Corporate governance report

Statement of compliance

Vodacom is committed to the highest standards of business integrity, ethics and professionalism.

The King IV Report on Corporate Governance for South Africa 2016, released on 1 November 2016, advocates an outcomes-based approach, and defines corporate governance as the exercise of ethical and effective leadership towards the achievement of the following governance outcomes:

• Ethical culture;
• Good performance;
• Effective control; and
• Legitimacy.

The application of King IV is on an apply and explain basis and the practices underpinning the principles espoused in King IV are entrenched in many of the Group’s internal controls, policies and procedures governing corporate conduct. The Board is satisfied that in the main, Vodacom has applied the principles set out in King IV, the detail of which is set out below and outlined in the King IV principles schedule.

For details of King IV Codes.

Corporate governance structure

The following diagram shows the Group’s governance structures as at 31 March 2018:

Ethical leadership

The Board accepts collective responsibility for defining how ethics and ethical behaviour should be implemented in Vodacom. This includes setting out the conduct of individual Board members to ensure that they act with integrity, competence, responsibility, accountability, fairness and transparency. These characteristics set the tone from the top to support an ethical culture within Vodacom.

Board leadership and committees

Board

Vodacom has a unitary Board of 12 directors, of whom five (including the Chairman) are independent non-executive directors, five are non-executive (but not independent as they represent Vodafone), and two are executive directors. King IV recommends that the governing body (Board) should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively. The Board is satisfied that the balance of knowledge, skills, experience, and diversity on the Board is sufficient and does not require additional independent voices. The Board acknowledges the requirement for race and gender representation in its membership. Vodacom has adopted a formalised policy on the promotion of race and gender diversity at Board level. The Nomination Committee regularly reviews Board and committee succession to ensure we have the right skills, continuity and experience for the future. The Board has an agreed process and policy in place for appointing directors. The Board has evaluated the performance of the Chief Executive Officer through the Nomination Committee and is satisfied with the outcome of the evaluation. The Board has delegated to the Chief Executive Officer to oversee that the key management functions are headed by individuals with necessary competence and authority and adequate resources.

Accountability

The Board takes overall responsibility for Vodacom’s success. Its role is to exercise leadership and sound judgement in directing Vodacom to achieve sustainable growth and act in the best interests of shareholders.

In line with best practice, the roles of Chairman and Chief Executive Officer are separate. The Chairman is responsible for leading the Board, while the Chief Executive Officer is responsible for the operational management of the Group.

The Board charter details the responsibilities of the Board, which include:

• Appointment of the CEO and CFO;
• Oversight of the Group’s strategic direction;
• Approving major capital projects, acquisitions or divestments;
• Exercising objective judgement on the Group’s business affairs, independent from management;
• Ensuring that appropriate governance structures, policies and procedures are in place;
• Ensuring the effectiveness of the Group’s internal controls;
• Reviewing and evaluating the Group’s risks;
• Approving the annual budget and operating plan;
• Approving the annual and interim financial results and shareholder communications;
• Approving the senior management structure, responsibilities and succession plans; and
• Information and technology governance

Directors

Vodacom’s memorandum of incorporation specifies that non-executive directors have no fixed term of appointment. Executive directors are subject to standard employment terms and conditions and a six-month notice period. Directors are subject to retirement by rotation and re-election by shareholders at least once every three years. Any director appointed to fill a temporary vacancy must retire at the first annual general meeting following their appointment.

Chairman

The memorandum of incorporation requires the Board to re-elect the Chairman annually. The Board is comfortable that the Chairman is able to perform the duties of this office effectively. Mr Jabu Moleketi was appointed as Chairman of the Company with effect from Wednesday 19 July 2017. His re-election as Chairman of the Board will be considered at the July 2018 meeting.

Independent advice

The Board recognises that there may be occasions where directors consider it necessary to take independent professional advice. This is done at the Company’s expense according to an agreed procedure.

Board meetings

The Board holds a minimum of four meetings, three teleconferences and a strategy session every year. Special Board meetings are convened when necessary. Two special Board meetings were convened during the year.

The table below records the attendance of directors at Board meetings for the year:

Name of director

12 May 2017

14 June 2017 Special

19 July 2017 Telecon

24 Aug 2017 Special

28 Sep 2017

10 Nov 2017 Telecon

7 Dec 2017

30 Jan 2018 Telecon

29 March 2018

PJ Moleketi 1

✔

✔

✔

✔

✔

✔

✔

✔

✔

MS Aziz Joosub

✔

✔

✔

✔

✔

✔

✔

✔

✔

V Badrinath

✔

✔

✔

✔

✔

✔

✔

✔

✔

DH Brown

✔

✔

✔

✔

✔

✔

✔

✔

✔

M Joseph

✔

✔

✔

✔

✔

✔

✔

✔

✔

BP Mabelane

✔

✔

✔

✔

X

✔

✔

✔

✔

SJ Macozoma 2

–

–

✔

✔

✔

✔

✔

✔

✔

TM Mokgosi-Mwantembe

✔

✔

✔

✔

✔

✔

✔

✔

✔

MP Moyo 3

✔

✔

–

–

–

–

–

–

–

M Pieters

✔

✔

✔

✔

✔

✔

✔

✔

✔

RAW Schellekens

✔

✔

✔

✔

✔

✔

✔

✔

✔

JWL Otty

✔

✔

✔

✔

✔

✔

✔

✔

✔

T Streichert

✔

✔

✔

✔

✔

✔

✔

✔

✔

Notes:

1. PJ Moleketi appointed as Chairman on 19 July 2017. 2. SJ Macozoma appointed 19 July 2017. 3. MP Moyo retired on 18 July 2017.

Board committees

The non-executive directors contribute their extensive experience and knowledge to the Board’s committees. All committees operate under Board-approved terms of reference, which are updated from time to time to stay abreast of developments in corporate law, King IV, the Listings Requirements of the JSE Limited and governance best practice.

Executive Committee

During the year, the Executive Committee included the Chief Executive Officer (Chairman), Chief Financial Officer, Chief Human Resources Officer, Chief Officer: Corporate Affairs, Chief Operating Officer: International Business, Chief Technology Officer, Chief Officer: Legal and Regulatory, Chief Officer: Strategy and New Business, Chief Officer: Consumer Business Unit, Chief Officer: Consumer Sales and Distribution, Chief Officer: Commercial Operations and Chief Officer: Vodacom Business.

The committee is responsible for managing the Group’s operations, developing strategy and policy proposals for the Board’s consideration, and implementing the Board’s directives. It has a properly constituted mandate and terms of reference.

The committee’s other responsibilities include:

• Leading executives, management and employees;
• Developing the strategy of the Group;
• Developing the annual budget and business plans for the Board’s approval; and
• Developing, implementing and monitoring policies and procedures, internal controls, governance, risk management, ethics and authority levels.

Audit, Risk and Compliance Committee

Current members: DH Brown (Chairman), BP Mabelane, SJ Macozoma

For details of the activities of the Audit, Risk and Compliance Committee, which can be found in its standalone report in the consolidated annual financial statements.

Remuneration Committee

Current members: TM Mokgosi-Mwantembe (Chairman), V Badrinath, DH Brown, 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 policy.

The membership of the Remuneration Committee does not comply fully with King IV or the JSE Listings Requirements, which advocate a majority of independent non-executive directors. Of the non-executive directors on the committee, only half are independent. Thoko Mokgosi-Mwantembe, the Chairman of the committee, and David Brown are independent non-executive directors. The Board is satisfied that Vodafone’s representation on this committee is appropriate given the valuable contribution of the Vodafone directors. Vivek Badrinath, who is the Vodafone Regional CEO for Africa, Middle East and Asia Pacific, has oversight over Vodacom, and Ronald Schellekens is the Vodafone Human Resources Director. Both provide useful insights to the performance of the Chief Executive Officer and the senior management. This assists with the evaluation of performance for reward purposes. To address non-compliance with the JSE Listings Corporate governance report continued Requirements, it was agreed with the JSE that the Chairman of the committee would have a casting vote in the event of any deadlock or dispute that could arise. The mandate of the committee was revised accordingly. The Chief Executive Officer and Chief Human Resources Officer attend the meetings by invitation. The committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.

In the year, the Remuneration Committee met five times with attendance as follows:

Name of director	9 May 2017		5 Sep 2017		9 Nov 2017		1 Feb 2018 Special		28 Mar 2018
TM Mokgosi-Mwantembe	✔		✔		✔		✔		✔
V Badrinath	✔		✔		✔		✔		✔
DH Brown	✔		✔		✔		✔		✔
RAW Schellekens	✔		✔		✔		✔		✔

For details of the activities of the Remuneration Committee, which can be found in the Remuneration report.

Nomination Committee

Current members: PJ Moleketi (Chairman), V Badrinath, TM Mokgosi-Mwantembe, RAW Schellekens

The Nomination Committee’s duties include identifying and evaluating suitable potential candidates for appointment to the Board, as well as candidates for the position of Chief Executive Officer and Chief Financial Officer. The authority to appoint directors remains a function of the Board. The committee also makes recommendations on the composition of the Board in terms of the mix of skills, size and the number of committees required, and it reviews and approves executive succession.

The membership of the Nomination Committee does not comply fully with King IV or the JSE Listings Requirements, which advocate a majority of independent non-executive directors. Of the non-executive directors on the committee, only half are independent. Jabu Moleketi, the Chairman of the committee, and Thoko Mokgosi-Mwantembe are independent non-executive directors. The Board is satisfied that Vodafone’s representation on this committee is appropriate given the valuable contribution of the Vodafone directors. Vivek Badrinath, who is the Vodafone Regional CEO for Africa, Middle East and Asia Pacific, has oversight over Vodacom, and Ronald Schellekens is the Vodafone Human Resources Director. As mentioned earlier, both provide useful insights to the performance of the Chief Executive Officer and other senior management. This assists with the review of the succession plans for management. To address non-compliance with the JSE Listings Requirements, it was agreed with the JSE that the Chairman of the committee would have a casting vote in the event of any deadlock or dispute that could arise. The mandate of the committee was revised accordingly. The committee is satisfied that it has fulfilled its responsibilities in accordance with its terms of reference for the reporting period.

In the year, the Nomination Committee met four times with attendance as follows:

Name of director	9 May 2017		5 Sep 2017		9 Nov 2017		28 Mar 2018
PJ Moleketi 1	–		✔		✔		✔
V Badrinath	✔		✔		✔		✔
TM Mokgosi-Mwantembe	✔		✔		✔		✔
MP Moyo 2	✔		–		–		–
RAW Schellekens	✔		✔		✔		✔

Notes:

1. PJ Moleketi appointed as Chairman on 19 July 2017. 2. MP Moyo retired on 18 July 2017.

The committee's key focus areas during the year included:

• Succession planning in respect of the senior leadership team;
• Reviewing the composition and mix of skills of the Board;
• Evaluating candidates for the positions of Chairman, annual review of the independence of directors, Lead independent director, Chief Operating Officer: International Business; Chief Officer: Commercial Operations and Chief Officer: Vodacom Business;
• Appointing a Lead independent director (per King IV); and
• Updating the committee charter to accommodate King IV.

Social and Ethics Committee

Current members: SJ Macozoma (Chairman), PJ Moleketi, RAW Schellekens, MS Aziz Joosub

There were no changes to the composition of the Social and Ethics Committee during the year. Key executives attend meetings by invitation but have no vote, including the Chief Risk Officer, Group Company Secretary (Ethics Officer), Chief Human Resources Officer, Chief Officer: Corporate Affairs, Chief Officer: Legal and Regulatory, Chief Officer: Strategy and New Business and Chief Officer: Commercial Operations.

As required by the Companies Act, No 71 of 2008 (as amended) and King IV, this committee oversees and monitors Vodacom's activities in relation to:

• Social and economic development, including the principles of the United Nations Global Compact, Broad-Based Black Economic Empowerment (BBBEE), Employment Equity and the Organisation for Economic Co-operation and Development's (OECD) recommendations on corruption;
• Good corporate citizenship which includes promotion of equality, prevention of unfair discrimination, corporate social responsibility, ethical behaviour and managing environmental impacts;
• Customer relations;
• Labour and employment, including skills development; and
• Safety, health and environmental issues.

The Social and Ethics Committee met four times during the year with attendance as follows:

Name of director	25 April 2017		30 Aug 2017		6 Nov 2017		13 Mar 2018
SJ Macozoma 1	–		–		✔		✔
PJ Moleketi 2	✔		✔		✔		✔
MP Moyo 3	✔		–		–		–
RAW Schellekens	✔		✔		✔		✔
MS Aziz Joosub	✔		✔		✔		✔

Notes:
1. SJ Macozoma appointed as Chairman of Committee on 28 September 2017.
2. PJ Moleketi stepped down as Chairman on 28 September 2017, but remained a member of the Social and Ethics Committee.
3. MP Moyo retired on 18 July 2017.

The committee's key focus areas during the year included:

• Noting the impact of the South African Government's National Integrated ICT Policy White Paper;
• Maintaining of the progress of the Vodacom 'Doing what's Right' programme;
• Driving BBBEE in Vodacom South Africa;
• Maintaining good relations with consumers;
• Maintaining good relations with employees and achieving employment equity;
• Promoting and protecting the environment, health and safety;
• Preventing and combating bribery and corruption;
• Being a good corporate citizen, particularly our efforts at protecting and advancing human rights, promoting equality and preventing unfair discrimination; and
• Extending the reach and impact of our values and ethics through our business partners and supply chain.

For details on the activities of the Social and Ethics Committee, which can be found in the Report of the Social and Ethics Committee.

Board evaluation

To allow sufficient time for the Board to complete all actions arising from a board evaluation King IV recommends that a board evaluation be conducted every second year. Certain actions from Vodacom's Board evaluation conducted in 2016/2017 are still in progress. On this basis, Vodacom will conduct its next Board evaluation in early 2019.

Company Secretary

All directors have access to the advice and services of the Group Company Secretary, Sandi Linford, who is responsible to the Board for ensuring compliance with procedures and applicable statutes and regulations. For the Board to function effectively, all directors have full and timely access to information that helps them do their duties properly. This includes corporate announcements, investor communications and information about developments that may affect Vodacom and its operations. Directors have full access to management as required.

The Group Company Secretary is responsible for director training. The Group Company Secretary and Chief Executive Officer induct new directors, which includes briefings on their fiduciary and statutory responsibilities, as well as on the Group's operations as required.

Share dealings

Vodacom has a share dealing policy requiring all directors, senior executives and the Group Company Secretary to obtain prior written consent from either the Chairman or Chief Executive Officer to deal in Vodacom Group shares. The Chairman has to obtain prior written clearance from the Chairman of the Audit, Risk and Compliance Committee. Closed periods are implemented as per JSE Listings Requirements, during which the Group's directors, executives and employees are not allowed to deal in Vodacom Group shares. Additional closed periods are enforced should Vodacom be subject to any corporate activity requiring a cautionary announcement.

Stakeholder relationships

Stakeholder engagement

The Board has delegated to management the responsibility to deal with stakeholder relationships in a proactive and constructive manner. There is an approved stakeholder policy in place.

For details of the initiatives and activities for the year, which are more fully reported on in the Report of the Social and Ethics Committee.

Shareholder relations

Vodacom proactively communicates its strategy and activities to shareholders through a planned investor relations programme which includes:

• Formal presentations of annual and interim results;
• Briefing meetings with major institutional shareholders after the release of results; and
• Hosting investor and analyst sessions.

Risk management

Management continuously develops and enhances its risk and control procedures to improve risk identification, assessment and monitoring. The Board considers business risks when setting strategies, approving budgets and monitoring progress against budgets.

A division reporting to the Chief Risk Officer assists in identifying, assessing and recording the risks facing the Group and, where appropriate, monitors mitigating actions.

Internal control

Management implements appropriate internal controls to provide reasonable assurance on safeguarding assets, preventing and detecting errors, the accuracy and completeness of accounting records, and the reliability of financial statements. Internal audit provides independent, objective assurance of the system of internal controls within the Group.

Technology and information governance

In line with King IV, technology and information governance forms part of our governance structures, policies and procedures. It forms part of the Group's strategic and business processes and is managed by the Chief Technology Officer.

The Vodacom Technology Governance Framework and Charter, which are mapped to the IT governance principles of King IV, have continued to be reinforced in the organisation. Each framework element is substantiated through demonstrable processes to align technology strategy and business needs, deliver value and manage performance, and to strengthen information security management, information management, risk management, business continuity management and compliance.