Remuneration report summary

The Remuneration Committee (Remco or the Committee) enables the Board to execute its mandate by ensuring competitive, fair, transparent and responsible remuneration strategies are in place. This facilitates the attraction, retention and engagement of the best talent required to sustainably achieve the Group's strategic objectives.

As part of Remco’s full mandate, as reflected in its terms of reference¹ and annual work plan, Remco reviews our Group remuneration strategy, management and its practices.

The Group remuneration mix consists of guaranteed pay (GP) and variable pay schemes that need to drive a high-performance culture at Group, business unit, and individual level. Our Group remuneration strategy aims to remain relevant, agile and fit for purpose, cultivate a value-based high-performance culture, and create value for shareholders and stakeholders.

¹ The Committee's terms of reference is available online.

The Committee provides strategic oversight and ensures that:

Transparent disclosure processes that enable stakeholders to reasonably assess the line of sight between the business strategy outcome and the implementation of the Group’s remuneration and governance are aligned
No deviations to the provisions of its remuneration policy, including short- and long-term incentive scheme rules
Adherence to the Companies Act, 71 of 2008, King IV guidance provisions on remuneration governance and the JSE Listings Requirements

FY2024 key performance considerations

Our 2024 financial results indicate a progression towards recovering, optimising and positioning Telkom at the heart of South Africa’s future digital transformation agenda. Our free cash flow has improved significantly. This demonstrates that we are driving operational efficiencies and applying sound financial management principles that set us up for continuous improvement.

Challenging macro-economic factors and intense competition had a direct impact on our overall business performance. Macro-economic headwinds impacted consumer spend, GDP growth (0.64%), inflation (5.9%), interest rates, and a weaking rand. In addition, loadshedding hours increased by approximately 25% compared to FY2023, resulting in progressively higher operational costs. High unemployment and retrenchments placed further strain on our consumers and employees.

These challenges forced the Group to reconsider its operating model and enter a Group restructuring process to reduce its fixed employment costs. This process was concluded with Telkom SA SOC Ltd, Gyro, BCX and Openserve in May 2023. The Group headcount was reduced by 1 731 employees, with total fixed employment cost savings of R1 billion for FY2024.

Brian Kennedy
Chairperson
Remuneration Committee

Remuneration strategy framework

The remuneration strategy framework is benchmarked annually by independent consultants, Deloitte, to ensure that our total remuneration policy and performance conditions are clearly defined and linked to Telkom’s strategy, and that our ESG objectives are embedded to drive accountability for achieving these within the Group.

We applied governance and best practice principles in formulating the design and development of the Group remuneration strategy. Our Group remuneration framework will continue to allow us to attract, motivate, engage and retain the best talent, and place them in significant valuable roles to drive the execution of the Group strategy within a pleasant, safe and conducive work environment.

Our hybrid work model remains key to driving high levels of engagement and productivity and creating a culture of strong team effectiveness through our OneTelkom mindset.

The table alongside outlines the remuneration strategy framework underpinned by the pay mix philosophy and principles.

Summary of remuneration policy changes in FY2024

The remuneration strategy is critical for enhancing our employee value proposition to enable Telkom to mitigate people risks. At the same time, it empowers our leaders to be accountable for strategy execution through the Group’s talent resources, and for setting the tone for a high‑performance culture conducive to the creation of value for all stakeholders.

We continuously assess the relevance, materiality and effectiveness of the Group remuneration policy and practices that drive the desired high‑performance culture to foster a sustainable positive outcome for shareholders. The shareholder engagements outlined below, along with our annual assessment, resulted in the following remuneration enhancements:

Benchmarked Executive Directors’ remuneration and Group Prescribed Officers’ pay mix on-target performance relative to the market

Consistent alignment with Group strategy through the development of Group, business unit and individual scorecards

Reviewed, redesigned and repositioned the STI scheme to drive sustainable strategic performance achievement in line with Group, business unit and individual scorecards

Aligned the LTI scheme with market best practices fit for Telkom’s long-term strategic objectives, and to ensure sufficient leverage between threshold, on-target and stretch performance

Integrated Telkom’s ESG strategy metrics as part of the performance conditions for the STI and LTI schemes

FY2025
Committee
focus areas

We will continuously assess our total remuneration against external market trends and internal parity, and integrate best practice underpinned by governance to ensure our policies and structures support the sustainable achievement of Telkom’s strategic objectives. Our remuneration policy, practices and decisions will continue to focus on ensuring that:

The Group scorecard that leads and aligns the business unit and individual scorecards promotes integration and provides a consistent framework for performance across the Group
The performance measures consider the broader Group and business unit strategies that integrate Telkom’s ESG strategy as part of running our business

