Developing a broad and highly skilled supplier base is in the long-term interests of our industry.

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1 34 Component objective Component sub-issues Developing a broad and highly skilled supplier base is in the long-term interests of our industry. Santam relies on its supplier base to provide its external and internal clients, and third parties, with an excellent, cost-efficient service when using their service and/or product for either a claim or a business-related requirement. We try to spend our money in a manner that helps develop our future suppliers and that ensures that their approach to safeguarding the environment and the health and safety of their workers aligns with ours. Preferential procurement Environment, health and safety in the supply chain Developing a broad and highly skilled supplier base is in the long-term interests of our industry. We also have a responsibility to foster change in the sector in line with our broader commitment to transformation and sustainability consideration,such as employee health, safety and environmental issues. We influence positive change in the sector by preferentially using suppliers that align with our values and strategy. Preferential procurement Aligned to: The brand promise: Insurance, good and proper Strategy Regulations Guidelines Santam policies Focus We insure with integrity Balancing growth and profit Broad-Based Black Economic Empowerment Act dti CoGP Preferential procurement policy HIGH

2 It is good business for us to develop our suppliers and supplier partnerships in line with international supplychain best practice. The more competent suppliers we can identify and develop the more choice we have. By virtue of the demographics of South Africa, most of our new suppliers will be black and therefore qualify as preferential procurement. Santam spends several billion rands per annum on procurement. We have a duty as a leading short-term insurer in the market to allocate our procurement spend in a way that helps to sustain the industry, while maintaining cost-efficiency targets and high standards of quality for our internal and external clients and third parties. This spend must also be allocated responsibly to achieve sustainable job creation, safeguard the environment and ensure the health and safety of suppliers workers. The claims business unit has made good progress on a number of ongoing and new initiatives which are covered more fully in our integrated report. These include: Our claims card (which won the global award in the category for Best Corporate Prepaid Programme) Santam s Car Labs in Cape Town and Pretoria Expanding our drive-in assessment centre network from six to fifteen Santam Glass Lab Predictive Analytics These and other efforts made a difference to our partners as we were voted Insurer of the Year by the South African Motor Body Repairers Association (SAMBRA) in

3 Stakeholders 36 Stakeholders Engagement Key stakeholder concerns Approach Government Ad hoc interactions Help drive BBBEE priorities Application of our preferential procurement policy Suppliers Policyholders Santam businesses and third parties Supplier conferences, motor body repair forum, industry bodies, and sms communications, one-on-one interactions with relationship managers, quality assurance visits Contact centres, intermediaries Ad hoc interactions Regulations and guidelines Preferential procurement guidelines form part of the Department of Trade and Industry (dti) Codes of Good Practice (CoGP). The Financial Services Charter, although not yet finalised, also contains guidelines on preferential procurement. We have aligned our preferential procurement policy with the dti CoGP. Fair treatment High-quality, professional service High-quality professional service Equitable contract terms and conduct Quality assurance teams vet work done Feedback mechanisms In 2012, the dti preferential procurement targets change to the next five-year cycle with a target of 70% of procurement with BBBEE suppliers by We are realigning our internal targets to this new benchmark and intend reaching the target as soon as possible. What we said we would do in 2011 Aspiration Further alignment with, and incorporation of, broad-based principles into strategic sourcing and supplier selection processes Continued assessment of the supplier base in line with broad-based principles Reporting on the FSC and the broad-based measurement of suppliers Procurement-specific input into the enterprise development strategy Establishing and aligning broad-based targets with the overall BBBEE strategy Lending support to Santam Namibia regarding the procurement dimension of the Namibian Financial Services Charter Achieving 65% of total sourceable spend with level 4 and above suppliers within the next two years Progress This remains a priority and continues Assessment of compliance in the supplier base continues Continuing priority Continued and increased collaboration with Enterprise Development. Actively involved in the Association for Savings and Investments South Africa (ASISA) initiative Preferential procurement aligns with our overall strategy In progress Achieved

4 How we manage preferential procurement The Santam group sourcing unit manages and delivers procurement in line with our preferential procurement policy. This policy includes clauses that promote sustainability concepts with our suppliers. When suppliers apply to be added to our supplier database we assess their BBBEE status and this forms a critical part of the approval process. Existing suppliers are rescreened to assess their compliance to broad-based principles. Our operations and governance unit monitors and reports progress and non-compliance. Our overall strategy is to source mainly from level 4 BBBEE and higher suppliers. Our current focus is on increasing the proportion of black-owned businesses and, in particular, black women-owned businesses. Traditionally the majority of the industries that we procure from have been male dominated. Our challenge is to find more black-owned and especially black women-owned businesses in the motor repair and building industry to add to our initiatives in other service-related industries. We are actively working with ASISA to create an enterprise development platform that will benefit our entire industry in this regard. The solution would seem to be to start an enterprise development programme in this sector. However, as this sector is already overtraded, this is in conflict with our approach of developing sustainable business. Thus our approach is to explore opportunities such as multiservice businesses which would enhance opportunities for additional revenue streams for these businesses. Traditionally, when Santam directly supports an emerging supplier, we run the risk of limiting the growth of that business as it would not be able to service other insurers. This in turn limits its ability to develop as a sustainable business. Therefore, we are working through the South African Insurance Association (SAIA) to find an industry solution to enterprise development in the supplier base. Highlights in 2011 Our overall preferential procurement score rose to 17.4 out of 20 points (unverified) (15.5 in 2010). The 2010 year saw a reduction in our score with the inclusion of subsidiaries and associates who source their supplies outside Santam s supply chain. In 2011, these functions were brought in line with the group policy and showed improvement as a result. Scores in the most challenging areas for us spend with black-owned businesses and black women-owned businesses remains a challenge but showed improvement from last year. Our continued implementation of the dti Codes of Good Conduct principles in our verification process has highlighted some challenges in the way certain suppliers claim BBBEE status when they do not meet the required level. However, we will remain vigilant in this regard. Every supplier must produce a BBBEE certificate annually. 37 PREFERENTIAL PROCUREMENT SPEND 70.0% 65.1% 60.0% 50.0% 40.0% 48.1% 44.4% 30.0% 20.0% 10.0% 0.0% * Unverified *

