Corporate governance report

The board of directors and senior management are committed to good corporate governance and understand their roles and responsibilities as custodians of the Company which has over 116 million customers and 145 000 shareholders.

Introduction

The MTN Group Limited subscribes to high ethical standards and principles of corporate governance. This has been an important feature of the business since the Company’s foundation. The Company’s corporate governance system is the cornerstone of its primary objective of creating value for its stakeholders in a sustainable way, in the context of the triple bottom line.

Regulatory compliance

The MTN Group Limited is a company incorporated in South Africa under the provisions of the Companies Act, 1973, as amended (Act No 61 of 1973). The Group encompasses operations in 21 countries in Africa and the Middle East, holding companies in at least three other jurisdictions and is listed on the JSE Limited (JSE). In keeping with its vision and strategy, the Group subscribes, and applies the principles contained in the Code of Corporate Practices and Conduct recommended by the King Report on Corporate Governance in South Africa 2002 (King II).

While the board is satisfied that the Group does comply with the JSE Listings Requirements, the Companies Act and the requirements of King II, the board has already started addressing the challenges posed by the recommendations of the updated and revised King Report on Governance for South Africa 2009 (King III) and the much awaited new Companies Act (Act No 71 of 2008).

In other jurisdictions where the Company operates, governance developments are monitored on an ongoing basis to ensure that local regulatory requirements are complied with. The board monitors compliance by means of committee reports, which include information on any significant interaction with key stakeholders, including regulators, and through the activities of locally based audit and risk committees and internal auditors.

The board of directors endeavours to ensure that all operations comply with these corporate governance principles and the requirements of global best practices. Likewise, the board places strong emphasis on implementing high standards of reporting, financial and risk management.

The MTN Group financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as required by the JSE Listings Requirements, Corporate Laws Amendment Act and other legislative requirements or corporate governance frameworks. The Company’s corporate governance systems are designed to exceed minimum compliance levels and continue to evolve to meet the expectations of all stakeholders.

During the year under review:

• The board received presentations on King III as well as the implications of the newly promulgated Companies Act, focused on the board, committees and individual directors;
• The board undertook a comprehensive review of the existing composition and skills available on the board and defined the key attributes that would be required for future appointments. It also reviewed the composition of the audit committee, nominations, remuneration, human resources and corporate governance committee (NRHR & CG committee) and the risk management and compliance committee as well as the composition of the board itself and, based on the findings, decided to reconstitute the membership of committees and the board. The effective date of such appointments was 1 January 2010.
• The board received presentations from the sponsor on the implications of changes to the JSE Listings Requirements.

Looking forward to 2010 and ahead

In keeping with King III, Companies Act, No 71 of 2008, JSE Listings Requirements and other governance and legislative developments, the focus in 2010 and ahead will be on the following initiatives:

• Implementation and assessment of the Company’s compliance with King III, including a gap analysis exercise to identify specific areas of improvements;
• Continue to review regulatory and legislative developments to ensure that the Group is able to respond appropriately;
• Prepare to implement the new corporate law regime, together with new or amended legislation relating to competition, privacy of information and consumer protection;
• Review and update the board charter, articles of associations and committees’ terms of reference to incorporate the requirements of the new Companies Act, the JSE Listings Requirements and King III; and
• Review all shareholder agreements to align them with new regulatory and corporate governance developments.

Board of directors and composition

The MTN Group has a unitary board structure comprising three executive directors, two non-executive directors and nine independent non-executive directors.

The non-executive directors and independent non-executive directors play a critical role as board representatives on the various board committees and ensure that the Company’s interests are served by impartial, objective and independent views that are separate from those of management and shareholders. Determination of independence is guided by the King Code, the Companies Act and corporate best practice.

The MTN Group board retains full and effective control over the Group and is responsible, inter alia, for the adoption of strategic plans, the monitoring of operational performance and management, and the development of appropriate and effective risk management policies and processes. The full extent of the board’s responsibilities is contained in an approved board charter. The directors are of the opinion that they have adhered to the terms of reference as detailed in the board charter for the financial year under review.

The board and its committees’ composition and the record of attendance are set out on page 98. The profiles of the individual directors, including appointment dates, are set out on pages 14 and 15 and page 98.

Articles of association and board charter

The general powers of the directors are set out in the Company’s articles of association. They have further unspecified powers and authorities in respect of matters which may be exercised and dealt with by the Company, which are not expressly reserved to the members of the Company in general meeting.

The board charter regulates how the board and individual members of the board discharge their responsibilities according to the principles of good governance. The charter aims to ensure that all board members understand their duties and responsibilities as well as the laws, regulations and best practices governing their conduct.

The board charter details the following key matters:

• Division of responsibilities between the board and management
• Size and composition of the board
• Balance of powers
• Role of the board
• Matters reserved for the board
• The role of the chairman, the chief executive and the company secretary
• Board and committees governance
• Evaluation and performance of the board and its committees; and
• Relationship with all stakeholders

Chairman

The board is chaired by Mr MC Ramaphosa. No individual board member has unfettered powers of decision making. Responsibility for managing the board and executive responsibility for the conduct of the business are differentiated. Accordingly, the roles of the chairman of the board and the chief executive officer are separate. The chairman is responsible for leadership of the board, ensuring its effectiveness in all aspects of its activities and setting its agenda. The chairman is also responsible for ensuring that the directors receive accurate, timely and clear information. The chairman also ensures effective communication with shareholders and facilitates the effective contribution of non-executive directors in particular and ensures constructive relationships between executive and non-executive directors. The board, on the advice and recommendation of the executive and steering committee (Exco), is responsible for setting the strategic direction of the Company. Annually, the board considers, debates and adopts with or without amendments, a strategic plan presented by Exco.

Group president and chief executive officer (GP & CEO)

Mr PF Nhleko is the GP & CEO and is responsible for the day-to-day management of the Group, supported by Exco, which he chairs. The GP & CEO provides leadership to the executive team in running the business, co-ordinates proposals developed by the executive committee for consideration by the board, and also develops the Company’s strategy for consideration and approval by the board.

Appointment and resignation

To ensure a rigorous and transparent procedure, any appointment of a director is considered by the board as a whole, on the recommendation of the NRHR & CG committee. Where necessary, MTN Group uses external service providers to source the skills required by the board. The selection process involves consideration of the existing balance of skills and experience on the board and a continual process of assessing the needs of the Company. Non-executive directors are required to devote sufficient time to the Company’s affairs.

There is no formal limitation on the number of board appointments that non-executive directors can hold but all directors are required to carefully consider the number of appointments they take so as to ensure that they have the time and capacity to properly and comprehensively carry out their duties as a director. Non-executive directors are required to advise the chairman of the board or the chairman of the NRHR & CG committee before accepting membership on other external boards. In line with the directorships policy, executive directors are permitted to accept one external non-executive board appointment subject to approval by the board. All fees received relating to the holding of a directorship on the board of an external company by an executive director are ceded to the MTN Group.

Non-executive directors are required to advise the board of any subsequent changes to or additional commitments from time to time as provided for the Companies Act, 1973.

Three non-executive directors namely; Messrs NP Mageza and A Harper and Ms MLD Marole were appointed to the board, effective from 1 January 2010. All board appointments met the requirements of the Companies Act, King II and the JSE Listings Requirements. During the year under review, Mr RD Nisbet resigned from the board as Group finance director and was replaced by Mr NI Patel effective from 27 November 2009. The appointments will be confirmed at the annual general meeting to be held on 15 July 2010. The board is confident that the current board, consisting of 14 members, is sufficiently well resourced and experienced.

Retirement of directors by rotation

The Company’s articles of association provide that one-third of the directors who have been longest in office since the last election, are required to retire at each annual general meeting (AGM) and may offer themselves for re-election. During the year under review, Messrs RS Dabengwa, AT Mikati, MJN Njeke and J van Rooyen retired from the board and were re-elected at the annual general meeting on 24 June 2009.

The board, on the recommendation of the NRHR & CG committee, reviewed the independence of Messrs MC Ramaphosa, DDB Band and AF van Biljon, who are due to retire from the board by rotation at the forthcoming AGM. Details of retiring directors are set out on page 171 of book 2.

The board concluded that despite Messrs MC Ramaphosa and DDB Band having served as directors since October 2001, and Mr AF van Biljon since November 2002, their independence of character and judgement are not in any way affected or impaired by their length of service, and the board is therefore of the opinion and has declared the three directors to be independent. The determination of independence is guided by the King Code, the Companies Act and international best practice.