GOVERNANCE

Board composition, structure and report back

Board of Directors

The Board directs the Group towards and facilitates the achievement of the Group's strategy and operational objectives. It is accountable for the development and execution of the Group's strategy, operating performance and financial results. Its primary responsibilities include determining the Group's purpose and values; providing strategic direction to the Group; appointing the joint Chief Executive Officers; identifying key risk areas and key performance indicators of the Group's businesses; monitoring the performance of the Group against agreed objectives; deciding on significant financial matters; approving policies; and reviewing the performance of the Executive Directors against defined objectives. A range of non-financial information is also provided to the Board to enable it to consider qualitative performance factors that involve broader stakeholder interests.

The Board, which meets at least quarterly, retains full and effective control over all the operations. Additional ad hoc Board meetings are convened as circumstances require.

Board Charter

Our Board Charter assists our Board in conducting its business according to legislative requirements and the principles of good corporate governance. It ensures that each director is aware of his or her powers, duties and responsibilities when acting on behalf of the Blue Label Telecoms Group. The Board Charter is subject to the provisions of the Companies Act, JSE Listings Requirements, our Memorandum of Incorporation (MOI), and all other applicable legislation. The Board Charter covers the role and function of the Board; its detailed responsibilities; how it discharges its duties; the Board composition; and the establishment of Board Committees. The Board Charter as well as the terms of reference and work plans of the Board subcommittees are aligned with the requirements of King IV.

The Board has concluded that it has collectively satisfied and fulfilled its responsibilities in accordance with the charter.

Governance framework

The Board regards governance as a fundamental essential for the success of the Group's business. It is committed to applying the principles of good governance in directing and managing the Group in order to achieve its strategic objectives. The Board is the focal point for and custodian of the Group's governance framework, and is supported by its Committee structures, management, shareholders and other stakeholders of the Company. The Board is ultimately accountable for the performance and affairs of the Company.

The governance framework facilitates a balance between the Board's role of providing direction and oversight with accountability to support acceptable risk parameters and consistent compliance with regulations, standards and codes relevant to the Group. At the same time, the Board encourages entrepreneurship and innovation, which are recognised as key drivers of Group performance. At the operations, governance processes are aligned with the governance framework established by Blue Label. Each subsidiary company has its own board of directors and its strategy, business plan and performance criteria are clearly defined. Subsidiary boards comprise Executive and Non-Executive Directors, some of whom are Executive and Non-Executive Directors of Blue Label.

Following the acquisition of 45% of Cell C in August 2017, the Blue Label Board has been actively monitoring and advising on the alignment of governance structures and processes at Cell C with those of the Company.

Board composition

Blue Label has a unitary Board structure comprising eight directors. Four are Independent Non-Executive Directors, while one is Non-Executive and three are Executive Directors. A biography of each director appears on Board of directors.

The Board has a majority of Non-Executive Directors. This is incorporated into our Board Charter, which promotes power and authority at Board of Director level to ensure that no one director has unfettered powers of decision-making. In line with King IV, the roles of the Chairman and the joint CEOs are separate. The Board is led by Larry Nestadt, an independent Non-Executive Chairman. The joint CEOs are Brett Levy and Mark Levy.

The Chairman's role includes setting the ethical tone for the Board and ensuring that the Board remains efficient, focused and operates as a unit. The Chairman provides overall leadership to the Board, without limiting the principle of collective responsibility for Board decisions. He also facilitates appropriate communication with shareholders and enables constructive relations between the Executive and Non-Executive Directors.

The joint CEOs' principal roles are to provide leadership to the executive team in running the Group's businesses. The Board defines the Group's levels of authority, reserving specific powers for the Board, while delegating others to Senior Management. The collective responsibility of management vests with the joint CEOs who regularly report to the Board on the Group's progress in delivering its objectives and strategy.

The Group's Financial Director is Dean Suntup. The Audit, Risk and Compliance Committee is satisfied that he has the appropriate expertise and experience for this position.

The Group has implemented a succession planning process at Board, top level management and subsidiary management levels. The succession plans are reviewed and approved by the appropriate bodies annually and documented accordingly. Furthermore, the business continuity plan for the Group has been drafted such that it incorporates the subsidiary succession plans. The Group has influential joint CEOs who co-founded the business, both of whom have a vested interest in the long-term future of the Group. However, in unforeseen circumstances, the Group has robust succession planning in place for both CEOs.