Our Group total remuneration offering aims to:

Drive a high-performance culture within a hybrid working model
Influence remuneration decisions through ESG metrics/performance conditions that are included in the STI and LTI scheme rules
Attract, motivate, engage and retain employees with key leadership and technical skills through a competitive total (financial and non-financial) reward offering
Balance the remuneration mix for Executive Directors and Group Prescribed Officers to continuously align their interests to those of shareholders
Drive fair and responsible pay objectives in line with the disclosure requirements envisaged under the Companies Act, 71 of 2008 and the proposed Companies Amendment Bill, 2021

FY2023 remuneration voting outcomes

The remuneration policy and implementation report are subject to non-binding advisory votes at the AGM, in line with the JSE Listings Requirements and King IV recommendations, and the proposed amendments to the Companies Act, 71 of 2008.
The graph below reflects the 3-year non-binding advisory support vote in favour over the past three years for our remuneration policy and report and the approval for Non-executive Directors’ fees. We view this as a good indication that shareholders are satisfied with the FY2023 remuneration policy and its implementation report. We will continue to improve and address shareholder concerns.

As per our commitment to proactively engage with and listen to shareholders, Telkom invited shareholders to engagements between 14 August and 17 August 2023, ahead of the 2023 AGM. The Chairpersons of the Board and Remco discussed the Group’s proposed resolutions with shareholders, and various concerns were raised, acknowledged and clarified.

We will continuously
assess our total
remuneration against
external market trends
and internal parity.

The table below reflects the main concerns raised by shareholders, which supplemented Remco's analysis of proxy voting recommendations and the Group's responses:

Fair and equal pay

PAY PARITY

Requested timelines for disclosure on pay transformation objectives, including the lowest/highest paid and gender and race pay gaps, and for interventions to close the gaps
Requested disclosure on pay parity between the top 10 and bottom five earners
Requested disclosure on how the Group will address gender parity at Group Exco level

Remco’s response

We have embarked on a journey to review our policy and practices to fully comply with the proposed amendments to the Companies Act on fair and responsible pay. We will commission Remchannel to assist by:

Conducting an independent and detailed fair pay analysis
Providing guidance on disclosure in line with King IV, the Companies Amendment Bill (B27B-2023), 2021 and institutional investors’ expectations

We will include the outcomes of the fair pay analysis, including ratios for GCEO pay and top 5% versus bottom 5%, in the FY2025 remuneration report. We have made progress in addressing gender parity on Group Exco level. As at 31 March 2024, Group Exco consisted of four men (two African, one Coloured and one White) and two African women.

GROUP CEO’S REMUNERATION

Requested that remuneration for the Group Chief Executive Officer (GCEO) be reconsidered
Asked whether the GCEO receives a retention bonus

Remco’s response

The GCEO’s remuneration will be reviewed during the annual salary review cycle with effect from 1 April 2024. The review will be based on Group and individual performance, aligned with the total remuneration pay mix approved in FY2023 (GP – 59%, STI – 15% and LTI – 26% at threshold performance)
There is no retention bonus in place for the GCEO

MINIMUM SHAREHOLDING REQUIREMENT (MSR)

The MSR build-up period is too long at five years; a review was requested
The LTI three-year cliff vesting is misaligned to the MSR tenure of five years

Remco’s response

Five years is viewed as reasonable, considering:

Market guidance on an acceptable MSR build-up period
The significant increase in MSRs, from 15% of GP to 200% for the GCEO and 150% for Group Prescribed Officers

Short-term incentives

KEY MEASURES

Consider proposal that the STI should rely 50% on delivery of the Value Unlock Strategy
Disclose the rationale for cash flow not being included as an "on and off" switch in the STI
Management to ensure that STI allocations are triggered by deals

Remco’s response

Value Unlock Strategy KPIs are incorporated in both Group and business unit scorecards. The KPIs include execution of strategic projects that will drive inorganic revenue growth and creation of significant value for the Group
Free cash flow, profit after tax and revenue are financial measures in the STI scheme
Refer to the policy section of the full remuneration report.

Long-term incentives

PERFORMANCE TRACKING

For some elements of the remuneration policy, it is not clear how they will be measured for remuneration purposes. An example is the KPI of closing three partnerships.

Remco’s response

As part of good reporting governance, the Committee will introduce a Group scorecard performance tracker that will create synergy on the set performance against the actual. This will include quarterly updates, a formal review after six months and a final review annually to Remco.

Long-term incentives

Governance and key decisions

DOWNSIDE CALIBRATION

The new remuneration policy is clear on the upside, but more clarity is required on the downside calibration.

Remco’s response

Modifiers built into the STI formula include:

A modifier that can be applied to adjust for affordability or other relevant factors. For example, Remco may modify incentives downwards for once‑off events or to ensure affordability
A negative governance modifier (0% – 15%) for:
- Systemic risk issues
- Breaches of regulations or regulatory requirements
- Unfair or unethical practices towards customers and/or within the Group

The Group and business unit scorecards are designed so that under-performance/outperformance against the scorecard will result in a zero to lower/higher award payout. Refer to the policy section of the full remuneration report.

KEY MEASURES

Concern that ROIC has the lowest weighting of the LTI measures
Recommendation that the HEPS must be cash
Need for full disclosure to understand the LTI remuneration
Concern that ESG measures are not included in the LTI scheme

Remco’s response

Concerns noted and disclosure in the implementation report

TIMEFRAME

Explain the rationale for shortening the LTI vesting period from five to three years.

Remco’s response

A three-year cliff vesting approach simplifies target setting and improves line of sight linked to decision‑making time horizons.

In conclusion, the shareholders indicated that the repositioning of our remuneration approach (implementation report and increased participation thresholds) drives the right behaviours.

Governance and key decisions

Committee composition and meeting attendance

The Committee's composition and Members’ attendance at the four regular and four special meetings held in FY2024 are reflected in the table alongside.

¹	Resigned on 29 September 2023.
²	The four special meetings were required to obtain approvals to enable management to execute key/strategic deliverables, including approvals of new LTI and STI schemes, wage settlement offers to bargaining unit members and consideration of appointments of GCFO and Group Chief of Capital Projects. No additional fees are payable for special meetings.

Name	Designation	Meeting dates								Total attendance
		5 Jun 2023	27 Jun 2023 (S)²	7 Jul 2023 (S)²	15 Aug 2023	21 Sep 2023 (S)²	28 Sep 2023 (S)²	15 Nov 2023	11 Mar 2024
B Kennedy	Chairperson	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	8/8
O Ighodaro	Member	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	8/8
MG Qhena	Member	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	8/8
M Nyati¹	Member	Yes	No	Yes	Yes	Yes	Yes	N/A¹	N/A	5/6
LL Von Zeuner	Member	No	Yes	Yes	Yes	Yes	Yes	Yes	Yes	7/8

Key decisions taken in FY2024

In line with the remuneration policy and with due cognisance of the factors impacting remuneration, Remco made the following key decisions:

Guaranteed
pay

Remuneration element	Employee level	Decision
FY2024 – effective 1 April 2023	Executive Directors, Group Prescribed Officers and management employees	0% increase granted
FY2024: with effect from 1 October 2023 retrospective 1 April 2023	Wage settlement agreement for bargaining unit employees	4% salary increase for bargaining unit employees calculated on relative 50th percentile of market functional areas All bargaining unit employees below the 50th percentile of their respective functional areas will be aligned to the functional area’s 50th percentile after the implementation of the 4% increase
FY2025: with effect from 1 April 2024		5% salary increase for bargaining unit employees calculated using the 50th percentile as the reference to market functional areas
FY2025: with effect from 1 April 2024		Average 5% salary increase for employees outside the bargaining unit, calculated using the 50th percentile as reference to market functional areas
FY2026: with effect from 1 April 2025		5% salary increase for bargaining unit employees calculated on the 50th percentile of market functional areas

Short-term
incentive
(STI)

Remuneration
elements

Decision

FY2024 STI payment

In line with the STI policy, the Board approved the STI pool based on 20% PAT achievement, linked to the Group, business unit and individual scorecards
The maximum amount for STI is capped at 20% of PAT, with a maximum cap payout of 150% of the on-target STI percentage of GP, if maximum performance is achieved
Telkom approved the individual STI payments for the Executive Directors and Prescribed Officers, considering the required level of Group, business unit and individual scorecards. Details of their STI payments are disclosed in the implementation section of the report

FY2025 STI plan

The Committee approved the FY2025 STI plan in line with key policy principles as approved with the following changes:

A threshold payment amended to below 25% of the on-target performance STI calculated as a percentage of GP. The threshold payment will be set at R1 above approved budget PAT. This implies that the bonus pool provision commences at R1 above budgeted PAT
Group and business unit scorecards structure for FY2025

Key principles remained the same, highlighting the following:

The scheme is self-funding from Group PAT, capped at 20%
The STI methodology is linked to the Group, business and individual performance to ensure line of sight
Financial targets and weightings are set to ensure that the pool caters for the following performance achievement: threshold, on-target and maximum

Performance area	FY2025 Group weighting	FY2025 business unit weighting
Financial	50%	50%
Strategic	20%	15%
Guaranteed pay (GP)
Customer appreciation	15%	15%
ESG	15%	20%

Long-term
incentives
(LTI)

Remuneration
elements

Decision

FY2024 LTI awards

No forfeitable shares were allocated to any permanent employees due to affordability and the prohibited/closed period regarding the potential sale of our masts and towers business.