5 38 Environment, health and safety in the supply chain Aligned to: The brand promise: Insurance, good and proper Strategy Regulations Santam policies Focus As a good corporate citizen, Santam has a responsibility to ensure that environmental, health and safety standards are in place and practised within its own operations and within those over which it has influence, including its Stakeholders supply chain. Suppliers that take into account their impact on the environment and care for their workers health and safety make better long-term partners. Stakeholders Engagement Key stakeholder concerns Approach Suppliers employees Government Supplier conferences, motor body repair forum, industry bodies, and sms communications, one-on-one interactions with relationship managers, quality assurance reviews Ad hoc interactions, SAIA interactions We insure with integrity Balancing growth and profit OHS Act, Waste Management Act Procurement policy, environmental policy MEDIUM Safe working conditions Safe working conditions for suppliers employees Respect for the environment Relevant clauses in supplier contracts requiring compliance with OHS Act, Waste Management Act and SHE specifications Relevant clauses in supplier contracts requiring compliance with OHS Act, Waste Management Act and SHE specifications What we said we would do in 2011 Aspiration Full roll-out of inspections and control self-assessments of motor body repairers in 2011 to encourage overall compliance with contractual terms Continue ensuring clients and intermediaries receive the service they expect and that suppliers have the support they need to deliver to our standards National roll-out of Motor Body Repair Forum Progress While inspections continue on a rolling basis, motor body repairers are required to do a self-assessment in terms of their facilities as part of the application process. We are looking for an effective means of self-assessment in terms of SHE aspects. Ongoing initiative Completed

6 How we manage environment, health and safety in the supply chain Sustainability-related issues at suppliers are influenced at a high level with the various representative supplier associations and at an operational level through relevant clauses in supplier contracts. The opportunity to include clauses related to management of HIV/Aids in the workforce of suppliers is an extremely complex area that we are finding difficult to influence. We continue to research the prevalence of HIV/Aids policies within our supplier base and to inform them of the benefits of such policies where relevant. Representatives from the quality assurance business unit review suppliers frequently as part of the claims process. They assess compliance with contract terms, including the SHE specifications where there are obvious breaches. Highlights in 2011 Quality Assurance has incorporated corporate social responsibility principles in how we partner with our supply base. All suppliers are measured against compliance with the Occupational Health and Safety Act and the Waste Management Act. Quality Assurance performs ongoing compliance reviews in terms of the group sourcing supplier selection processes and with each new supplier application. Quality Assurance has incorporated safety, health and environmental minimum standard criteria in all supplier sourcing application forms and physical or electronic on-site evaluations are performed to measure compliance. All the Santam supplier agreements contain specific compliance clauses, as defined in the quality specifications and criteria, addressing high-level Safety, Health and Environmental sustainability submission of updated certifications on expiry, awareness and compliance. Examples of these clauses and the areas they cover include: Motor body repairers (including heavy commercial vehicle body repairers): Sourcing criteria include health and safety aspects such as ear plugs, safety boots, gloves, separate eating areas and environmental aspects such as waste collection, disposal, soil contamination, air pollution, etc. Motor towing operators (including heavy commercial vehicle towing operators): Sourcing criteria include health and safety aspects such as reflective clothing, traffic cones, fire extinguishers, first-aid kits and environmental aspects such as road accident surface clean-up, soil contamination, etc. Salvage contractors: Sourcing criteria include health, safety and environmental aspects such as waste collection, disposal, soil contamination, air pollution, etc. Building contractors: Sourcing criteria include health, safety and environment aspects such as removal of debris from claimants premises, disposal of waste, etc. SMEs are not in a position to acquire costly internationally recognised certifications such as OHSAS 18001:1999 (Occupational Health and Safety Management System) or ISO 14001:2004 (Environmental Management System). In such cases, Santam requirements are adapted and aligned accordingly. Quality Assurance is in negotiations with the South African Bureau of Standards (SABS) to develop a certification programme fit for the South African environment. 39 l A sustained supplier base Aspirations for 2012 Sub-issue Preferential procurement Environment, health and safety in the supply chain Work towards achieving the dti scorecard preferential procurement goal of 70% by Continue to increase the percentage of business sourced from black-owned, and especially black women-owned business All supplier contracts to include environmental health and safety clauses