7 / 98
03
The regulator in Lesotho has recently commenced engagement
with the sector on the proposed introduction of customer
registration regulations in that country. Although these regulatory
requirements pose some significant challenges, as a result
customer growth has slowed in the latter part of the year as these
regulations are implemented, I am confident that we have the
structures in place to manage these risks.
One of the particularly encouraging developments in these markets
has been the continued growth in M-Pesa, our mobile-based money
transfer, financing and micro-financing service. To support this
growth we have invested in migrating from our legacy M-Pesa
platforms to the new Vodafone Group Mobile Financial Services
platform, which offers improved stability, availability and
performance. The DRC has already migrated to the new platform,
and we are planning to migrate Tanzania and Mozambique soon.
Driving responsible business practice
An important aspect of the Group’s strategy is to ensure the
responsible management of environmental, social and governance
risks facing the company and our stakeholders.
One of the most significant risks facing our customers is the threat
to privacy and information security associated with increased access
to internet-based services. We have world-class policies, processes
and technologies in place to manage this risk and ensure full
compliance. As part of the Vodafone Group, we contribute to
Vodafone’s industry-leading law enforcement disclosure report,
which provides a detailed insight regarding the demands from law
enforcement agencies across 28 countries. We believe that
promoting such transparency is an important part of managing
this tension.
Other important risks relate to the health and safety of our people
and service providers, and the environmental footprint of our
operations. The Board is satisfied that the Group is managing these
risks effectively, the details of which are covered elsewhere in this
report and in our sustainability report. It saddens me to report that
this year we had four fatalities. We extend our sympathy to their
family, friends and colleagues. In response to these accidents, we
have introduced various new measures aimed at reducing the
potential for road accidents.
Ensuring good governance
The main role of the Board is to provide informed and objective
oversight of the Group’s strategy and activities to ensure that it
delivers on its fiduciary duty. I believe that the Board’s effectiveness
is a function of the skills, experience and diversity of its members,
and their level of understanding of the Group’s activities and
operating context. Every year, we perform an internal evaluation of
the Board’s effectiveness. We were reassured by their findings that
the Board has done well in fulfilling its duties, and that we have a
good mix of directors with demonstrated commitment to working
in Vodacom’s best interest.
During the year, there were various changes to the Board.
Till Streichert, formerly Executive Director Finance for Vodacom
South Africa, took over as Group CFO from August. In October, we
welcomed Marten Pieters to the Board. As the former CEO and
managing director of Vodafone India, Marten brings valuable
practical experience of the emerging markets telecoms sector. We
bid farewell to Ivan Dittrich, who stepped down as Group CFO, and to
Hatem Dowidar, who resigned as a non-executive director. Although
half of our non-executive directors represent Vodafone, and thus are
not deemed independent as recommended by King III, the Board is
satisfied that the balance of power and objectivity on the Board is
sufficient and does not require additional independent voices.
We have made some changes in the short-term incentives for the
year. The substantial investment in our network needs to be
supported by a clear step-up in the customer experience and
satisfaction. To ensure that this is reflected in the short-term
incentives, the Board increased the percentage of the short-term
incentive based on customer appreciation measures, to 40%
(up from 25%). The customer appreciation assessment is based
on a market-by-market assessment of measures, including NPS
performance, relative revenue market share, brand consideration
and churn. Our long-term incentives are intended to ensure that
we retain the skills and motivation of executive directors and
other employees over the longer term, and that we incentivise
them to support the Group in meeting its objectives relating to
sustainable performance and creating long-term shareholder value.
Looking ahead
Looking ahead, I anticipate some further challenges in the
macroeconomic environment. The South African economy has
faced a particularly tough year and these pressures will continue
to place a strain on the economy in the next year. The sustained
downturn in export commodity prices and the intensifying drought
has resulted in job losses in the country’s labour-intensive mining
and agricultural sectors. The low GDP growth rate has been
accompanied by rising food and electricity costs, a weakening rand,
high inflation and an increasing interest rate, all of which has led to
depressed consumer confidence and reduced spending power.
I believe firmly, however, that by empowering people and
communities through access to reliable and affordable voice and
data services, we provide an important basis for addressing many
of these underlying challenges. I am confident, too, that the Group
has the right strategies in place, and the right team, to ensure our
continued ability to deliver value for all our stakeholders.
Appreciation
In closing, I wish to express my gratitude to my colleagues on the
Vodacom Board for their continuing wise counsel, and to Vodacom’s
executive team, who have demonstrated effective leadership during
this challenging year.
Peter Moyo
Chairman
3 June 2016
Our performance
Our business
Governance review
Administration
Overview