2016 - ellipsis · broadband infraco integrated report 2016 ... africa’s biggest mobile network...

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BROADBAND INFRACO INTEGRATED REPORT 2016

Sharing our Successes…

THE IMPLEMENTATION OF BUILD, GROW AND EXPAND STRATEGY

2014• Secondanchorcustomeracquired• Five(5)openaccessPoPscompleted• PresidentialProclamationsignedon19September2014,effectivelytransferringBroadbandInfracofromtheDepartmentofPublicEnterprisestotheDepartmentofTelecommunicationsandPostalServices

• 89.47%AchievementofShareholders’Compact• Unqualifiedauditreport

2015• 83%AchievementofShareholders’Compact• 74%ofemployeesparticipatedinasatisfactionsurveyand70%weresatisfied• Overallawardand“A”ratingincompliance• “A”ratingininternalauditandinternalcontrol• Unqualifiedauditreport

2016• 87.50%AchievementofShareholders’Compact• Zeroirregularexpenditure• NOSAAccreditation• ISO18001successfulaudit• Unqualifiedauditreport• PositiveEBITDA

1BROADBAND INFRACO INTEGRATED REPORT 2016

CONTENTS

SECTION 11. Aboutthisreport 3

2. Overview 5

3. Whatwedo 7

4. Ourleadership 9

5. ReportfromtheChairmanandtheChiefExecutiveOfficer 11

6. ChiefFinancialOfficer’sReport 14

7. Highlights 16

8. PerformanceAgainstShareholders’Compact–2015/16 18

9. TechnicalEnvironment 22

10.BusinessDevelopment 24

11.StakeholderEngagements 26

12.CorporateSocialInvestment 28

13.Governance 30

14.LegalandRegulatory 42

15.PeopleManagement 43

16.SupplyChainManagement 48

17.Safety,Health,EnvironmentandQualityPerformance 49

SECTION 218. AnnualFinancialStatements2015/16 50

19.AcronymsandAbbreviations 89

20.GeneralCompanyInformation 91

SECTION 1

2 BROADBAND INFRACO INTEGRATED REPORT 2016

Broadband Infraco prides itself on excellence in service delivery


SECTION 1

1. Introduction

The Board of Directors and Executive Management ofBroadband Infraco SOC Limited (“the Company”) arepleasedtopresenttheIntegratedReportoftheCompanyfor2016.BroadbandInfracoreportson itsactivitiesandperformance to the shareholders, namely the Ministerof Telecommunications and Postal Services (ExecutiveAuthorityintermsofthePublicFinanceManagementAct1of1999)inhiscapacityasashareholderrepresentativeon behalf of the government of South Africa, and tothe Industrial Development Corporation of South AfricaLimited(IDC)ofSouthAfrica,asthesecondshareholder.

The Company’s main accountability instruments are theCorporatePlan,Shareholders’CompactandPerformanceIndicators, Integrated Report, Quarterly Reports, AnnualFinancialStatementsandanyother informationthatmaybe requested by the shareholders from time to time.The Integrated Report is tabled annually in the NationalAssembly in compliance with the requirements of thePublicFinanceManagementAct29of1999asamended(the “PFMA”), the National Treasury Regulations issuedin termsof thePublic FinanceManagementActand theCompaniesActNo71of2008.

The aim of this Integrated Report is to provide insightintoBroadbandInfraco,itsvaluepropositionandstrategy,opportunitiesandrisks,itsbusinessmodelandgovernance.Furthermore, it provides details of the current yearperformanceagainstitsstrategicobjectivesinawaythatgivesstakeholdersaholisticviewoftheCompanyanditsfutureactivities.

TheIntegratedReportpresentedincludesforward-lookinginformation to allow stakeholders to make an informedassessment of the future value creation ability of theorganisation.ThisreportistabledagainstthebackgroundofaturnaroundintheCompanymanifested,amongothers,bythefollowingperformancevariables:

I. Economic and Strategy Performance Indicators• Achievingdouble-digitsyear-on-yearrevenuegrowth

of 24% (year ended 31 March 2016 amounts to R452million;previousyearR366million)inanindustrythatreflectssingle-digityear-on-yearrevenuegrowth.

• Continuingtodiversifyitscustomerbasebyincreasingitsnumberofcustomersfrom18inthepreviousyear,to23intheyearunderreview.

• Growingitscumulativeyear-on-yearSTM-1equivalentfrom1506STMeto2003STMe.

• Cementing its long-term partnership with the state,throughCustomer1becomingamajoranchorcustomer.

• SignificantlyincreasingitsshareofrevenuefromSouthAfrica’s biggest mobile network operator through along-term,multiple-linktransaction.

• Continuously attracting emerging Internet ServiceProviders(ISPs),utilisingefficientIP-basedservices.

II. Environmental PerformanceThe implementation and maintenance of Safety, Health,Environment andQuality (SHEQ) systems forms part ofthecoreoftheCompany’sstrategy.Thefollowingarethehighlightsfortheperiodunderreview:

• OSHAS18001:AuditsconductedsuccessfullyandSABSaccreditationconfirmed.

• The 2015/16 year ended without a fatality fromoperationalincidents.

• The Company has been applying ISO 9001 principlesandhasnowresolvedtoinitiatethecertificationprocess,ofwhich32%hasbeencovered.

• Reduction in direct energy consumption per energysource.

• Increasedpercentageofuseofrecyclablematerials.• Noenvironmentalincidentshavebeenreportedand/or

recorded.• Reductioninwaterconsumptioninprojectimplementation

programmes.• Environmentally friendly materials used during the

implementationofvariousprojectsofBroadbandInfraco.• Indirectenergyconsumptionreducedbyprimarysource

andenergysaveddue toconservationandefficiencyimprovement.

III. Social Performance IndicatorsTheCompanyenlisted thesupportofpartnershipswithinprivate and public companies to acquire and donate 60tablets to Seshigo High School. The tablets, donated tobenefitmainlythematriclearnersattheschoolandloadedwith an online content application, named 2Enable, weredeliveredtoensurethatthetoolsareateachingaidthatwillcomplementtheworkoftheteachers,whilesimultaneouslyproviding an audio-visual learning opportunity for thelearners.

The2Enableapplicationboaststhefollowingfeatures:

• Diagnosticself-assessments• Courseware• Coursesupport• SACECPTDtracking• Analyticsandreporting• Communicationandtrainingcalendar• Learningcircles/usergroups• Administration

1. ABOUT THIS REPORT


SECTION 1

Thetabletswerealsodeliveredwiththefollowingvalue-addedservicesatnocostfromtheserviceprovider:

• Simcardswith200MBdatafor12months.• WiFidataaccessfortwo(2)years.• Monitoringandevaluationimplementationprogramme.

IV. Network PerformanceBroadband Infraco has achieved numerous successesin the past financial year. Major positive changes havetakenplaceinthetechnicaloperatingenvironmentoftheCompany,includingcompletionofmanyprojects,allowingmuchrequiredautonomyandcostsaving.Similarly,manycustomerserviceshavebeenbuiltandprovisioned.Notableamongtheachievementsarethefollowinghighlights:

• CompletionoftheMultiwavelengthTransportServices(MTS) project together with the core networkoptimisationprojects,whichhave increased the totalnetwork capacity with more than 100% capacity insomecases.

• Thecompletionandmigrationofservicesfromsomethird-party closed points of presence (PoPs), thusallowing major cost of sales savings and networkautonomy.

• The completion of the Oberholzer to Ramatlabamalink Dense Wavelength Division Multiplex (DWDM)upgrade, allowing more services to be providedto neighbouring Botswana. This strengthens theBroadband Infraco mandate to improve regionalconnectivity.

• Thesuccessfulimplementationandtimelyprovisioningof key customer services to amajormobile networkoperator.

• Thebuilding,installationandprovisioningofservicesaspartofthefirstandsecondphasesoftheprojectforCustomer1.

• SuccessfulrelocationofBroadbandInfracoequipmentfrom Transnet Freight Rail sites, which contributesto better network maintainability and improvesrestoration times, thus improving overall networkperformance.

• A quality system programme has been initiated forimplementation, with a goal of reaching ISO9001accreditationinthenexttwo(2)years.

• National Occupational Safety Association (NOSA)accreditation.

1. ABOUT THIS REPORT CONTINUED

V. Socio-Economic PerformanceThe Supply Chain Management (SCM) department hassucceededindeployingsystems,policiesandproceduresspecifically designed to attract meaningful contributionfrom previously disadvantaged groups, and created anenvironmentwithintheCompanywheretheseindividualsenjoy preference in terms of the supply of goods andservices inallspheresofthesupplychain.Asastrategicbusinesspartner,SCMcontinuestohaveagreatimpactonthedeliveryoftheCompany’sobjectivesandmandate.Italsoplayedamajorroleintransformationbycontributingto the Broad-Based Black Economic Empowerment(B-BBEE),throughasupplychainmanagementsystemthatenabledallstakeholderstoparticipateinafair,equitable,transparent,competitiveandcost-effectivemanner.

Thesespecificintegratedreportingindicatorsarecontainedintherelevantsectionsbelow.

Shareholders’ Compact The Company and its Shareholders are bound by theShareholders’ Compact, which the two (2) partiesconclude annually, in terms of the Treasury Regulations.ThisrecordsthemandatedkeyperformancemeasuresandindicatorstobeattainedbyBroadbandInfracoasagreedbetween the Board and the Shareholders. The partiesare bound by the principles of Corporate Governancein the Public Sector (Protocol), the Broadband InfracoAct,2007,theCompaniesAct,thePFMAandapplicableTreasury regulations. The Company endeavours toenhanceeffectivebusinessperformanceandtomaintaingoodcorporategovernance, includingsubscribing to theprinciplescontainedintheKingIIIReport.

TheShareholders’CompactrecordstheobjectivesoftheCompanyasfollows:

ToensurethatBroadbandInfraco:

• Maintainsareliablenetwork;• Ensuresfinancialsustainability;• ImplementssoundHRpractices;and• Economictransformation.


2.1 Overview

Broadband Infraco is a national asset that must beleveraged to drive national growth and industrialisation.Itsextensivefixednationalandinternationalinfrastructureis open to all competitive and public InformationCommunication Technology (ICT) operators engaged innationaldevelopmentthroughICT.

Broadband Infraco’s legislative mandate is set outin the Broadband Infraco Act No 33 of 2007 (theAct). The main objectives in terms of the Act are toexpand the availability and affordability of access toelectroniccommunications, including,butnot limitedto,underdeveloped and underserviced areas. These are inaccordancewith theElectronicCommunicationsActNo36 of 2005 and commensuratewith international bestpracticeandpricing, throughtheprovisionofelectroniccommunications network services and electroniccommunicationsservices.TheCompany isaSchedule2publicentityintermsofthePFMAandhastheDepartmentof Telecommunications and Postal Services (DTPS) andthe IndustrialDevelopmentCorporationofSouthAfricaLimited (IDC) as its shareholders. The Minister is theExecutiveAuthorityintermsofthePFMA.

Broadband Infraco’s mandate resonates with three (3)Strategic Infrastructure Projects, (SIP) 15 which focuseson expanding access to ICT, SIP 16 which focuses onthe Square Kilometre Array (SKA) andMeerkat, and SIP17 which focuses on regional integration for Africancooperationanddevelopment.AvailingthecapacityoftheWestAfricanCableSystem(WACS)totheDepartmentofScienceandTechnology(DST)isatthecoreofSIP16,whiletheCompanyalsohasanobligationtoconnectneighbouringcountries addressing ICT infrastructure requirements forSIP17.

The Company’s purpose is in line with the NationalDevelopmentPlan(NDP)ofestablishingnational, regionalandmunicipalfibre-opticnetworkstoprovidethebackboneforbroadbandaccess.Broadband Infracooperatesonthepremisethatthenational,provincialanddistrictbackhaulsrequirestateintervention,thusallowingprivateinvestmentstoleadthewayintheaccessmarket.

Broadband Infraco has 14 661 km of fibre networknationally and 156 PoPs. The national long-distancefibre-optic network currently utilises DWDM equipment,providing a number of 2.5 Gigabits, 10 Gigabits and 40Gigabitslambdasalongthemajorityoffibreroutes.

2.2 Vision Statement

BroadInfraco’svisionisasfollows:

“Toberecognisedasthewholesaleproviderofchoiceforbackhaulconnectivity.”

TheCompany’scriticalsuccessfactorsare:

• Toenable100%high-speedbroadbandconnectivityforallprovinces,districtsandmunicipalitiesinSouthAfrica;

• Toconnecttoallsix(6)neighbouringcountriesofSouthAfrica;and

• ToconnectcountriesonthewestcoastofAfricatotheWACS.

2.3 Mission Statement

BroadbandInfraco’sMissionisto:

• Enable national and regional private and publiccollaborationoninfrastructuredevelopment;

• Expandtheavailabilityandaffordabilityofaccesstoelectronic communications networks and services,including, but not limited to, underdeveloped andunderservicedareas;and

• Ensure that the high-capacity connectivity andbandwidth requirements for specific projects ofnationalinterestsaremet.

2.4 Values

• EngageStakeholders BroadbandInfracoproactivelyengagesitsstakeholders

tounderstandtheirongoingrequirements.

• Broadband Infraco prides itself on excellence inservice delivery

Broadband Infraco is dedicated to satisfying itscustomers’ needs. Broadband Infraco respects itscustomers, and understands their requirements byproviding them with quality services within agreedtimeframesandataffordableprices.

• BroadbandInfracoexecutesinasimpleandflexiblemanner

BroadbandInfraco’sdesignphilosophyistobeflexiblein order to accommodate customisation of solutionsforitscustomers.

• BroadbandInfracoactswithintegrityinallwedo Broadband Infraco’s directors and employees are

personally accountable for the highest standards ofbehaviour,includinghonestyandfairnessinallaspectsof their work. Broadband Infraco’s personnel willfulfil their commitments as responsible citizens andemployees. Broadband Infraco will consistently treatcustomerswiththerespectthattheydeserve.

2. OVERVIEW


SECTION 1

2.5 Opportunity Overview

The approved South African National Broadband Policyconsiders broadband as an ecosystem of high-capacity,high-speedandhigh-qualityelectronicnetworks,servicesapplicationsandcontent thatenhances thevariety, usesandvalueofinformationandcommunicationsfordifferenttypesofusers.

BroadbandInfracocurrentlyoperatesasthesecondlargestcommercial national long distance optic fibre network inSouthAfrica,withnearly14661kmor28%ofthecurrenttotalnetwork.

Broadband Infraco’s activities during the period underreviewweredirectedat:

• Repositioning its operations from a pure broadbandnetworkprovidertoanenablerofsolutionsthatimprovethequalityoflifeofthecitizensofSouthAfrica;

• Creatingopportunitytousepartnershipstoenabletheuseofaccessnetworksofpotentialpartners;

• Developing organisational capability through people,systems,andanongoingimprovementtothenetwork;and

• Cooperating with different partners to harvestbroadband networks that will grow the use ofbroadbandservices.

2. OVERVIEW CONTINUED

2.6 Organisational Development

Broadband Infraco has successfully transitioned from alimitedcustomerbasetoamoreopen-marketplayermodel,witha legislatedmandate.Thischange intheCompany’soperational model has provided unique challenges andrequiresresourcestoaddressthem,including:

• ThecomplexityaroundraisingfundsastheCompanyhasnohistoryofdebt;and

• Market price declines, which impact revenuesnegatively.

Sinceitslicensingin2009andtheconnectionofthefirstindependent customer in 2010, Broadband Infraco hascontinuedtodevelop itscapabilityandcapacitythroughthe implementationof theBuild-Grow-Expand strategy.Thisstrategyhasfocusedbothoninternalefficienciesandexternal service delivery. It executes the legal mandateand is also customer-centric. It supports the nationalbroadbandpolicybyensuringthat:

• Thecosttocommunicateiskeptaffordable;• High-capacitybandwidthisavailableforallthecitizens;• Optimalplanningdesignsavoidduplication;and• It works within the framework of the National

BroadbandPolicyinpartnershipwithprivateandpubliccollaborators.


Our Core Business

Broadband Infraco is a licensed telecommunicationsservice provider of wholesale services to the industry.Ourservicesarebasedontheprovisionofhigh-capacitybandwidthfrompointofpresence(PoP)toPoPwithinourNationalLongDistanceFibreOpticNetwork.

TheBroadbandInfracobusinessisacombinationofthree(3)elements:

1. National Connectivity

Inlinewiththevisionfor“broadbandtoall”,andasindicatedearlier in the report, the Broadband Infraco fibre opticnetworkismadeupof14661kmoffibre.TheCompanyhasupgradedmajorportionsofthenetworkfromSynchronousDigitalHierarchy(SDH)toDWDMandInternetProtocol(IP)technology,which is the latest technology.Themaximumcapacityonsomeroutesnowgoesupto170Gb/s.

3. WHAT WE DO

Economic Hubs

Broadband Infraco’s National Long Distance Networkcovers the country’s nine (9) provinces andmostmajorcities and towns. The Network Master Plan has beenapprovedto improvethe resilienceandscalabilityof thenetworktoaccommodatetheincreasingmarketdemandandtocontinuetoexceedtheneedsandexpectationsofthewholesalemarket.Thecapitalinvestmentprogrammewill extend the reach of the network and improveaccessibilitytobothurbanandruralcommunities.

Major Products and Services

At present, customers are able to buymultiple units ofindividual(DWDM,IPandSDH)servicesbetweenanytwo(2)long-distancedrop-offpoints(orcities)connectedbytheBroadbandInfraconetwork.


SECTION 1

2. Regional Connectivity

Network extensions have also been implemented toprovide fibre connectivity to theneighbouring countriesofLesotho,Mozambique,Namibia,Swaziland,Zimbabweand Botswana. Broadband Infraco can link West Coastand East Coast international cable systems through itsterrestialnationalnetwork.

InlinewiththeSouthernAfricanDevelopmentCommunity(SADC) Protocol on transport, communications andmeteorologyandtheregionalinfrastructuredevelopmentmasterplanalignment,BroadbandInfracoisconnectedtoalltheneighbouringSADCcountries.

3. WHAT WE DO CONTINUED

3. International Connectivity

Broadband Infraco’s a tier-1, core investor in theWACSinitiative. The Company was instrumental in bringing allthepartiestogethertoaddresstheneedforinternationalconnectivity. Through Broadband Infraco’s investment,the government has direct access to internationalconnectivity,which:

• Provides lower cost, sustainable and efficientinternationalbandwidth;and

• Positions South Africa for future economic growthas itwill beable toconnect tokeyglobal knowledgeeconomies,includingNorthAmericaandEurope.

Key Customer Base

Broadband Infracohas three (3)anchorcustomers fromwhich80%of its revenue is derived. TheCompany alsoprovides key connectivity to SADC regional operators,internet service providers and other infrastructureoperators.Itscustomerbaseissetoutas:

• corporatecustomers;• thepublicsector;• mobilenetworkoperators;• internationaloperators;• SADCregionaloperators;• systemintegrators;and• internetserviceproviders.

Forallitscustomers,BroadbandInfracowill:

• Sustain a very high-level relationship/accountmanagementprogramme;

• Maintain the accounts that are targeted at masterservice agreement revenue levels as part of longertermnegotiations;

• Grow accounts through leveraging site-sharingopportunities;

• Identify strategic major risks and opportunitiesassociatedwitheachoftheanchorcustomers;and

• Assess the likelihood of each scenario; quantify theexpected impactofmost likelyscenario;anddevelopmitigationplans.


