Broad-based Black Economic Empowerment

Vodacom SA is independently verified for the year ended 31 March 2009 as a Level 4 contributor according to the DTI’s BBBEE Codes of Good Practice (“DTI Codes”), with a score of 69.13. However, these numbers do not reflect the company’s long history of commitment to transformation in South Africa. In June 1994, from the commencement of commercial service, Vodacom began investing in the government’s Joint Economic Development Programme,making the required R1 billion investment well ahead of the ten-year schedule. Vodacom SA recognises that BBBEE is an integral part of any commercial strategy and not an adjunct to it. Therefore, BBBEE is viewed holistically and as an intrinsic part of our competitive positioning.

Equity ownership

In October 2008, Vodacom SA successfully concluded a R7.5 billion BBBEE transaction in terms of which Royal Bafokeng Holdings (Proprietary) Limited and Thebe Investment Corporation (Proprietary) Limited, through their subsidiaries, the black public (as defined in the DTI Codes),business partners and employees acquired an aggregate of 6.25% of Vodacom SA. Of this total shareholding, 3.44% accrues to YeboYethu Limited, a BBBEE company established for this purpose, with 45% of YeboYethu Limited held by Vodacom employees via the Employee Share Ownership Scheme, and the remaining 55% held by black South African citizens. Vodacom SA now scores 6.97 out of 20 for the equity ownership pillar of the BBBEE scorecard compared with the initial verification score of 1.9.

Management control

Black representation among executive directors rose from 63% in 2007 to 73% in 2008. Unfortunately, there is no representation by black women among executive directors on the Vodacom SA board.

Employment equity

Vodacom is continuously introducing innovative initiatives to attract candidates from designated groups who have engineering, information technology and telecommunications skills. Illustrating this commitment, a total of 69% of new appointments in 2009 were black candidates, bringing overall black representation in the workforce to 70%. Representation of the various race groups in senior, middle and junior management is 24% African, 23% Coloured, 14% Indian and 39% White. Work still remains to be done to meet race and gender representation targets at certain management levels in the organisation specifically at Executive Head of divisions and Managing Executive levels.

The proportion of disabled employees has risen from 0.5% in 2007 to 1.2% in 2009, and Vodacom will endeavour to reach 2%. Retention of black employees, and in particular black female employees, remains a challenge. The current attrition rate of the black designated group is 37% of all leavers, down from 38% last year. Vodacom SA now scores 9.53 out of 15 for the employment equity element of the BBBEE scorecard compared with the previous year’s score of 8.97.

Skills development

For the financial year 2009, Vodacom has invested over R90 million in the training of employees, of which R68 million was spent on the training of the Black Designated Group and R38 million on black females. This represents an investment of 3.0% of the total leviable amount over and above the 1% the company contributes to the National Skills Levy Fund. Of the total employee compliment of 4 743 which forms the baseline, 273 learnerships and/or category B, C and D learning programmes for black employees were identified for the period under review.

Vodacom SA retained its score of 12 out of 15 for the skills development pillar of the BBBEE scorecard.

Preferential procurement

Procurement from BBBEE-accredited suppliers amounted to R6.6 billion out of a total procurement spend of R14.5 billion. Within this spend range Vodacom directed R748 million to Qualifying and Exempt Micro Enterprises (QSEs), R450 million to 51% black-owned businesses and R52 million to 30% black women-owned businesses. Compared to previous years, Vodacom increased its spend value of over R600 million for QSE’s, R200 million for 51% black owned. Vodacom’s internal target for preferential procurement is increasing annually, driving spend towards smaller entities. To achieve its goals, the procurement unit has appointed a dedicated liaison to assist large suppliers to register, or improve their status to at least a Level Four, where necessary through contractual obligations. Vodacom offers skills training to QSEs and emerging micro enterprises to enable them to gain more of our business.

Vodacom SA now scores 13.69 out of 20 for the preferential procurement pillar of the BBBEE Scorecard compared with last year’s score of 12.38%.

Enterprise development

Vodacom SA meets the requirements of a Level 1 contributor to BBBEE in the enterprise development pillar (scoring 15 out of 15), through discounts offered to its Community Services Operators. Through their business association with Vodacom, our business partners in the distribution chain are developed as described below:

• Community services – From the original 22 000 subsidised public cellular telephones deployed in underserviced and rural areas as part of the company’s license obligation, this has now grown to more than one million phones in community retail outlets. The emergence of super traders responsible for a number of operators is fuelling the increase in this business avenue.

• Retail franchisees – All new franchisees have to be at least 50% black owned, and existing shop owners wanting to acquire a new shop are required to take on a black partner holding a minimum ownership stake of 30%. These stores receive support in a variety of forms, including training, rental support, shop fitting and advertising. The number of Vodashop stores with a minimum of 25% black ownership increased by 36% this year, from 84 to 114.

• Wireless application service providers (“WASPs”) – While this growth area presents exciting opportunities for BBBEE entrepreneurs, uptake has been very slow. In the year under review, four out of a total of 168 WASPs on the Vodacom SA network were black owned. Revenue from WASP services have grown 10% during the reporting period. Start-up WASP businesses also receive assistance from Vodacom SA in the form of free or subsidised rental, training and other services that help them gain a competitive edge in the marketplace.

Socioeconomic development

The DTI Codes recognise that companies have a role to play in the transformation of communities and individuals beyond their core business activities. Of Vodacom SA’s R98 million spend on socioeconomic development, over R30 million is allocated from the CSI budget of the Vodacom Foundation. The remaining allocation is made up of a contribution that Vodacom makes annually to the Universal Services Agency, a portfolio organisation of the Department of Communications, tasked with the rollout of ICT infrastructure in the country. Vodacom SA continues to score 100% for the socioeconomic development pillar of the BBBEE scorecard.