Approval of 2020 TSA share vesting

The tranche vesting of Telkom shares (June 2023) was approved in line the LTI performance conditions scorecard and the rules of the scheme.

The Committee was challenged by the average performance approach followed to evaluate the total shareholder return (TSR) performance condition for vesting the TSA award. Given the under-achievement against set targets for the third year of the performance period (FY2023), the Committee opted to apply its discretion, as provided for in the TSA letter, and was of the view that performance achievement for each year with no recognition of over-performance (year 1 and 2) and no vesting in respect of year 3 was more palatable. The Committee applied its discretion and recommended a 66.67% vesting which was approved by the Board.

Details of the performance vesting condition and achieved targets for Executive Directors and Group Prescribed Officers are outlined in the implementation report.

NED fees
FY2024 Non-executive Director fee proposals	Remco recommended to the Board a 0% increase in the all-inclusive fee structure for Non-executive Directors.

Additional talent matters considered

The Committee also reviewed and noted the following:

The appointment of Sello Mmakau as Group Chief Digital Officer effective 1 April 2024
Continuous monitoring of the cost management target as set during the S189A restructuring processes
Succession planning for the Group Executive Committee

Single-figure remuneration

Executive Directors

The following table outlines the aggregate remuneration, benefits paid and STIs for FY2024:

Executive Director: GCEO S Taukobong

	FY2024	FY2023
GP	R9 450 000	R9 450 000
Motor car insurance	R11 997	R11 997
Funeral benefit	R296	R296
STI	R2 972 575	R0
LTI (vested shares)	R0	R1 604 942
Total remuneration paid	R12 434 868	R11 067 235
Telkom Retirement Fund (TRF)*	R859 950	R859 950

Executive Director: GCFO NS Dlamini
Appointed 1 December 2023

	FY2024	FY2023
GP	R2 166 666	N/A
Motor car insurance	R0	N/A
Funeral benefit	R99	N/A
STI	R545 234	N/A
LTI (vested shares)	R0	N/A
Total actual remuneration paid	R2 711 999	N/A
TRF*	R163 367	N/A

*	Company contributions included in GP. However, employees have the flexibility to determine contributions.

Executive Director: GCFO DJ Reyneke
1 April 2023 to 30 November 2023

	FY2024	FY2023
GP	R4 076 800	R6 115 200
Motor car insurance	R7 998	R11 997
Funeral benefit	R197	R296
STI	R0	R0
LTI (vested shares)	R0	R586 600
Total actual remuneration paid	R4 084 995	R6 714 093
TRF*	R461 086	R691 629

*	Company contributions included in GP. However, employees have the flexibility to determine contributions.

Group Prescribed Officers

The following table outlines the aggregate remuneration benefits paid and STIs for FY2024:

	Group Prescribed Officers
	DJ Reyneke*	NM Lekota	AC Beukes	LM Siyo	PJ Bogoshi	LS Maloba	FY2024 Total	FY2023 Total
GP	R2 038 400	R4 351 552	R5 700 000	R5 608 727	R5 783 355	R4 119 500	R27 601 534	R25 937 634
Motor car insurance	R3 999	R0	R11 997	R11 997	R0	R9 997	R37 990	R35 991
Funeral benefit	R99	R296	R296	R296	R296	R271	R1 554	R1 480
STI	R1 643 795	R1 269 718	R1 448 296	R1 760 996	R967 553	R0	R7 090 358	R0
LTI (vested shares)	R0	R0	R0	R0	R0	R10 732 525	R10 732 525	R5 601 108
Separation	R0	R0	R0	R0	R0	R2 214 864	R2 214 864	R0
Leave payment	R0	R0	R0	R0	R0	R112 350	R112 350	R0
Total actual remuneration paid	R3 686 293	R5 621 566	R7 160 589	R7 382 016	R6 751 204	R17 189 506	R47 791 174	R31 576 213
TRF**	R230 543	R456 913	R518 700	R325 306	R563 877	R348 098	R2 443 437	R2 244 540

*	DJ Reyneke - 1 December 2023 to 31 March 2024.
**	Company contributions included in GP. However, employees have the flexibility to determine contributions.

Executives' and Group Prescribed Officers' emoluments are set out in the annual financial statements, which are available online.