4. OUR LEADERSHIP

The Board

BMCNgcoboChairpersonoftheBoard

Qualifications:

LLB(Natal),LLMinCompanyLaw(WITS),BusinessManagementProgramme(UCT)AdmittedAttorney

Expertise:

TelecommunicationsandBusinessManagement

SMabalayoChairperson:HumanResourcesandRemunerationCommittee

Qualifications:

BSc(ElectricalEngineering)(UCT),MBA(WITS)

Expertise:

Telecommunications,ProjectandGeneralManagement

N SelamolelaChairperson:Investment,Finance,TenderandProcurementCommittee

Qualifications:

BCom(Accounting)(North-WestUniversity),BCom(Honours)(UKZN)

Expertise:

Telecommunications,FinanceandGeneralManagement

M MaponyaChairperson:AuditandRiskCommittee

Qualifications:

BCom(Accounting)(WITS),BCom(Honours)(Natal)CA(SA),

Expertise:

Auditing,CorporateFinanceandTelecommunications

MMosweuChairperson:SocialandEthicsCommittee

Qualifications

BCompt(Hons)(UNISA) CA(SA),MBL

Expertise:

Project,CorporateFinanceandTelecommunicationsexpertise

P KweleChiefExecutiveOfficer

Qualifications:

BScHonours(WITS),PostgraduateDiplomainManagement(WITS), CertificateinFinancialManagement(UJ) CharteredMarketer(MarketingAssociationofSA)

Expertise:

TelecommunicationsandBusinessManagement,StrategyDevelopmentandExecution

II van NiekerkChiefFinancialOfficer

Qualifications:

B.Compt(Hons)(UNISA), CA(SA),CIBM(UNISA),CertificateinShort-termReservingTechniques(UP)

Expertise:

Telecommunications,FinancialManagement,CommercialManagementandStrategy

A GithiariIndependentNon-ExecutiveDirector

Qualifications:

PhD(ElectricalEngineering)(CambridgeUniversity), BSc(ElectricalEngineering)(UniversityofNairobi)

Expertise:

TelecommunicationsIndustrySpecialist

B.Compt


SECTION 1

4. OUR LEADERSHIP CONTINUED

ExecutiveCommittee

P KweleChiefExecutiveOfficer

Qualifications:

BScHonours(WITS),PostgraduateDiplomainManagement(WITS), CertificateinFinancial,Management(UJ)CharteredMarketer(MarketingAssociationofSA)

Expertise:

TelecommunicationsandBusinessManagement,StrategyDevelopmentandExecution

SMafuChiefMarketingandSalesOfficer

Qualifications:

BA;Post-GradDipManagement(UCT);MBA(Hull:UK);CharteredMarketer(MarketingAssociationofSA)

Expertise:

Telecommunications,SalesandMarketing,BusinessDevelopment,Strategy,Nationalsocioeconomicdevelopment

G ZowaChiefTechnicalOfficer

Qualifications:

BScElectricalEng(Hons),MBA(UniversityofPretoria),PrEng(ECSA),MSAIEE,MIEE(UK)

Expertise:

Telecommunications,(Switching,Transmission,Mobile(2G,3G,LTE,IP,IT).StrategicManagement,andBusinessManagement

M MopeliExecutive:HumanResources

Qualifications:ExecutiveDevelopmentProgramme(GIBS)MastersofManagementinHR(WBS)Honours-BachelorofLibrary&InformationScienceBA:PoliticalScienceandPublicAdministration

Expertise:

HR&GeneralManagement(Telecommunications&Manufacturing),OrganisationalDevelopmentandTransformationStrategy,EmployeeRelationsandLabourLegislation

M MojapeloExecutive:Compliance,RiskandAudit

Qualifications

B.Compt,GIA;PA.(S.A);EDP(ExecutiveDevelopmentProgram(Wits);LP(LeadershipProgrammeforSeniorManager(Univ.ofPTA);InternationalLeadershipDevelopmentProgram(ILDP)HenleyandPennStateBusinessSchool

Expertise:

InternalAuditing;Compliance;Risk;GovernanceandStrategy

F MohamedCompanySecretary(exofficio)

Qualifications:

BA(Law),PGDBM(HenleyUK)

Expertise:

CompanySecretariat,Governance,Administration,andStakeholderManagement

II van NiekerkChiefFinancialOfficer

Qualifications:

B.Compt(Hons)(UNISA), CA(SA),CIBM(UNISA),CertificateinShort-termReservingTechniques(UP)

Expertise:

Telecommunications,FinancialManagement,CommercialManagement,Strategy

Note:MrKMotlhabane(Executive:LegalandRegulatory)andMrVMaharaj(Executive:CapitalProgrammes)resignedfromBroadbandInfraco.

B.Compt

B.Compt


The Chairman and Chief Executive Officer, on behalf ofthe Board of Directors, present the Broadband Infraco’sIntegratedAnnualReportfortheyearended31March2016.

This Integrated Report covers the total performance oftheCompany,itsfinancialandotherresources.Thisreportreflects theperformanceof theCompanyover thepastfour(4)years.Theexecutionofthestrategicthemeshasresulted in numerous successes, such as the continuousincreaseinrevenuegenerated(R452millionagainstaR366millionforthepreviousfinancialyear),reductionofcostofsales(17%)andachievementofnetworkautonomy.Thisisasaresultofoptimisingandcontainingcostswhilenothamperingservicedeliverytocustomers.

1.1 The Past Four Years: The Successes

Overthepastfour(4)yearstheCompanyhasexecutedits Build,Grow and Expand strategy,which has resultedinnumeroussuccesses.This is reflected in the followingtrajectory:

• Consistentlyachievinginexcessof80%Shareholders’Compact deliverables (87.5% for 2015/16; 83%2014/15).

• Consistently increased its revenue by double-digitsyear-on-year(fromR302m,R366mtoR452m).

• Consistentlygeneratedagrossprofit (R149m,R51mtoR192m).Theincreaseingrossprofitisasaresultofdecreasedcostofsales.

• Optimised33PoPstoachievenetworkautonomy.• Consistentlyinvestedverysignificantcapitalexpenditure

intheextensionandrefurbishmentofitsnationallong-distancenetworks(R199m,R148mtoR161m).

TheCompany’soverallstrategyovertheperiodhasevolvedtoalignittonewconditionsandtobetterexploitemergingopportunities.Thekeythemesthatwereimplementedinsupportofthestrategyinclude:

Strategic Thrust 3-YearStrategyEvolution

Revenue Diversificationofcustomerbaseandgrowthofcustomernumbers

Pricing AsoundPricingStrategydrivingprofitability

Cost of Sales Fromacceptingfixedexpensesasimmutable;torobustlyre-engagingwithleasingpartnerstoextractrealvalueformoneyandmassivecostreductions.Thisincludesconstantlyassessingthemostfeasibleoptiontodeployinfrastructure

Infrastructure Management and Maintenance

Optimisingourtechnicaldesignsandexecutionofsoundengineeringprinciplescomplementedbyre-engagingstrategicpartnersresultedinareductionofcostofsales

Human Capital

Aconstantcriticalreviewofproductivityandhigh-performancecontractingenforcementenableshonestconversationsinareasofimprovement

5. REPORT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER


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5. REPORT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER CONTINUED

1.2 Results of the Year Under Review

• Shareholders’Compact

TheCompanyhasachieved87.5%ofitsShareholders’Compact targets for the financial year. The two (2)non-achievements are due to non-attainment ofrevenue,andtotalspendingonpeoplewithdisability-ownedenterprisetargets.

In total, 70% of the Company’s Annual PerformancePlan(APP)isfinancialinnature.Thefoundationofnon-financialindicatorshasbeensetandthisphaseisaboutfinancialsustainability.Whiletherevenuetargetswerenotachieved,criticaltargetslikethereductionofcostofsalesandoperatinglosswereachieved.

• UpdateonSHEQ

TheimplementationandmaintenanceofSHEQsystemsformspartofthecoreoftheCompany’sstrategy.Thefollowingarethehighlightsfortheperiodunderreview:

a. Safety: the Company was awarded NOSAaccreditation during the period under review andfor OSHAS18001 audit queries were resolvedsuccessfully and a recommendation to issue thecertificatehasbeensubmittedtoSABS.

b. The 2015/16 year endedwithout a fatality fromoperationalincidents.

c. TheCompanyhasbeenapplyingISO9001principlesand has now resolved to initiate the certificationprocess,ofwhich32%hasbeencovered.

d. No environmental incidents have been reportedand/orrecorded.

e. Therehasbeennothird-partyclaimasaresultofnon-compliancetoSHEQrequirements.

• Enterprise Development and Corporate SocialInvestment

TheEnterpriseandSupplierDevelopmentStrategy isin the second year of implementation. This strategyhas been designed to provide conclusive enterpriseand supplierdevelopment througheffectiveplanningandsourcingofproductsandservices.Ithasalsobeenaligned to business objectives and targets. Themainfocusofthisstrategyisto:

• Increase black women and youth participation inthetelecommunicationsindustry;

• IncreaseskillscapacityandcapabilitywithintheICTsector;

• Achieveequitablerepresentationinallprocurementactivitiesandlevelsintheefforttodriveenterprisestoreachmaximumlevelsofparticipation;and

• Entrench preferential procurement as a tool todrivetransformation.

TheEnterpriseandSupplierDevelopmentProgrammehasyielded114% (113%: 2014/15) B-BBEE spent, ofwhich45%(33%:2014/15)wasspentonblackwomen-ownedenterprises,and10.7%onyouth-ownedenterprises.

Thestrategytosupportthelearningofmathsandscienceis still relevant and thus the Company has continued tosupport Seshigo High School in Limpopo and EzakheniHighSchool inMpumalanga.Overthefour(4)yearstheCompanyandourstrategicpartnershaveinvestedinICT


to aid the learning of various subjects includingmathsandscience.InadditiontoTelematicsandthecomputerlab provided previously, Seshigo High School has nowbeen provided with tablets that have the approvedCurriculum and Assessment Policy Statement (CAPS)curriculumuploaded.

1.3 Network Improvement

Four(4)yearsago,80%ofthetransmissionwasold,andnowmajor projects to upgrade this network have beencompleted.TheseincludetheMTSandcoreoptimisationprojects.

With regard to regional connectivity, the RamatlabamaPoPhasbeenupgradedtothelatestDWDMequipment,allowing for higher capacity and enabling seamlesscommunicationbetweenSouthAfricaandBotswana.

1.4 Human Capital Management

TheBuild-Grow-ExpandStrategyrequiredstrategicrenewalofourHumanCapitalmanagementpractices.ThestrategicandoperationaloutputsofHumanResourceshavefocusedonenablingtheorganisationtorenewandreenergiseitselfthrougheffectivehumancapitalrevitalisationstrategies.

The Company has managed to address the challengesof balancing capacity and capability requirements forthe execution of critical aspects of the business and thebalancingoffinancialresourcestoaffordimperatives.

Thecriticalimperativeswere:

• Advancing the implementation of human resourcesdevelopment strategies to sharpen existing skills andbuildnewcompetency requirements in critical areasofwork;

• Retention of skills base, workplace morale andaccolades that are important for business reputationlike contribution to B-BBEE ratings (EmploymentEquityplan,WorkplaceSkillsPlanandstudyassistanceprogramme);and

• Innovative HR practices were explored and ways ofoptimisinghumanresourcescapacitytoavoidpossiblejob losses and to monitor labour costs within theconfines of the Company’s financial circumstanceswereimplemented.

Thesewere underpinned by a process of anHR capacitydatabasethatindicatedqualifications,competencies,yearsofserviceandexperiencesprofileofeachemployeewhichincludedthefollowing:

• The HR capacity database informed the rotation,secondment and temporary deployments that wereeffectedtomulti-skillandintensifytalentdevelopmentfor succession planning and career advancement at

variouslevelsoftheorganisationalstructure.• Atwelve-monthproductivityanalysiswasconducted

per functional area to assess where there wereshortagesandareaswithpossibleexcess.

Amongtheimperativesthatwereinstrumentalinbolsteringtheenhancementofpeoplemanagementpractices intheorganisationwerethefollowing:

• Approval of the framework for implementation ofthe temporarydeploymentstrategy foreffectiveHRoptimisation.

• Continuedtherealignmentofcriticaldivisionalstructuresfor optimisation and operational effectiveness fordepartmentssuchasInformationTechnology.

• Implementation of the automated performancemanagementsystem.

AllthesewereconductedandtheCompanystillmaintaineditscompliancetoallHRlegislativeimperatives.

Appreciation

A special thanks and appreciation is expressed to ourShareholders, the Minister of Telecommunications andPostalServices,DrSiyabongaCweleandhisdepartment,aswellastheChairpersonoftheIndustrialDevelopmentCorporation of South Africa, Ms B Mabuza, the IDCShareholderrepresentative,MsLizekaMatshekgaandherexecutiveteamfortheirongoingsupport.

To the Board:ThanksforhelpingnavigatethroughwatersbothcalmandtroubledandforalwaysputtingBroadbandInfraco’sinterestsfirst.YourprofessionalismembodiestheCompany’svaluesandphilosophyandyourhardworkisaninspirationtoallofus.

To Team Infraco: It’sonlyamatterof timebeforeyourcollectiveeffortswilltranslateintosustainable,operatingprofit. Your hardwork, perseverance and loyalty to theCompanyhavebecometheepitomeofstandingstrongandpunchingwayaboveyourweight.Thepositive feedbackfromthemarketpraisingyourcompetenceanddedicationwillpercolateintoadditionaldesiredgrowth.Thankyou.

ToourCustomers:Wordscanneverbeenoughtosaluteyou for trusting us with enabling you to provide SouthAfrica’s connectivity requirements. As we express ourgratitude,wedonotforgetthatthehighestappreciationisnottoutterwords,buttolivetheminthequalityofservicewerender.

MNgcobo PKweleChairmanoftheBoard ChiefExecutiveOfficer


SECTION 1

ItiswithgreatpleasurethatIpresentherewiththefinancialreportfortheyearended31March2016.

Thishasbeenayearinwhichwesetabouttostabilisethebusiness,growrevenueandcontainandmanageourcosts.IampleasedtoreportthattheCompanyhasexceededthetargetsthatweresetaroundstabilisingthebusinessandcontainingcosts.Albeittherevenuegrewbyalmost24%,theCompanyisslightlybelowthetargetthatwasset,butwellonitswaytocontinuethisgrowthpattern.

Financialresults

Revenue – The Company has grown its customerbasefrom18to23inthecurrentyear.Ithasacquiredsignificant up-sales from existing customers andalso sold significant capacity to new customers. Ithas engaged customers strategically and reviewedtransactions stringently to ensure better returns pertransaction.Revenuegrewby24%duringthecurrentyearandisexpectedtogrowoverallby18%inthenextfinancialyear.

Cost of sales – Management undertook severaloptimisationexercisestoreducecostofsalesthroughre-negotiations of maintenance contracts and fibreleaseagreements,optimisationofroutes,andbuildingnew networks instead of leasing. This resulted in asustainable reduction in cost of sales in excess of R50millionperannumor17%onthepreviousfinancialyear.Thisreductionwillbecarriedthroughtothe2017financialyearwithafurtherreductionof3%incostofsalesbeingbudgetedfor.

Operational cost–Operatingexpenditureexcludingdepreciationfortheyearis17%lowerthanthepreviousyear, after providing for abnormal legal arbitrationcosts.Managementundertookafocusedcost-savingdrive during 2015/16 to reduce operational costsacross the Company. This resulted in sustainablereduction in operational costs excluding depreciationinexcessofR30million.Itisexpectedthatoperationalcostswillincreasebyinflationonanannualbasisfromthislowbase.TheNeotelmatterhasbeensettled.

Capex

Duringtheyearunderreview,theCompanycontinuedto roll outmajor capital projects for theprovisioningandimplementationofservicestostrategiccustomers.ThetotalcapitalspendfortheyearunderreviewwasR161million.ItisenvisagedthatatotalofR75millionwill be spent in the next financial year to completetheseprojects.Atotalof420kmnewfibrewasaddedandmorethan30pointsofpresence(POPs)optimised.

Cash flow

TheCompanyremainedcashpositivethroughoutthefinancialyear,withapositiveEarningsBeforeInterest,Taxes, Depreciation and Amortisation (EBITDA) of7% and generating net cash flows from operations.It isenvisagedthatthispositivepatternwillcontinueinto the future, and positive returns on EBITDA areexpectedinthenextfinancialyear.

Futureoutlookandsustainability

Driving revenue remains a key focus and priority of theCompanyandwillbedrivenhardnotonlybytheChiefSalesand Marketing Officer, but also by the Chief ExecutiveOfficerandeachExecutiveMember,asrevenueisthekeydifferentiatorinensuringthesustainabilityoftheCompany.

Thegoodfoundationthatwascreatedduringthecurrentfinancial year – positive and continued sales growth,cost of sales sustainable reduction and operating costoptimisations,willcontributefurthertoenableandensurethesustainabilityoftheCompany.

Although the forecast of Broadband Infraco remainspositive, the Company has embarked with renewedintensityonsourcingfundingtofurtherenhance liquidityand sustainability. The funding requests are to variouscommercialbanksanddevelopmental finance institutionsto fundworkingcapital, specific ring-fencedprojects forcustomersandselectivecriticalmaintenanceprojects.

Socio-Economic Development

The Supply Chain Management (SCM) department hassucceeded indeploying systems,policies andproceduresspecifically designed to attract meaningful contributionfrom previously disadvantaged groups, and created anenvironmentwithintheCompanywheretheseindividualsenjoyed preference in termsof the supply of goods andservices inall spheresof thesupplychain.Asastrategicbusinesspartner,SCMcontinuestohaveagreatimpactonthedeliveryoftheCompany’sobjectivesandmandate.ItalsoplayedamajorroleintransformationbycontributingtoB-BBEEthroughasupplychainmanagementsystemthatenabledallstakeholderstoparticipate inafair,equitable,transparent,competitiveandcost-effectivemanner.

6. CHIEF FINANCIAL OFFICER’S REPORT


The total procurement spend for the year was almost R318million.Abreakdownofspendisindicatedbelow:

Numberofindirectjobscreated 686

AllocationofB-BBEEbudget 114%

Percentageincreaseonblack-ownedentitiesspend 54%

Percentagespendonyouth-ownedentities 11%

Percentagespendonwomen-ownedentities 45%

Percentageincreasespendonpeople-with-disabilities-ownedentities

0,1%

The focus going forward is to continuously improveefficiency in supply chain practices and compliance tolegislativerequirements,tomaintaincurrentB-BBEEspendandranking,amidchangesinlegislativeenvironment.

Funding

BroadbandInfracocontinuestofollowafundingstrategythatisdesignedtocaterforatransitioningbusinessmodelthat will enable sustainability. The Company’s businessmodel has transitioned from a single customer to onebased on multiple customers, ranging from the privateto the public sector. The Company’s planned capitalinvestmentprogrammeissupportiveoflong-termfinancialsustainability,withfour(4)keypriorities:

• Revenueprotectionprojects.• Revenuegeneratingprojects.• Mandateandlicenseobligationsprojects.• Essentialassetupgradesandrefurbishmentprojects.

The funding strategy is to source funding from theprivate commercial banking sector, DevelopmentFinanceInstitutions(DFIs)andselectivevendorfinancingalternatives.Commercialbanksaretargetedasasourceofshort-termcashandliquidity-provisioningfacilities,whiletheDFIsareexpectedtosupporttheCompanywithlong-termdebt capital and vendors to supportmedium- andlong-term balancing of operational costs with revenuethroughthefinancingoftechnologyenhancements.

Indeterminingthefundingstrategyfortheperiodunderreview, and aligning primarily to the capital investmentprogramme,theCompanyconsideredanumberoffundingmechanisms and sources, ultimately deciding on thefollowingthree(3)options:

• Project-based structured financing: PreviouslyBroadbandInfracowasnotabletosecurefundingforcustomer-generatedprojectsduetothelackofatrackrecord.TheCompanyisnowabletodemonstratethattheyareabletowin,planandexecutemajorprojectssuccessfully.Theseprojectsresultedinbothsignificantgrowthandcost-savings.TheCompanyispositivethat

itwillbeabletosecurefundingoffthebackoftheseprojects for future, customer-requested projectswhererevenuewillimprove.

• Development Finance Institutions facilities (including bank funding for bridging purposes):TheCompanyhasdemonstrateditsabilitytomanagecash optimally over the past twelve months. Thiswas achieved through proactively and continuouslyapplying cost optimisation strategies, engaging withsuppliers to extend payment terms and appealing tocustomerstopaytheCompanyasquicklyaspossible.ThiswillhaveapositiveeffectonfutureengagementwithsomeoftheDFIsandcommercialbanks.

• Vendor financing of technology upgrades: Duringthepastyear,theCompanyengagedwithmanyofitskeysuppliersandwasabletonegotiateextendedcreditterms with most of them. Many of these suppliershavenowindicatedthattheywillbewillingtoconsiderlonger-term financing of technology and customerenhancements,overtheuseful lifeoftheequipment.This type of funding could cover a significant partof the planned capital expenditure planned for the2016/17financialyear.

These options sought to secure funding for BroadbandInfracoeitherdirectlyontotheCompany’sbalancesheetoronanoff-balance-sheetbasis.

Conclusion

Duringtheforthcomingperiod,theCompanywillremainfocused on doingwhat it is doing now, only better.Wewill continue to drive revenue, ensure we maintain andoptimisecostlevels,andimproveefficienciesevenfurther.

Wearecommittedtooperatingwithinourfinancialmeans,and in a way that does not detract from our deliverycapability,norfromachievingoursustainabilitytarget.

IwanttotakethisopportunitytothankeveryBroadbandInfraco employee, contractor, executive and ourshareholdersfortheir tirelessefforts inassistingtohelpBroadband Infraco on the road to achieving financialsustainability. To the finance team, I thank you for yourprudenceanddiligence.

