Sustainability strategy in action

Sustainability strategy in action

The key pillars of our sustainability include meeting the reasonable requirements of our beneficiaries, financial strength and durability, maintained product relevance to customer experience, regulatory compliance and adequately skilled human resources. In summary, a business has to stay in business to be able to take advantage of the commercial opportunities that are presented to it. Good businesses fail when they are fragile, inflexible, unethical and/or poorly managed.

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 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

  2018   2017
Black ownership 65%   62%
       
Value added contribution to black economic empowered businesses, PDIs and government R8.4 billion   R8.5 billion
       
BBBEE level Level 1   Level 1
       
CSI outcomes Tsogo Sun sports, arts and learning academies support 42 010 learners   Tsogo Sun sports, arts and learning academies support 46 398 learners
ESD outcomes Tsogo Sun Entrepreneurs programme supports 242 beneficiaries   Tsogo Sun Entrepreneurs programme supports 200 beneficiaries

2018 PERFORMANCE

Shareholders

As mentioned in the group overview on page 03 the nature of the HCI shareholding is of particular importance as it provides the bulk of the 65% 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 balance of the shareholding is diverse with significant liquidity.

Community

Tsogo Sun continues to be committed to uplifting and developing communities in need, spending a portion of our profits annually on social investment through Tsogo Sun Citizenship in three primary areas - community development, entrepreneurial development, and the natural environment. We effectively harness our resources, geographic spread, and extensive experience to deliver initiatives that create a lasting and positive impact on the communities where we are located.

Community development

During the year, the group's combined social investment in community development amounted to R57 million, all of which is verified spend on BBBEE socio-economic development. This is the equivalent of 2.9% of net profit after tax and represents 1.9pp more than the tourism sector code target.

The group's hotel and casino properties continue to uphold their mandate to provide significant support and involvement to their local communities, in line with corporate policy, reaching 42 010 learners throughout the year-long initiatives.

In direct response to alarming unemployment levels among young people in South Africa, Tsogo Sun has strengthened its focus on education, particularly in the area of career guidance and preparation for employment for high school learners from impoverished backgrounds. In 2017 Tsogo Sun introduced an online platform to facilitate this for grades 9 to 12, starting with online evaluations that match interests, skills and aptitudes with personality types to establish the most suitable career opportunities for each learner. This assists with learner subject choices in line with their potential career choices. In grade 10, learners attend workshops on topics such as financial literacy and tertiary education options. Grade 11 and 12 learners receive assistance with applications for higher education and job-readiness training.

Tsogo Sun's focus on education also includes peer-driven initiatives through Columba Leadership, which have been sponsored by the group since 2013. Columba is a high impact programme for high schools in economically disadvantaged communities that encourages youth to be self-motivated, work-ready and employable. Principals, educators and grades 10 to 12 learners work together to assess their schools' challenges and implement solutions, become engaged in social change projects, and develop critical skills for life and work.

The Moves for Life chess programme operates nationally in 49 schools with more than 18 000 participating learners from local communities. It entails weekly classes during school hours and is aimed at unlocking cognitive potential in children through the structured implementation of chess education, where aspects of the game are linked with mathematics, science and life skills concepts, and the learning is made fun and exciting.

Also delivering value to local communities is the 'Safe-Hub' programme, sponsored by Tsogo Sun in areas around South Africa and run by AMANDLA EduFootball, which provides children from grade R to matric access to a safe environment for facilitated sports, arts, life skills lessons, and personal development. The Safe-Hub also features the PlayMaker Learnership, a one-year accredited programme for young people committed to changing their communities and being positive rolemodels. The learnership includes an NQF level 4 in sports administration qualification, as well as training to implement the EduFootball programme, and valuable work experience.

Other educational initiatives within the group include Olwazini Discovery and Computer Centre, a science and cultural centre geared at making education fun and promoting learning of science, technology and mathematics, and the Apartheid Museum, the leading museum in the world dealing with 20th century South Africa, and more particularly, the apartheid years.

Learners are frequently hosted at both these facilities to improve their knowledge and understanding. Tsogo Sun properties are also involved in the provision of bursaries and learnerships across schools nationally and through the Suncoast Bursary programme; Hemingways Casino's sponsorship of the ITEC mathematics, science and technology programme that contributes towards improved competence in the subjects among learners in the Eastern Cape; and through Cape Town properties, involvement and support of the Mellon Educate education development programme to benefit more than 100 000 disadvantaged learners over 10 years through the Building Blitz initiative.

Over and above these efforts to improve access and efficacy in education, at our many destinations around the country, Tsogo Sun supports its local communities in the areas of further education, health and welfare through the provision of clothing, food, linen, furniture, fittings and equipment, donations, prize letters, collections and in-kind contributions. Throughout the year, the group supports local community organisations, charities, old-age homes, orphanages, shelters, hospices and local schools, and when disasters occur.

Enterprise and supplier development

Tsogo Sun develops emerging enterprises 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 all industries, with a particular focus on those in the tourism sector.

