Corporate governance highlights

Audit committee: AF van Biljon (chairman), NP Mageza, MJN Njeke, JHN Strydom (withdrawn 29 May 2012), J van Rooyen
Risk management, compliance and corporate governance committee: J van Rooyen (chairman), KP Kalyan, NP Mageza, MLD Marole, MJN Njeke, JHN Strydom
Nominations committee: MC Ramaphosa (chairman), A Harper, AT Mikati, JHN Strydom (nominated 5 March 2013), AF van Biljon,
Social and ethics committee: KP Kalyan (chairman), NP Mageza, MLD Marole, JHN Strydom (withdrawn 5 March 2013), J van Rooyen
Remuneration and human resources committee: A Harper (chairman), AT Mikati, MC Ramaphosa, JHN Strydom
Executive committee: RS Dabengwa (chairman), CM de Faria (withdrawn 31 January 2013), JA Desai, S Fakie, A Farroukh, B Goschen, PD Norman, NI Patel, KW Pienaar,
J Ramadan (withdrawn 31 March 2012), I Sehoole (withdrawn 31 March 2012), KL Shuenyane
Group tender committee: WA Nairn (chairman), JA Desai, A Farroukh, NI Patel, KW Pienaar, J Ramadan (withdrawn 31 March 2012), I Sehoole

Key governance enhancements and compliance

In 2011 the Group undertook to address some areas relating to King III and the Companies Act, No 71 of 2008, which required enhancement and implementation. The following are some of the key enhancements achieved in 2012:

Our approach to governance is to have a set of targets each year and report on our progress against these targets.

Looking ahead, we aim to continue focusing on embedding the highest standards of ethics and good governance, monitor our regulatory compliance and respond to any emerging issues related to our environment.

Governance structure

During the year under review, the board appointed Fani Titi as an independent non-executive director on the board and as a member of the remuneration and human resources committee. Fani has extensive experience in private equity, banking and general business.

Although the Group director and Group secretary appointment policy was not adopted at the time of his appointment, his appointment process was formal and transparent. The Group president and CEO disclosed the previous business association between Fani and himself. Pursuant to that disclosure Fani was subjected to an independence review. The outcome of the review showed that Fani was independent from the MTN Group business. The board was satisfied that the business association between the Group president and CEO and Fani would not have an impact on the performance of their duties and responsibilities.

The board's governance structure was reviewed and it was concluded that the Group tender committee should be independent from the board. Thus the board resolved that this committee will cease to be a standing committee of the board.

The board is satisfied that its committees are structured in such a way that there is sufficient competence to deal with current and emerging issues of the business and is able to enhance the performance of the Company.

The elements of the Group structure are replicated in major subsidiaries to maintain good governance throughout the Group. The governance structures of subsidiaries across the Group have been reviewed and are aligned with the operating model, which was implemented in March 2012.

The MTN Group has a unitary board structure with a majority of independent non-executive directors. The board considers nine out of the eleven non-executive directors to be independent.

The roles and duties of the non-executive chairman and the Group president and CEO are separated and clearly defined. This division of responsibilities ensures a balance of authority and power, with no individual having unrestricted decision-making powers.

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.

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.

Diversity on our board

	Representation by gender on the board

The board will address this matter as part of the succession planning programme in 2013.

Chairman

The board is chaired by MC Ramaphosa. Responsibility for managing the board and executive responsibility for the conduct of the business are differentiated. The chairman is responsible for leadership of the board, ensuring effectiveness in all aspects of its activities and setting its agenda. The chairman is responsible for making sure that the directors receive accurate, timely and clear information. The chairman also:

• ensures effective communication with shareholders;
• facilitates the effective contribution of non-executive directors in particular; and
• safeguards constructive relationships between executive and non-executive directors.

No individual board member has unfettered powers in respect of decision making.

The board, on the advice and recommendation of the executive committee, 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 the executive committee. this plan is further reviewed in the first quarter of each year.

Group president and chief executive officer

RS Dabengwa is the Group president and CEO and is responsible for the day-to-day management of the Group, supported by the executive committee, which he chairs. He 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.

Delegation of authority and risk management

The ultimate responsibility for the Group's operations rests with the board. The board retains effective control through a well-developed governance structure of board committees that specialise in specific areas of the business. Necessary authorities have been delegated to the Group president and CEO to manage the day-to-day business affairs of the Company. The executive committee assists the Group president and CEO in discharging his duties and the duties of the board when it is not in session. However, in terms of statute and the Company's constitution, certain matters are reserved for board and/ or shareholder approval. The delegation of authority is reviewed periodically to ensure it remains aligned and relevant in relation to the rapid growth of the Company.