Ian van NiekerkChiefFinancialOfficer


SECTION 1

Thefollowingsalientmilestoneswereachievedintheyearunderreview:

YEAR-ON-YEAR CUSTOMERS

From18to23growth

CAPITAL EXPENDITURE

FromR148mtoR161m

7. HIGHLIGHTS

NETWORK AUTONOMY

33open-access PoPsoptimised

CORPORATE SOCIAL INVESTMENT

60tabletsprocuredanddeliveredthrough

partnershipswithsuppliers

SHAREHOLDERS’ COMPACT

87.5%achieved

REVENUE: R452M

24%year-on-year growthachieved


NETWORK SALEABILITY

497STM-1equivalent year-on-yeargrowth

achieved

NETWORK AVAILABILITY

Exceededindustrynorm by99.92%

PRODUCT DEVELOPMENTSuccessfullylaunched

RemotePeeringandMastColocationproducts

SHEQThe2015/16yearendedwithoutafatalityfromoperationalincidents

WATERReductioninwater

consumptioninprojectimplementationprogrammes

ENVIRONMENTNoenvironmentalincidents

havebeenreported and/orrecorded


SECTION 1

Strategic Objective Weighting KPA KPI Sub-

weighting Baseline2015/16 Target

Q1Actual results

Q2Actualresults

Q3Actualresults

Q4Actualresults

YTD Status Comments

Ensure BusinessSustainability

30%

NetworkPerformanceRebates

Networkperformancerebatespaidaspercentageofgrossrevenue

12.50% 0.17% ≤0.3%ofcustomerrevenue 0.03% 0.10% 0.12% 0.13% 0.10% Achieved Serviceavailabilityimproved

Revenue Percentageincreaseofactualrevenue 7.50% R364mil 28%increasein

Revenue 65% 32% 10% 4.2% 23.6% NotAchieved

DelayinbillingcycleandlowerrecoveryfromWACS

CostofSalesPercentagedecreaseofcostofsalesexcludingdepreciation

5% R444mil 10%decreaseofCostofSales 98% -6% -53.30% -45.9% -17.6% Achieved Lowerfibremaintenancecosts

andrenegotiatedcontracts

NetProfitDecreasedamountofOperatingLoss 5% (R267mil) (R133mil)decrease

inOperatingLoss (R47.8million) (R29.1million) (R41.4million)

R26.9million

(R91.4million) Achieved

Loweremployee,marketingandadmincostsduetonaturalattritionandcostcontainment

Network Saleability

30% NetworkUtilisationNumberofSTM-1equivalentsold 30% 1484STM-

1160STM-1Equivalent

341.27STM-1Equivalent 74.45 80STM-1

Equivalent1.55STM-1Equivalent

497STM-1Equivalent Achieved

Network Improvement

20%

CustomerEnablement

NumberofKMoffibreaddedtotheNetwork 10% 14392.14 100kmby31

March 2016 202.60km 182.50km 15.49km 19.46km 420.05km Achieved RouteoptimisationandCustomer1connectivity

OberholzertoRamatlabamaLinkupgradedtoDWDM 5% –

OberholzertoRamatlabamaUpgradecompletedbyendofNov2015

In Progress In ProgressUpgradesuccessfullycompleted

Upgradesuccessfullycompleted


Achieved

Projectscompleted NumberofProjectsontime,scopeandcost 5% – 5Projects In Progress In Progress In Progress 6Projects

completed6Projectscompleted Achieved

Economic Transformation

20%

ControlledTrainingSpend

Trainingspendaspercentageofpayroll 3% 3% 1% 0.10% 0.47% 0.76% 1.24% 1.33% Achieved

TrainingwasinaccordancewiththeWorkplaceSkillsPlanning(WSP)

MaximiseSocioeconomicContributions

Numberofindirectjobscreated 2% 182 60jobs 40 47 412 187 686 Achieved Agreementwithserviceproviders

tocreatejobs

AllocationofB-BBEEbudgetdiscretionaryspend 5% 117% 70% 111% 106% 117% 121% 114% Achieved Orderswereplacedwithlevel1

and3suppliers

PercentageincreaseonBlack-ownedentitiesspend 2% 35% 40%spendof

B-BBEE 34.10% 47.0% 69% 70.70% 54.1% Achieved ImplementationoftheEnterprisedevelopmentplan

PercentagespendofYouth-ownedentities 2% 8% 10%spendof40%

spendonBOE 2.1% 8.3% 13.6% 15.4% 10.7% Achieved Youthparticipationisincreasing

PercentagespendofWomen-ownedentities 2% 33% 10%spendof40%

spendonBOE 48.1% 51.7% 42.2% 43.1% 44.5% Achieved Womenparticipationinthesectoris increasing

PercentageincreasespendonPeoplewithDisabilities-ownedentities

2% R518k 1% 0% 0% 0.00% 1% 0.1% Notachieved

Thecertificatefordisabilityverifiedthattheserviceproviderwasonly35%

Enhancelearningenvironmentthroughtheuseofdigitallearningtools

Numberofdigitallearningtools 2% Interactive

boards 60tablets In Progress

DFAsponsorshipletterfor

R50000hasbeenreceived.

60tablets 60tablets60tabletsprocuredanddelivered

Achieved Partnershipwithserviceproviders

8. PERFORMANCE AGAINST SHAREHOLDERS’ COMPACT - 2015/16



weighting Baseline2015/16 Target

Q1Actual results

Q2Actualresults

Q3Actualresults

Q4Actualresults

YTD Status Comments


30%

NetworkPerformanceRebates

Networkperformancerebatespaidaspercentageofgrossrevenue

12.50% 0.17% ≤0.3%ofcustomerrevenue 0.03% 0.10% 0.12% 0.13% 0.10% Achieved Serviceavailabilityimproved

Revenue Percentageincreaseofactualrevenue 7.50% R364mil 28%increasein






NetProfitDecreasedamountofOperatingLoss 5% (R267mil) (R133mil)decrease

inOperatingLoss (R47.8million) (R29.1million) (R41.4million)

R26.9million

(R91.4million) Achieved

Loweremployee,marketingandadmincostsduetonaturalattritionandcostcontainment

Network Saleability


1160STM-1Equivalent



497STM-1Equivalent Achieved

Network Improvement

20%

CustomerEnablement

NumberofKMoffibreaddedtotheNetwork 10% 14392.14 100kmby31


OberholzertoRamatlabamaLinkupgradedtoDWDM 5% –

OberholzertoRamatlabamaUpgradecompletedbyendofNov2015

In Progress In ProgressUpgradesuccessfullycompleted



Achieved

Projectscompleted NumberofProjectsontime,scopeandcost 5% – 5Projects In Progress In Progress In Progress 6Projects

completed6Projectscompleted Achieved

Economic Transformation

20%

ControlledTrainingSpend

Trainingspendaspercentageofpayroll 3% 3% 1% 0.10% 0.47% 0.76% 1.24% 1.33% Achieved

TrainingwasinaccordancewiththeWorkplaceSkillsPlanning(WSP)

MaximiseSocioeconomicContributions

Numberofindirectjobscreated 2% 182 60jobs 40 47 412 187 686 Achieved Agreementwithserviceproviders

tocreatejobs

AllocationofB-BBEEbudgetdiscretionaryspend 5% 117% 70% 111% 106% 117% 121% 114% Achieved Orderswereplacedwithlevel1

and3suppliers

PercentageincreaseonBlack-ownedentitiesspend 2% 35% 40%spendof

B-BBEE 34.10% 47.0% 69% 70.70% 54.1% Achieved ImplementationoftheEnterprisedevelopmentplan

PercentagespendofYouth-ownedentities 2% 8% 10%spendof40%

spendonBOE 2.1% 8.3% 13.6% 15.4% 10.7% Achieved Youthparticipationisincreasing

PercentagespendofWomen-ownedentities 2% 33% 10%spendof40%

spendonBOE 48.1% 51.7% 42.2% 43.1% 44.5% Achieved Womenparticipationinthesectoris increasing

PercentageincreasespendonPeoplewithDisabilities-ownedentities

2% R518k 1% 0% 0% 0.00% 1% 0.1% Notachieved

Thecertificatefordisabilityverifiedthattheserviceproviderwasonly35%

Enhancelearningenvironmentthroughtheuseofdigitallearningtools

Numberofdigitallearningtools 2% Interactive

boards 60tablets In Progress

DFAsponsorshipletterfor

R50000hasbeenreceived.

60tablets 60tablets60tabletsprocuredanddelivered

Achieved Partnershipwithserviceproviders

8. PERFORMANCE AGAINST SHAREHOLDERS’ COMPACT - 2015/16


SECTION 1

8. STRETCH TARGETS BY SHAREHOLDERS


weighting Baseline2015/16 Stretch Target

Q1Actual results

Q2Actualresults

Q3Actualresults

Q4Actualresults

YTD Status Comments


70%

Revenue Percentageincreaseofactualrevenue 15% R364mil 32%increasein






DebtorsCollection*Numberofdaysperoutstandingcustomerinvoices

5% - 45days 43days 27days 46days 26days 26days Achieved Improvementincollection

UnallocatedCreditors*

Numberofdaysforunallocatedcreditors 5% - Unallocatedcreditors

lessthan1weekAllocated

withinaweekAllocatedwithin

aweekAllocated

withinaweek

Allocated withinaweek

Allocatedwithinaweek Achieved

Network Saleability


1668STM-1Equivalent



497STM-1Equivalent

NotAchieved

Increaseoftargetsbasedoncustomerupgrades

Network Improvement

10%

CustomerEnablement

NumberofkmoffibreaddedtotheNetwork 5% 14392.14 250kmby31


PointsofPresence(PoP)optimisation

NumberofPoPsoptimisedtofacilitatecustomerconnectionpoints

2.50% – 41PoPsoptimised In Progress In Progress 24PoPs optimised

9PoPs optimised

33PoPsoptimised

NotAchieved

Optimisationislinkedtocustomerconnectivitythatwillbeconcludedinthenewfinancialyear

*DebtorscollectionandunallocatedcreditorswerenewKeyPerformanceAreas(KPAs).



weighting Baseline2015/16 Stretch Target

Q1Actual results

Q2Actualresults

Q3Actualresults

Q4Actualresults

YTD Status Comments


70%

Revenue Percentageincreaseofactualrevenue 15% R364mil 32%increasein






DebtorsCollection*Numberofdaysperoutstandingcustomerinvoices

5% - 45days 43days 27days 46days 26days 26days Achieved Improvementincollection

UnallocatedCreditors*

Numberofdaysforunallocatedcreditors 5% - Unallocatedcreditors

lessthan1weekAllocated

withinaweekAllocatedwithin

aweekAllocated

withinaweek

Allocated withinaweek

Allocatedwithinaweek Achieved

Network Saleability


1668STM-1Equivalent



497STM-1Equivalent

NotAchieved

Increaseoftargetsbasedoncustomerupgrades

Network Improvement

10%

CustomerEnablement

NumberofkmoffibreaddedtotheNetwork 5% 14392.14 250kmby31


PointsofPresence(PoP)optimisation

NumberofPoPsoptimisedtofacilitatecustomerconnectionpoints

2.50% – 41PoPsoptimised In Progress In Progress 24PoPs optimised

9PoPs optimised

33PoPsoptimised

NotAchieved

Optimisationislinkedtocustomerconnectivitythatwillbeconcludedinthenewfinancialyear


SECTION 1

9. TECHNICAL ENVIRONMENT

Operational Review1. Network Improvements

In the period under review, Broadband Infraco achievednumeroussuccesses.Manyprojectsthatwereininceptionphasehavenowbeencompleted,allowingmuchrequiredautonomy and cost-saving. Similarly, many customerserviceshavebeenbuiltandprovisioned.Notableamongtheachievementsarethefollowinghighlights:

• Finalisation of the MTS project together with thecompletionofthecorenetworkoptimisationprojects,which have increased the total network capacity bymorethan100%insomeinstances.

• Thecompletionandmigrationofservicesfromsomethird-party closed PoPs, thus allowingmajor cost ofsalessavingsandnetworkautonomy.

• The completion of the Oberholzer to Ramatlabamalink DWDM upgrade, allowing more services to beprovided to neighbouring Botswana. This improvesthe Broadband Infraco mandate to improve regionalconnectivity.

• Thesuccessfulimplementationandtimelyprovisioningofmajorcustomerservicestoamajormobilenetworkoperator.

• Thebuilding,installationandprovisioningofservicesaspartofthefirstandsecondphasesoftheprojectforCustomer1.

• SuccessfulrelocationofBroadbandInfracoequipmentfrom Transnet Freight Rail sites, which contributesto better network maintainability and improvesrestoration times thus improving overall networkperformance.

• A quality system programme has been initiated forimplementation, with a goal of reaching ISO 9001accreditationinthenexttwo(2)years.

• LTIFR – The lost-time injury frequency rate hasdroppedtozerosinceJanuary2016.


2. Network Engineering Projects

Laboratory: From the test and training laboratory thatwassuccessfullyestablishedinthepreviousfinancialyear,Broadband Infraco has managed to run and successfullycomplete all DWDM and Synchronous Digital Hierarchy(SDH)interoperability tests with third-party suppliers inpreparationfordiversifyingsuppliersonthenetwork.

Route optimisation: After the successful completionof the latest DWDM equipment, both the new DWDMandtheoldSDHequipmentwererunninginparallel.Thisresultedindoubleconsumptionofpowerandspace,thusincreasingthemonthlyoperationalcosts.TheorganisationthenembarkedonnetworkoptimisationtoeliminatetheexistenceoftheparallelSDHandDWDMlinksforthemajoraffectedroutes.Thisoptimisationwascompletedandthusresulted inamoreefficientnetwork.Theoptimisation iscontinuingforroutesthatareoutstanding.

Corenetwork(MTS)upgrade:Duringthefinancialyear,the MTS upgrade project and associated sub-projects(core network upgrades and optimisation), were allcompleted.Therewasasignificantadditionofcapacityonthenetworkduetotheseupgrades.Asaresult,BroadbandInfraco is now providing services requiring significantcapacityfornewandexistingcustomers.

Othercustomerprojects:Theprojectstocompletetheredundancy links for other customers are ongoing andat various stages of progress. These are summarised asfollows:

• WutheringHeights:Fibrebuildisinprogress.

• Witbank: The protection fibre forWitbank has beenconstructed, testedandacceptedandtheprotectionservicesarenowrunning.

• RamatlabamaProject:TheprojecttoupgradenetworkcapacityontheborderwithBotswanawascompletedintime.

3. Network operations

3.1 Network Availability Trend

Theperformanceofthenetworkismeasuredthroughtheserviceavailabilityforcustomers.This isameasurementof the actual time that customer services are available(up and running). In 2015/16 the averaged BroadbandInfraco network service availability was 99.92%, whichis higher than the contracted SLA at99.50%. This is asaresultofsomeofthenetworkfailuresoccurringwheretherewere redundant links, thusprotectingtheservicesand improving the uptime for customer services. Thegraphbelowshowsthisperformanceincomparisontotheprevious year’s performance, and also in comparison tothecontractedSLA.

3.2 Mean Time To Restore (MTTR)

The MTTR is a measure of the average total time ittakestorestoreanetwork incident,which is inclusiveofadministrative delay (fault-logging), logistical delay andactualfaultrepairtime.

TheMTTRoverthepastfinancialyearremainedacceptablewithin the target of eight (08:00) hours. The actualaveragevaluewasaboutsix(06:10)hours.

3.3 Network Information

BroadbandInfracohas157PoPsitesand14661kmoffibre(overheadandunderground). Thebasic network layout isshownonthemap(page7).

Broadband Infraco National Network

3.4 Focus Areas

The following areas will be targeted for operationalimprovements:

a. Obsolete network technology: Whereas recentsuccessful network upgrades have resulted in morethan75%oftheactivenetworkbeingrevamped,therearestilloutstandingelementsinthenetworkthatwillneed to be refurbished or upgraded. In addition, theAdlash fibre will need to be upgraded in conjunctionwithEskom’srefurbishmentplans.

b. Information Technology network: Disaster recoveryplans have been completed and most of them havebeenimplementedalready.


SECTION 1

Broadband Infraco’sbusinessdevelopmentsuccessesfortheyearunderreviewareasfollows:

Achieving double-digit year-on-year revenuegrowthofa24%increase(yearended31March2016amountsto R452 million; previous year of R366 million) inan industry that reflects single-digit year-on-yearrevenuegrowths.

Continuingtodiversifyitscustomerbasebyincreasingitsnumberofcustomersfrom18inthepreviousyearto23intheyearunderreview.

Growing its cumulative year-on-year STM-1equivalent growth from 1 506 STM-1 Equivalent inthelastyear,by497STM-1Equivalentduringtheyearunderreview,bringing ittoatotalannual increaseof 2003STM-1Equivalentfortheyear.

• Cementingitslong-termpartnershipintermsofbeingacoreprovidertopublicsectorconnectivitydemand.

• Consolidating itspositionasaproviderofallprimaryend-to-end links for a leading Mobile Networkoperator.

SignificantlyincreasingitsshareofrevenuefromSouthAfrica’s biggest mobile network operator revenuethroughalong-term,multiple-linktransaction.

• Continuously attracting the emerging ISPs utilisingefficientIP-basedservices.

Thesesuccessesarepremisedonthefollowingembeddedservicedeliveryprinciples:

• Broadband Infraco provides carrier-grade serviceavailability to all its customers that far exceeds thecontractedSLAofitscustomers.

• Each customer is allocated a full-time, dedicatedhumanresourceasafirstandcomprehensivepointofentrytotheirspecificneeds.

• Broadband Infraco’s decision-making is agile, andits structures are flat, which allows for expeditedconclusion of governance processes to enable thehighestlevelsofservicetocustomers.

• Broadband Infraco sees its customers as long-termpartnerscontributingtowardsmakingconnectivity inSouth Africa, a ubiquitous, affordable necessity. Thishas allowed the Company to cross-sell and up-sellsignificantservicestoitsexistingbase.

• BroadbandInfracodeployshighlytrainedstaffonthegroundinallprovincestoconductbothrestorativeandpreventativemaintenancetoitsnationallong-distancenetwork.

• Broadband Infraco’s products and services arecompetitively priced and reflect objective value formoney.

• TheCompanyisledbyexperiencedindustryveteranswhosemaindriveistodeliveraworld-classcustomerexperiencetothemarket.

10. BUSINESS DEVELOPMENT


BroadbandInfracohadreceivedanoverwhelminglypositiveCustomerSatisfactionSurveyinits2014/15independentCustomerSatisfactionSurvey.Thishascontinuedthroughdirectcustomerfeedbackduringthelastyearwithregardtotheresponsivenessof itsNetworkOperationsCentre,dedication of its staff, competitive pricing and ease oftransactionwiththemarket.

Themajorcontributorsofitsrevenueoutcomesare:

Customer 1

BroadbandInfracohasbeenabletogrowitssliceofrevenuefromcustomer1throughnearlydoublingitscapacityfromthe timeof inception andendof the financial year. Thisenablescustomer1tointurndeliveraprotected,always-available, end-user experience to its portfolio of criticalservicedeliveryconnectivity.

Customer 2

Broadband Infraco continues to supply all primaryconnectivity links to customer 2’s terrestrial networkacrossallregionsofoperations.TheCompanyalsoprovidescolocationservicestocustomer2onalong-termbasis.

Customer 3

Broadband Infracocontinues toprovidecritical backhaulservicesenablingcustomer3toconductbusinesswithintheSAtelecommunicationsvaluechain.BroadbandInfracoenablescustomer3todeliverservicesatwholesale,retailand enterprise level providing critical services to theeconomyofthecountry.

Customer 10

BroadbandInfracohasintensifieditsstrategicpartnershipwith customer 10 due to its consistent delivery of animpeccable track record of high-quality of redundant,zero-disruptedexperience.BroadbandInfracoistheonlyproviderofend-to-endgig-Eservicestocriticalregionalandin-countrynodestocustomer10.

Customer 18

Broadband Infraco grew its volume of business fromcustomer 18 significantly within the past year, due tocustomer18’sexponentialmarketgrowth.Thispartnershipis likely to continue generating more opportunities forbothoperatorsintheforthcomingyear.

Emerging ISPs

Broadband Infraco has experienced a significant growthfrom the small to medium Internet Service Providers(ISPs).TheCompanyhasmanagedtoconcludecontractswithseveralnewInternetServiceProviderswhooperateinmarketsoverlookedbythebiggeroperators.BroadbandInfraco’s competitiveDWDM/IP product portfolio is thecornerstoneofsuchgrowthasthenatureoftheproductsissuchthattherevenuesinitiatedstartsteadyandbecomesignificantovertime.

BroadbandInfracoremainstheonlystate-ownedcompanycreated by an Act of Parliament solely for the purposeof rolling-out strategic broadband infrastructure andenabling national development. Broadband Infraco looksforwardtoalong-termstrategicpartnershipwithoneofthe country’s leadingnationalmobile networkoperatorsdrivingnationalbroadbandpenetration.

Pricing

In addressing the prevailing market conditions such ascustomers’ expectations for better pricing, heightenedcompetition in the backhaul market space and ensuringincreasedmarketshareandtheCompany’ssustainability,theCompanyembarkedonacomprehensivecostingandpricing review exercise. This review exercise resulted inaunitprice that isprofitable andcompetitiveaswell asa pricingmodel that will go a longway in ensuring thesustainabilityoftheCompany.Thisisoneofthegreatestmilestones achieved in the period under review as itplaces theCompanyontoa firmpathof sustainableyetresponsiblemarkettrade.

Product Development

The Company has successfully launched the colocationservice(hostingspaceandmast) inresponsetogrowingcustomer demands and also to intensify the “one-stopshop” for backhaul connectivity. In total, 17% of thecustomerbaseisalreadyutilisingthesecolocationservices.

BroadbandInfracoalsolaunchedthe“NOCasaService”(Phase 1 - Disaster Recovery NOC) in March 2016.BroadbandInfracoiscurrentlyusingitsNOCforitsowncustomers,connectedto itsnetwork.Thisconceptseesan opportunity to extend these NOC services to otheroperators whomay require them. This has potential tostimulatetheCompany’srevenuewithoutanyadditionalcapitalinvestment.


SECTION 1

Stakeholdermanagemententailsproactivelyengagingourstakeholderstounderstandtheirexpressedandunexpressedneeds.

11. STAKEHOLDER ENGAGEMENTS

Building the brand through high-visibility stakeholder engagements

Provincial Youth, Career and Small, Medium Enterprise Development Events

Date Event Area BroadbandInfracoPurpose

DTPSLaunchofICTYouthandDisabilityinMpumalanga

3-5February2015

NgwenyamaLodge,WhiteRiverMpumalanga

TodisseminatecorporateinformationaboutBroadbandInfraco’sproductsandservicesandopportunitiesforyoungentrepreneursandICTcareeradvocacy.

DeputyPresidentYouthIndaba 20February2015

UniversityofJohannesburgSowetoCampus

TodisseminatecorporateinformationaboutBroadbandInfraco’sproductsandservicesandopportunitiesforyoungentrepreneursandICTcareeradvocacy.

JoziniYouthSummitandCareerExpo

14/15November2015

JoziniLocalMunicipality PresentationaboutBroadbandInfraco;Careeradvisetoyouth.

Wi-FiRoll-OutLaunch 19February2016

PotchefstroomTaxiRank,Tlokwe TodisseminatecorporateinformationaboutBroadbandInfraco’sproductsandservicesandpositionitasabackhaulproviderofchoicetoWi-Ficonnectivity.

