Report of the audit committee

Report in terms of section 270A (1) (f) of the Companies Act, No 61 of 1973, as amended

Group audit committees

The report provides an overview of the audit committee and its activities as well as appropriate information on how the committee has discharged its responsibilities. The committee is a statutory committee and performs duties delegated by the board. The committee has a majority of independent non-executive directors who are financially literate as recommended by King III.

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

The committee meets not less than four times per year.

The head of Group business risk management/internal audit (BRM) and external auditors have unrestricted access to the committee and its chairman. Internal audit’s performance is reviewed annually by the committee.

Audit committees exist in each Group operation and significant risk and audit matters relating to operations are regularly reported to the Group audit committee. The non-executive chairpersons of subsidiary audit committees do meet formally with the Group audit committee annually or more often as required. Audit workshops are held annually to consider and agree on audit plans for all operations for the year ahead and to review the effectiveness of the overall internal audit function.

The main meetings of the committee are preceded by an in-camera session of non-executive members only and are concluded by separate in-camera sessions with the management, internal and external audit as key invitees. Executive directors attend committee meetings as permanent invitees.

The external auditors’ performance and independence is regularly monitored by the committee and formally assessed annually. The audit partners are rotated every five years. Auditors are appointed by the board on the recommendation of the committee and ratified by shareholders. Both internal and external auditors attend all committee meetings.

The committee has conducted its work over the year and discharged its responsibilities in accordance with these terms of reference. The committee is pleased to present below its report in terms of section 270A (1) (f ) of the Companies Act, No 61 of 1973, as amended, for the financial year ended 31 December 2010. The committee was formally reappointed by the board during the year.

Execution of functions of the audit committee

The committee has executed its duties and responsibilities in accordance with its terms of reference as they relate to the MTN Group’s accounting, internal auditing, internal control and financial reporting practices. The committee performed the following activities during the year under review:

• Considered the effectiveness of the internal audit function and monitored adherence to the annual internal audit plan;
• received and reviewed reports from both internal and external auditors concerning the effectiveness of the internal control environment, systems and processes;
• reviewed the reports of both internal and external auditors detailing their concerns arising out of their audits and requested and considered appropriate responses from management;
• reviewed the processes in place for the reporting of concerns and complaints relating to accounting practices, internal audit, contents of the Company’s financial statements, internal controls and any related matters. The committee can confirm that there were no such complaints of substance during the year under review;
• reviewed the report prepared by internal audit regarding the risk management processes in the Company and the extent to which such have been embedded within each operating division;
• reviewed and approved the Company’s policy for non-audit services that can be provided by the external auditors. This policy sets out those services that may not be provided by the external auditors and the required authorisation process for those services that the external auditors may provide;
• considered the independence and objectivity of the external auditors and ensured that the scope of additional services provided did not impair their independence;
• approved the non-audit-related services performed by the external auditors in the year in accordance with the policy established and approved by the board;
• approved the external auditors’ fees for 2010 and the budgeted fees for the 2011 financial year.

In addition the chairman of the committee:

• met separately over the course of the year with management, and with both internal and external auditors; and
• attended the Group risk management and compliance committee meetings held during the year under review.
  

During the year, the internal audit function reviewed the Company’s system of internal controls and risk management. Considering information and explanations given by management, and discussions with both internal and external auditors on the results of their audits, assessed by the audit committee, nothing has come to the attention of the audit committee that caused it to believe that the Company’s system of internal controls and risk management is not effective and that the internal financial controls do not form a sound basis for the preparation of reliable financial statements.

Further to this, the Company launched King III compliance project during the year to identify gaps and address new requirements as a consequence of King III, including a review of the mandate, implementation of a combined assurance approach, and implementation of a more comprehensive IT governance framework.

After assessing the requirements set out in section 270A(5)(a-d) of the Companies Act, the committee is satisfied with the independence and objectivity of the external auditors, and recommends the reappointment of the joint external auditors at the next annual general meeting.

The Group’s external auditors are PricewaterhouseCoopers (Inc ) and SizweNtsaluba vsp. Fees paid to the auditors for the year under review are disclosed in note 5 to the annual financial statements on page 141.

The committee has evaluated the financial statements of MTN Group for the year ended 31 December 2010 and, based on the information provided to it, considers that the Group complies with the Companies Act, as amended, International Financial Reporting Standards (IFRS) and the Listings Requirements of the JSE.

In compliance with paragraph 3.84(h) of the JSE Listings Requirements, the committee reviewed the performance, appropriateness and expertise of the Group finance director, NI Patel. The committee is satisfied that he has the appropriate expertise and experience to fulfil the role of Group finance director and has performed appropriately during the year under review.

AF van Biljon
Audit committee chairman
8 March 2011