Blue Label Group recognises the value of diversity and is committed to promoting gender and race equality in the Group. Our Board has introduced the policy on the Promotion of Gender and Race Equality in the Blue Label Telecoms Group which is available online at www.bluelabeltelecoms.co.za. Our talent management processes, together with our policy, will enable us to improve diversity within the Group.

On an ongoing basis, the Board considers its structure, its gender, race and size composition, as well as the relationship between Executive and Non-Executive Directors. It is committed to making sustainable progress towards ensuring that the Board is sufficiently gender and race diverse and has the necessary skills to competently discharge its duties, having regard to the strategic direction of the Group. No specific targets have been set in relation to the Board diversity policy. With 25% of the Board being black and no female representation, the Board recognises that it must continue to progress race diversity and female representation in particular. The Board is actively pursuing the appointment of additional Independent Non-Executive Directors to further enhance independence and diversity of skills, race and gender at Board level. The Board acknowledges that, with effect from 31 May 2021, the Board must have a policy on the promotion of broader diversity at Board level, specifically focusing on the promotion of the diversity attributes of gender, race, culture, age, field of knowledge, skills and experience. This policy is currently in place although specific targets on each of these diversity factors are still in the process of being set. The principles of this policy are being applied as the Board actively seeks additional, new Independent Non-Executive Directors and we are pleased to put forward Ms Nomavuso Mnxasana as a new Non-Executive and Independent Director, for appointment by the shareholders at the AGM on 26 November 2020. The Board has concluded that it has the appropriate mix of knowledge, experience and independence.

The Remuneration and Nomination Committee (RNC) annually debates the independence of its Independent Non-Executive Directors who have served on the Board for a period of nine years or more. Laurence Nestadt, Gary Harlow and Joe Mthimunye have been assessed in this regard. The Committee has found them suitably independent, with continuing strong contributions, considering their experience within the Group and sector, and they are considered to continue operating independently and objectively and have no conflicts of interest.

The Board wishes to assure all stakeholders that the tenure and independence of Non-Executive Directors is vigorously debated and tested and that all Board meetings are robust in terms of their deliberation. Given the complexity of the industry within which Blue Label operates and the complexity of Blue Label itself, the Board believes that long-term knowledge and understanding of the issues surrounding the business are invaluable. The RNC is managing the succession plan at Board level to ensure that a pipeline of new Independent Non-Executive Directors is established and that the succession plan will be seamless and maintain a mixture of new appointees with experienced directors.

Board appointments

One-third of the directors retire by rotation every three years in terms of the MOI. If eligible, available and recommended for re-election by the RNC, their names are submitted for re-election at the AGM, accompanied by a short biography set out in the integrated annual report. In this regard, GD Harlow, KM Ellerine and DA Suntup will be retiring at the forthcoming AGM and, being eligible, have made themselves available for re-election. A brief biography of each Director appears on Board of directors

The RNC assists the Board with the assessment, recruitment and nomination of new Directors, subject to the whole Board approving these appointments. Board members are also invited to interview potential appointees.

A formal and transparent procedure applies to all new Board appointments, which are subject to approval by shareholders at the first AGM following that Director's appointment. Prior to appointment, candidates are required to complete a fit and proper test, as per the JSE Listings Requirements.

A policy requiring directors to observe a "cooling-off" period before accepting appointments to other, Boards, which may present a conflict of interest, has been included in the Board Charter.

Board effectiveness

The Board Charter provides for assessment of the Board and its committees every other year. During 2020 an internal assessment of the effectiveness of the Board, its subcommittees and individual directors was performed. The overall results reflected that the Board, its subcommittees and individual directors were performing effectively and above satisfactory in the categories surveyed. The need for improved diversity of the Board was highlighted again. Other continuous improvement areas were noted, together with agreed actions that will be tracked to implementation. The Board is satisfied that the evaluation process improves performance and effectiveness.

Evaluations of individual Executive Director's performance take place annually, once during remuneration increase and performance bonus award periods and, as applicable, prior to the AGM regarding the re-election of Directors. Refer to the remuneration section for the performance evaluation of the CEOs and the CFO against agreed upon performance measures and targets.

Induction of a new Director is tailored according to the knowledge and experience of the Director in a listed company environment. Focus is placed on providing information on the Board structure, business operations and Group strategy. Ongoing training and development of Directors involve ad hoc presentations to the Board by professional advisers and Senior Management to ensure the Board is kept abreast of governance, regulatory, financial and operational developments.