TheseeventsareofteninitiatedatthelevelofthePresident;DeputyPresident;MinisterofTelecommunicationsandPostalServicesandhisDeputy,andinpartnershipwithkeyprovincialandmunicipalpartners.Careerexhibitionsinruralareas,suchasJoziniassistwithdirectempowermentopportunitiesandknowledgetransferandareanadvocacyplatformforICTcareers.

Broadband Infraco participates in Ministerial, Provincial,MunicipalandotherStakeholdereventsonaregularbasis.TheCompanyparticipatedinthefollowingpriorityeventsduringtheperiodunderreview:


Co-creation of the Limpopo Provincial broadband strategy

Planning engagements between Broadband Infraco andthe Limpopo Department of Economic Development,Environment and Tourism (LEDET) continued duringthe period under review. The draft Limpopo ProvincialBroadband plan positions Broadband Infraco as thebackhaulproviderofchoicetotheprovince.TheCompanyhasconductedextensivedetailednetworkfeasibilityanddesignworkandhasprovidedsuchinformationtoLEDET.TheLimpopoProvincialBroadbandfeasibilitystudyisstilltobeapprovedandfinalisedinthe2016/17financialyear.

LEDEThasalsobeensupportiveofBroadbandInfracoCSIinitiatives in the province, e.g. the Seshigo High Schoolcomputerlablaunch,andthetabletsponsorshiplaunch.

Broadband Infraco continues to interact with all otherprovinces to various degrees of detail in termsof beingreadyandcapableofprovidingfortheirconnectivityneedsgiventheextensivenationalandinternationalfootprintoftheCompany.

Broadband Infraco’s positive brand-building events

Objectives:

• Toincreasebrandawarenesswithexistingandpotentialcustomers.

• TodifferentiateBroadband Infracofromcompetitors;thisencouragescustomerstofeelpositiveabouttheirassociation with Broadband Infraco and continue toconsumemore.

• To increase brand loyalty to Broadband Infraco’sproducts.

Strategies:

• Sponsorandparticipateinindustry-relatedevents.• Partnerwith other SOCs in support of shareholders’

initiatives.• Advertise in targeted niche media platforms, which

distributestopublicandICTsectors.

Highlightsduringtheyearunderreview:

• Broadband Infraco AfriCom 2015, at Cape TownICC

AfriCom is the biggest and best technology event inAfrica that gathers senior decision-makers from theentire digital ecosystem. Broadband Infraco acquiredbrand visibility for this event to connect with majorexisting and prospective customers. AfriCom is theperfectplatformforface-to-facemeetingswithsenior-levelbuyersandinfluencersfromtheregion’soperators.

BroadbandInfracoprocuredabrandedmeetingroomattheconference.TheCompany’sKeyAccountsManagerssucceeded in meeting with existing and potentialcustomers in a professional environment to positionBroadband Infraco’s brand and showcase its productsandservicesamongtheleadersoftheAfricanTelecoms,Media,andICTandBroadcastIndustry.

• BroadbandInfracoatGovTech2015

Govtech is the premium ICT platform for thoughtleadersandtheirassociatedinnovationsintheongoingquest to find practical and progressive solutions to adevelopingnationusingICTtools.

Broadband Infraco, as part of the sponsors for theevent, was afforded an opportunity to erect a fullcolour3X3 exhibition stand. The exhibition areawasused as a platform to display Company information,hostmeetingswith existing and potential customersandincreasebrandawarenesslevels.

The positive aspect of the stand is that BroadbandInfracosendspeoplewithdifferentskillstotheevent,which helps to address different enquiries from thepeople visiting the stand. Amongpeoplewho visitedBroadband Infraco’s stand were the Minister ofTelecommunicationsandPostalServices;Chairpersonof the Portfolio Committee,MsMmamoloko KubayiandtheDeputyMinister,ProfessorHlengiweMkhize.SITAlaunchedtheICTAwardsatthe2015conferencewithseven(7)categories.BroadbandInfracoCEO,MsPulengKwelewasthesecondrunner-upintheWomeninICTcategory.

• I-Week2015

iWeek is South Africa’s leading Internet industryconference, held annually since 2001. iWeekbrings together all of South Africa’s major Internetorganisations for a series of presentations, paneldiscussions, workshops, training sessions and socialevents.TheiWeekco-hostsare:

- InternetServiceProviders’Association(ISPA)

- InternetExchange–SouthAfrica(INX-ZA)

In addition, a number of partners are supporting iWeek2016by facilitatingcontentorhostingevents, includingAFRINIC,FID/IDEA,FPB,ISOC-Gauteng,ISOC-ZA,WAPA,Wi-FiForumSA,ZACRandZADNA.

Broadband Infracowas proud to have brand visibility atthisevent.


SECTION 1

12. CORPORATE SOCIAL INVESTMENT

Strategies:

Broadband Infraco’s CSI strategies are to do thefollowing:

• Adoptschoolsforaperiodofthree(3)yearsinordertobeabletomonitorprogressattheschools.

• Take qualifying students through a leadershipprogramme.

• Conductneedsanalyseswithschoolsandprovidethebasicneedsfortheschoolstoruneffectively.

• Recruitwomenandyouthcompaniestoourdatabasebyhosting“BasadiinTelecommunications”events.

Highlightsduringtheyearunderreview:

TheCompanyenlistedthesupportofpartnershipswithinthe private and public companies to acquire and donate60tabletstoSeshigoHighSchoolas itsthird instalmentin itsongoingCSIsupportingprogramme incontributingtomathsandscienceskillcapacitation inthenation.Thetablets,donatedtobenefitmainlythematric learnersattheschoolandloadedwithanonlinecontentapplication,named2Enable,were delivered to ensure that the toolsareateachingaidthatwillcomplementtheworkof theteachers,while simultaneously providing an audio-visuallearningopportunityforthelearners.

Broadband Infraco’s Corporate Social Investment (CSI)Programmesincludethefollowing:

• Youthskillsdevelopmentprogramme:- Internships .- Adoptionofschools.

• Availingandencouragingbusinessopportunitieswithyouth-andwomen-ownedbusinesses.

Objectives:

• Ensurethatlearnersfromdisadvantagedbackgroundshaveanequalopportunityofbeingthebeststudentstheycanbe.

• Ensure quality leadership and teaching, adequateinfrastructure, community involvement and properacademicsupport.

• Promote youth- and women-owned businesses assuppliers in the Broadband Infraco supply chain asstipulated in Statement36 and37(c) of theB-BBEECodesFramework.

• Enhance Enterprise Development (ED) initiatives inBroadband Infraco to support youth- and women-ownedenterprises.


The2Enableapplicationboaststhefollowingfeatures:

• Diagnosticself-assessments• Courseware• Coursesupport• SACECPTDtracking• Analyticsandreporting• Communicationandtrainingcalendar

Learning circles/user groups

Administration

Thetabletswerealsodeliveredwiththefollowingvalue-addedservicesatnocostfromtheserviceprovider:

• Simcardswith200MBofdatafor12months.• WiFidataaccessfortwo(2)years.• Monitoringandevaluationimplementationprogramme.

BroadbandInfracopridesitselfintheremarkablemannerinwhichithassustainedamutuallybeneficialrelationshipwithSeshigoHighSchool,withthecontinuedintentiontopositivelysupportandleveragetheuseofICTinteaching,learninganddevelopment.TheCompanywillcontinuetodeliver annual contributions to strengthening thismulti-partner(provincialdepartments;privatecompanies;localcommunity)partnershipestablishedoveryears.

The tablets that were delivered during the period underreviewwereaculminationofotherdeliverablesthathadbeenmadetotheschoolinthepast,whichincludedthefollowing:

• Theintroductionofinteractiveteachingandlearningaids,openinganewavenueintheclassroomenvironment.

• Portable,compact,durableteachingtools(interactivewhiteboards)were also acquired and supplied to theschools, offering new levels of curriculum access,interactivity and proficiency, thereby stimulatinglearnerparticipationandimprovingresults.

• ApartnershipwithTransnet,whichculminated in thebuilding and completion of a 35-seater computerlaboratory. The laboratory is equipped with desktopcomputersandaprojectorscreentoenablelearnerstoalsouseitasanadditionalvenueforTelematics(long-distancelearning)offeredbyStellenboschUniversity.

• The provision of scientific calculators has also gonea long way in ensuring that lessons are practicaland interesting for both teachers and learners. Thecalculators are for the use of the school and notindividuallearners,thusguaranteeingalongershelflifeandusebyagreaternumberoflearners.

• Buildingand renovationof43toilets forable-bodiedanddisabledlearnersatSeshigoHighSchool,ensuringthat learners in South Africa, regardless of raceand class, will be able to learn in environmentswithadequateinfrastructure.


SECTION 1

13. GOVERNANCE

Our Governance

It is important to note upfront that Broadband Infraco isfully committed to good corporate governance and theethical principles of fairness, accountability, transparencyandresponsibility.

Duringtheperiodunderreview,BroadbandInfracocontinuedtoevolve itsgovernancestructuresandpractices tomakesurethatweachieveourvisiontodelivertoourcustomerseffectively, efficiently and transparently. We establishednewoperational committees accountable to the ExecutiveCommittee to enhance our compliance and strategicdeliverables,whicharealignedtogovernancepractices.

The Board of Directors’ responsibility is to ensure thatthe Company practises good corporate governance, issustainable and delivers on its corporate obligations andlegislative requirements. Broadband Infraco’s systemsof solid and sound corporate governance principles arecontinuallyevolvingasitstrivesforbestpracticeamidstthedevelopingneedsandexpectationsofstakeholders.

The Company is a proudly South African State-OwnedCompany(SOC)andourgovernance,riskandcomplianceinitiativesaredrivenbymorethanminimumrequirements,butratherafirmbeliefthatourlicencetooperatedependsonbeing responsiblecorporatecitizens.As such,we takedecisionsthatenableourstrategyandobjectives,ensureour

profitabilityandperformance,andconsiderourrisks,whilestrivingtomeetthe legitimate interestsandexpectationsof our stakeholders through actions that are socially andenvironmentallyresponsible.

Balancingtheseimperativesandensuringawell-governedand ethical organisation is one of the Chief ExecutiveOfficer’s key performance areas. This ensures thatgovernanceisalignedwiththeKingIIIprinciples.

BroadbandInfracomaintainsastrongcultureofcorporategovernance, which is an important consideration in itsday-to- day operations, and its Directors and ExecutiveManagementarefullycommittedtothehigheststandardsofcorporategovernanceintheconductofthebusiness.

Board Structure

Broadband Infraco’s Board of Directors is responsiblefor corporate governance and strategic direction of theCompanyandmonitoringtheCompany’sprogressagainstthebusinessstrategy.TheBoardalsodrivestheCompany’sgoaltobeagoodcorporatecitizenandisassistedbytheExecutiveCommittee(Exco).

Board members have a diverse profile that includestelecommunications industry experts, businessmanagement, sciences, engineering, law, finance,auditing, project and corporate finance, enterprise risk


management and accounting skills and expertise. Themajority of the Board ismade up of independent Non-ExecutiveDirectorswhobringindependenceandprovideabalancedjudgementtotheCompany’sbusiness.TheaimistohaveaBoardwithanappropriatebalanceofskillsandexperience to support Broadband Infraco’s strategy andmeettherequirementstoleadtheCompanyeffectively.

TheCompany’sstrategicdirection isguidedbyaunitaryBoard (ie, a single Boardwith both Executive andNon-ExecutiveDirectors).TheChairpersonandChiefExecutiveareindependentofeachotherandnotthesameperson.

The Profiles of the Board of Directors are reflected onpage9.

Board Operation

TheBoardisresponsibletoshareholdersforconductingthebusinessoftheCompany.ItprovidesleadershipandvisiontotheCompanysothatshareholdervalueisenhancedandthe Company’s long-term sustainable development andgrowthareachieved.TheBoardapproves theCompany’sstrategy,reviewsCompanyperformance,approvesinterimand Annual Financial Statements, determines internaltreasury policies, riskmanagement policies and approvesmajorinvestmentsordisinvestments,amongstothers.

Non-Executive Directors are provided with sufficientinformation timeously to enable them to formulateindependent conclusions on allmatters brought to theirattentionatBoardmeetings.

The Board is ultimately accountable for BroadbandInfraco’sperformanceandaffairs.

Application of King III

During2015,Broadband Infraco continued to evolve itsgovernancestructuresandpracticestoensureweachieveourvisiontodeliveronourstrategyandtoourcustomerseffectively, efficiently and transparently. The applicationofandadherencetotheKingIIIprinciplescontinuetobeakeyfocus.In2015,theComplianceDepartmentreviewedthe Company’s application of the King III principles andwassatisfiedthat ithadsubstantiallyappliedtheKing IIIprinciples.

BroadbandInfracoiscommittedtoapplyingtheprinciplesandpractices intheKingreportongovernanceforSouthAfrica 2009 (King III). The Compliance Office assessestheapplicationofKingIIIonaquarterlybasisandprovidesreportstotheAuditandRiskCommitteeforconsideration.

BroadbandInfracobelieves ithascompliedwithKingIII inallmaterialrespectsandalsocomplieswiththeadditionalgovernancerequirementsaspertheProtocolonCorporate

Governance in the Public Sector, the Public FinanceManagementAct,andallrelevantaspectsoftheCompaniesAct (Act 71 of 2008). The Company is committedto continue the process of integrating our reporting tostakeholdersinamoremeaningfulandtransparentway.

Non-Financial Aspects

Broadband Infracocontinues tobeguidedby theGlobalReporting Initiative’s (GRI) sustainability reportingguidelines on economic, environmental and socialresponsibilityaspects.

Shareholders and Board of Directors

Broadband Infraco has two (2) shareholders namely; theDTPSandtheIDCofSouthAfrica.TheCompanyreportstotheMinisterofTelecommunicationsandPostalServicesasthe“ExecutiveAuthority”(intermsofthePFMA)andtheShareholderRepresentativeonbehalfof theGovernmentoftheRepublicofSouthAfricaandalsoreportstotheIDCShareholderRepresentative.

Changes in Board Composition

Duringtheperiodunderreview,therewerenochangestotheNon-ExecutivedirectorappointmentsontheBoard.

Cabinet approved the appointment of the new ChiefFinancial Officer of the Company, Mr Ian van Niekerkon 26 August 2015, and he commenced his duties andresponsibilities on 15 September 2015.Mr van NiekerkwasappointedasanExecutiveDirectorof theBoardon23March2016.

Director Induction

All new Directors receive appropriate and ongoingorientation and induction training, as well as directordevelopment training, focusing on Broadband Infraco’sbusiness,itsenvironment,keyrisks,fiduciarydutiesandsustainabilityissues.

Meetings of the Non-Executive Directors

AllDirectorshaveaccesstotheadviceandservicesoftheChairman,CEO,CFOandCompanySecretary.TheCompanySecretary is responsible to the Board for ensuring Boardand governance procedures are followed and applicableregulationsareadheredto.

Where a need arises, Non-Executive Directorsmeet andcommunicate independently via in-committee sessions,without ExecutiveDirectors present. Additionalmeetingsare convened should any matter arise that requiresconsiderationbytheBoardoutsideofscheduledmeetings.TheChairmanandCEOengagemonthlyormoreoften,asand when required, to discuss strategic and operationalmatterspertainingtotheCompany.


SECTION 1

Corporate Governance Framework

Oneoftheessentialcomponents istheemphasisontheclarity of roles between the Board, shareholders andmanagement.

Broadband Infraco’s governance framework regulatestherelationshipbetweentheshareholders,theBoardandmanagement,andincludesthefollowing:

• MemorandumandArticlesofAssociation,whichsetoutcertainpowersoftheshareholdersandtheBoard.Broadband Infraco’s Memorandum of Incorporation(MoI)asrequiredintermsoftheCompaniesAct71of2008,isintheprocessofbeingfinalisedbetweentheShareholders.

• A strategic intent statement, which sets out theagreedmandateandstrategyforBroadbandInfraco.

• The Corporate Plan, which forms the basis ofBroadband Infraco’s operations and outlines theCompany’spurpose,valuesandstrategicobjectives.

• A Shareholders’ Compact, which sets out theobjectives and annual key performance indicatorsandtargets insupportofthestrategy.Totheextentnecessary,theshareholders’compactseekstoclarifytheobjectivesoftheCompany.

• Codes of good governance suchasKing IIIandtheProtocolonCorporateGovernanceinthePublicSector.BroadbandInfracohasendeavouredtoapplytheKingIIIprinciplesandpractices.

• Relevant legislation, including the Companies Act,thePublicFinanceManagementAct(PFMA),NationalTreasury Regulations, Broadband Infraco Act, andIndependent Communications Authority of SouthAfrica(ICASA)Regulations.

• Significance and Materiality Framework (SMF), which sets out the requirements regarding mattersneedingapproval.TheSMFalsosetsoutthefinancialthresholds and approvals limits of the Board,subcommitteesandExecutiveDirectorsandindicateswhen Executive Authority approval is required forprocuringservicesandgoodsasperthePFMA.

Relevant Policies and Procedures

• DelegationofAuthorityFramework,whichdelegatespower and authority from the Board to committeesandemployees.ThedelegationofauthorityframeworkwasapprovedbytheBoardandisbeingimplemented.

• Policy Approval Framework, which sets out theResponsible, Accountable, Consulted and Informed(RACI) matrix for which policies need approval atwhichlevel,i.e.approvalbytheBoard,committeesoratExecutivelevel.

• Stakeholder Management Framework, which setsouthowemployeesengageinterdepartmentally,withindustry,non-profitorganisations,communitygroups,stakeholdersandshareholders.This is importantas itallowsforBroadbandInfracotooperateinawaythatoptimises both interactionwith government and theimplementationofpolicy.

Committees

TheBoard’seffectivenessisimprovedbytheuseofBoardsubcommittees, towhich it delegates authoritywithoutdilutingitsownaccountability.Boardcommitteesconsistof a majority of independent Non-Executive Directorswhoexercisetheirauthorityinaccordancewithapprovedterms of reference, which are reviewed annually. Thesetermsofreferencedefineeachcommittee’scomposition,role, responsibilities and authority, and are aligned withregulatory requirements andbest-governance practices.TheBoardprovidesthestrategicdirection,whiletheChiefExecutive,whoisassistedbytheExecutiveCommittee,isaccountabletotheBoardforimplementingthestrategy.

13. GOVERNANCE CONTINUED


ThediagrambelowsetsoutBroadbandInfraco’skeygovernancestructures:

Internal Controls Including Security and Combined Assurance

Internal controls

The Board, through the Audit and Risk Committee,ensuresthatinternalcontrolsareeffectiveandadequatelyreported on for auditing and regulatory purposes. Inlinewith King III, Broadband Infraco applies a combinedassurancemodeltogivetheauditandriskcommitteeanoverviewofsignificantrisks,aswellastheeffectivenessofcriticalcontrols tomitigate these risks.Theprinciplesfor the combined assurance model are embeddedin the Combined Assurance Framework. BroadbandInfraco’sinternalauditfunctionismanagedbyExecutive:Compliance, Risk and Audit,who reports directly to theAuditandRiskCommitteeChairperson.

Combinedassurance

Combined assurance assists management in identifyingduplication of assurance work, any potential assuranceshortfallandimprovementplansforthoseareasidentified.ItalsohelpsfocusassuranceproviderstobetterachieveconsensusonthekeyriskstheCompanyfacesandreducestheriskoffailingtoidentifysignificantrisks.

Compliance with Laws, Rules, Codes and Standards

TheBoardensuresthatBroadbandInfracocomplieswithapplicable laws and considers adherence to non-bindingrules,codesandstandards.Assuch,theBoardhastakenthenecessary steps toapproveall identified laws, rules,codes and standards applicable to the Company, byadopting the Company’s Compliance/Regulatory universe

SA Government Department of Telecoms and Postal Services

Shareholding 74%

Industrial Development Corporation (IDC)Shareholding 26%

Broadband Infraco SOCBoard of Directors

Investment, Finance, Tender and Procurement Committee

Human Resources and Remuneration Committee

Audit and Risk Committee

Social and Ethics Committee

Chief Executive Officer

Executive Management Committee (Exco)


SECTION 1

Themembers’attendanceatmeetingsisreflectedinthetablebelow:

No. 1 2 3 4 5 6 7 8 9 10

Total

Meeting Date

14.04.15

26.05.15

29.06.15

10.07.15

15.09.15

26.10.15

18.12.15

27.01.16

23.02.16

17.03.16

Name of Director

BMCNgcobo1 √ √ √ √ √ √ √ √ √ √ 10/10MMMaponya √ √ A √ A A √ A √ A 5/10STMabalayo √ √ √ √ √ √ √ A √ √ 9/10NSelamolela √ √ A A √ √ √ √ √ A 7/10AGithiari A √ √ √ √ √ A A A A 5/10MMosweu √ A A √ A √ √ √ √ √ 7/10PKwele √ √ √ √ √ √ √ √ √ √ 10/10IIvanNiekerk* – – – – – √ √ √ √ √ 5/5TPama(ActingCFO)** √ √ √ √ – – – – – – 4/4Note:**MsTPama(ActingCFO)resignedfromtheCompanyand*MrIanvanNiekerkwasappointedandcommencedhisdutieson15September2015and

wasappointedasanExecutiveDirectoroftheBoardon23March2016.1ChairpersonoftheBoard √ Attendance A Absentwithapology


and align it to the Corporate Compliance Plan. The Boardhas ensured that the Company has a Compliance PolicyFrameworkandprocessesinplace.Managementhasensuredthat the approved compliance policy and framework areembeddedCompany-wide.

Compliance is then achieved through integration withbusiness/organisational policies, processes, ethics andculture. A delegated compliance function is in place andensuresthattheCompanyisincompliancewithapplicablelaws, rules, codes and standards aswell as included as aregularitemontheagendaoftheAuditandRiskCommittee.

Board Meetings

Boardmeetingsareheldatleastquarterlyorasandwhenrequired.AllDirectorsareinvitedtoadditemstoagendasforBoardmeetings.DatesforBoardmeetingsaresetandapprovedbytheBoardinthefinalquarterofthefinancialyearforthefollowingyear.

Duringtheperiodunderreview,theBoardconvenedten(10)meetings.Five(5)meetingswere‘ordinary’meetingsasscheduledandtheremainingfive (5)meetingswere‘special’meetingsconvened todiscuss issuesof criticalimportancetothebusinessandshareholdersalike.


Conflicts of Interest

Directors are required to inform the Board timeously ofconflictsorpotentialconflictsofinterestonanymattersontheagendafordiscussion.Directorsareobligedto recusethemselves from discussions or decisions on matters inwhichtheyhaveaninterest.Directorsarefurtherrequiredtodiscloseallotherdirectorshipsatthebeginningoftheyearbywayofadeclarationof interestform,andchangesaretabledwhentheyoccur.TheDeclarationofInterestRegisteriscirculatedateveryBoardmeetingforreviewbyMembers.

Evaluating the Board’s Performance

In consultation with the Shareholders and due to thechallenges experienced by the Company in the 2015/16financialyear,itwasagreedthatanevaluationoftheBoard’sPerformance will be conducted every three (3) years tocoincidewithdirectors’appointmentsforaperiodofthree(3)years.

Structure and Committees

Specific responsibilities have been delegated to variouscommittees of the Board. The Audit and Risk, HumanResources and Remuneration (also plays the role of theNominations Committee), Social and Ethics, Investment,Finance, Tender and Procurement committees assist theBoard in discharging its duties and report to the Boardregularly on their activities. Each committee acts inaccordancewithitsownwrittentermsofreference,underwhichcertainfunctionsoftheBoardaredelegatedforclearlydefined purposes. The Board, however, recognises thatdelegatingvariousfunctionsandauthoritiestocommitteesdoesnotabsolvetheBoardofitsdutiesandresponsibilities.

Thechairsofthevariouscommitteesarerequiredtoattendtheannualgeneralmeetingtoanswerquestionsraisedbyshareholders.TheBoardisempoweredtoformordisbandcommittees, as it may deem appropriate. The Boardevaluatestheperformanceandeffectivenessofeachofthecommittees.

Executive Management Structures

The Board has delegated specific authorities to the CEOto ensure the effective day-to-day management of theCompany.TheCEOhasestablishedanExecutiveCommittee(Exco) to assist with this task. She is accountable to theBoardformanagingtheCompanyandreportstotheBoardofDirectorsonanongoingbasis.

Executive Committee

TheExecutiveCommitteecomprisesthefollowingmembers:

PulengKwele–ChiefExecutiveOfficer,CommitteeChairmanIanvanNiekerk–ChiefFinancialOfficerGiftZowa–ChiefTechnicalOfficer

SammyMafu–ChiefSalesandMarketingOfficerMontsengMopeli–Executive:HumanResourcesMikeMojapelo–Executive:Compliance,RiskandAudit

ThemainpurposeofthecommitteeistoassisttheCEOwiththefollowing:

• The responsibility for day-to-daymanagement of theCompanyanditsdivisionsthatreportdirectlytotheCEO.

• Reviewing Company risks and providing assurance tothe CEO that risk management policies are operatingeffectively.

• ReviewingCompanyperformanceaswellascommercialandstrategicissuesaffectingtheCompany.

• Providing assurance to the CEO that the businessstrategysetbytheBoardisoperatingeffectively.

TheExecutiveCommitteemeetsonaweeklybasis.Additionaladhocmeetingsareconvenedasandwhennecessary.

The Executive Committee has also established the ExcoProcurement Subcommittee, Pricing Committee, ProductDevelopmentCommittee,andmostrecentlytheITOversightCommittee.Thesecommitteesconveneonanongoingbasisandmakeapprovalswithintheirdelegatedpowerslimitedaspertheirtermsofreferences,ormakerecommendationstoExcoforapproval.

Reporting Controls

The Company has comprehensive monthly financialaccountingandreportingroutinesforitsoperatingdivisions.Managementofcash,bankingrelationships,humancapitaland property-related matters are centralised. Formalmeetings are attended by the Executives to reviewperformance,commercialandstrategicissues.TheExecutiveCommitteealsomonitorstheinternalauditreports.

Board Committees and Attendance Reports

ThecommitteesormembersareappointedbytheBoardofDirectors toensure thateffective andefficient corporategovernancepreceptsarefulfilled.TheBoardofDirectorsofBroadbandInfracohasdelegatedsomeofitsresponsibilitiestotheBoardcommittees.BroadbandInfracoconsistsofthefollowingcommittees:

• AuditandRiskCommittee,• HumanResourcesandRemunerationCommittee,• Investment,Finance,TenderandProcurementCommittee;

and• SocialandEthicsCommittee.

Thecommittees’ responsibilitiesareclearlysetout intheirtermsofreferenceandtheapprovedDelegationofAuthorityPolicy.


SECTION 1

Audit and Risk Committee Attendance 2015/16

TheMembers’attendanceisreflectedinthetablebelow:

No. 1 2 3 4

Meeting date

Name of Director 25.05.15

28.07.15

07.10.15

24.02.16

Total

MMMaponya1 √ √ √ √ 4/4

STMabalayo √ √ √ √ 4/4

NSelamolela √ A √ √ 3/4

AGithiari A A √ √ 2/4

Executives

PKwele √ A √ √ 3/4

IIvanNiekerk* – – – √ 1/1

TPama** √ √ – – 2/21 Chairperson √ Attendance A Absentwithapology* MrIanvanNiekerk(CFO)commencedhisemploymenton15September

2015

**MsTPama(ActingCFO)resignedfromtheCompany

Human Resources and Remunerations Committee Attendance 2015/16

As the chairperson of the Human Resources andRemunerationCommittee(HRRC),itismypleasuretosubmitthecommitteereportforthe2015/16financialyear.

During the period under review, the HRRC comprised ofthree (3) Independent Non-Executive Directors: Mr SMabalayo(Chairperson),MrMNgcobo,andMsMMosweu.

In line with good corporate governance precepts, thechairperson of HRRC rotated andMr SydneyMabalayowas appointedChairperson ofHRRC in2015. TheChiefExecutive Officer and the Executive: Human Resourcesare invited toattendthemeetingsof theHRRCandareexcused from themeetings if there are anymatters ofpotentialconflictsofinterest.

The main objectives of the HRRC are to address humanresources-related matters. The committee approves,guidesand influenceskeyHumanResources(HR)policiesandstrategies.ItmonitorscompliancewiththeHRPolicies,Labour Relations Act, Employment Equity Act and BasicConditions of Employment Act, amongst others. Thecommittee further guides strategies to achieve equityin Broadband Infraco. It is also approves the principlesregardingtherewardandincentiveschemes.

TheHRRCfurtherfulfilstheroleoftheBoardNominationsCommittee and makes recommendations to the Boardon matters pertaining to appointments, removals, andresignations of Executive and Non-Executive Directors.

TheCommitteewasactivelyinvolvedintheidentificationand recommendation of the current CFO’s appointmentduringthefinancialyear.

TheHRRCconvenedfive(5)timesduringtheperiodunderreview.Refertomeetingattendancetablebelow:

No. 1 2 3 4 5

Total

Meeting date

Committee member 1

8.05.15

24.11.15

23.02.16

23.02.16

(In-Com

mittee)

17.0318

(In-Com

mittee)

STMabalayo1 √ √ √ √ √ 5/5

BMCNgcobo √ √ √ √ A 4/5

MMosweu √ √ √ √ √ 5/5

Executives:

PKwele √ √ √ √ √ 5/5

MMopeli √ √ √ - - 3/31 Chairperson √ Attendance A Absentwithapology

Iamdelightedtoreportthatthecommitteetogetherwithmanagementwasabletoachieveanumberofthesetkeyperformanceobjectives.

Furthertotheabove,theHRRCalsoachievedthefollowing:

• Reviewed and considered the Optimisation of HRCapacity.

• Reviewed the HR Quarterly Status Updates frommanagement.

• Reviewed and approved the Executive ManagementStructure.

• Considered and recommended the approval of theappointmentoftheChiefMarketingandSalesOfficer(CMSO).

• Reviewed and recommended the approval of theExecutive Remuneration and Rewards Policy by theBoardofDirectors.

• Reviewed and revised the Company’s OrganisationalStructure(ExecutiveManagement) inordertoensurecapacityoptimisation.

• ConsideredtheEmploymentEquityReportfor2015/16.• ApprovedtheRewardandRecognitionPolicy.• Approved the employee Cost of Living Adjustment

2016/17.• ReviewedtheHRPoliciesdashboardandnotedtheHR

ComplianceAnalysis.• Considered and made recommendations on

managements relationship with the CommunicationsWorkersUnion(CWU).

• Considered the employee Performance Managementforthe2015/16FinancialYear.

• ConsideredandreviewedHumanResourceDevelopment(HRD)withintheorganisation.



• Actively participated and supported Management’sdriveforsecuringinternsfortheCompanythroughtheMICTSETA.

• Considered matters of Irregular, Fruitless and WastefulExpenditure as recommended by the Audit and RiskCommittee;andareintheprocessoffinalisingtheirreports.

It is my view, that the HRRC executed its roles andresponsibilitiesasperitstermsofreferenceasdelegatedtoitbytheBoardofDirectorsinthebestinterestoftheCompanyanditsshareholders.

I would like to commend the HR Function and theExecutiveManagementfortheirdiligenceinensuringthatthe Company complies with legislation and for puttinginterventions in place to create a stable environmentunderdifficultconditions.

MrSydneyMabalayoChairpersonHumanResourcesandRemunerationCommittee

Investment, Finance, Tender and Procurement Committee Attendance 2015/16

Duetoafreezeonnewinfrastructurespendinthe2015/16financialyearnoIFTPCommitteemeetingwasconvened.

Social and Ethics Committee Report for the year 2015/16

TheSocialandEthicsCommitteedidnotconveneduringthe2015/16financialyear.

Ethics

BroadbandInfracohasadoptedaCodeofEthicstoensuretheCompanyoperates,inallrespects,asagoodcorporatecitizen.ThecoderequiresCompanyemployeestoperformtheirdutiesingoodfaith,tobeuncompromisinglyhonestin all their dealings with customers, suppliers, eachother and all other stakeholders, thereby maintaining areputationforintegrityandresponsiblebehaviour.

The Company continues to adopt a zero-toleranceapproachtotheft,fraudandofferingoracceptingbribesand/orfavours.

Company Secretary

AllDirectorshaveaccesstotheCompanySecretary.TheCompany Secretary provides guidance to the Board asa whole and to individual Directors on discharging theirresponsibilities. The Company Secretary oversees theinduction of new Directors and also assists in settingBoardandcommitteeplansfortheyear.

Compliance, Risk and Audit

BusinessProcessManagement(BPM)

The Business Process Management (BPM) functioncontinuouslyengagesbusinessunits toensurethat theCompany’s operational efficiency and effectivenessis achieved. This is done through facilitating theestablishment of operational controls, and optimisingend to end processes between critical interdependentbusiness functions. It further engages in the BuildingEnterprise Effectiveness programme that ensuresthat legislative, mandatory policies and processesare formalised, standardised and embedded in theorganisation. During the year under review, BPM hasconcentratedinthefollowingareas:

•EnhancingEnterpriseProcessCapability

The Business Process Management (BPM) function hasfacilitated the development and approval of businessprocesses identified within the Enterprise OperatingModel. In the period under review, BPM managed toadvance the completion and finalisation of outstandingbusiness processes. It also facilitated the optimisationof approved business processes and compliance withapplicable processes and policies. This has ensured thatthe Company has the ability to process its operationalobjectiveswithinrequiredtimeframesatoptimisedcosts.

All the above interventions have resulted in significantimprovementinoperationalcontrols. Ithasalsoenforcedcrossfunctionalcollaboration.Thecrossfunctionalprocessmeetings and workshops are focused on evaluating,monitoring and improving performance of businessprocesessacrosstheorganisations.

Furthermore,BPMhasidentifiedISO9001accreditationrequirements, in parthership with the SHEQ team andhas established an aproach to ensure that a qualitymanagementsystemisinplace.

•InstitutionalisationofPoliciesandProcedures

The enterprise-wide policy and operational frameworksregister has been put in place in order to facilitateinstitutionalisation of policies and procedures, and toensurethereiscompliancewithapplicablelegislationandbusinessrequirements.

BPMhasrecordedatotalnumberof54policiesidentified,38policiesapprovedand implemented, ten (10)policiesrecommendedbyExcotobetabledatBoardcommittee,four(4)underreviewandtwo(2)newpoliciesindraft.


SECTION 1


•EstablishmentofInformationSecurityPlatform

The Company established the Information TechnologyOversight committee facilitated by the BPM departmentwith theaimofensuring that theCompany information issecured.Theobjectivesofthecommitteeincludeamongstothers:minimiseoperationalrisk,compliancewithlawsandregulationsassuranceofoperationalcontinuity,safeguardingtheconfidentiality,integrityandavailabilityinformation.

Internal Controls including Security and Combined Assurance

Internal controls

The Company has established internal controls, whichincludealloftheprocessesandprocedurestohelpmakesure that its assets are protected and that CompanyactivitiesareconductedinaccordancewiththeCompany’spoliciesandprocedures.

Toensureeffectiveinternalcontrol,anintegratedassuranceframeworkhasbeenput inplace toassist in structuringand evaluating controls that address a broad range ofrisks.Theframeworkdefinesinternalcontrolasaprocess,effectedbyanentity’sBoardofDirectors,management,and other personnel, designed to provide reasonableassuranceregardingtheachievementofobjectivesrelatingtooperations,reporting,andcompliance.

IntegratedAssurance

Broadband Infraco has adopted a principle of integratedassurance process that integrates risk and assurancearrangements and provides a platform from which to

BPM has recorded a total number of 16 operationalframeworksandmethodologies,13operationalframeworkswere approved and implemented, two (2) operationalframeworks and methodologies are under review and indraftandone(1)operationalframeworkandmethodologyapprovedatExco.

Enterprise-wide Framework and Methodology Register

n Totalnumberofpoliciesapprovedandimplementedis38

n TotalnumberofpoliciesrecommendedbyExcotabledatBoardcommitteemeetingsis10

n Totalnumberofpoliciesunderreviewis4

n Totalnumberofpoliciesnewpoliciesindraftis2

Enterprise-wide Policy Register

n Totalnumberofoperationalframeworksandmethodologiesapprovedandimplementedis13

n Totalnumberofoperationalframeworksandmethodologiesindraftis 2

n TotalnumberofoperationalframeworksandmethodologiesapprovedatExcois1

70%

19%

7%4%

81%

13%

6%


support governance and regulatory reporting such asIntegrated Reporting. The Company has embeddedintegratedassuranceasaprocess that leveragesoff theCompany’senterprise riskmanagementsystemsandtheassociatedvaluedrivers.Assuch,thereisdirectextensionof the ERM arrangements into the sphere of assuranceactivity,optimisingthecostandqualityofassuranceacrossallthelinesofdefence(Exco,Excosubcommittees;SHEQ;Risk,ComplianceDepartmentandInternalAudit)andcaterforconsolidatingaconclusionbasedon the resultsofalltheassuranceprovidersacrossmultipleassuranceyears.

The Integrated Assurance allowed Management andoversightstructuressuchastheAuditandRiskCommitteetofocusonthebusinessvalueofassuranceactivities, i.e.whether thecontrol structuresareadequate tomitigateriskexposurestoacceptablelevels.

CompliancewithLaws,Rules,CodesandStandards

ComplianceformsanintegralcomponentoftheBroadbandInfracogovernancestructuresandtheCompanyconsidersnon-compliancewith the legislative requirementsasakeyrisk,as itnotonlyexposestheCompanytofinesandcivilclaims,butcanalsoresultinthelossofoperationallicencesandreputationalharm.TheBoardensuresthatBroadbandInfraco complies with applicable laws and considersadherence to non-binding rules, codes and standards. Assuch,managementhastakenthenecessarystepstoidentifyalllaws,rules,codesandstandardsapplicabletotheCompany.The Board then approves the Company wide regulatoryuniversewhichisalignedtothecorporatecomplianceplan.

TheBoardhasensuredthattheCompanyhasacomplianceframework and processes in place. Management hasensured that the approved compliance policy andframework are embedded companywide. The CompanyhasestablishedaformalComplianceFunctionthatreportstoExecutive:Compliance,RiskandAudit.TheCompany’sCompliance Policy is reviewed annually or updated asand when necessary. The Compliance Policy forms thefoundationoftheCompany’sComplianceFramework.

Internal Control Environment

TheBoard,managementandotherpersonneltookownershipand effected processes to provide reasonable assuranceregarding the achievement of objectives in the followingcategories:

1.Effectivenessandefficiencyofoperations.2.Reliabilityoffinancialreporting.3.Compliancewithapplicablelawsandregulations.

Thecontrol environmentdevelopedensured that the toneset,influencedthecontrolconsciousnessofitspeople.Itisthefoundationforallothercomponentsofinternalcontrol,providingdisciplineandstructure.

The control environment includes factors such as theintegrity,ethicalvalues,organisationalculture,competenceofpeople,management’sphilosophyandoperating style,delegation of authority and responsibility, aswell as theintentionanddirectionprovidedbytheBoard.

Broadband Infraco complied with the Auditor-GeneralDashboard, using the following key control environmentpillars:• Leadership.• Financeandperformancemanagement.• Governance.

The InternalAudit Functionprovidedquarterly assuranceto management and the Board on the adequacy andeffectiveness of these control pillars using the followingassessmentdrivers:• Financial.• Performance.• Compliance.

ProgressreportsweresubmittedtoExcoandtheAuditandRiskCommitteeon a quarterly basis. Theoverall controlenvironmentratingforBroadbandInfracowasregardedasgood.

Internal Audit

Broadband Infraco has an independent internal auditdepartment, which has direct access to the Board’sChairperson and the Audit and Risk Committee. Thedepartment reports functionally to the Audit and RiskCommitteeandadministrativelytotheCEO.The internalaudit function has the necessary resources, budget, andstanding authority within the Company to enable it todischargeitsauthority.

The internal audit function operated in accordance witha charter approved by the Audit and Risk Committee.The Internal Audit charter formally defines the purpose,authorityandresponsibilityofthe internalauditfunction.ThecharterisalignedwiththeInstituteofInternalAuditors’principlesand is reviewedannuallybytheAuditandRiskCommittee.

The internal audit department operated in line with a Riskbased internal audit plan discussedwithmanagement andapproved by Audit and Risk Committee. The internal auditdepartmentformsanintegralpartofthecombinedassurancematrix and focuses on adding value to the operations ofBroadbandInfraco.Itperformsthefollowingfunctions:• Evaluates the appropriateness of and adherence to

Companypoliciesandprocedures.• Preventsfraud,unethicalbehaviourandirregularities.• Producesqualitymanagementinformation.• Ensures sound business processes and associated

controls.


SECTION 1


The Manager: Internal Audit reports to the Executive:Compliance,RiskandAuditwhoattendsallAuditandRiskCommitteemeetingsandsubmitsareportateachmeeting.

EffectivenessandAdequacyofInternalFinancialControls

Internal Audit conducted a Critical Financial ReportingControls review to test the adequacy and effectivenessof internal controls. The scope of the work covered thefollowingkeyareas:

• Financialcloseprocess.• Revenueandreceivables.• Procuretopay.• Properties,plantandequipment.• Payroll.

InternalAuditachieved90%coveragefortheperiodunderreview and completed all of the additional managementrequests, which formed part of consulting services. Theplannedauditsweretotesttheadequacyandeffectivenessofthesystemofinternalcontrolinordertomanageand/ormitigateriskexposures.

Correctiveactionplanswererecommendedtomanagementand agreed upon with Internal Audit in order to improvecontrolweaknessesidentifiedbyInternalAudit.

Enterprise Risk Management

Broadband Infraco is committed to effective Enterprise-Wide Risk Management (ERM). ERM is an integratedapproach that supports the alignment of strategy,processes, people and systems to allow the BroadbandInfracotoidentify,prioritiseandefficientlymanagerisk.

TheCompanyrecognisesthatthemanagementofbusinessriskiscrucialtocontinuedgrowthandsuccessandthatERMis central to the Broadband Infraco’s business as a goingconcern. Broadband Infraco developed comprehensivesystems and risk management processes to control andmonitorall itsactivities.WhilstultimateaccountabilityforrisklieswiththeBoard,riskiscloselymonitoredbytheERMdivisionandtherelevantriskmanagementcommittees.

TheCompanyfusesanERMframeworktoimplementtheriskmanagementstrategyacrosstheorganisation.This isastructuredanddisciplinedapproachtoriskmanagementthat aims toeffectivelybalance risk andcontrol.Aligningstrategy, processes, people, technology and knowledgeenables Broadband Infraco to evaluate and manage theopportunities,threatsanduncertaintiesthatitfaces.

The framework consists of policies, methodologies,governanceandreportingstructuresbasedonISO31000,the Committee of Sponsoring Organisations (COSO)governanceprinciples,theKingIIICode,andthePFMA.

Theprimaryobjectivesoftheframeworkareto:

• ProtecttheCompanyagainstpossiblelosses;• Provideearlywarningofadverseriskconditions;• Integrate risk management at all levels of decision-

making;• Anticipateandmitigateriskeventsbeforetheyoccur;• Ensureearningsstability;and• Optimisetheuseofcapital.

