owned businesses) 216 416   212 337   209 937   2
Scope 3 80 272   81 804   83 452   (2)
Energy consumed (tenants) 24 268   24 162   25 810   1
Energy consumed (managed properties) 25 104   25 729   25 729   (2)
Laundry services (outsourced) 28 650   29 454   29 454   (3)
Business travel 2 250   2 459   2 459   (8)
Total emissions (tCO2e) 302 623   299 856   298 832   1


Ninety seven percent of scope 1 and 2 emissions arise through the consumption of electricity and thus demand-side management of electrical consumption remains the area of focus for the group in reducing emissions. Ninety eight percent of the scope 3 emissions arising from tenants at group properties and at properties managed by the group also arise from the consumption of electricity.

Electricity
Scope 2 emissions from electricity consumption at the group's owned properties increased during the year by 2% to 216 416 tCO2e mainly due to the casino complex expansions at Gold Reef City and Silverstar and a 5% increase in hotel rooms sold offset by savings from ongoing energy-saving initiatives and, at some properties, reduced electricity consumption due to load shedding. The installation of energy-efficient equipment continues where practical, although much has been done since 2006, and the majority of the consumption reductions are as a result of consumption measurement and behavioural change initiatives at the units.

LPG and natural gas
LPG and natural gas are primarily used for cooking with limited space heating and water heating at three properties. Scope 1 emissions from the consumption of LPG and natural gas decreased by 10% to 2 486 tCO2e due mainly to owned outlets closed for refurbishment during the year.

Diesel
Diesel is utilised for back-up electrical generation. Scope 1 emissions from the consumption of diesel increased by 9% to 2 677 tCO2e due mainly to running generators to generate electricity during load shedding and supply interruptions.

Scope 3 emissions
The 1% increase in scope 3 emissions from tenants at group properties is mainly due to additional outlets at Silverstar operating for a full year. The 2% reduction in scope 3 emissions from properties managed by the group is due mainly to load shedding at Queens Casino and the closure of Sandton Sun during the year for refurbishment. The group utilises outsourced laundries at the majority of its owned and managed properties and the 3% decrease in scope 3 emissions from laundry services is due mainly to improved management of rewashes offset by increased volumes.

Water
Although supply interruptions due to poor municipal infrastructure continue to increase and medium-term water shortages are possible, the group does not have company-specific water risks. The majority of our properties are in urban areas and use potable water provided by local municipalities (90% of consumption). Two resort properties utilise surface water for irrigation, two resort properties are fully reliant on river water, one property primarily utilises ground water due to continuous supply problems from the local municipality and the Gold Reef City Theme Park utilises cleaned mine water for the water rides. Water consumption at the group's owned properties increased during the year by 3% to 2.8 million kilolitres mainly due to the casino complex expansions at Gold Reef City and Silverstar and a 5% increase in hotel rooms sold offset by ongoing conservation and reduction measures at all properties.

Waste management
Recycling initiatives are in place at many properties although the efforts differ depending on the infrastructure available to support recycling. Waste management information is being collated throughout the group and there are plans to standardise recycling systems and volume monitoring methods across our properties.

Biodiversity
The majority of our properties are in urban areas and are thus not in close proximity to sensitive environments. There are four resort properties in rural environments where management of biodiversity is more important and no new facilities were developed at these properties during the year. Where applicable, the properties have programmes in place to replace alien vegetation with indigenous plants.

Environmental education
As part of our commitment to the upliftment and development of communities through Tsogo Sun Citizenship, we strive to create awareness in local communities to encourage a responsible attitude towards the use of electricity and water and the management of waste. We also champion opportunities to educate people about reducing their impact on the environment through tree planting, food security and conserving our natural heritage. Towards this end, Tsogo Sun partners with Generation Earth and the Miss Earth SA leadership development programme, both of which instil awareness and provide education about environmental issues among young South Africans.

Through environmental education, the group plays an active role in influencing stakeholders such as communities, employees and customers to take responsibility for their impact on the environment and positively change their behaviour through campaigns such as '#WasteStopsWithMe' and by holding Citizenship seminars that address, among other topics related to the green economy, the subject of climate change.