The group's combined spend on enterprise and supplier development for the year is R101 million, R21.1 million of which was spent on enterprise development beneficiaries and R79.4 million of which was spent on supplier development beneficiaries, representing a total of 5.1% of net profit after tax, which is 1.6pp above the tourism sector code target.

The group's enterprise and supplier development plan connects emerging black-owned enterprises into the procurement pipeline, supports existing black-owned exempt micro-enterprises ('EMEs') and qualifying small enterprises ('QSEs') who are suppliers to the group through the Tsogo Sun Entrepreneurs programme, and at the same time ensures that our procurement requirements are met.

As part of this plan, we support 242 businesses who are enrolled in the Tsogo Sun Entrepreneurs full year development programme, which provides business mentorship, leadership coaching, a University of Cape Town ('UCT') accredited business course, business foundation skills and various other benefits to the beneficiaries. As the only programme of its kind in South Africa, 80% of the entrepreneurs developed by Tsogo Sun Entrepreneurs are black South African women.

A total of 53 businesses in the Alumni phase have expanded their operations as a result of the programme. Each employs between one and 50 staff and reaches up to 30 people in the value chain. A total of 200 entrepreneurs have successfully completed the UCT Business Management Course funded by the programme.

Tsogo Sun volunteers

Tsogo Sun staff continue to demonstrate compassion for those who are less advantaged in their communities in tangible ways, reaching out to meet real need with thousands of volunteer hours, donations and resources contributed to upliftment initiatives annually. Campaigns supported across the group include Mandela Day, Reach for a Dream, Casual Day, Slipper Day, Tekkie Tax Day, the CANSA Shavathon and PinkDrive breast cancer education and awareness.

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 1 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
  2018   2017
Ownership 27   27.0   27.0
Management and control 19   11.3   10.4
Skills development 20   19.3   18.8
Enterprise and supplier development 40   41.1   37.3
Socio-economic development 5   8.0   8.0
Overall 111   106.7   101.5
Rating level     1   1

The group is proud to be a level 1 BBBEE contributor with 135% procurement recognition status for 2018 and we have worked hard to implement our empowerment strategy in order to achieve this result. The group received 106.7 out of a total available 111 points on the tourism sector scorecard. Tsogo Sun's black ownership is verified at 64.9% and black women ownership is 34.6%.

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 groupwide 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 gambling 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 actively participates in business and industry bodies such as the TBCSA, the SATB, the NBI, Business Against Crime, 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 office, 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 407 tenants across Tsogo Sun's various properties, tenanting is one of the group's core focus areas to ensure that our customers have access to the best office, retail, restaurant and entertainment-related offerings.

The group's property and tenanting department manages this important element of our business together with the real estate department to ensure that our buildings are appropriately tenanted, maintained, refurbished, upgraded and renovated on an ongoing basis so 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 operations 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. Verified total procurement spend on black economic empowered businesses amounted to R3.4 billion during the year. The group's BBBEE score for preferential procurement, which is measured within the enterprise and supplier development element is 24.1 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 does not own the property or the business. The most significant leasing relationship is with HPF from which the group leased ten hotel properties from September 2016 and an additional 29 hotel properties from July 2017. The most significant management relationship is with Liberty for whom Tsogo Sun manages three hotel properties and from whom the group leases the Sandton Convention Centre. The relationships are mutually beneficial with financial returns and access to additional properties for Tsogo Sun and enhanced returns to the owners through our skills and distribution.

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 serve the interests of our company and the community and in achieving this our stated policy and commitment are 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 specifically 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 and the restatements are mainly as a result of a change from DEFRA to IPCC conversion factors. The restatements are not significant at 0.07% of consumption.

Emissions measurement

Total emissions (tCO2e)   2018     2017 
Restated 
2017 
Reported 
  
change on 
2017 
Restated 

change on 
like-for-like 
portfolio  
Scope 1  5 529     5 198  5 010     (8)
Petrol and diesel (owned company vehicles) 1 157     499  446     132 
Diesel consumed (owned businesses) 1 278     1 871  1 767     (32) (32)
LPG and natural gas usage (owned businesses) 3 094     2 828  2 797    
Scope 2  217 394     216 516  216 516     –  (4)
Energy consumed (owned businesses) 217 394     216 516  216 516     –  (4)
Scope 3  118 766     103 504  103 458     15  (1)
Energy consumed (tenants) 64 578     48 571  48 488     33  (6)
Energy consumed (managed properties) 21 510     24 151  24 147     (11) (2)
Laundry services (outsourced) 30 684     28 752  28 752    
Business travel  1 994     2 030  2 071     (2) (4)
Total emissions (tCO2e) 341 689     325 218  324 984     (3)

Ninety-eight 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 were flat on the prior year at 217 394tCO2e despite the inclusion of Gameco from November 2017, the opening of the SunSquare and StayEasy Cape Town City Bowl hotels in September 2017 and the acquisition of two additional hotels in October 2016. Excluding the inorganic growth, the emissions reduced 4% on the prior year due to savings from ongoing energy-saving initiatives. 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 increased by 9% to 3 094tCO2e due mainly to the opening of the SunSquare and StayEasy Cape Town City Bowl hotels in September 2017 and the acquisition of two additional hotels in October 2016. Excluding the inorganic growth the emissions increased by 5% on the prior year mainly due to additional outlets using gas.

