The RITE strategy and the six capitals | Blue Label Telecoms | 2019 Integrated Annual Report

The RITE strategy and the six capitals

The key elements of Blue Label's strategy to grow and maintain shareholder value are Reach, Innovation, Trust and Efficiency. This strategy was developed during the 2018 financial year and has been deeply embedded in the operations of our business units and in Blue Label's culture. In allocating our capital to our strategy's levers and among the various value drivers, we need to consider the trade-offs between the six capitals which describe the resources available to us. The IIRC describes the six capitals as stocks of value that are affected or transformed by the activities and outputs of an organisation.

All our decisions are made through seeking to maximise positive outcomes and mitigate negative impacts.

Reach
continues to expand all our
distribution channels in banking, retail,
independent and informal markets.
Expanding our reach also encompasses
adding innovative products to our
product portfolio. We are a magnet
for foot traffic.

Innovation
Platform renewal, improvement,
innovation and transformation
remain key to our central mandate
of delivering world-class,
customer-centric solutions across
our businesses. Agile systems
create the needed flexibility to
service our markets.

Trust
We have redesigned our operating
structure to improve the ability to
service customers according to their
needs. Building trust with merchants,
suppliers and customers is key to
business success.

Efficiency
Efficiency of business processes and
capital allocation will dominate our
actions into the future. We need to
deliver returns to all stakeholders.

FINANCIAL CAPITAL	REACH	INNOVATION	TRUST	EFFICIENCY		OUTCOMES

						Blue Label has managed to grow gross transactional values which includes imputed PINless revenue and electricity by 10% to R57.8 billion. A strong performance given South Africa's currently weak economic environment. On exclusion of the negative impacts as detailed below*, core headline earnings increased by 26% to R904 million.
The pool of capital available to Blue Label, including debt, equity and cash generated from operations and investments.	Driving financial inclusion within previously underserved markets through the growth of our hub and spoke model into informal markets in South Africa. Enhanced reach in Group accounts across the retail and banking sectors. Revenue assurance solution developed by Cigicell is being rolled out to further municipalities across South Africa. Ticketpro has increased its sales network to more than 2 000 stores in South Africa – the country's largest physical ticket purchase network.	R209 million capex devoted to investing in technology and point-of-sale devices. Launching first truly home-grown near field communication (NFC) solution.	The ability to reconcile over one billion physical cash and virtual payments a month builds trust with suppliers, merchants and customers. The Group has spent R68 million on different types of vending terminals that suit our wide variety of customers. These terminals control the front-end processing for our billions of transactions. Municipalities trust Cigicell to collect their prepaid electricity and water revenue as well as rates and taxes.	An efficient treasury function primarily within The Prepaid Company and Cigicell are vital to the acquisition and wholesaling of all products and supporting our funding of electricity projects. An efficient treasury function is essential to the success and profitability of our business. Capital allocation and risk assessment functions are a daily consideration in growing our business.

	* On exclusion of the negative impact attributable to: Cell C's trading losses, impairment of certain of its property, plant and equipment, the impact of the derecognition of its deferred tax asset and the impairment of Blue Label's total investment in Cell C; Fair value downward adjustments of the exposure relating to SPV1 and SPV2 pertaining to the initial recapitalisation of Cell C and the Glocell loan; An impairment of Blue Label's total investment in the Oxigen India group, including 2Dfine Holdings Mauritius, as well as providing for loan impairments and guarantees payable therein; and Partial impairments of goodwill and an investment in a joint venture.

HUMAN CAPITAL	REACH	INNOVATION	TRUST	EFFICIENCY		OUTCOMES

						Employees increased from 874 to 1 111 in FY19. 65% of South Africans employed within BLT are black talent, 49% of whom are African males and African females. 85% of talent recruited into BLT were black candidates. 67% of talent recruited into BLT were African candidates. Female talent recruited into BLT increased from 39% in FY18 to 45% in FY19. Increased investment in skills development by 53%. 92% of total skills development spend was invested in black talent. 67% of all promotions were awarded to black talent. 50% of all promotions were awarded to African talent.
The knowledge, skills and experience of the Company's employees and managers, as well as the capacity to add to this reservoir of knowledge, through training.	We are invested in creating a diverse talent pool within BLT that reflects our customer and consumer base. Our talent is intrinsically linked to expanding our points of presence and product portfolio. Skills development learnership initiatives are focused on enabling us to extend our reach and support rapid market expansion initiatives.	We are investing in new skills and capabilities through organisational redesign, talent attraction and talent development in support of creating products and services that meet the needs of our consumers and customers. We are investing in additional resources, new skills and revising our operating model to enable speed to market of new products and services.	Our organisation is being restructured to enable improved customer service that will support our aspiration to be a trusted brand and supplier of choice with our merchants and key accounts. Talent development is being accelerated in support of our transition to new technology stacks that will enable us to be a trusted brand with our consumers.	We are actively leveraging key skills for the benefit of a broader number of subsidiaries. The new Africa Distribution structure and supporting operating model enable us to scale efficiently and effectively as we extend our reach.