Lead independent director (LID)

Although our chairman is considered independent, the LID has been appointed to further embed the culture of independence of the board. The LID's primary role is to provide leadership and advice to the board without detracting from the authority of the chairman when a conflict of interest arises.

Group secretary

The Group secretary plays a pivotal role in the continuing effectiveness of the board, ensuring that all directors have full and timely access to information and training that equips them to perform their duties and obligations properly and enables the board to function effectively.

The Group secretary's key duties with regards to the directors include, but are not limited to the following:

• Providing counsel and guidance to the board on their individual and collective powers and duties;
• Providing ongoing support and resources enabling directors to extend and refresh their skills, knowledge and understanding of the Group;
• Providing regular updates on effective and proposed changes to laws and regulations affecting the Group and/or its businesses.

In May 2012, the JSE Listings Requirements were amended to provide that with effect from 1 December 2012, company boards must consider and satisfy themselves annually regarding the competence, qualifications and experience of the Group secretary, and also whether she maintains as arm's-length relationship. The performance of the Group secretary, as well as her relationship with the board, are assessed on an annual basis. The Group secretary is not a director of the Company.

The board, with the assistance of the nominations committee and external assurers, have evaluated the Group secretary and is satisfied that she is suitably qualified to fulfil the role.

Details of the qualifications and competencies of the Group secretary are set out below.

The board charter

The board charter regulates and details the following key matters:

• Board leadership and defines the separate responsibilities of the chairman and the chief executive as well as the role of the lead independent director;
• Board composition, procedures, pre-requisites and competencies for membership, size and composition of the board;
• Balance of powers;
• The role and responsibilities of the board;
• Board committees' governance;
• Appraisal and performance of the board and its committees; and
• Relationship with stakeholders.

The board charter stipulates that the operation of the board and the executive responsibility for the running of the company's business should be two key and separate tasks and there should be a clear division of responsibilities at the head of the Company to ensure a balance of power and authority, ensuring that no individual or block of individuals has unfettered powers of decision-making or can dominate the board's decisions.

Memorandum of incorporation

The general powers of the directors are set out in the Company's MOI. They have further unspecified powers and authorities in respect of matters that may be exercised and dealt with by the Company and that are not expressly reserved for the members of the Company in general meetings.

Matters reserved for the board

There are certain matters that are dealt with exclusively by the board. These include, but are not limited to, approval of financial statements; the Group's business strategy; the annual capital expenditure plan; major changes to the Group's management and control structure; material investments or disposals; risk management strategy; sustainability and environmental policies; and treasury policies.

Board induction and ongoing development

The Group secretary is tasked with assisting the board with the induction of new directors. All directors undergo a formal induction programme, which outlines their fiduciary and statutory duties and provides an in-depth understanding of the Group and its operations. Re-elected directors are also subject to an ongoing director training and development programme, which includes regular updates and information consultations on legislative and regulatory changes.

Board rotation

Directors are subject to retirement by rotation at least once every three years and may avail themselves for re-election, in accordance with the Company's memorandum of incorporation.

Independence of directors

Determination of independence is guided by King III, the JSE Listings Requirements and common corporate practice.

The chairman of the Group is subject to re-appointment by the board and evaluation of his independence on an annual basis.

Board appraisal

An independent appraisal was conducted by the governance agency Ratings Afrika on all the members of the board and the Group secretary. The appraisal included a peer review as well as a consolidated board appraisal. This process has recently been completed and the board is in the process of reviewing the report to identify areas of improvement.

Board and committee attendance

The MTN Group board recognises that it is ultimately accountable and responsible for the performance and affairs of the Group and that the issue of delegated authorities to board committees and management in no way absolves the board collectively from the obligation to carry out their fiduciary duties and responsibilities. All board committees operate under written terms of reference approved by the board. All committee chairpersons also provide the board with a report on recent committee activities.

Board committees are permitted to take independent outside professional advice as and when deemed necessary. The office of the Group secretary provides support and secretarial services to each of the board committees. Membership of board committees comprises independent and non-executive directors only, with the exception of the executive committee and the Tier II tender committee, which are primarily committees of an operational nature and so comprised of senior management. There is full disclosure and transparency from these committees to the board. The membership and attendance of the committees are set out below. Each committee's authority and the discharge of its responsibilities are directed by a charter.

Attendance register

^# Appointed with effect from 1 July 2012

In-camera meetings

During the period under review, most of the board and committee meetings were preceded by an in-camera meeting of non-executive directors.

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 deliberate on any special matters under review by the committee.

Standing board committees

The committees are as follows:

• audit committee (details are set out on page 108)
• risk management, compliance and corporate governance committee
• nominations committee
• remuneration and human resources committee
• social and ethics committee (details are set out on page 96)
• executive committee

The board is satisfied that the board committees as set out in detail below have effectively discharged their responsibilities as contained in their respective terms of reference during the year under review:

Group risk management, compliance and corporate governance committee

The risk management, compliance and corporate governance committee was established to improve the efficiency of the board and assist it in discharging its duties which include the following:

• identifying, considering and monitoring risks impacting the Company; and
• responsible for the sustainability framework and sustainability reporting for the Group.

A close working relationship exists between the risk management, compliance and corporate governance committee and the audit committee. Three non-executive directors serving on the audit committee also serve on the risk, compliance and corporate governance committee. This ensures that overlapping responsibilities are dealt with in an efficient manner. The committee is also responsible for performing the following functions:

Compliance and corporate governance

• To periodically review issues relevant to the board's oversight responsibilities, including compliance with and adherence to the relevant laws and governance standards;
• Review compliance with all local and foreign legislation and regulatory body requirements applicable to the Company including but not limited to the following:
  – Companies Act
  – JSE Listings Requirements
  – Governance frameworks
  – Health and safety legislation
  – Employment equity
  – Security Services Act
  – Taxation legislation
  

During the year under review, the JSE had made a few amendments to its listings requirements; the committee assessed the Company's compliance with these requirements and all other statutory and governance codes and was satisfied that it had complied with the requirements. The committee is constituted of independent and non-executive directors only and details of attendance and membership of the committee are set out on page 73.

The remuneration and human resources committee

The committee is constituted as a committee of the board of directors in respect of all duties assigned to it by the board.

The committee oversees the formulation of a remuneration philosophy (policy) and human resources strategy to ensure that the Company employs and retains the best human capital possible relevant to its business needs and maximises the potential of its employees.

Nominations committee

The committee is constituted as a committee of the board in respect of all duties assigned to it by the board.

The committee has been constituted to improve the efficiency of 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 and to oversee the development of directors. In line with the JSE's requirement, the committee is chaired by the chairman of the board.

Executive committee

This committee is constituted as a committee of the board but comprises only executive management and is chaired by the Group president and CEO. The committee facilitates the effective control of the Group's operational activities in terms of its delegated authority approved by the board. It is responsible for recommendations to the board on the Group's policies and strategies and for monitoring their implementation in line with the board's mandate. The committee meets at least monthly and additionally as required. The profiles of the executive committee and subcommittee details are set out on pages 26 to 29.

Audit committee

Social and ethics committee

Details of the audit committee and social and ethics committee are contained in their respective committee reports set out on pages 96 to 98 and page 108 of this integrated report.

External advisers

During the year under review, the board and its committees engaged numerous external advisers who frequently advise the board on a variety of matters that require board consideration and approval.

Regulatory compliance

The MTN Group encompasses operations in 22 countries in Africa, Europe and the Middle East and holding companies in three other jurisdictions. In keeping with its vision and strategy, the Group subscribes to and applies the principles contained in the Code of Corporate Practices and Conduct recommended by King III.

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 management committees.

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

The Company's corporate governance systems are aligned with the guidelines of King III and are designed to exceed minimum compliance levels and continue to evolve to meet the expectations of all stakeholders.

Conflicts of interest

A director or prescribed officer is prohibited from using his or her position with respect to the Company or confidential Company information obtained by him or her relating to the Company, in order to achieve a financial benefit for himself or herself or any related third party.

Furthermore, a director or prescribed officer is obliged to make certain disclosures regarding any conflict of interest he or she may have when such arises.

Directors and prescribed officers who have declared a conflict of interest in certain transactions, have voluntarily recused themselves from participating in any manner with regard to those transactions.

Code of business conduct

The MTN Group is committed to promoting the highest standards of ethical behaviour among its directors, management and employees. In accordance with this objective and in the interests of good corporate governance, the code of business conduct is subject to review annually and is cascaded down to all operations.

In addition, the board has also endorsed a social and ethics statement which embodies the Group's values and ethical standards and behaviours.

Sponsor

MTN fully understands the role and responsibilities of the sponsor as stipulated in the JSE Listings Requirements. MTN has a sound relationship with its sponsor (Deutsche Securities (SA) Proprietary Limited) and considers that they have discharged their responsibilities with due care.

For further details of the governance report please visit our website at