Looking ahead

Community development
The Tsogo Sun community development programmes continue to grow both in reach, as well as in the level of development that they provide. Our intention is to create scalable and replicable models that can either be done by ourselves or in collaboration with other corporates, civil society or government.

In line with global practice, the group intends to focus more on the depth of impact that the community programmes deliver to their beneficiaries. The intention is to work with smaller numbers of beneficiaries in the flagship programmes, in order to provide stronger support with a more meaningful effect on the beneficiaries, so that they in turn can become positive influencers themselves.

Monitoring and evaluation has become increasingly important to enable us to measure our impact. An internal information system continues to comprehensively track and manage all contributions made by the group, including that of financial, in-kind and volunteering of employees.

We actively monitor the participation, attendance and involvement of learners, educators and community stakeholders. An assessment tool piloted during the year will be further developed and expanded to determine the impact on our beneficiaries and how we are positively influencing the lives of the people we support, where we need to apply more attention to achieve our intended results and how these results are addressing the needs of the communities.

We will continue to emphasise and enhance the offering of life readiness and career guidance skills and tools. Skills such as first-aid training, workshops on self-confidence and public speaking, writing skills and leadership will be added to what is already being offered, namely wellbeing, financial literacy and talent development. We will also be enhancing the offerings of the programmes to focus strongly on the provision of job readiness skills to facilitate access into the workplace for learners. We intend to explore the feasibility of creating pipelines for entry level employment within the group for the beneficiaries of our programmes who have successfully completed them.

The formalising of bursaries and community learnerships across the group will continue in the coming year.

Enterprise and supplier development
The Tsogo Sun enterprise and supplier development plan will continue into its second year of the five-year implementation. A monitoring and evaluation tool will be introduced to enable the group to accurately measure the plan's impact on the businesses supported by Tsogo Sun Entrepreneurs. A system for the selection of entrepreneurs for development will be adopted and managed centrally in order to ensure that the beneficiaries receiving development are a correct fit for the programme. Supplier showcases, which commenced in the current year, will be rolled out at Tsogo Sun properties across the country and they will serve both as mini-indabas for promising suppliers to the group and as a channel for the registration and enrolment of new entrepreneurs into the development portion of the programme. These showcases will enable the group's hotels and casinos to continue their focus on supporting local small businesses and suppliers, in order to address the need for access to new markets, wealth creation and employment.

Transformation
With the group having successfully undertaken its first BBBEE audit against the Revised BBBEE Codes of Good Practice – tourism sector scorecard in 2016, alignment of our transformation practices is well under way. The group has developed a plan for enterprise and supplier development, that connects emerging black-owned enterprises into the procurement pipeline, supports existing black-owned EMEs and qualifying small enterprises ('QSEs') who are suppliers to the group (through Tsogo Sun Entrepreneurs) and at the same time ensures that our procurement requirements are not compromised. The plan will continue to be the focus in the year ahead.

An area that the group is monitoring is that of preferential procurement, which forms part of Enterprise and Supplier Development in the Revised Codes. While in 2016 companies have been able to use BBBEE certificates issued on the 2007 Codes, the next year will see all entities being verified against the Revised Codes, which could potentially see many suppliers to the group receive significantly lower BBBEE results. The performance of other companies affects Tsogo Sun's ability to achieve good BBBEE results, which could potentially affect the next rating.

In line with the plan, in the coming year the company will continue to focus on managing a growing portion of its procurement centrally to allow for enhanced consistency in standards and pricing and closer relationships with our suppliers. In addition, processes are being aligned, as far as is practical, to meet the requirements of the Revised Codes. The procurement function will work closely with the Enterprise and Supplier Development function to identify qualifying suppliers and potential suppliers for development.

Environment
The focus during the year will be to ensure that the energy and water consumption management programmes remain in place with the objective of continuously reducing consumption year on year, excluding the impact of increased capacity or additional operations. Through environmental education, the group will continue to influence stakeholders such as communities, employees and customers, to take responsibility for their impact on the environment and positively change their behaviour by holding Citizenship seminars that address among other topics related to the green economy, the subject of climate change.