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Vodacom Group Limited Annual Report - for the year ended 31 March 2009 |
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Group overview
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Performance review
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| Corporate governance statement Vodacom is committed to the highest standards of business integrity, ethical values and professionalism in all of its activities. As an essential part of this commitment, the Board supports the highest standards of corporate governance and in so doing; the Board recognises the need to conduct the enterprise in accordance with the principles as contemplated in the Code of Corporate Practices and Conduct as set out in King II and looking forward to King III. These include discipline, independence, responsibility, fairness, social responsibility, transparency and accountability of directors to all stakeholders. These principles are entrenched in the Group’s internal controls and policy procedures governing corporate conduct. The Board of the Vodacom Group is satisfied that every effort is being made to comply in all material aspects of King II. Board Vodacom Group has a unitary Board consisting of 12 directors. Of these, four, including the Chairman, are independent non-executive directors while five are nonexecutive and three are executive directors. A Board charter has been adopted where the detailed responsibilities of the Board include:
Accountability The Board takes overall responsibility for the success of the company. Its role is to exercise leadership and sound judgement in directing Vodacom to achieve sustainable growth and act in the best interests of the shareholders. In line with best practice, the roles of chairman and chief executive are separate. The board is led by the chairman while operational management of the Group is the responsibility of the Chief Executive Officer. Directors The directors have a wide range of expertise as well as significant experience in financial, commercial and mobile telecommunications activities. In terms of Vodacom Group’s recently adopted articles of association, the non-executive directors have no fixed term of appointment while the executive directors are subject to the standard terms and conditions of employment. Two of the three executive directors have a notice period of 3 months, while the Chief Executive Officer has a notice period of 12 months. In terms of Vodacom’s articles of association, the directors are subject to retirement by rotation and re-election by shareholders at least once every three years. Any director appointed to fill a casual vacancy must retire at the first annual general meeting following his appointment and stand for re-election at that annual general meeting. Independent advice The Board recognises that there may be occasions where one or more directors feel it necessary to take independent professional advice at the company’s expense. There is an agreed procedure for them to do so. Board meetings A minimum of four board meetings plus a strategy session are scheduled per financial year. Additional board meetings may be convened when necessary. Five board meetings plus four special board meetings were held during the past financial year. The accompanying table details the attendance by each director at these meetings.
* Replaced by MP Moyo at date of listing (18 May 2009) Board committees The Board has established several committees in which the non-executive directors play a pivotal role. All committees operate under board approved terms of reference, which may be updated from time to time to keep abreast with developments in corporate law and best practice in governance. Executive committee Members: Chief Executive Officer (Chairman), Chief Financial Officer, Chief Officer Human Resources, Chief Officer Corporate Affairs, Chief Officer International Business and the Managing Director Vodacom SA. The executive committee is responsible for the operational
activities of the Group, developing strategy and policy
proposals for consideration by the Board and implementing
the Board’s directives.
Audit committee Members: TA Boardman (Chairman); P Malabie. In line with the Corporate Laws Amendment Act, the Board revised the constitution of the audit committee to comprise of independent directors only. Mr TA Boardman (Chairman) and Ms P Malabie were appointed as members on 24 February 2009. The Chief Executive Officer and Chief Financial Officer attend audit committee meetings by invitation, as well as the head of internal audit and the external auditors. The primary role of the audit committee is to ensure the integrity of the financial reporting, the audit process and that a sound risk management and internal control system is maintained. In pursuing these objectives the audit committee oversees relations with the external auditors and reviews the effectiveness of the internal audit function. The audit committee’s responsibilities include the following:
The internal and external auditors have unlimited access to the Chairman of the audit committee. The internal audit department reports directly to the audit committee and is also responsible to the Chief Financial Officer on day-to-day administrative matters. Four audit committee meetings are scheduled per financial year. Additional committee meetings may be convened when necessary. During the previous financial year, five committee meetings and one special meeting were convened. Remuneration committee Members: TA Boardman, M Lundal, TM Mokgosi-Mwantembe, RAW Schellekens. The remuneration committee, in consultation with executive management, ensures that the Group’s directors and senior executives are fairly rewarded for their individual contributions to overall performance and in line with Vodacom’s remuneration philosophy. The remuneration committee has a mandate and terms of reference from the Board and includes the following responsibilities:
Four remuneration committee meetings are scheduled per financial year. Additional committee meetings may be convened when necessary. During the previous financial year, three committee meetings were convened. Nomination committee The Board has adopted a mandate and terms of reference for the establishment of a nomination committee. The duties of this committee include:
To the date of this report, the membership of this committee had not yet been appointed. It was expected that by financial year end 2010, the members to this committee would have been appointed. Company secretary All directors have access to the advice and services of the company secretary, who is responsible to the Board for ensuring compliance with procedures and applicable statutes and regulations. To enable the Board to function effectively, all directors have full and timely access to information that is relevant to the proper discharge of their duties. This includes information such as corporate announcements, investor communications and other developments which may affect Vodacom and its operations. This also includes access to management where required. The company secretary is responsible for development of director training. All new directors, where relevant, are appropriately inducted to Vodacom by the company secretary and Chief Executive Officer, which includes briefings on fiduciary and statutory responsibilities as well as orientation in respect of the Group’s operations. Relations with shareholders Vodacom is committed to communicating its strategy and activities to shareholders and, to that end, maintaining an active dialogue with investors though a planned investor relations programme. This programme includes:
Risk management Effective risk management is integral to the Group’s objective of consistently contributing to the business. As a result, management is continuously developing and enhancing its risk and control procedures to improve the mechanisms for risk identification, assessment and monitoring. When setting strategies, approving budget and monitoring progress against the budget, the directors therefore consider the identified business risks. In order to facilitate the process of embedding risk management within the Group to assist in identifying, assessing and recording strategic risks currently facing the Group and, where appropriate, to monitor procedures to mitigate pertinent risks, a division reporting to the Chief Risk Officer has been established. Risks are identified and managed at five different levels within the organisation, namely at project, process, operational, tactical and strategic levels. These risks are periodically reviewed and updated. As relates to the strategic risks, a filtering and reporting process ensures that the relevant items are reported to the risk management committee comprising executive management, and, ultimately, that these risks reach the audit committee. The major consolidated key strategic risks identified during the year under review were as follows: Increased regulatory requirements The main risks in this area include wholesale and retail price control, subscriber registration and additional fees and taxes. These risks are managed through a dedicated regulatory team which ensures constant contact with the various regulators; the attendance of formal hearings and provision of the necessary reports to the regulator and involvement in international debate, dialogue and research to determine best practices. In South Africa, it has been noted that additional scrutiny is exercised with regard to proposals for new regulations by ICASA. This includes the imposition of wholesale price control and increasing enquiries into retail pricing. Also affecting South Africa is the liberalisation of the telecommunications markets which encompasses Voice-over IP (VoIP) and facilities provisioning. These factors have resulted in an increase in competition due to the existence of additional entrants into the market. This has ultimately placed pressure on pricing and margins. In the DRC, constant changes and increases to telecommunications fees and obligations have been noted. This is currently not a major concern, however it may impact upon future prices and margins. Subscriber registration has been implemented by the regulator, and, to further complicate this issue within a rapidly changing country such as the DRC, the infrastructure within remote areas can be described as limited at best. Global recession The effect of the decreasing GDP growth due to the negative impact of the power crisis, increased fuel and food prices, and exchange rate fluctuations is currently impacting negatively on revenue growth and budgets as customers are tightening their spend patterns. Although this is not a major issue within South Africa, this is the cause for concern within certain of the African operations. For example, in the DRC the impact has been compounded due to the dramatic fall in the copper and cobalt prices from September 2008, resulting in the closure of several mines and hence in the retrenchment of numerous employees. This risk is currently managed through many initiatives and cost control exercises in each country. These initiatives include increased efficiencies in customer care, network deployment, infrastructure upgrades and procurement. Cooperation with major suppliers, and products and services innovations to increase revenue and limiting headcount growth has also proven to be a successful strategy in countering the effects of the recession. Along with management’s efforts at ensuring the implementation of the necessary controls to mitigate these major risks to an acceptable level, Vodacom subscribes to a comprehensive insurance programme and has a fully embedded business continuity strategy. Internal control Internal controls comprise methods and procedures adopted by management to provide reasonable assurance in safeguarding assets, prevention and detection of error, accuracy and completeness of accounting records and reliability of financial statements. The internal audit function serves management and the Board by performing independent evaluations of the adequacy and effectiveness of the group companies’ controls, financial reporting mechanisms and records, information systems and operations and provides additional assurance in safeguarding of assets and financial information. Code of ethics A detailed code of ethics forms part of the overall employee policies within Vodacom. All executives and employees are required to maintain the highest ethical standards in ensuring Vodacom’s business practices are conducted in a manner which, in all reasonable circumstances, is above reproach. Share dealings Vodacom has adopted a share dealing policy requiring all directors, senior executives and the company secretary to obtain prior written clearance from either the Chairman or Chief Executive Officer to deal in Vodacom shares. The Chairman is required to obtain prior written clearance from the chairman of the audit committee. Closed periods are operated as defined by the JSE Listings Requirements. During these periods, the Group’s directors, executives and employees are not permitted to deal in Vodacom shares. Additional closed periods would be enforced should Vodacom be subject to any corporate activity where a cautionary announcement is published.
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Copyright © Vodacom 2009.
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