Ensuring business integrity

An ethical culture

Telkom has a zero-tolerance policy regarding unethical behaviour, fraud and corruption. The board is committed to building a group that supports the delivery of assurance functions to promote an ethical culture to all stakeholders. All employees are responsible to disclose information relating to any fraudulent conduct or unethical behaviour. Ethics policies are included in the group induction programme through the group company secretariat office and forms part of the continuous development online learning programme published on the Telkom Values Hub and various Telkom publications.

The Business Code of Ethics and its related policies were reviewed and replaced with the board-approved group ethics handbook to enhance ethics governance. The share dealing policy is included in the group ethics handbook, but it remains as a standalone policy due to its nature. The group ethics handbook was launched during the international fraud awareness week (18 to 22 November 2019) and is posted on the Telkom Values Hub.

The implementation plan of the group ethics handbook focused on Telkom’s values, conflict of interests, the ethics leadership pledge, gifts and entertainment, and share dealing activities. The board Chairperson and the GCEO signed the approved ethics pledge on behalf of the leadership committing to lead with integrity, promoting a culture of honesty, accountability and teamwork, and the group is encouraged to follow this example.

The Supplier Code Of Conduct regulates the conduct of service providers. Supported by the fraud policy statement, Telkom investigates allegations of fraud or irregular conduct without regard to any person’s relationship with the business, stature, position or tenure.

To promote combined assurance, proactive forensic assignments were undertaken with other assurance providers to uncover fraud or to identify internal control weaknesses. The economic crimes forum consists of Telkom Group Forensics, security, network protection services, cybersecurity and other role players. The forum meets periodically to deal with prevalent and pervasive fraud issues.

Share dealing policy

Telkom’s share dealing policy was reviewed and enhanced certain elements of it included in the group ethics handbook for ease of reference. However, it remains a standalone policy. This policy is informed mainly by the Financial Markets Act, 19 of 2012, and the
JSE Listings Requirements.

All directors and employees are required to adhere to the share dealing policy’s provisions. During FY2019, the closed period was extended by one month for affected directors and affected persons to ensure adequate protection of pricesensitive information. Trading in the company’s securities is not permitted during prohibited periods.

Engaging with shareholders

During August 2019, the Chairperson of the board engaged material shareholders through governance roadshows in Johannesburg and Cape Town. The international shareholders were also invited to various online meetings, but these were cancelled as the feedback indicated that the international investors did not have any issues which warranted an engagement at that time.

The key focus areas were governance-related matters, contributing to the strategic intent and value creation. These shareholder engagements will assist the board in exercising constructive influence, as and when appropriate. Refer to the Chairperson's report.

Shareholders received the Chairperson and management positively.

Fighting fraud

Telkom Group Forensics (TGF) conducted extensive faceto- face awareness campaigns in all of Telkom’s operating regions. We also used various other delivery methods that targeted employees, service providers and third-party employees. The fraud awareness messages were tailor-made for specific audiences and included positive messaging and real forensic cases to deter fraud. We engaged business units’ leadership on prevalent cases to find a common solution to the issues identified and to share learnings.

We conducted a fraud health check survey to understand whether our fraud awareness efforts are bearing fruit and to identify areas that needed special focus. The positive outcome was that most employees indicated that there was an open environment which made it comfortable to report fraud. The areas of improvement related to persuading more employees to report misconduct through the hotline, management or directly to TGF.

The key initiative was the “lead with integrity” pledge where group exco and various levels of employees signed the pledge to lead with integrity. The training results are reflected in the number of cases reported to the Telkom Crime Hotline, and in the high number of allegations directly reported by various stakeholders to TGF for investigation.

The Telkom Crime Hotline (0800 124 000 and ethicsline@kpmg.co.za) is independently managed and operates 24 hours a day. Complainants can choose to report anonymously and will be updated on the progress of the investigation or outcome if they elect that option.

During FY2020, 1 562 calls and emails were made to the Telkom Crime Hotline. The calls and emails were mainly for incidents related to TGF, security network protection services, and Telkom Mobile: 120 calls and emails received from the hotline were for TGF,
resulting in 78 forensic cases. In addition to that, 92 cases were walk-ins or directly reported to TGF, bring the total number of cases to 170. They related to fraud, corruption, theft and irregularity (non-compliance to policies, procedures or established practices).
The breakdown of the 170 cases is as indicated in the table below.

Common or key cases per each incident type

 

Incident types       Number   %     Summary of allegations reported
Corruption     12   7     Collusion between employee and service providers; between employee and customer; collusion between third-party employees and collusion between employees/third-party employees; and fraudsters
                   
Fraud     23   14     Service provider claiming for work not done (submitting fraudulent invoices); mismanagement of stock; fraud and theft of customer payments or abuse of suspense accounts; non-declaration of interest; employees conducting business with their own companies; submission of inflated or fraudulent invoices and subscription fraud
                   
Irregularities     16   9     Awarding contracts to service providers without following the procurement policy; leaking confidential information; irregular conduct relating to procurement and contract management; employees not declaring or managing their conflict of interest; employees/managers employing their relatives
                   
Theft     5   3     Theft of stock or Telkom assets by employees
                   
Early
resolution
cases		     114   67     These are small, non-core forensic cases. They are resolved through referrals to management or the relevant department, quick reviews by TGF or they are closed due to lack of evidence or information. Some cases related to misuse of Telkom resources, absenteeism and other management-related complaints
                   
        170   100      

In FY2020, the following were corrective actions stemming from forensic investigations: 11 employees were dismissed, 11 employees received various warnings including alternative to dismissals and 10 suspensions without pay; six employees resigned due to investigations being instituted against them or we recovered or withheld fraud losses from pension funds of six employees; two service provider contracts were terminated due to fraud or irregular conduct; and one employee’s contract was not renewed as a result of the investigation outcome. As at 31 March 2020, four employees and two service providers were under suspension based on the allegations of fraud or irregular conducted reported to TGF.

For criminal acts, we reported cases to the South African Police Services. They are investigating various criminal cases and others are pending in court. Where Telkom suffered fraud losses, appropriate remedies in law were used to recover loss amounts from implicated parties. To deal with supplier misconduct, a supplier disciplinary committee was formed within Openserve. This will be extended to the rest of the group in FY2021.