Company Secretary

Our Board remains satisfied with the competency and experience of our Group Company Secretary, Janine van Eden (BProc, LLB, Conveyancing). The performance appraisal of the Company Secretary for the year under review took into account the quality of support received and guidance provided to the Board. She maintains an arm's length relationship with the Board, providing guidance to Board members on execution of their duties and keeps up to date on the latest developments in corporate governance and regulation. All Directors have full access to the services and advice of the Group Company Secretary in all aspects of the Board's mandate and operations of the Group; the Board is satisfied that these arrangements are effective.

Board Committees

The Board has delegated certain functions to well-structured committees without abdicating its own responsibilities and accountability. Board Committees operate under written terms of reference approved by the Board.

Board Committees are free to take independent professional advice as and when deemed necessary, for which a formal policy is in place. The Group Company Secretary provides secretarial services for the Committees.

There is transparency and full disclosure from Board Committees to the Board. The minutes of Committees are submitted to the Board for noting and discussion. In addition, Directors have full access to all Board Committee documentation and Committee Chairpersons provide the Board with verbal reports on recent activities.

The Board is of the opinion that all Board Committees have effectively discharged their responsibilities, as contained in their respective terms of reference.

Our Board subcommittees are structured and attendance at meetings is presented as follows:

  Board     Special 
board 
   Audit, Risk 
and 
Compliance 
   Remune- 
ration and 
Nomination 
   Social, Ethics 
and Trans- 
formation 
   Investment    
Total number of meetings held during the year                   
Actual attendance/possible maximum attendance of meetings                         
LM Nestadt  4/4     4/4     –     3/3     –     –    
KM Ellerine  4/4     4/4     –     –     3/3     2/2    
GD Harlow  4/4     4/4     4/4     3/3     3/3     2/2    
BM Levy  4/4     4/4     4/4*    2/3*    1/3     2/2    
MS Levy  3/4     4/4     3/4*    3/3*    –     2/2    
JS Mthimunye  4/4     4/4     4/4     3/3     –     2/2    
SJ Vilakazi  4/4     3/4     4/4     –     3/3     –    
DA Suntup  4/4     4/4     4/4*    3/3*    –^     2/2    
DR Hilewitz#  –     –     –     –     –     1/2    
* Attendee.
^ Alternate to BM Levy.
# Member of subcommittee but not a director

Subcommittee structure and report back

The Board remains accountable for all matters where it has delegated responsibility to its subcommittees. The committees, their members and principal functions and focus areas are set out below:

Executive Committee

Members
MS Levy (Chairman) I Zwarenstein  
BM Levy G Jones***  
DA Suntup A Greenblatt  
SN Milne* A Roberts**  
A Kodesh G Levin****  
J Smith
DB Rivkind
EC de Villiers
D Hilewitz
L Pogir
J van Eden
* Resigned 29 June 2020
** Appointed 5 July 2020
*** Resigned 6 September 2020
**** Appointed 16 September 2020

Key objective and terms of reference

The Group Executive Committee is augmented beyond the Executive Directors by the inclusion of operational and functional management to provide a forum for dissemination of strategies and policies to operating subsidiary levels and provide oversight and feedback from operations on strategic matters in a combined forum. Group-wide strategic and policy decisions are typically formulated by the Executive Directors and approved by the Board.

Certain Group Executive Committee members are represented on boards of operating subsidiaries and act as liaisons with operating subsidiary CEOs and/or management.

The Executive Committee has concluded that it has fulfilled its responsibilities in accordance with its terms of reference.

2020 focus areas and activities

In addition to discharging its obligations in its terms of reference, during the year under review the Executive Committee focused on:

Refer to CEO discussion and operational review for further details.

2021 focus areas

Key focus areas of the Executive Committee during FY21 shall include concentrating on growing the core distribution business of the Group as well as deriving revenue from big data analytics and revenue assurance models;

As an ongoing practice, the Executive Committee is responsible for ensuring that subsidiaries:

Audit, Risk and Compliance

Members and attendees Number of meetings  
JS Mthimunye (Chairman) 4  
GD Harlow
SJ Vilakazi Member attendance  
BM Levy* 100%  
MS Levy*
DA Suntup*
* Attendee.

Key objective and terms of reference

Provides governance over internal controls, compliance, performance of internal and external audit, appropriateness of accounting and adequacy of external reporting.

The Audit, Risk and Compliance Committee concluded that it has fulfilled its responsibilities in accordance with its terms of reference.

