Governance highlights

Governance structure

This section provides an overview of the Group’s governance structure. This structure is also the basis for governance in the five largest MTN subsidiaries and others. In all subsidiary operations, the audit committee also assumes the responsibilities of risk management and compliance. The board endeavours to ensure that all operating companies comply with the same governance principles to which the Group aspires.

Group company secretary

The company secretary is a central source of information and advice to the board and within the Company on matters of ethics and good governance.

This office also communicates and monitors compliance, among others, with the Group trade embargo policy and the Listings Requirements ensuring that no employee, executive director or non-executive director is allowed to deal in the Company’s securities during prohibited periods.

MTN understands that compliance with laws, regulations and all governance frameworks promotes and sustains the reputation and standing of a company. In ensuring compliance with King III, Listings Requirements and the Companies Act, 2008, the company secretary office, has the compliance function responsible for assisting the board of directors and management in implementing the awareness and assessment of compliance.

The general powers of the directors are set out in the Company’s articles of association. The board charter regulates how the board and individual members 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. It also details the division of responsibilities at board level and between the board and between the board and management.

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 strategy of the Group is mapped by the board in consultation with the Group executive and steering committee (Exco). The board and Exco meet annually to formulate, review and agree on the group’s strategic intent.

The directors are of the opinion that they have adhered to the terms of reference as detailed in the board charter for the 2010 financial year.

Board committees

The board is satisfied that the board committees set out in detail below have effectively discharged their responsibilities as contained in their respective terms of reference during the year under review. Details of attendance and membership of the committees are set out on page 26. The committees’ members’ fees are included in the table of directors’ emoluments and related payments on page 94. The committees’ summaries are as follows:

Group audit committee

The primary role of the committee is to ensure the integrity of financial reporting and the audit process. The full report of the committee is set out on page 85.

Group nominations, remuneration, human resources and corporate governance committee (NRHR & CG)

The committee assists the board in discharging its duties relating to the nomination of board members and senior management. It makes recommendations to the board on the composition of the board and board committees; oversees the formulation of a remuneration philosophy and human resources strategy to ensure that the Group employs and retains the best human capital possible relevant to its business needs; maximises the potential of its employees; and ensures the Group’s adherence to sound corporate governance principles. Some committee meetings were preceded or followed by an in-camera session (meeting of non-executive directors only). All members of the committee are independent non-executive directors.

In terms of King III and the Listings Requirements, the chairman of the nominations committee should be the chairman of the board, and membership of the committee must consist of only non-executive directors. MTN has combined the nominations committee, human resources and remunerations committees as well as the corporate governance committee under one committee. As such MTN is not strictly compliant with King III recommendation. The chairman of the board is, however, a member of the committee and thus able to influence the nomination processes sufficiently.

The committee’s chairman attended the annual general meeting during the year under review.

Further details regarding directors’ remuneration and the Group remuneration philosophy are set out on page 92.

Group tender committee

The Group tender committee’s primary objective is to promote a sustainable and fair tender culture and to ensure that tender policies are applied consistently, always bearing in mind best business practices to develop all markets and promote economic development. The committee is chaired by an independent non-executive director. The committee’s charter, which is approved by the board and reviewed periodically, aims to promote an effective, transparent and independent procurement and tender evaluation process. Due to the fact that the committee only reviews high-level tenders the meetings are convened as the need arises. Various lower-level tender committees are in place group-wide to ensure that all other tenders are reviewed with the same level of efficiency.

Special ad hoc board committees

In certain instances, the board constituted special board committees which are granted the necessary authority to deal with the salient matters under special projects and to allow for a more detailed consideration of issues. Special committees may consist of different directors depending on the expertise required to resolve any special matters under review by the committee.

Group tender committee members (including independent non-executive chairman)

Group risk management and compliance committee

The committee identifies, considers and monitors risks impacting the Group and ensures compliance with prevailing legislation and other statutory requirements (including voluntary corporate governance frameworks). The committee is also responsible for the sustainability framework and reporting to the Group. Three non-executive directors serving on the committee including the committee chairman also serve on the audit committee, to ensure that overlapping responsibilities are dealt with in an efficient manner.

Risk management

As a group that operates in and understands emerging markets, MTN believes that risk management and internal control are fundamental to effective corporate governance and the development of a sustainable business.

MTN is currently in the process of implementing the King III requirements with regards to risk management, specifically the aspects of combined assurance and IT governance.