SOCIAL AND
RELATIONSHIP CAPITAL	REACH	INNOVATION	TRUST	EFFICIENCY		OUTCOMES

						We have increased our customers in the formal retail, banking and mass market as well as in the informal market segments and municipalities.
The strength/efficacy of supply chain relationships, community acceptance, government relations, relationships with competitors and customer loyalty.	Part of our core strategy is to develop deep and mutually beneficial long-term partnerships with the mobile network operators (MNOs) retailers, banks and independent outlets. Our relationships remain vital. As we grow, they grow. Our ability to extend the reach of electricity sales for municipalities further entrenches our relationships and provides exclusivity for other Group products and services. A focus for FY19 has specifically been centred on informal markets where our service is differentiated by extensive engagement and training together with the provision of marketing material which grow our customers' businesses.	We continue to move our technology platforms into agile stacks which improve our customer service and speed to market.	We are an ecosystem that is reliant on suppliers, technology, devices, merchants and customers working together for mutual benefit. The Blu Approved brand embodies trust and reliability.	Across all our stakeholder groups, we have vigilant and accessible processes in place to engage and service all interest groups and customers.

MANUFACTURING CAPITAL	REACH	INNOVATION	TRUST	EFFICIENCY		OUTCOMES

						Volumes of transactions and more complex solutions continue to increase.
Material goods and infrastructure owned, leased or controlled by Blue Label that contributes to products or services sold.	Our proprietary Aeon switch and leased Postilion switch are capable of seamlessly handling increased volumes as a result of growing reach. We have significant VAS platforms from advance airtime, electricity and data to a full MNO service delivery platform (SDP) to an integrated communications platform (SMS, IM, In-App messaging, cross-channel optimisation and BI) and an MNO airtime and data sales and rewards and loyalty platform. This extends BLM's reach significantly across multiple products to almost all of MNO's customer base.	We continue to understand customer needs and wants to expand our platform functionality and concomitantly product and service offerings and we continue to look for strategic joint ventures or acquisitions for new product or platform capability.	Our platform, systems and devices work. We have virtually no downtime and provide exceptional service to suppliers, merchants and customers. We deliver enormous volumes of mission critical transactions on a real-time basis to massive audiences and customer bases. It's critical these systems have >99.9% up-time and can process the millions of transactions per day and real-time too. This requires and builds significant trust.	We strive to use all our assets to become the lowest cost producer or distributor of transactions, messages and digital products.

INTELLECTUAL CAPITAL	REACH	INNOVATION	TRUST	EFFICIENCY		OUTCOMES

						We remain the market leader in the digital distribution of airtime and electricity. Our range of innovative products and services, designed to add convenience to consumers' lives, continues to grow.
Refers to the know-how and intellect behind how we craft our strategy, manage our reporting and data collection to drive growth for Blue Label.	Continued investments into skills, reporting structures, technology, agile and carrier grade platforms and scalable operating structures assist the Group in expanding our reach, improving service delivery and speed to market.	Innovation is key to growth in a challenging economy and competitive environment. Enhancing our intellectual property through processes, software and hardware is a daily focus. We also continue to develop targeted analytical processes, machine learning and artificial intelligence to use the data we receive to design better products and services.	The quality of our technology and constant innovation allow our entire ecosystem to evolve alongside us.	Blue Label has developed a business that is resilient to economic downswings, has delivered growth in excess of the broader telco sector and, now, through our acquisitions, has provided new revenue streams which mitigate the impact of a poor economy and exceptionally tough retail environment.

NATURAL CAPITAL


Any stock of natural resources or environmental assets (such as soil, water, atmosphere, ecosystems) which provide a flow of useful goods and/or services, now and in the future.		As a technology company, Blue Label has a limited impact on the environment. We do however acknowledge that no matter how small our impact relative to energy or mining companies, we do have an impact and it is our duty to reduce that impact. Excluding offshore operations, the Group consumption of and spending on is as follows:
		Electricity R5 747 662 4 758 753 kWh	Water R702 897 19 672 kℓ	Petrol R10 679 080 685 283 ℓ	Diesel R1 550 110 100 462 ℓ		Paper R3 213 600 102 291 kg
		The Board and Executive Management are developing savings targets for all these categories. We continue to automate and employ the latest technologies to reduce our use of scarce and valuable natural resources.