Report of the audit committee

for the year ended 31 December 2017

The role of the audit committee has never been more fundamental in ensuring that trust and integrity are maintained over corporate reporting, entrenched by the efficiency of internal controls, the effectiveness of the internal audit function, the independence of external auditors and optimised through a combined assurance model.

The group has made substantial progress on improvements in the internal control environment. Sustaining the actions initiated and maintaining the positive momentum remain a priority. Internal controls relating to subscriber registration, cyber security and Mobile Money were key focus areas during 2017.

The implementation of a revised second and third line assurance model will gear the organisation to deal with the challenges faced and strengthen the current combined assurance model. These actions will be supported by initiatives to standardise policies and procedures across the group.

Despite the progress noted to date, MTN faces challenges posed in conflict markets such as Syria, Afghanistan, South Sudan and Yemen, coupled with regulatory uncertainties in markets such as Benin and Cameroon.

TERMS OF REFERENCE

The audit committee assists the board in discharging its duties by monitoring the strength of the operational, financial and control processes. These include internal financial controls and ensuring that assurance services and functions enable an effective control environment and that these support the integrity of information produced in compliance with applicable legal and regulatory requirements.

MEMBERSHIP, MEETING ATTENDANCE AND EVALUATION

Members of the committee are independent and are nominated annually by the board for re-election by shareholders. The individual members satisfy the requirements to serve as members of an audit committee as provided in section 94 of the Companies Act and have adequate knowledge and experience. The composition of the committee and the attendance at the meetings by its members are set out below for the period January to December 2017:

Members	Attendance
KC Ramon (chairman)	4/4
NP Mageza	4/4
J van Rooyen	4/4
P Hanratty	4/4

The committee meets at least four times a year and members' fees are included in the table of directors' emoluments and related payments in note 10.2.

The committee also convened special audit committee meetings to discuss critical matters that arose during the period.

The group president and CEO, the group chief financial officer, the group business risk officer, joint external auditors and other assurance providers attend committee meetings by invitation. The committee also meets separately with the joint external auditors, internal auditors and senior management before or after every meeting.

The effectiveness of the individual members of the committee and of the committee as a whole is assessed on an annual basis.

EXECUTION OF FUNCTIONS OF THE AUDIT COMMITTEE

The committee is satisfied that, in respect of the period under review, it has conducted its affairs and discharged its duties and responsibilities in accordance with its terms of reference and the Companies Act.

The committee discharged the following responsibilities during the year under review:

External auditors

Considered and satisfied itself with the independence and objectivity of the joint external auditors and designated registered auditors and ensured that the scope of non-audit services rendered did not impair their independence.
Considered the Mandatory Audit Firm Rotation rule which is effective for financial periods commencing on or after 1 April 2023.
Approved the non-audit-related services performed by the joint external auditors during the year in accordance with the policy established and approved by the board.
Determined the joint external auditors' terms of engagement and fees for 2017.
Satisfied itself with the performance of the joint external auditors and designated registered auditors and further that they are accredited on the JSE's list of auditors and advisers.
Satisfied itself that the designated registered auditors are within their tenure and rotation requirements.
The group's joint external auditors are PricewaterhouseCoopers Incorporated and SizweNtsalubaGobodo Incorporated. PricewaterhouseCoopers is a global auditing firm and SizweNtsalubaGobodo is a local auditing firm. Both firms are level 1 BBBEE contributors. The external auditors have been auditing the group for 24 years and 15 years, respectively. Fees paid to auditors for the year under review are disclosed in note 2.4 of these annual financial statements.
The committee recommends the reappointment of the joint external auditors at the annual general meeting.

Financial statements, accounting practices and other financial matters

Reviewed and approved the accounting policies and the annual financial statements of the group and the company for the year ended 31 December 2017, and based on the information provided to it, the committee considers that, in all material respects, they are appropriate and comply with the provisions of the Companies Act, IFRS, the SAICA Financial Reporting Guides as issued by the APC, Financial Reporting Pronouncements as issued by the FRSC, and the JSE Listings Requirements.
Reviewed the processes in place for the reporting of concerns and complaints relating to reporting and accounting practices, internal audit, contents of the group's and the company's financial statements, internal financial controls and any related matters. The committee can confirm that there were no such complaints of substance during the year under review.
Considered the appropriateness of management judgement and the accounting treatment of significant transactions. These included judgement applied regarding the impairment of goodwill, the classification and measurement of the IHS available-for-sale investment and the election of a quoted foreign exchange rate in a multiple exchange rate environment for the purposes of converting transactions and balances and converting foreign entities in relation to Nigeria and Sudan, as well as judgement relating to uncertain tax and regulatory matters as described in notes 1.5 and 6.8. Significant transactions included the exercise of the IHS exchange right (note 2.3) and the valuation of the IHS investment (note 7.1.3) as well as the loss on derecognition of a long-term loan receivable (note 2.6).
Reviewed group tax exposures and assessed the appropriateness of the group's tax policies.
Reviewed group treasury reports, group funding requirements, credit ratings and recommended financing proposals to the board.
Reviewed progress on litigation and legal exposures and the related accounting applied and disclosure included in these annual financial statements.
Received regular updates from management on the repatriation of funds from sanctioned territories.

Internal financial controls

Reviewed the written assessment, prepared by internal audit, on the effectiveness of the group's system of internal control (including internal financial controls). This written assessment formed the basis of the committee's recommendation to the board in this regard. The board's report on the effectiveness of the system of internal controls, which the committee fully supports, is included in the directors' report.
Reviewed the reports of the external auditors detailing their concerns arising from their audit and considered the appropriateness of the responses from management.
Assessed the revenue assurance control environment and related revenue leakage exposure for the group.
Reviewed fraud and whistleblowing reports and that appropriate management action is taken with regards to the control environment and consequence management.

Going concern status

Considered the going concern status of the group and the company on the basis of review of the annual financial statements and the information available to the committee and recommended such going concern status for adoption by the board. The board's statement on the going concern status of the group and company is contained in the directors' report.

Internal audit

Considered the effectiveness of the internal audit function and monitored adherence to the annual internal audit plan.
Reviewed the performance of the group business risk officer, Mr R Wessels, and was satisfied that he has the necessary expertise and experience to fulfil this role and that he had performed appropriately during the year under review. Mr R Wessels was appointed following the retirement of Mr S Sooklal who retired in May 2017.

Finance director and finance function

Reviewed the performance of the group chief financial officer, Mr RT Mupita, and was satisfied that he has the necessary expertise and experience to fulfil this role and that he had performed appropriately since his appointment on 3 April 2017.
Considered, and has satisfied itself of the appropriateness of the expertise and experience of the finance function and adequacy of resources employed in this function.

SOLVENCY AND LIQUIDITY REVIEW

The committee is satisfied that the board has performed a solvency and liquidity test on the company in terms of section 46 of the Companies Act and has concluded that the company will satisfy the test after payment of the final dividend.

The committee also considered guarantees issued on behalf of subsidiaries.

KEY FOCUS AREAS FOR 2018

The committee has set the following key areas for management to focus on during 2018:

Implement a model to separate and strengthen the second and third lines of defence in the organisation.
Further strengthen the internal control environment.
Monitor regulatory compliance and further strengthen maturity of compliance structures.
Review progress on adoption of new accounting standards.
Consider the impact of the new leases accounting standard, applicable from 1 January 2019, on the existing accounting policies and contracts in place.
Extract efficiencies of a combined assurance model.
Continue to facilitate a fair and balanced approach to corporate reporting.

KC Ramon
Audit committee chairman

Fairland
7 March 2018