Independent business risk management function

Business risk management is an independent function responsible for the disciplines of enterprise risk management, internal audit and fraud risk management and co-ordination of combined assurance across the Group. The business risk management function has a staff complement of more than 180 comprising risk, internal audit, fraud risk and forensic specialists across the 21 operating countries of which more than two thirds are internal audit specialists. The internal audit discipline within business risk management is independent from the risk management discipline. Business risk management is headed by a Group executive who reports to the Group president and chief executive officer and has direct access to and has regular meetings with the chairpersons of the Group audit committee and Group risk management and compliance committee. MTN now has business risk management functions in all of its operations with oversight from the Group business risk management function. The activities of the business risk management function are guided by a set of policies, frameworks and methodologies which have been approved by the Group audit committee and Group risk management and compliance committee.

Combined assurance

MTN is in the process of implementing a full combined assurance approach in line with best practice and King III. This approach will ensure that maximum value is extracted from the various assurance providers. These include first line assurance (management), second line assurance (risk management) and third line assurance (internal and external audit). Assurance from all the lines will be mapped to a set of principle risks and will allow the Exco as well as the Group board to get an improved view of the mitigation of risk in the organisation as well as the state of the control environment.

Risk appetite

MTN’s risk appetite is determined by the type of risk. This allows for a more controlled way of managing risk levels. A formal risk escalation structure was implemented at the end of 2009 based on MTN’s riskbearing capacity and a set of risk thresholds at various levels in the Group. Aggregation of total risk is done qualitatively and the Group risk management and compliance committee assesses the acceptability of MTN’s consolidated risk profile.

Enterprise risk management

As far as enterprise risk management is concerned, the business risk management function is responsible for ensuring the existence of an effective framework for risk management and driving the implementation of this framework throughout the Group. This is done by assisting and advising management on the topic and by ensuring effective reporting and escalation of risks.

The process of risk management in the Group is guided by a risk framework which is based on best practice risk management procedures and will in future form the foundation of the combined assurance methodology. The Group business risk management function, together with management, has the mandate and responsibility of ensuring that adequate risk management processes are implemented in all areas of the business in line with the risk framework.

Insurance and risk transfer

MTN has a comprehensive insurance programme in place which covers perils such as material damage, business interruption, political risk, public liability, directors’ and officers’ liability, crime and professional indemnity. The limits of indemnity for these covers have been structured to optimise the balance between maximum potential loss and containing premiums. MTN also believes that risk retention and self-insurance are necessary to keep premiums at reasonable levels and show commitment towards risk management. MTN’s risk retention levels differ from policy to policy.

IT governance

IT governance has always been an important aspect of the control environment in MTN, as the Group is technology driven. However, in line with the new chapter in King III, MTN is in the process of improving and formalising certain aspects of its IT governance framework. The Group has embarked on a shared services model to improve technology efficiency and cost synergy. This will form an integral part of the IT governance framework in future along with aspects such as information security, data privacy and business continuity.

Fraud risk management

The fraud risk management function (part of business risk management) is responsible for assessing fraud risk across the Group and driving the implementation of fraud prevention activities, which include whistle blowing processes. Fraud risk management is also responsible for detecting and investigating fraud. The Group has made good progress with the implementation of its fraud prevention activities. This includes the roll out of a Group-wide whistleblowing programme, central fraud incident database, fraud awareness campaigns etc. MTN continues to see an increase in the number of fraud cases but believes that this is as a result of the success of the fraud prevention and detection mechanisms and not necessarily an increase in fraud activity. The overall value of fraud and theft incidents uncovered to date is not material in relation to the size of the Group.

MTN recognises new legislation including the UK Bribery Act. Although it does not apply to MTN directly, it applies to the Group – suppliers and finance providers.

In 2011, MTN will focus on the following inherent fraud risk categories from both a fraud risk and internal audit point of view:

• Procurement – conflict of interest and collusion with suppliers
• Review and/or subscriber fraud
• Asset and inventory theft
• Site acquisition and construction
• Manipulation of billing data
• Bribery and corruption

Internal audit

MTN has a substantial internal audit function (part of business risk management) which is responsible for providing independent internal audit assurance to the Group. The independence of the internal audit discipline is maintained and internal audit work is ultimately governed by the Group audit committee, within an internal audit charter. In future, internal audit will form an integral part of third line assurance in the combined assurance methodology.

Internal audit activity in the Group has increased constantly over the past few years with total internal audit hours in 2010 rising to 130 000 from 110 000 in 2009. Internal audit assurance is guided by extensive risk evaluation. Projected internal audit hours for 2011 are in excess of 160 000 hours. The Group is now reaching the point where internal audit coverage is extending to most operations and all high-risk processes.