BroadbandInfracomaintainsandcontinuouslydevelopsitsformal risk policies and frameworks to helpmanagementaddresscategoriesofriskassociatedwith itsriskappetiteandbusinessoperations.

Risk-Management Approach

The ERM framework and policy were enhanced andapprovedbytheAuditandRiskCommittee.

TheERMdivisionoverseestheriskmanagementprocesses.The internalauditorsassisttheAuditandRiskCommitteein evaluating the effectiveness of the risk managementprocesses. Broadband Infraco’s risk managementframeworks – including projects risk management,compliance,ITgovernanceandenterpriseriskmanagement– are continuously reviewed to ensure they conform tointernationalbestpractice.TheCompanyappliesapracticaland systematic methodology to identify, analyse, assess,mitigateandmonitorallknownrisksthatmightaffecttheoperations.Thestrategicriskidentifiedintheperiodunderreviewarestatedinpage41(table).

BroadbandInfracoisresponsiblefortheriskmanagementprocesses, assisted by the Audit and Risk Committee.Managementisresponsibleformanagingriskanddesigningand discharging appropriate processes in support of thisfunction.

Risk Governance

TheERMframeworkandtheriskappetiteframeworkensurethatBroadband Infracohasawell-structuredapproachtoriskmanagement.Risksareidentified,measured,monitoredandrespondedtothroughvariouscontrolmechanisms.Theriskmanagementprocessisdesignedtoensurethat:

• All relevantrisksare identifiedandevaluated,basedontheirpotentialimpactandlikelihoodofoccurrence.

• RisksandtherequiredprocessesandcontrolstomanagethemareassessedinlinewiththeCompany’sriskappetite.

• Appropriate management information and monitoring.Processesareinplace,sothatnecessaryremedialactioncanbetaken.

• Annual risk assessments are conducted with BusinessUnits and quarterly risk reports are submitted to ExcoandtheAuditandRiskCommittee.


No. Vulnerability(Riskdescription)Mitigatingactionplanstofurtheraddresstheresidualriskexposure/contingency actions

1 Likelihoodnottocontinueasagoing concern

1.a) Continuewiththesalesdrive. b)Negotiatelong-tenurerevenuecontracts.2.a) Renegotiationofkeysuppliercontracts. b) Rigorouscashmanagement.3. Continuetoapplyforfundingfromexternalparties.

2 Limitationsinresolvingfulfilmentvaluechain

1. Embedtheprojectmanagementmethodologyandpolicy.2.a) Processowners/sponsorstoformaliseimplementationofthecurrent

businessprocessapprovedintheirworkingenvironment. b) BusinessProcessManagementtoconductbusinessprocessperformance

assessmenttoascertaintheeffectivenessofapprovedandimplementedbusinessprocesses.

3 Marginpressure1. Embedandcontinuetooptimisepricingstrategy.2. Renegotiationofkeysupplier’scontracts.

4 The impact of Non ICT SOCs on thecosttocommunicate

1. ContinuetoengagenonICTSOCs.2. EngagetheregulatorstoensurethatnonICTSOCsaregovernedbythe

regulations.

5Lack of awareness for new imperatives in privacy and securityofinformation

1. SetuptheITgovernanceframework.2. Reinforcetheexternalcommunicationprotocol.3. Formalisecontrolsaroundlogicalandphysicalaccess.4. Socialisationofinformationregulationsandpolicies.

6 Difficultytoraisefunds1. Extendedcredittermswithmajorsuppliers(ratedandinternational

suppliers).2. Continuetoapplyforfundingfromexternalparties.

7 DamagetothereputationofBroadbandInfraco

1. Reinforcethecurrentcommunicationstrategy.2. HarmonisetheexternalcommunicationwiththeShareholders.3. Continuousengagementwithjournalist.

8 Lackofregulatorycertaintyonnew market services

1. Continuetoprovideinputsasperdefinedprocesses.2. AcquireECSlicence.

9 SlowevolutiontowardsIPtechnology

1. RolloutIPNetworkbyutilisingpossibleOEMfunding.

10 Difficultytoretainandattracttherequiredskills

1. RolloutofInternshipprogrammetoincludebothcoreandnon-coreunits.2. Continuewithemployeeengagementstrategy.

Risk Management Mechanisms

Broadband Infraco has made considerable progress inimplementing the risk mitigation strategies outlined inthe Corporate Plan. Risk management implementationis monitored through risk management and governancemechanisms,aswellasoversightbodies.

Risk Maturity

BroadbandInfracohasmadesignificantprogressinembeddingariskmanagementculture.However,moreemphasiswillbeplacedonprudentmanagementofenterpriserisktoachievethe 2016 Corporate Environment. Broadband Infraco hasinstitutionalisedriskmanagementasfollows:

• TheBoardchampionstheprocessofriskmanagement.• TheAuditandRiskCommitteeoverseesriskmanagement

processes.

• TheSeniorManagerRisk:coordinatesriskmanagementfunctions.

• Theriskregisteriscontinuallyreviewedandalignedwithcorporatestrategy.

• Thresholdsforkeyindicatorsinriskappetitearereviewedannually.

• Internal and external audits review how the riskmanagementstrategyisbeingdischarged.

Business Continuity Risk Management

TheBusinessContinuityManagement(BCM)strategyandpolicyaredesignedtoprovideaframeworkforoperationalresilience and to ensure the survival of the networkoperations in the event of natural disasters. BroadbandInfraco has separate BCM processes for key operationssuch as IT and Network Operation Centre. A process isunderwaytointegratetheseseparateprocesses.


SECTION 1

State-Owned Company (SOC) Rationalisation

Broadband Infraco fully supports the process ofrationalisationofSOCsasoutlinedbytheDepartmentofTelecommunicationandPostalServices.

TheobjectivesofSOCsrationalisationincludestheneedtoensurethattheICTsectorisfundamentallytransformedandplacedin itsrightfulpositiontosupporteconomicgrowthandto rationalise the rolesandresponsibilitiesofSOCs intherolloutofvariousaspectsofthebroadbandcapability.

Broadband Infracowill endeavour toensure thevalueoftheCompanyispreserved.

Regulatory Developments

NationalIntegratedICTPolicyDiscussionDocumentDuringthe2015/16financialyear,theprincipalregulatorydevelopmentwastheDepartmentofTelecommunicationsandPostalServices’finalisationoftheNationalIntegratedPaperon InformationCommunicationsTechnology, (“thedraftWhite Paper on ICT”). The draftWhite Paper aimsto provide the necessary policy certainty to incentiviseprivateandpublicinvestmentintheICTsector.

TheScopeofthedraftWhitePaper is toaccomplishthefollowing:• Reviewthefunctioningofthepolicyandregulatory

framework of telecommunication, broadcasting,postal ande-commerce inSouthAfricaandassess itseffectivenessinachievingappropriatepolicyobjectivesfortheknowledge-basedsociety.

• Review the structure of the broadcasting,telecommunications, content, postal and e-commerceindustriesinSouthAfrica,andtheroleoftheIndependentCommunicationsAuthorityofSouthAfricaandtake intoaccounttheviewsandexpectationsofthepublicingeneral.

• Determine policy goals and strategies for ICT ResearchandDevelopment, applications development promotion,humancapitaldevelopment,investmentinICTmarketforgrowthanddevelopment.

• ProposeuniversalserviceanduniversalaccesspolicygoalsforSouthAfrica,includingmethodsofpolicyexecution.

• ProposeICTmarketregulation,andstructures,institutionalalignment for delivering universal access and universalservicepolicygoals.

Givenitsscopeandobjectives,thedraftWhitePaperwillfundamentallychangehowbusinessisdoneinthesectorandhowthesectorisstructuredandregulated.

ThedraftWhitePaperisduetobetabledbeforeCabinetinthenearfuturebeforebeingpublishedforpubliccomment.

NeotelArbitrationTheNeotelarbitrationmatterwassettledon27May2016afteramutualagreementwasnegotiatedandreached.

ECS Licence

Broadband Infraco has initiated processes regarding theacquisition, by the Company, of an Individual ElectronicCommunications Service (“I-ECS”) licence. The Company’srationaleforwantingtoacquireanI-ECSlicenceispremisedonitssocio-economicmandate.

Broadband Infraco’s socio-economic mandate stipulatesthat the Company shall expand the availability of accesstoelectroniccommunications, including,butnot limitedto,underdevelopedandunderservicedareasinaccordancewiththe ECA. TheCompany has, in fulfilment of thismandateandaspartofdeliveringonitsUniversalAccessobligationscontained in its Individual Electronic CommunicationsNetwork Service (“I-ECNS”) licence, rolled out28PoPs inunderservicedcommunities.However,mostof thesePoPsarecurrentlyutilisedfordiversifyingthemovementoftrafficonthenetworkanddonothaveanytraffic initiated fromthemdue toa lackof interest fromcommercialoperators.Commercial operators regard underserviced areas asunviablebusinessventures,whichdonotgeneratesufficientreturnsoninvestment.

WiththeacquisitionofanI-ECSlicence,BroadbandInfracowould be able to enter into Public-Private-Partnerships(PPP)withunlicensedSMMEs/ISPs located in these areas.Thatis,theCompanywouldsellitscapacitytotheSMMEs/ISPswhowould then package and re-sell it to end-users.Therefore,BroadbandInfracowill,withtheacquisitionofanI-ECS licence,givetangibleeffecttotheobjectivesoftheNational Broadband Policy by, not only extending internetconnectivity to underserviced communities, but also bystimulating the growth of (unlicensed) SMMEs located intheseareas.

Broadband Infraco has, through the deployment ofinfrastructure, established interconnections with SouthAfrica’sneighbouringcountriessuchasMozambique,Namibia,Lesotho,Swaziland,ZimbabweandBotswana.State-ownedoperators licensed in these countries (and who do notpossessSouthAfricanlicences)areincreasinglyapproachingtheCompanywitharequesttoterminatethetrafficinthecountry.BroadbandInfracowill,withanI-ECSlicence,beina position to fulfil this requirement, thereby expanding itsrevenuebaseaswellasenhancingregionalconnectivity.

Asmentioned,BroadbandInfracoisalsoaTier-1investorin the WACS. The Company utilises its WACS capacityto not only provide connectivity to projects of nationalimportance,butalsotoattractinternationaloperatorswhohaveestablishedapresence intheSouthAfricanmarket.An I-ECS licence will enable the Company to bundleits WACS offering with its national distance products,therebyofferinganend-to-endsolutiontoitsunlicensedinternationalcustomers.

14. LEGAL AND REGULATORY


Executive Summary

OurHumanResource(HR)Strategy2015/16hasbeentheblueprintforourstrategicandoperationaloutputsensuringthe implementationof thekey strategicobjectives aimedatenablingtheorganisationtorenewandreenergiseitselfthrougheffectivehumancapitalrevitalisationstrategies.

TheHumanResourcedepartmenthasmanagedtoaddressthe challenges of balancing the Company’s capacity andcapability requirements for the execution of the criticalaspects of the business and the balancing of financialresourcestoaffordimperatives.Amongthemostsignificantwerethefollowing:

• Advancing the implementation of human resourcesdevelopmentstrategiestosharpenexistingskillsandbuildnewcompetencyrequirementsincriticalareasofwork.

• Retaining the skills base, workplace morale andaccoladesthatareimportantforbusinessreputation,likecontributiontoB-BBEEratings(EmploymentEquityPlan,WorkplaceSkillsPlanandStudyAssistanceProgramme).

• Exploringandimplementingcreativewaysofoptimisinghuman resources capacity to avoid possible job lossesandtomonitor labourcostswithintheconfinesoftheCompany’sfinancialcircumstances.

• Taking advantage of the rotation, secondment andtemporary deployments to multi-skill and intensifytalentdevelopmentforsuccessionplanningandcareeradvancement at various levels of the organisationalstructure.

Amongtheimperativesthatwereinstrumentalinbolsteringtheenhancementofpeoplemanagementpractices in theorganisationwerethefollowing:

• Approval of the framework for implementation ofthe temporary deployment strategy for effective HRoptimisation.

• Continuation of the realignment of critical divisionalstructuresforoptimisationandoperationaleffectivenessfordepartmentssuchasInformationTechnology.

• Implementation of the automated performancemanagementsystem.

Background

HR Strategic Undertaking

“Broadband Infraco will attract, retain, develop, deployand appropriately reward people with the right skills,experience, commitment and energywhowill proactivelyand enthusiastically implement its strategy. The HR unithas a mandate to facilitate the achievement of requiredperformancelevelsthroughacomprehensiveperformancemanagementframeworkandeffectivetalentmanagementstrategies.”

HRStrategicObjectives

Initsroleasastrategicbusinesssupportfunction,HRhassetitselfmilestonestoensuresuccessfulexecutionofthemandateandtheprimarybusinessstrategicgoals:

• Optimisationoforganisationalcapacityandcapability.• Inculcation of a culture of high performance and

individualaccountability.• Attractionandretentionofkeytalent.• Provision of an environment for sound employee

engagementandeffectivestakeholderrelations.

15. PEOPLE MANAGEMENT


SECTION 1

Talent Sourcing

TheCompanycontinuedtheheadcountfreezestrategytocontaincostsandthis ledtominimalactivity intermsoftalentsourcing.Twocrucialpositionswerefilledexternallyand one internally. Two (2) of the appointments werein the finance environment, which included the criticalappointmentoftheChiefFinancialOfficer.

Terminations

A total of 37 terminations were processed during thefinancial year and of those, ten (10) were expiry ofintern contracts, 25 voluntary and two (2) involuntaryseparations.

15. PEOPLE MANAGEMENT CONTINUED

Headcount Statistics

Staff complement

Belowistheheadcountcalculationforthe2015/16financialyear.

HeadcountCalculationCategories Q1 Q2 Q3 Q4 FY 2015/16

Opening Balance 185 174 166 154 185

PermanentStaff 175 172 164 152 175

Contract(s) 0 0 1 1 0

InternshipStudents 10 2 1 1 10

Appointments 0 1 0 2 3


Contract(s) 0 1 0 1 2


Losses (11) (9) (12) (5) (37)

Resignations 3 8 10 4 25


InvoluntaryReductions 0 0 2 0 2

ClosingHeadcount 174 166 154 151 151


Contracts 0 1 1 2 2


AgeProfileByJobLevel

JobLevels Average Age

Executives 47

SeniorManagement 44

ProfessionalSpecialistandMiddleManagement 42

SupervisoryandJuniorManagement 38

Support 35

AverageCompanyAgeProfile 40


With the exclusion of separations due to the expiry ofcontracts, reasons provided for the resignations weremainlycareeradvancement,bettersalariesandbenefits.TheCompany’sfutureuncertaintyhasalsobeenthekeyreasoncitedbyemployeesleavingtheorganisation.

Labourturnover

Labourturnover Q1 Q2 Q3 Q4FY

2015/16

Averagenumberofemployees (opening +closing/2)

180 170 160 153 168

Labourturnover(losses/average) 2% 5% 6% 3% 15%

Resignations 3 8 10 4 25

Performance Management

Inthe2015/16financialyeartheHRDepartmentworkedtirelessly to automate the performance managementsystem. This led to the final review process beingimplementedthroughtheHRInformationSystemandthecontractingprocessfor2016/17willthusbeperformedthrough the automated system. The performanceagreementsubmissionrateshowedanimprovementwithwellover90%ofthetotalstaffcomplementparticipating.TheHRDepartmentcontinuestoprovidesupporttostaffinrespectofperformancemanagementsystemssupport.ItisHR’sdesiretoreachapointwherethequalityoftheagreementsisalsoimproved.

0

2

4

6

8

10

12

14Total Separations

Executives Senior Management

MiddleManagement

Operational Support

n 2014/15 n 2015/16


SECTION 1

15. PEOPLE MANAGEMENT CONTINUED

Human Resources Development

Despite the cost containment programme implementedacross the business, the Human Resource departmentfocused on the most critical and urgent traininginterventions requiredby thebusiness. This is indicativeof the Company’s commitment towards human capitaldevelopmentandcapacitatingthemostkeyfunctionsofthebusiness.

In the financial year 2015/16, the Company continuedwith its study assistance programme and awardedfinancial study assistance to 13 employees inclusiveof new applications and those who were continuing tofurther their academic studies. Three of those awardedstudy assistance, left the services of the Company andcostswererecoveredinaccordancewiththepolicy.Fourbeneficiaries are still in the Company’s employ as theywereeithernot successfulwith their studies, ordidnotsitfortheirexams.Theamountsawardedwererecoveredin accordance with the policy. Two (2) completed theirstudies;theotherfour(4)passedandarecontinuingwiththeirstudies.

Internship Programme

Thebusinesshadten(10)studentsandgraduateswhocompletedtheirinternshipprogrammeduringthefinancialyearunderreview.Duetofinancialconstraints,BroadbandInfraco could only absorb one intern as ofMarch 2016.OwingtotheintensivetrainingthattheyreceivedfromtheCompany’stechnicalenvironment,therestoftheinternsmanagedto immediatelysecurepermanentemploymentinthejobmarket.

Human Resource Information Systems (HRIS)

The implementation of the HRIS system continued tobe a critical milestone within the Human Resourcesdepartment. During the period under review, theHR division had managed to implement 80% of thee-performance management system, implemented thetrainingformanagersandusers,andensuredthecapturingof data for the skills development module. A furtherachievementwasthedefiningoftheaccesscontrolrightsfortherespectiveuserswithintheHumanResourcesandFinance Departments in keeping with the segregationof responsibility principle. The implementation is workin progress to ensure that the HR function is executedseamlessly,effectivelyandefficiently.


Employee Remuneration And Benefits Management

Through the implementation of the second year of thethree-year substantive agreement on remuneration andconditionsofservice,theCompanyreducedlabourcostsfrom32%ofrevenueto24%bytheendofthefinancialyear.

The Company’s referred dispute to the Pension FundAdjudicator arising from the Fund Administrator’schallengesofadministratingtheFundwerefinallyresolvedon31March2016.Thenextprocess tobeundertakenbytheFundAdministrator istheallocationofrespectivemember investment losses to each of the affectedemployeesandthisprocesswillbefinalisedinthefinancialyear2016/17.

Employee Relations Environment

Employee relations climate

Therelationshipbetweentherecognisedorganisedtradeunionofficialsandmanagementcontinuestomaturefromtheadversarialleveltocooperativestage.

During the period under review, two (2) disciplinaryhearings were held ending in the dismissal of two (2)employees.TheseweresubsequentlyreferredtotheTheCommission for Conciliation, Mediation and Arbitration(CCMA) resulting in the matters settled at conciliationstage.Noformalgrievancewaslodgedintheperiodunderreview. The stable industrial peace is reached throughcommunication and engagement with key stakeholdersandensuringadherencetothelegislativeprescripts.

Legislative Compliance

The Employment Equity (EE) Report was submitted on15January2016followingtheconsultativeprocesswiththe Employment Equity Committee. The Organisationhas complied with legislative requirements in so far asthe related required annual submissions are concerned.The Workplace Skills Plan 2016/17 financial year andtheAnnualTrainingReport2016/17financialyearweresubmittedtotheMICTSETA.


SECTION 1

16. SUPPLY CHAIN MANAGEMENT

The SCM department has continuously succeeded inmaintaining itseffortstoempoweranddistributewealthtopreviouslydisadvantagedgroups.Thedepartmenthassignificantly exceeded its targeted spend on both Black-owned and Black-women-owned enterprises. Morejobswere created in this financial year compared to thepreviousyear.

Asastrategicbusinesspartner,SCMcontinuestohaveagreatimpactonthedeliveryoftheCompany’sobjectivesand mandate. SCM has upheld standards to ensureadherence to compliance to the legislative requirements.Tothisend,ithasconsistentlyachievedcleanaudits.

ThetotalprocurementcostsfortheyearareR318million.The focus for theyearhasbeenon sustainingefficiencyin supply chain practices and compliance to legislativerequirements.Thesehaveyieldedresultsthatareindicatedbelow:

Procurement and B-BBEE Spend

TotalB-BBEE spend

114%

Black-ownedenterprises

54%

Black-women-owned

45%

Black-youth-ownedenterprises

11%

Expenditureonpeoplewithdisabilities

0,1%

Totalnumber ofindirectjobs

created

686

The focus going forward is to strive to empower Black-ownedandvalue-addingenterprises,maintainefficiencyin supply chain practices and compliance to legislativerequirements.


17. SAFETY,HEALTH,ENVIRONMENTANDQUALITY PERFORMANCE

1. Safety, Health, Environment and Quality

Therewereno repeataudit findings fromexternalauditsconducted this financial year within Broadband InfracopertainingtotheSHEQsystems.

2. Lost-time injury frequency rate

Definition and calculation of lost-time injury frequencyrates(LTIFR):

• The lost-time injury frequency rate is the number oflost-time injuries within a given accounting periodrelative to the total number of hours worked in thesameaccountingperiod.

The graph below shows the performance of theorganisation over the whole year. The graph trajectoryhas beengoingdownwards, culminating in a zero-ratinginthelastquarteroftheyear.Thisisagreatachievement,whichshowshowBroadbandInfracovaluesandprioritisesstatutoryrequirementspertainingtohumancapital.

As part of self-improvement for the organisation, arigorous quality system project has been initiated forimplementation over the next couple of years. All rolesand responsibilities as well as processes and procedureshavebeen identified foraction.Asa resultof this focus,no safety, environmentorquality-related incidentshavebeenreported.