2020 focus areas and activities

The Audit, Risk and Compliance Committee recognised the importance of the Cell C recapitalisation and ensuring the ongoing operations of Cell C. There has been some progress made in strengthening the control environment at Cell C while the recapitalisation process continues, and this includes:

Improving the governance and control environment at Cell C is a process and the major milestone will be the completion of the recapitalisation, which may necessitate further changes, depending on the final recapitalisation agreement.

In addition to strengthening governance structures and processes at Cell C, the Committee was focused on:

Refer to governance of risk, technology and information governance, combined assurance and to the Audit, Risk and Compliance Committee report for further details.

2021 focus areas

In the 2021 financial year the Audit, Risk and Compliance Committee will focus on:

Remuneration and Nomination Committee

Members and attendees Number of meetings
GD Harlow (Chairman of Remuneration Committee) 3
LM Nestadt (Chairman of Nomination Committee) Member attendance
JS Mthimunye 100%
BM Levy*
MS Levy*
DA Suntup*
* Attendee.

Key objective and terms of reference

Ensure competitive remuneration and incentive policies aligned with strategy to drive performance and value creation and to attract and retain the right talent, review design and targets of incentive schemes and remuneration packages, Executive and Non-Executive Director appointments and succession planning, annual evaluation of independence of Non-Executive Directors and composition of Board and its Committees.

The RNC concluded that it has fulfilled its responsibilities in accordance with its terms of reference.

The RNC continues to ensure that total rewards are set at levels that are competitive and drive performance in the short and long term ensuring alignment with shareholder interest and at the same time promoting an ethical culture and responsible corporate citizenship.

2020 focus areas and activities

During the 2020 financial year, the RNC has focused on ensuring stability throughout the Group in the wake of the write down of Blue Label's investment in Cell C, the need to focus on core operations and go back-to-basics and assisting the Group to evolve succession planning given the importance of attracting new talent both to the Board and Executive levels. Key focus areas have been:

Refer to remuneration report for further details on our remuneration philosophy, policy and implementation.

2021 focus areas

The Board has mandated the Remuneration Committee to continually assess the executive remuneration market and governance frameworks. Given the current South African economic environment and Blue Label's strategy and operational performance, we anticipate the following focus areas for the year ahead:

Social, Ethics and Transformation Committee

Members Number of meetings
SJ Vilakazi (Chairman) 3
KM Ellerine
GD Harlow Member attendance
BM Levy (alternate DA Suntup)
83%

Key objective and terms of reference

Monitor the Group's activities and compliance with legislation relating to equality, black economic empowerment, good corporate citizenship, the environment, health, public safety, and consumer and labour relations, as well as advise the Board where necessary and appropriate. Review ethical business conduct, including any activity on the ethics hotline.

The Social, Ethics and Transformation Committee concluded that it has fulfilled its responsibilities in accordance with its terms of reference.

2020 focus areas and activities

The Group understands that much effort needs to be placed on continual transformation of the business and plans with regard to achieving employment equity targets must be implemented. Executive remuneration is dependent on achieving transformation targets. Blue Label's driving philosophy is to advance financial inclusion for all South Africa's people. While the Group's drive in terms of aggressively expanding products and services in the informal market is highly commendable in terms of creating employment and reducing the cost of living for residents living in informal environments, the Committee recognises that CSI initiatives should function alongside the Group business drive so that each of these efforts is fortified and achieves more scale. The 2020 financial year saw continued focus on:

Key focus areas for 2021

Refer to the human capital report,the Social, Ethics and Transformation Committee report, on the effective and ethical leadership report and stakeholder relations sections for further details.

Investment Committee

Members Number of meetings
GD Harlow (Chairman) 2
KM Ellerine
DR Hilewitz Member attendance
BM Levy 93%
MS Levy
JS Mthimunye
DA Suntup

Key objectives and terms of reference

2020 focus areas and activities

The Investment Committee made some hard decisions in the 2019 financial year including the write down and impairments of many of our historic investments, including that of Cell C which severely affected the Group's performance and reputation with all stakeholders. Cell C is presently undergoing a significant debt restructuring programme, management changes and a new strategic direction. The success of these programmes is vital to the Group's performance and share price rerating. Blue Label's management and Board nominees are playing an active role in these initiatives.

Key focus areas were as follows
2021 focus areas

The Investment Committee's primary focus during the 2021 financial years will be: