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Corporate governance report
Governance structures

The board has delegated some of its functions to formally constituted committees, for execution.

The board respects its ultimate responsibility for the group, and recognises that delegating functions does not reduce the directors' individual and collective responsibilities. Each member exercises due care and judgement in accordance with their statutory and fiduciary duties.

Our board and committee structure

Our board and committee structure

The board

The board operates in accordance with a well-defined board charter, which is available at www.telkom.co.za/ir. The charter defines the board’s roles and responsibilities as well as requirements for its composition and meeting procedures. An annual work plan guides the board in addressing all the required matters within the year.

In fulfilling its duties, the board is further guided by the company’s MOI, the Companies Act, King IV, JSE Listings Requirements and all other relevant legislation. The group has codes and policies governing directors’ conduct and management of conflicts of interests. It is according to such codes and policies that our directors are held accountable for effective and ethical leadership.

The board is satisfied that it has discharged its duties in accordance with its charter for FY2018. Some of the board’s key focus areas were, among others, approving the group’s governance framework, improving customer experience, exploring innovative ways to improve performance and ensuring King IV compliance.

In FY2019, the board will ensure management adequately implements the governance framework across the group, thereby enhancing effective control and ensuring that the group is aligned from a governance perspective. It will also continue the focus of customer service to improve the overall customer experience as our customers are the base of our company. In light of the revenue pressures facing the group, there will be more focus on increasing new generation revenue streams.

Composition of the board

As per the provisions of the MOI, the board comprises 14 non-executive and two executive directors, and is led and presided over by an independent chairman. All the non-executive directors are classified as independent. The nominations committee annually reviews the board’s composition to ensure that it reflects the appropriate mix of knowledge, skills, experience, diversity and independence. The board is satisfied that its composition reflects these metrics appropriately.

The GCEO is mandated with formulating the strategy for board approval, and then implementing it with the assistance of the exco. He is the direct liaison between the board and management. The responsibility for the day-to-day running of the business emanates from this strategy. The GCEO reports to the board on the matters within the ambit of the exco.

The board has an approved diversity policy, which articulates the board’s commitment to diversity, particularly gender and race. Although no targets have been set, the board prioritises diversity and the perspectives it brings. The board’s commitment to diversity extends beyond the boardroom. For example, Telkom ’s FLDP programme mentors women for leadership roles. Refer to page 72 for more information.

Gender Race
Classification Tenure

Board committees

Each committee is constituted in accordance with the provisions of the Companies Act, King IV and the JSE Listings Requirements and taking into account additional criteria agreed to by the board. In constituting the committees, the board gives due regard to crossmembership within the committees. This ensures committees collaborate and complement each other’s work.

The group company secretary supports the board and the committees. Each committee has approved terms of reference that stipulate its roles and responsibilities. These terms of reference are reviewed annually by the board.

Each committee’s terms of reference is available online at www.telkom.co.za/ir.

Committee meetings are scheduled before board meetings so their chairmen can provide feedback and for consideration recommendations or raise concerns to the board. Through a board-approved process, each committee has authority to secure the services of professional advisors and subject matter experts to assist them as they execute their duties.

All the board committees are satisfied that they have discharged their duties in accordance with their terms of reference during FY2018.

Below is a table of the board and each committee’s meeting attendance.

Director Board Audit committee Risk committee Nominations committee Remuneration committee Social and ethics committee Investment and transactions committee
Independent non-executive directors
JA Mabuza (chairman) 5/5 2/2 4/4
N Kapila 5/5 4/4 4/4 6/6
I Kgaboesele 5/5 7/7 4/4
KW Mzondeki 5/5 7/7 4/4 6/6
SL Botha 5/5 2/2 4/4
L von Zeuner 5/5 7/7 4/4 4/4
K Kweyama 5/5 2/2 3/4
F Petersen-Cook 5/5 4/4 6/6
RG Tomlinson 4/5 7/7 6/6
GW Dempster 5/5 4/4 6/6
Dr H Touré1 4/5 1/4 2/6
D Mokgatle2
S Moloko2
S Luthuli3
Executive directors
SN Maseko 5/5 7/7 4/4 2/2 4/4 4/4 6/6
DJ Fredericks4 5/5 7/7 4/4 4/4 4/4 6/6
TBL Molefe5
1 During the year Dr Touré was selected as a Presidential candidate for Mali, which has greatly affected his availability.
2 Appointed 20 March 2018.
3 Appointed 25 May 2018.
4 Stepped down 30 June 2018.
5 Appointed 1 July 2018.
Audit committee

The mandate of the audit committee is in terms of the provisions of the Companies Act and its terms of reference.
It nominates auditors for appointment as auditors of the company, determines the fees to be paid, terms of engagement, nature and extent of the non-audit services and ensures that such appointment is in line with the Companies Act. The audit committee has a statutory obligation to report to shareholders on how the committee has carried out its obligations.

The audit committee comprises four independent non-executive directors. The chairman of the committee is appointed annually by the board in accordance with our MOI. The GCEO, GCFO, chief risk and compliance officer, group executive: internal audit and the senior partners in charge of the external audit attend these meetings. The chairman of the risk committee is an ex-officio member of the audit committee. The board is satisfied that the audit committee meets the statutory requirements for its composition.

The internal control environment of Yellow Pages has been a focal area for the audit committee in the wake of extensive business transformation. A task team was appointed to oversee the implementation of processes and system improvements to strengthen the control environment. As part of our endeavours to strengthen the control environment, we:

  • appointed a chief risk and compliance officer responsible for group oversight;
  • reviewed the mandate and role of internal audit as a centralised group audit function;
  • are continually reviewing the internal controls and the IT environment for adequacy; and
  • have ensured that all agreements which were entered into fraudulently were cancelled, and legal proceedings to recover funds are in process.

Under the guidance of the audit committee, a policy for inter-company processes was implemented, together with a processes and procedures document. The CFOs of subsidiaries were requested to sign service level agreements as a sign of commitment to the policy, processes and procedures. The audit committee continues to monitor the internal control environment for adequacy. One of the focus areas for the audit committee was strengthening the internal control environment for the group, particularly Yellow Pages, and improving on inter-company processes.

For more details on the activities of the audit committee, refer to the audit committee report on page 8 in the annual financial statements, available online at www.telkom.co.za/ir.

Remuneration committee

The remuneration committee is mandated with assisting the board with recommendations on policies and processes regarding the appointment, development and succession of group senior executives as well as recommending the remuneration of the non-executive directors and senior executives.

It ensures that the company's remuneration philosophy and policy are competitive and meet best practice standards, in support of the group's strategic objectives.

The committee comprises three independent non-executive directors. The GCEO, chief of human resources and group executive: remuneration attend the meetings by invitation.

The remuneration policy was reviewed and updated to include the process to be followed should Telkom receive less than a 75 percent vote of the shareholders on its remuneration policy and implementation plan.Refer to the remuneration report on page 103.

Risk committee

The risk committee assists the board with risk management by ensuring that the company has implemented an effective policy and plan for risk management that will enhance its ability to achieve its strategic objectives.

The committee comprises five non-executive directors. The GCEO, GCFO, chief risk and compliance officer, senior audit partners in charge of the external audit, risk owners, group executive of internal audit and the executive of enterprise risk management attend the committee meetings by invitation. The chairman of the audit committee and the chairman of the investment and transaction committee are ex-officio members of the risk committee.

During the year under review, the committee's focus was on reviewing all risks identified by management to ensure that adequate mitigations were in place and that there was an appropriate balance between risks taken and the expected benefits to be derived. The risk committee also took time to interrogate the regulatory landscape and its impact on business sustainability, as well as ensuring that all relevant legislation and applicable laws are complied with.

In light of the board's increased obligations regarding the management and oversight of information and technology as echoed in King IV, and given the increase in cyberattacks and threats, the risk committee is devoting more attention to this aspect. The terms of reference were updated to articulate the increased responsibility. The technology and information governance charter was approved as part of the committee's responsibilities for the oversight of technology and information. Refer to page 65 for technology and information governance, and page 25 for ERM.

Nominations committee

The nominations committee (nomco) is responsible for reviewing and making recommendations on the board composition. This includes all aspects of diversity including academic qualification, technical expertise, industry knowledge, experience, business acumen, race and gender as well as the balance between executive, non-executive and independent non-executive members.
It ensures that there is a balance of power within the board and its structures.

The committee works with the remuneration committee to formulate succession plans for senior executives and critical roles within the group. A board-approved diversity policy guides the nomco in nominating candidates for the board.

The nomco facilitates the evaluation of the board, individual directors and board committees. It comprises three non-executive directors. The GCEO attends by invitation.

Having considered the board composition and required skills, the nomco initiated a process to appoint additional directors. The appointment process is articulated in the nomco's terms of reference. Key elements in determining whether additional members were required were:

  • the principal skills of each director;
  • the combined skill set of the board;
  • diversity considerations which included gender, race and background;
  • the number of directors that were nearing nine years tenure; and
  • the skill set required to meet the strategy and vision of the group.

The committee determined that three more directors would be required. The nomco recommended the appointment of Dolly Mokgatle, Sello Moloko and Sibusiso Luthuli to the board. Dolly and Sello were appointed on 20 March 2018 and Sibusiso was appointed on 25 May 2018. The three directors will be up for election at the AGM in August 2018.

Investment and transactions committee

The investment and transactions committee ensures that all investments or business disposal decisions are aligned to the group's strategy, gearing and risk appetite. It reviews and recommends:

  • all significant capital investment; and
  • contracts to be entered into by the group which require board approval in line with the delegation of authority.

The committee monitors the performance of investments against original investment criteria and pre-investment assumptions, and contracts against the contract terms and conditions.

The committee comprises seven members. The GCEO is a member of this committee and the GCFO attends by invitation.

The committee considered the implications of government selling its Telkom shares, following an announcement to this effect by the former minister of finance. Discussions were also held on the ICT White Paper, spectrum auction and the associated implications for Telkom.

Social and ethics committee

The social and ethics committee monitors the company's activities regarding legislation and codes of best practice. In executing its duties, the committee takes cognisance of the UN Global Compact Principles, Organization for Economic Cooperation and Development recommendations, the Employment Equity Act and the B-BBEE Certification Act.

The committee adheres to the specific requirements of Regulation 43 in the Companies Act that requires it to monitor matters relating to social and economic development, good corporate citizenship, environmental, health and safety concerns, consumer relations and labour and employment. This committee is further mandated with overseeing the implementation of company ethics.

The committee comprises three non-executive directors. The GCEO, GCFO, chief of human resources and chief risk and compliance officer attend the meetings by invitation.

Refer to page 91 for further detail.