Petrol and diesel – vehicles

Scope 1 emissions from the consumption of petrol and diesel in company-owned vehicles increased by 132% to 1 157tCO2e due to the acquisition of the Gameco businesses where travel to the distributed sites is significant.

Diesel – stationary

Diesel is utilised for back-up electrical generation. Scope 1 emissions from the consumption of diesel decreased by 32% to 1 278tCO2e due to reduced load shedding and supply interruptions during the year.

Scope 3 emissions

The 33% increase in scope 3 emissions from tenants at group properties is mainly due to the acquisition of 12 additional hotels through the HPF acquisition in September 2016. Excluding the inorganic growth the emissions decreased by 6% on the prior year. The 11% reduction in scope 3 emissions from properties managed by the group is due mainly to the two previously managed hotels being acquired in October 2016. Excluding the inorganic reduction, the emissions decreased by 2% on the prior year. The group utilises outsourced laundries at the majority of its owned and managed properties and the scope 3 emissions from laundry services were 7% up on the prior year.

Water

Although supply interruptions due to poor municipal infrastructure continue to increase and medium-term water shortages are probable, the group does not have company-specific water risks. The group is, however, subjected to the general impacts of climate change, as evidenced by the current severe water shortages in the Western Cape. Contingency plans for the hotels in Cape Town, such as reverse osmosis of brackish water and boreholes with water treatment plants, were made during the year, but realistically a solution must be provided on an industrial scale by government, as there is little point in the hotels having access to potable water if the region does not. The majority of the group's 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 decreased during the year by 6% to 2.5 million kilolitres mainly due to ongoing conservation and reduction measures at all properties, offset by the opening of the Sun Square and StayEasy Cape Town City Bowl hotels in September 2017 and the acquisition of two additional hotels in October 2016.

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.

Tsogo Sun partners with Generation Earth and the Miss Earth SA leadership development programme, both of which provide education about environmental issues among young South Africans. Through these partnerships, about 23 000 school children have been educated on environmental responsibility, 1 550 trees have been planted and hundreds of environmental youth ambassadors are enabled to travel to all corners of South Africa, delivering the message for a sustainable future.

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 national empowerment and citizenship seminars that address, among other topics related to the green economy, the subject of climate change.

LOOKING AHEAD

Community development

Tsogo Sun's community development programmes are growing in impact and reach, with a focus on education for disadvantaged young people, preparing them for the world of work. The aim is to create scalable and sustainable programme models that can be replicated more widely in collaboration with other corporates, civil society and government.

The emphasis on career guidance and development to ensure a pipeline of development for high school learners is continuing, with significant acknowledgement of the positive impact by educators and learners.

Tsogo Sun properties are increasing their involvement and support of mentoring and job shadowing programmes in local schools, constantly seeking ways to close the gaps in career development and job readiness, and enabling a successful future.

Consistent monitoring and evaluation is essential to enable meaningful change to be accurately assessed and replicated. Comprehensive tracking and management of financial, in-kind, and employee volunteering contributions made across the group is maintained, and the participation, attendance and involvement of learners, educators and community stakeholders is monitored to evaluate the impact on our beneficiaries, how we are influencing their lives, and where more emphasis is needed for improved results.

Tsogo Sun is committed to ensuring significant depth of impact that our programmes provide to communities, engaging learners and other beneficiaries in flagship programmes and customising support to ensure opportunities are created that will have a lasting effect.

Enterprise and supplier development

The Tsogo Sun enterprise and supplier development plan will continue into its fourth year of the five-year implementation. The monitoring and evaluation tool will be refined to enable the group to continue to accurately measure the plan's impact on the businesses supported by Tsogo Sun Entrepreneurs. The group's system for the selection of entrepreneurs for development will continue to be managed centrally in order to ensure that the beneficiaries receiving development are a correct fit for the programme.

Supplier showcases will continue to be held at Tsogo Sun properties across the country, serving as mini-indabas for promising suppliers to the group and as channels for the evaluation and enrolment of new entrepreneurs into the development portion of the programme.

These showcases 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

The group has met its target of achieving level 1 BBBEE contributor status for the second consecutive year and the future intention is to maintain this performance in the year ahead. We intend to do this through continued focus on all areas of empowerment, but specifically where we have not yet exceeded the tourism charter scorecard target - such as employment equity and skills development.

From an operational point of view, this will involve paying close attention to maintaining the diversity of our workforce and developing their skills and those of potential new employees.

Environment

The focus during the year will continue to be to ensure that the energy and water consumption management programmes remain in place with the objective of 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.