0,80

5

0,80

1

0,81

0,40

0,40

0,41

0,41

0,40

7

0,41

0,00

0,00

0,00

BBI – LTIFR % (Lost-Time Frequency Injury Rates)2015/16

0,900

0,800

0,700

0,600

0,500

0,400

0,300

0,200

0,100

0,000Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

SECTION 1


CONTENTSReportoftheAuditandRiskCommittee 51

Company Secretary’s Certificate 52

Directors’ResponsibilitiesandApproval 53

Directors’ Report 54

IndependentAuditor’sReport 55

Statement of Financial Position 58

Statement of Comprehensive Income 59

StatementofChangesinEquity 60

Statement of Cash Flows 61

Notes to the Financial Statements 62

AcronymsandAbbreviations 89

BroadbandInfracoSOCLimited AnnualFinancialStatements fortheyearended31March2016

TheCompany’sAnnualFinancialStatementswereauditedintermsoftheCompaniesActNo.71of2008.

ThepreparationoftheCompany’sAnnualFinancialStatementsweresupervisedbytheChiefFinancialOfficer,IanvanNiekerk.

TheseAnnualFinancialStatementswereauthorisedbytheBoardofDirectorson21July2016.

ThereportsandstatementssetoutbelowcomprisetheAnnualFinancialStatementspresentedtothemembers.

SECTION 2


REPORT OF THE AUDIT AND RISK COMMITTEE

Audit And Risk Committee Report For The 2015/16 Financial Year

TheAuditandRiskCommitteeisanindependentcommitteeconstituted to review the control, governance and riskmanagementoftheCompanyintermsofregulation27(1)ofthePublicFinanceManagementAct(1999)(PFMA),asamended;theAuditandRiskCommitteereportsthatithasdischargeditsresponsibilitiesascontainedintheAuditandRiskCommitteetermsofreference.

ThecommitteecomprisedMsMetaMaponya(Chairpersonand Independent Non-Executive Director),Ms NokuthulaSelamolela(Non-ExecutiveDirector),MrSydneyMabalayo(Non-Executive Director) and Dr Anthony Githiari (Non-ExecutiveDirector).TheAuditandRiskCommitteewasinplaceforthe2015/16financialyearandthememberswerere-appointedbytheShareholdersat theCompany’sAGMon23March2016asrequired intermsofsection94(2)theCompaniesAct7of2008.

TheAuditandRiskCommitteemeetsatleastfour(4)timesper annum, and has the authority to convene additionalmeetings as and when necessary. There were four (4)meetingsheldduringfinancialyearended2015/16.Criticalissues were discussed and minutes were recorded. Theminutes of theAudit andRiskCommitteemeetingsweremadeavailabletotheBoardonrequest.

No. 1 2 3 4

Meeting date

Name of Director 25.05.15

28.07.15

07.07.15

24.02.16

Total

MMMaponya1 √ √ √ √ 4/4

STMabalayo √ √ √ √ 4/4

NSelamolela √ A √ √ 3/4

AGithiari A A √ √ 2/4

Executives

PKwele √ A √ √ 3/4

IIvanNiekerk – – – √ 1/1

1 Chairperson √ Attendance A Absentwithapology**MrIanvanNiekerk(CFO)commencedhisemploymenton15September

2015

During the 2015/16 financial year, the Audit and RiskCommittee:

• Reviewedtheeffectivenessof internalcontrol systemsbyapprovingtheinternalauditplan,internalauditcharterandreviewingquarterlyinternalauditreportssubmitted;

• Consideredtheriskareasoftheoperationscoveredinthescopeofinternalandexternalaudits;

• Consideredaccountingandauditingconcerns identifiedasaresultofinternalandexternalaudits;

• Assessed the adequacy, reliability and accuracy offinancialinformationprovidedbymanagement;

• Assessedcompliancewithapplicablelegalandregulatoryrequirements;

• Reviewedtheeffectivenessoftheinternalauditfunction,complianceandriskdepartments,throughassessmentsofthequalityofthereportssubmittedtoAuditandRiskCommittee;

• Reviewed the financial statements and reporting forproper and complete disclosure of timely, reliable andconsistent information and confirmed that accountingpoliciesusedareappropriate;

• Reviewedtheexpertise,resourcesandexperienceoftheCompany’sfinancefunction;

• Reviewedthequarterlyprogressandupdateonlitigations;• ProvidedachannelofcommunicationbetweentheBoard

and management, the risk division, internal auditors,externalauditorsandthecomplianceofficer;

• Received regular reporting from each of the abovefunctionsandmonitoredtimely resolutionsof issuesorconcernsraisedbymanagement;

• LiaisedwiththeBoardCommitteesandmetasrequiredwith the regulators and separately with internal andexternalauditors;

• Ensuredthatthecombinedassurancemodelwasappliedtoprovideacoordinatedapproachtoallassuranceactivities;and

• Ensured that the combined assurance received wasappropriate toaddressall significant risks facedby theCompany.

TheAuditandRiskCommitteeensuredthattheCompany’sInternal Audit function was independent and had thenecessary resources, and standing authority in order toenabletheInternalAuditdepartmenttodischargeitsduties.

Havingconsidered,analysedandreviewedtheinformationprovidedbymanagement,InternalAudit,ExternalAuditandtheRiskandCombinedAssuranceCommittee,theAuditandRiskCommitteeconfirmsthat:

• TheinternalcontrolsoftheCompanywereeffectiveinmostmaterialaspectsthroughouttheyearunderreview;

• Appropriate policies, supported by reasonable andprudentjudgementsandestimateswereapplied;

• Properaccountingrecordsweremaintained;• Theadequacyandeffectivenessofcontrolsthatare in

placesafeguardedtheassets;• The financial statements comply, in all material

respects,withtherelevantprovisionsofthePFMAandInternationalFinancialReportingStandards;and

• Theskills,independence,auditplanreportingandoverallperformanceoftheexternalauditorswereacceptable.

SECTION 2


REPORT OF THE AUDIT AND RISK COMMITTEE CONTINUED

TheAuditandRiskCommitteenotedtheemphasisofmatterongoingconcernbytheexternalauditorsand issatisfiedwithmanagement interventions of cost optimisation andrevenuedrive.TheCompanycontinuesonitsefforttoraisefundingfromexternalsources.

The Audit and Risk Committee has noted paragraph 19and22oftheexternalauditorsreportrelatingtomaterialmisstatements and perceived inadequate managementreview on performance information. The Audit and RiskCommitteeissatisfiedthatmanagementwasreviewingtheperformanceinformationreportsonaquarterlybasisagainstboththeapprovedannualperformanceplanthatwastabledinparliamentandtheshareholdersapprovedstretchtarget.

Meta MaponyaChairpersonAuditandRiskCommittee

In termsofSection88(2)(e)of theCompaniesAct,No.71of2008,asamended,IcertifythattheCompanyhaslodgedwiththeRegistrarofCompaniesallsuchreturnsasarerequiredofapubliccompanyintermsoftheAct,andthatallsuchreturnsaretrue,correctanduptodate.

The Audit and Risk Committee concurs with the Boardof Directors andmanagement that the adoption of thegoingconcernprincipleinthepreparationofthefinancialstatements isappropriate,andagreeswith thedetails intheDirectors’report.

F MohamedCompanySecretary

COMPANY SECRETARY’S CERTIFICATE


DIRECTORS’ RESPONSIBILITIES AND APPROVALfortheyearended31March2016

ThedirectorsarerequiredintermsoftheCompaniesAct71of2008tomaintainadequateaccountingrecordsandareresponsibleforthecontentandintegrityoftheAnnualFinancial Statements and related financial informationincluded in this report. It is their responsibility toensurethat the Annual Financial Statements fairly present thestateofaffairsoftheCompanyasattheendofthefinancialyearand the resultsof itsoperationsandcash flows forthe period then ended, in conformity with InternationalFinancial Reporting Standards. The external auditors areengagedtoexpressanindependentopinionontheAnnualFinancialStatements.

TheAnnualFinancialStatementsarepreparedinaccordancewith International Financial Reporting Standards and arebased upon appropriate accounting policies consistentlyapplied and supported by reasonable and prudentjudgementsandestimates.

The directors acknowledge that they are ultimatelyresponsible for the system of internal financial controlestablished by the Company and place considerableimportanceonmaintainingastrongcontrolenvironment.Toenablethedirectorstomeettheseresponsibilities,theboardsetsstandardsforinternalcontrolaimedatreducingthe risk of error or loss in a cost-effectivemanner. Thestandardsincludetheproperdelegationofresponsibilitieswithinaclearlydefined framework,effectiveaccountingproceduresandadequatesegregationofdutiestoensureanacceptable levelof risk.Thesecontrolsaremonitoredthroughout theCompanyandall employeesare requiredtomaintain thehighestethical standards inensuring theCompany’sbusiness isconducted inamannerthat, inallreasonable circumstances is above reproach. The focusof risk management in the Company is on identifying,assessing, managing and monitoring all known forms ofriskacross theCompany.Whileoperating riskcannotbefullyeliminated,theCompanyendeavourstominimiseitbyensuringthatappropriateinfrastructure,controls,systemsand ethical behaviour are applied and managed withinpredeterminedproceduresandconstraints.

Thedirectorsareoftheopinion,basedontheinformationandexplanationsgivenbymanagement,thatthesystemofinternalcontrolprovidesreasonableassurancethatthefinancial recordsmaybe reliedon for thepreparationof

theAnnualFinancialStatements.However,anysystemofinternalfinancialcontrolcanprovideonlyreasonable,andnotabsolute,assuranceagainstmaterialmisstatementorloss.

Duringtheyearunder review,theDirectors retainedfulland effective control over the Company andmonitoredmanagement in implementing the approved plans andstrategies.TheDirectorsareoftheopinionthattheAnnualFinancialStatementsfairlypresentthefinancialpositionofBroadbandInfracoandtheresultsoftheiroperationsandcashflowsfortheyearended31March2016.

TheBoardofDirectorshasconsideredwhether thegoingconcern assumption is appropriate for the Company inthe preparation of the Annual Financial Statements. ThedirectorshavereviewedtheCompany’sforecastedfinancialperformance for the year 31March 2017 aswell as 31March2018.Inlightofthisreviewandthecurrentfinancialposition,theyaresatisfiedthattheCompanyhasaccesstoadequateresourcestocontinueitsoperationalexistencefortheforeseeablefuture.

Thegoingconcernisdiscussedinmoredetailonthesectionbelowthisreport.

The external auditors are responsible for independentlyauditingandreportingontheCompany'sAnnualFinancialStatements. The Annual Financial Statements have beenexamined by the Company's external auditors and theirreportispresentedonthelattersectionofthereport.

TheAnnual FinancialStatements setoutonpages58 to88,whichhavebeenpreparedonthegoingconcernbasis,underthesupervisionof IanvanNiekerk,wereapprovedby theboardon21 July2016andweresignedon theirbehalfby:

BMCNgcoboChairmanoftheBoard

P Kwele ChiefExecutiveOfficer

SECTION 2


DIRECTORS’ REPORTfortheyearended31March2016

ThedirectorshavepleasureinsubmittingtheirreportontheAnnualFinancialStatementsofBroadbandInfracoSOCLimitedfortheyearended31March2016.

1. Reviewoffinancialresultsandactivities

TheAnnualFinancialStatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheCompaniesAct71of2008.Theaccountingpolicieshavebeenappliedconsistentlycomparedtotheprioryear.AllamountsareinSouthAfricanthousandRands.

TheCompany recordedanet lossafter tax for theyearended31March2016ofR91,394.This representedadecreaseof63%fromthenetlossaftertaxoftheprioryearofR244,693.

Companyrevenueincreasedby24%fromR365,511intheprioryeartoR451,650fortheyearended31March2016mainlyduetoadditionalrevenuefromexistingcustomers.

Companycashflowsfromoperatingactivitiesincreasedby190%from(R152,532)intheprioryeartoR137,163fortheyearended31March2016.

BroadbandInfracocontinuestodrivecostoptimisationsinbothcostofsalesandoperationalcosts.

2. Share capital

Therehavebeennochangestotheauthorisedorissuedsharecapitalduringtheyearunderreview.

3. Directorate

Thedirectorsinofficeatthedateofthisreportareasfollows:

Directors Office Designation Changes

BMCNgcobo Chairperson Non-ExecutiveDirectorSDMabalayo Other Non-ExecutiveDirector

MMMaponya Other Non-ExecutiveDirector

NSelamolela Other Non-ExecutiveDirectorAGithiari Other Non-ExecutiveDirectorMMosweu Other Non-ExecutiveDirectorPKwele ChiefExecutiveOfficer ExecutiveDirectorIIvanNiekerk ChiefFinancialOfficer ExecutiveDirector Appointed23March2016

4. Events after the reporting period

Thedirectorsarenotawareofanymaterialevent,whichoccurredafterthereportingdateanduptothedateofthisreport.

5. Going concern

TheAnnualFinancialStatementshavebeenpreparedonthebasisofaccountingpoliciesapplicabletoagoingconcern.Moredetailsaroundthegoingconcernprinciplesappliedareinnote26oftheAnnualFinancialStatementssection.

6. Auditors

NexiaSAB&TcontinuedinofficeasauditorsfortheCompanyfor2016.

7. Secretary

TheCompanySecretaryisMrFahimMohamed.

BMCNgcoboChairmanoftheBoard

P Kwele ChiefExecutiveOfficer


INDEPENDENT AUDITOR’S REPORT

INDEPENDENT AUDITOR’S REPORT TO PARLIAMENT AND THE SHAREHOLDERS THE DEPARTMENT OF TELECOMMUNICATIONS AND POSTAL SERVICES AND THE INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH AFRICA ON BROADBAND INFRACO SOC LIMITED

Report on the Annual Financial Statements

Introduction

1. WehaveauditedtheAnnualFinancialStatementsofBroadbandInfracoSOCLimited(Infraco)setoutonpages58to88whichcomprisethestatementoffinancialpositionasat31March2016,thestatementofprofitorlossandothercomprehensiveincome,statementofchangesinequityandstatementofcashflowsfortheyearthenended,aswellasthenotes,comprisingasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.

Accountingauthority’sresponsibilityfortheAnnualFinancialStatements

2. The board of directors, which constitutes the accounting authority, is responsible for the preparation and fairpresentationoftheseAnnualFinancialStatements inaccordancewith InternationalFinancialReportingStandards(IFRS)andthe requirementsof thePublicFinanceManagementActofSouthAfrica,1999(ActNo.1of1999)(PFMA),andtheCompaniesActofSouthAfrica,2008(ActNo.71of2008)(CompaniesAct),andforsuchinternalcontrolastheaccountingauthoritydeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor’sresponsibility

3. Our responsibility is to express an opinion on these financial statements based onmy audit.We conducted ourauditinaccordancewithInternationalStandardsonAuditing.Thosestandardsrequirethatwecomplywithethicalrequirements,andplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.

4. Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements. The procedures selected depend on the auditor’s judgement, including the assessment of the risksofmaterialmisstatementoftheAnnualFinancialStatements,whetherduetofraudorerror. Inmakingthoseriskassessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation ofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionon theeffectivenessof theentity’s internalcontrol.Anauditalso includesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

5. Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisformyauditopinion.

Opinion

6. Inouropinion,theAnnualFinancialStatementspresentfairly,inallmaterialrespects,thefinancialpositionofInfracoasat31March2016anditsfinancialperformanceandcashflowsfortheyearthenended,inaccordancewithIFRSandtherequirementsofthePFMAandtheCompaniesAct.

Emphasis of matter

7. Wedrawattentiontothematterbelow.Ouropinionisnotmodifiedinrespectofthismatter.

Going concern

8. Wedrawattentiontonote26onpage85oftheAnnualFinancialStatements,whichindicatesthatInfracoincurredanetlossduringtheyearended31March2016andprioryearsandInfracoiscurrentlytradingatamonthlycashshortfall.Theseconditions,alongwithothermattersassetforthintheAnnualFinancialStatements, indicatetheexistenceofamaterialuncertaintythatmaycastsignificantdoubtontheCompany’sabilitytooperateasagoingconcern.

SECTION 2


INDEPENDENT AUDITOR’S REPORT CONTINUED

Additional matters

9. Wedrawattentiontothemattersbelow.Ouropinionisnotmodifiedinrespectofthesematters.

OtherreportsrequiredbytheCompaniesAct

10. Aspartofourauditofthefinancialstatementsfortheyearended31March2016,wehavereadtheDirectors’Report, theAuditCommittee’sReportandtheCompanySecretary’sCertificate for thepurposeof identifyingwhethertherearematerial inconsistenciesbetweenthesereportsandtheauditedfinancialstatements.Thesereportsaretheresponsibilityoftherespectivepreparers.Basedonreadingthesereportswehavenotidentifiedmaterial inconsistencies between the reports and the audited financial statements.We have not audited thereportsandaccordinglydonotexpressanopiniononthem.

Audittenure

11. IntermsoftheIRBARulepublishedinGovernmentGazetteNumber39475dated04December2015,wereportthatNexiaSAB&ThasbeentheauditorofInfracoforfouryears.

Report on other legal and regulatory requirements

12. InaccordancewiththePublicAuditActofSouthAfrica,2004(ActNo.25of2004)(PAA)andthegeneralnoticeissued in terms thereof,we have a responsibility to report findings on the reported performance informationagainstpredeterminedobjectivesforselectedobjectivespresentedintheannualperformancereport,compliancewith legislationandinternalcontrol.Theobjectiveofourtestswasto identifyreportablefindingsasdescribedundereachsubheadingbutnottogatherevidencetoexpressassuranceonthesematters.Accordingly,wedonotexpressanopinionorconclusiononthesematters.

Predetermined objectives

13. WeperformedprocedurestoobtainevidenceabouttheusefulnessandreliabilityofthereportedperformanceinformationforthefollowingselectedobjectivespresentedintheannualperformancereportofInfracofortheyearended31March2016:

Objective1:Ensurebusinesssustainabilityonpages18to19Objective2:Networksaleabilityonpages18to19Objective3:Networkimprovementonpages18to19Objective4:Economictransformationonpages18to19

14. WeevaluatedtheusefulnessofthereportedperformanceinformationtodeterminewhetheritwaspresentedinaccordancewiththeNationalTreasury’sannualreportingprinciplesandwhetherthereportedperformancewasconsistentwiththeplannedobjectives.Wefurtherperformedteststodeterminewhetherindicatorsandtargetswerewelldefined,verifiable,specific,measurable,timeboundandrelevant,asrequiredbytheNationalTreasury’sFrameworkformanagingprogrammeperformanceinformation(FMPPI).

15. Weassessedthereliabilityofthereportedperformanceinformationtodeterminewhetheritwasvalid,accurateandcomplete.

16. Wedidnotidentifyanymaterialfindingsontheusefulnessandreliabilityofthereportedperformanceinformationforthefollowingprogrammes:

Objective1:Ensurebusinesssustainabilityonpages18to19Objective2:Networksaleabilityonpages18to19Objective3:Networkimprovementonpages18to19Objective4:Economictransformationonpages18to19


Additional matter

17. Wedrawattentiontothemattersbelow.Ouropinionisnotmodifiedinrespectofthesematters.

Achievement of planned targets

18. Refertotheannualperformancereportonpages18to19for informationontheachievementoftheplannedtargetsfortheyear.

Adjustment of material misstatements

19. We identifiedmaterialmisstatements in theannualperformancereportsubmittedforauditing.Thesematerialmisstatements were on the reported performance information of Objective 1: Ensure business sustainability,Objective2:NetworksaleabilityandObjective3:Networkimprovement.Asmanagementsubsequentlycorrectedthe misstatements, we did not raise any material findings on the usefulness and reliability of the reportedperformanceinformation.

Compliance with legislation

20. We performed procedures to obtain evidence that Infraco had complied with applicable legislation regardingfinancialmatters,financialmanagementandotherrelatedmatters.Wedidnotidentifyanyinstancesofmaterialnon-compliancewithspecificmattersinkeylegislation,assetoutinthegeneralnoticeissuedintermsofthePAA.

Internal control

21. Weconsideredinternalcontrolrelevanttomyauditofthefinancialstatements,annualperformancereportandcompliancewithlegislation.Themattersreportedbelowarelimitedtothesignificantinternalcontroldeficiencies

thatresultedinouropinion,thefindingsontheannualperformancereportincludedinthisreport.

Financial and performance management

22. AfterthetablingoftheCorporatePlaninParliament,theshareholderchangedtheperformancetargetsfortheCompany.Thesestretchedtargets,presentedonpages20and21,wereusedbymanagementwhenpresentingtheCompany’sperformanceinthequarterlyreportssubmittedforthe2015/16financialyear.Asaresult,significantmaterialmisstatementswerenotedbetweentheapprovedcorporateplanandreportedpredeterminedobjectives.

NexiaSAB&TPer:TJDeKockDirectorRegisteredAuditor21July2016

STATEMENT OF FINANCIAL POSITIONat 31 March 2016

SECTION 2


Note

2016 2015

R’000 R’000

ASSETS

Non-currentassets

Property,plantandequipment 3 1 297 319 1304152

Intangibleassets 4 57 149 19348

Tradeandotherreceivables 6 13 587 14715

1 368 055 1 338 215

Currentassets


Cashandcashequivalents 7 141 626 156668

190 355 413251

Total assets 1 558 410 1 751 466

EQUITY AND LIABILITIES

Equity

Sharecapital 8 – –

Shareholders’loans 9 1 829 530 1829530

Accumulateddeficit (957266) (865872)

872 264 963 658

LIABILITIES

Non-currentliabilities

Deferredincome 12 502 857 546 830

Currentliabilities

Tradeandotherpayables 11 99 067 158536

Deferredincome 12 71 759 70529

Provisions 10 12 463 11913

183 289 240 978

Totalliabilities 686 146 787 808

Totalequityandliabilities 1 558 410 1 751 466

STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 March 2016


Note

2016 2015

R’000 R’000

REVENUE 13 451 650 365511

Cost of sales 14 (259 573) (314849)

Gross profit 192 077 50 662

Operatingexpenses 15 (292130) (310622)

Operatingloss (100053) (259960)

Investmentrevenue 16 8 808 15269

Financecosts 17 (149) (2)

Loss for the year (91394) (244693)

Taxation 18 – –

Lossfortheyearaftertax (91394) (244693)

Other comprehensive income – –

Total comprehensive loss for the year (91394) (244693)

SECTION 2


STATEMENT OF CHANGES IN EQUITYfortheyearended31March2016

Shareholders’ loansR’000

Accumulatedloss Totalequity

Note R’000 R’000

Balance at 01 April 2014 1 829 530 (621179) 1 208 351

Lossfortheyear – (244 693) (244693)

Othercomprehensiveincome – – –

Total comprehensive loss for the year – (244693) (244693)

Balance at 01 April 2015 1 829 530 (865872) 963 658

Lossfortheyear – (91394) (91394)

Othercomprehensiveincome – – –

Total comprehensive loss for the year – (91394) (91394)

Balance at 31 March 2016 1 829 530 (957266) 872 264

9


STATEMENT OF CASH FLOWSfortheyearended31March2016

Note

2016 2015

R’000 R’000

Cash flows from operating activities

Cashgeneratedfromoperations 21 137312 (152530)

Financecosts 17 (149) (2)

Net cash from operating activities 137 163 (152532)

Cash flows from investing activities

Purchaseofproperty,plantandequipment 3 (118409) (136310)

Purchaseofotherintangibleassets 4 (42604) (11587)

Interestincome 16 8808 15 269

Net cash from investing activities (152205) (132628)

Total cash movement for the year (15042) (285160)

Cashatthebeginningoftheyear 156668 441828

Total cash at end of the year 7 141 626 156 668

SECTION 2


NOTES TO THE ANNUAL FINANCIAL STATEMENTSfortheyearended31March2016

1. Presentation of Annual Financial Statements

TheAnnualFinancialStatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards,andtheCompaniesAct71of2008.TheAnnual Financial Statements have been preparedon the historical cost basis, and incorporate theprincipalaccountingpoliciessetoutbelow.TheyarepresentedinSouthAfricanthousandRands.

These accounting policies are consistent with thepreviousperiod.

1.1 Corporate information

Broadband Infraco SOC Limited is a Companydomiciled and incorporated in South Africa. Theaddress of the Company’s registered office isCountry Club Estate, Building 9, 21 WoodlandsDrive,Woodmead, 2146. The Company is ownedby the South AfricanGovernment and is primarilyinvolved in the establishment of a national long-distancefibre-opticnetworkandtheestablishmentofan internationalmarine-cablenetworkdeployedbetweenSouthAfricaandtheUnitedKingdom.

1.2 Functionalandpresentationcurrency

These financial statements are presented in SouthAfrican Rand, which is the Company’s functionalcurrency.FinancialinformationpresentedisinSouthAfricanRand,roundedtothenearestthousand.

1.3 Significantjudgementsandsourcesofestimationuncertainty

In preparing the Annual Financial Statements,management is required to make estimates andassumptions that affect the amounts representedin the Annual Financial Statements and relateddisclosures. Use of available information and theapplicationofjudgementisinherentintheformationofestimates.ActualresultsinthefuturecoulddifferfromtheseestimateswhichmaybematerialtotheAnnualFinancialStatements.Significantjudgementsinclude:

Tradereceivablesandloansandreceivables The Company assesses its trade receivables, held

tomaturity investmentsand loansand receivablesforimpairmentattheendofeachreportingperiod.In determiningwhether an impairment loss shouldbe recorded in profit or loss, theCompanymakesjudgementsastowhetherthereisobservabledataindicating ameasurable decrease in the estimatedfuturecashflowsfromafinancialasset.

Impairment testing TheCompanyreviewsandteststhecarryingvalue

ofassetswheneventsorchangesincircumstancessuggest that the carrying amount may not berecoverable.Ifthereareindicationsthatimpairmentmay have occurred, estimates are prepared ofexpectedfuturecashflowsfortheassets.

Provisions Provisionswereraisedandmanagementdetermined

an estimate based on the information available.Additionaldisclosureoftheseestimatesofprovisionsareincludedinnote10-Provisions.

1.4 Property,plantandequipment

Property, plant and equipment are tangible assets,which the Company holds for its own use or forrentaltoothersandwhichareexpectedtobeusedformorethanoneyear.

An item of property, plant and equipment isrecognised as an asset when it is probable thatfutureeconomicbenefitsassociatedwiththe itemwillflowtotheCompany,andthecostoftheitemcanbemeasuredreliably.

Property,plantandequipmentareinitiallymeasuredat cost. Cost includes all of the expenditure,which is directly attributable to the acquisition orconstructionoftheasset,includingthecapitalisationofborrowingcostsonqualifyingassets.

Expenditureincurredsubsequentlyformajorservices,additions to or replacement of parts of property,plantandequipmentarecapitalised if it isprobablethat future economic benefits associated with theexpenditurewill flow to theCompanyand the costcanbemeasuredreliably.Day-to-dayservicingcostsareincludedinprofitorlossintheyearinwhichtheyareincurred.

Property, plant and equipment are subsequentlystated at cost less accumulated depreciation andanyaccumulatedimpairmentlosses.

Depreciationofanassetcommenceswhentheassetis available for use as intended by management.Depreciation is charged to write off the asset’scarryingamountoveritsestimatedusefullifetoitsestimatedresidualvalue,usingamethodthatbestreflects thepattern inwhich the asset’s economicbenefits are consumed by the Company. Leasedassetsaredepreciated inaconsistentmannerover


the shorter of their expected useful lives and theleaseterm.Depreciationisnotchargedtoanassetifitsestimatedresidualvalueexceedsorisequaltoitscarryingamount.Depreciationofanassetceasesattheearlierofthedatethattheassetisclassifiedasheldforsaleorderecognised.

The useful lives of items of property, plant andequipmenthavebeenassessedasfollows:

ItemDepreciation

methodAverage usefullife

NetworkInfrastructure

Straightline 20years

Capital-WorkinProgress

Notdepreciated

–

Sparesandtestequipment

Straightline 5-15years

Officeequipment Straightline 10years

Computerequipment

Straightline 3-6years

Motorvehicles Straightline 5years

The residual value, useful life and depreciationmethod of each asset are reviewed at the end ofeachreportingyear.Iftheexpectationsdifferfromprevious estimates, the change is accounted forprospectivelyasachangeinaccountingestimate.

Thedepreciationchargeforeachyearisrecognisedinprofitor lossunless it is included inthecarryingamountofanotherasset.

Impairmenttestsareperformedonproperty,plantandequipmentwhenthereisanindicatorthattheymaybe impaired.Whenthecarryingamountofanitemofproperty,plantandequipment isassessedtobehigherthantheestimatedrecoverableamount,an impairment loss is recognised immediately inprofit or loss to bring the carrying amount in linewiththerecoverableamount.

An item of property, plant and equipment isderecognised upon disposal or when no futureeconomicbenefitsareexpectedfromitscontinueduse or disposal. Any gain or loss arising from thederecognition of an item of property, plant andequipment is included in profit or loss when theitem isderecognised.Anygainor lossarisingfromthederecognitionofanitemofproperty,plantandequipmentisdeterminedasthedifferencebetweenthenetdisposalproceeds, if any, and thecarryingamountoftheitem.

WorkinProgress(WIP)referstothenetworkunderconstruction.WIPisrecordedatthecostpriceatthestage of completion and transferred to equipmentoncetheassetisreadyforuse.

1.5 Intangibleassets

Anintangibleassetisrecognisedwhen:

• itisprobablethattheexpectedfutureeconomicbenefits that are attributable to the asset willflowtotheentity;and

• the cost of the asset can bemeasured reliably.Intangibleassetsareinitiallyrecognisedatcost.

Intangible assets are carried at cost less anyaccumulated amortisation and any impairmentlosses.

Anintangibleassetisregardedashavinganindefiniteusefullifewhen,basedonallrelevantfactors,thereis no foreseeable limit to the period over whichtheasset isexpectedtogeneratenetcashinflows.Amortisation is not provided for these intangibleassets,buttheyaretestedforimpairmentannuallyandwhenever there isan indication that theassetmay be impaired. For all other intangible assetsamortisationisprovidedonastraight-linebasisovertheirusefullife.

The amortisation period and the amortisationmethod for intangible assets are reviewed everyperiod-end.

Reassessingtheusefullifeofanintangibleassetwithafiniteusefullifeafteritwasclassifiedasindefiniteis an indicator that the assetmaybe impaired. Asaresulttheasset istestedfor impairmentandtheremaining carrying amount is amortised over itsusefullife.

Internally generated brands,mastheads, publishingtitles,customer listsanditemssimilar insubstancearenotrecognisedasintangibleassets.

Amortisationisprovidedtowritedowntheintangibleassets,onastraightlinebasis,totheirresidualvaluesasfollows:

Item Usefullife

Servitudes 20years

Computersoftware 5-7years

SECTION 2


NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016

1.6 Financialinstruments

Classification TheCompanyclassifiesfinancialassetsandfinancial

liabilitiesintothefollowingcategories:• Loansandreceivables.• Financialliabilitiesmeasuredatamortisedcost.

Classificationdependsonthepurposeforwhichthefinancial instruments were obtained/incurred andtakesplaceatinitialrecognition.

Derecognition Financial assets are derecognisedwhen the rights

to receive cash flows from the investments haveexpiredorhavebeentransferredandtheCompanyhastransferredsubstantiallyallrisksandrewardsofownership.

Impairment of financial assets At each reporting date the Company assesses

all financial assets, other than those at fair valuethroughprofitorloss,todeterminewhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetshasbeenimpaired.

ForamountsduetotheCompany,significantfinancialdifficultiesofthedebtor,probabilitythatthedebtorwillenterbankruptcyanddefaultofpaymentsareallconsideredindicatorsofimpairment.

Impairmentlossesarerecognisedinprofitorloss.

Impairment losses are reversed when an increasein the financial asset’s recoverable amount canbe related objectively to an event occurring afterthe impairment was recognised, subject to therestrictionthatthecarryingamountofthefinancialasset at the date that the impairment is reversedshall not exceedwhat the carrying amountwouldhavebeenhadtheimpairmentnotbeenrecognised.

Tradeandotherreceivables Tradereceivablesaremeasuredatinitialrecognition

at fair value, and are subsequently measured atamortised cost using the effective interest ratemethod. Appropriate allowances for estimatedirrecoverable amounts are recognised in profitor losswhen there is objective evidence that theasset is impaired. Significant financial difficultiesofthedebtor,probabilitythatthedebtorwillenterbankruptcyor financial reorganisation,anddefaultor delinquency in payments (more than 30 daysoverdue) are considered indicators that the tradereceivable is impaired. The allowance recognised

ismeasuredasthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuture cash flows discounted at the effectiveinterestratecomputedatinitialrecognition.

Thecarryingamountoftheassetisreducedthroughtheuseofanallowanceaccount,andtheamountofthelossisrecognisedinprofitorlosswithinoperatingexpenses.Whenatradereceivableisuncollectable,it is written off against the allowance accountfor trade receivables. Subsequent recoveries ofamountspreviouslywrittenoffarecreditedagainstoperatingexpensesinprofitorloss.

Tradeandother receivablesareclassifiedas loansandreceivables.

Tradeandotherpayables Trade payables are initiallymeasured at fair value,

andaresubsequentlymeasuredatamortisedcost,usingtheeffectiveinterestratemethod.

Cashandcashequivalents Cashandcashequivalentscomprisecashonhand

and notice deposits, and other short-term highlyliquid investments that are readily convertibletoaknownamountofcashandare subject toaninsignificant risk of changes in value. These areinitiallyandsubsequentlyrecordedatfairvalue.

1.7 Tax

Currenttaxassetsandliabilities Currenttaxforcurrentandpriorperiodsis,tothe

extentunpaid,recognisedasaliability.Iftheamountalreadypaidinrespectofcurrentandpriorperiodsexceeds the amount due for those periods, theexcessisrecognisedasanasset.

Currenttaxliabilities(assets)forthecurrentandpriorperiodsaremeasuredattheamountexpectedtobepaid to (recovered from) the tax authorities, usingthetaxrates(andtax laws)thathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiod.

Deferredtaxassetsandliabilities Adeferredtax liability isrecognisedforall taxable

temporary differences, except to the extent thatthe deferred tax liability arises from the initialrecognitionof an assetor liability in a transactionwhichatthetimeofthetransaction,affectsneitheraccountingprofitnortaxableprofit(taxloss).


Adeferredtaxassetisrecognisedforalldeductibletemporary differences to the extent that it isprobablethattaxableprofitwillbeavailableagainstwhichthedeductibletemporarydifferencecanbeutilised.Adeferredtaxassetisnotrecognisedwhenit arises from the initial recognitionof an assetorliability in a transaction which at the time of thetransaction, affects neither accounting profit nortaxableprofit(taxloss).

A deferred tax asset is recognised for the carryforwardofunusedtaxlossestotheextentthatitisprobablethatfuturetaxableprofitwillbeavailableagainstwhichtheunusedtaxlossescanbeutilised.

Deferred tax assets and liabilities are measuredatthetaxratesthatareexpectedtoapplytotheperiodwhen the asset is realisedor the liability issettled,basedontaxrates(andtaxlaws)thathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiod.

Current and deferred taxes are recognised asincomeoranexpenseandincludedinprofitorlossfor the period, except to the extent that the taxarisesfrom:• atransactionoreventwhich is recognised, inthe

sameoradifferentperiod,toothercomprehensiveincome,or

• abusinesscombination.

Current tax and deferred taxes are charged orcreditedtoothercomprehensiveincomeifthetaxrelatestoitemsthatarecreditedorcharged,inthesameoradifferentperiod,toothercomprehensiveincome.

Current tax and deferred taxes are charged orcredited directly to equity if the tax relates toitemsthatarecreditedorcharged,inthesameoradifferentperiod,directlyinequity.

1.8 Leases

Aleaseisclassifiedasafinanceleaseifittransferssubstantiallyall therisksandrewards incidentaltoownership.Aleaseisclassifiedasanoperatingleaseifitdoesnottransfersubstantiallyalltherisksandrewardsincidentaltoownership.

Operating leases – lessee Operating lease payments are recognised as an

expenseonastraight-linebasisovertheleaseterm.The difference between the amounts recognised

as an expense and the contractual payments arerecognisedasanoperatingleaseasset.Thisliabilityisnotdiscounted.

Any contingent rents are expensed in the periodtheyareincurred.

1.9 Impairment of assets

TheCompanyassessesateachendofthereportingperiodwhetherthereisanyindicationthatanassetmaybe impaired. Ifanysuch indicationexists, theCompanyestimatestherecoverableamountoftheasset.

If there is any indication that an asset may beimpaired, the recoverable amount is estimated fortheindividualasset.Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,therecoverableamountofthecash-generatingunittowhichtheassetbelongsisdetermined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value lesscoststosellanditsvalueinuse.

If the recoverable amountof anasset is less thanits carrying amount, the carrying amount of theasset is reduced to its recoverable amount. Thatreductionisanimpairmentloss.

An impairment loss of assets carried at cost lessany accumulated depreciation or amortisation isrecognisedimmediatelyinprofitorloss.

Anentityassessesateachreportingdatewhetherthere is any indication that an impairment lossrecognised in prior periods for assets other thangoodwillmaynolongerexistormayhavedecreased.If any such indication exists, the recoverableamountsofthoseassetsareestimated.

The increased carrying amount of an asset otherthan goodwill attributable to a reversal of animpairment loss does not exceed the carryingamount thatwould havebeendeterminedhadnoimpairment loss been recognised for the asset inpriorperiods.

Areversalofanimpairmentlossofassetscarriedatcostlessaccumulateddepreciationoramortisationother than goodwill is recognised immediately inprofitorloss.

SECTION 2



1.10 Sharecapitalandequity

Anequityinstrumentisanycontractthatevidencesa residual interest in the assets of an entity afterdeductingallofitsliabilities.

1.11 Shareholders’ loans

Loans made by Shareholders to the Company, insubstance,representadditionalcapitalcontributionsbytheShareholdersassettlementofsuchloansisneitherplannednorlikelytooccurintheforeseeablefuture.

1.12 Employeebenefits

Short-termemployeebenefits

The cost of short-term employee benefits, (thosepayablewithin12monthsaftertheserviceisrendered,such as paid vacation leave and sick leave, bonuses,and non-monetary benefits such as medical care),are recognised in the period inwhich the service isrenderedandarenotdiscounted.

The expected cost of compensated absences isrecognisedasanexpenseastheemployeesrenderservices that increase their entitlement or, in thecase of non-accumulating absences, when theabsenceoccurs.

The expected cost of profit sharing and bonuspayments isrecognisedasanexpensewhenthereis a legal or constructive obligation tomake suchpaymentsasaresultofpastperformance.

Definedcontributionplans Paymentstodefinedcontributionretirementbenefit

plansarechargedasanexpenseastheyfalldue.

1.13 Provisions and contingencies

Provisionsarerecognisedwhen:• theCompanyhasapresentobligationasaresult

ofapastevent;• it is probable that an outflow of resources

embodyingeconomicbenefitswillberequiredtosettletheobligation;and

• areliableestimatecanbemadeoftheobligation.

The amount of a provision is the present value oftheexpenditureexpected tobe required tosettletheobligation.

Where some or all of the expenditure required tosettle a provision is expected to be reimbursed byanother party, the reimbursement is recognisedwhen, and onlywhen, it is virtually certain that

reimbursementwillbereceived iftheentitysettlesthe obligation. The reimbursement is treated asa separate asset. The amount recognised for thereimbursementshallnotexceedtheamountoftheprovision.

Provisionsarenot recognised for futureoperatinglosses.

If an entity has a contract that is onerous, thepresentobligationunderthecontractisrecognisedandmeasuredasaprovision.

1.14 Revenue

When the outcome of a transaction involving therendering of services can be estimated reliably,revenue associated with the transaction isrecognisedbyreferencetothestageofcompletionofthetransactionattheendofthereportingperiod.The outcome of a transaction can be estimatedreliablywhenallthefollowingconditionsaresatisfied:

• Theamountofrevenuecanbemeasuredreliably.• It is probable that the economic benefits

associatedwith the transactionwill flowto theCompany.

• The stage of completion of the transaction attheendofthereportingperiodcanbemeasuredreliably.

• The costs incurred for the transaction andthe costs to complete the transaction can bemeasuredreliably.

Whentheoutcomeofthetransactioninvolvingtherenderingof servicescannotbeestimated reliably,revenue is recognised only to the extent of theexpensesrecognisedthatarerecoverable.

Contractrevenuecomprises:

• the initial amount of revenue agreed in thecontract;and

• variationsincontractwork,claimsandincentivepayments:- totheextentthatitisprobablethattheywill

resultinrevenue;and- theyarecapableofbeingreliablymeasured.

Revenue is measured at the fair value of theconsiderationreceivedorreceivableandrepresentsthe amounts receivable for goods and servicesprovided in the normal course of business, net oftrade discounts and volume rebates, and value-addedtax.


1.15 Cost of sales

Therelatedcostofprovidingservicesrecognisedasrevenueinthecurrentperiodisincludedincostofsales.Contractcostscomprise:

• coststhatrelatedirectlytothespecificcontract;• coststhatareattributabletocontractactivityin

generalandcanbeallocatedtothecontract;and• suchothercostsasarespecificallychargeableto

thecustomerunderthetermsofthecontract.

1.16 Translationofforeigncurrencies

Foreigncurrencytransactions

Aforeigncurrencytransactionisrecorded,oninitialrecognition inSouthAfricanRands,byapplyingtotheforeigncurrencyamountthespotexchangeratebetween the functional currency and the foreigncurrencyatthedateofthetransaction.

Attheendofthereportingperiod:

• foreigncurrencymonetary itemsare translatedusingtheclosingrate;

• non-monetary items that are measured intermsofhistoricalcostinaforeigncurrencyaretranslatedusingtheexchangerateatthedateofthetransaction;and

• non-monetary items that are measured at fairvalue in a foreign currency are translatedusingthe exchange rates at the date when the fairvaluewasdetermined.

Exchangedifferences arisingon the settlementofmonetary items or on translatingmonetary itemsat rates different from those atwhich theyweretranslated on initial recognition during the periodor in previous Annual Financial Statements arerecognised in profit or loss in the period inwhichtheyarise.

Cash flows arising from transactions in a foreigncurrency are recorded in South African Randsby applying to the foreign currency amount theexchange rate between the Rand and the foreigncurrencyatthedateofthecashflow.

1.17 Related parties

Related-party transactions are defined astransactions with entities that have the samecontrolling shareholder as the Company andtransactions with directors and key managementand their families andentities controlledor jointlycontrolledbytheseindividuals.

1.18 Offset

Wherealegallyenforceablerightofoffsetexistsforrecognised financial assets and financial liabilities,and there is an intention to settle the liability andrealisetheassetsimultaneously,orsettleonanetbasis,allrelatedfinancialeffectsareoffset.

1.19 Deferredrevenue

Deferred income relates to revenue receivedunder Irrefutable Right of Use (IRU) agreementsofwhich servicesareprepaidby thecustomeroncommissioningoftheservices.Therevenuewillberecognisedonamonthlybasiswhentheservice isprovidedovertheperiodoftheagreement.

1.20 Operating segments

TheCompany’soperatingactivities areconductedin one segment and there are no product andgeographicalsegmentstoreporton.

2. New Standards and Interpretations

2.1 Standards and interpretations effective and adoptedinthecurrentyear

In the current year, the Company has adopted thefollowing standards and interpretations that areeffectiveforthecurrentfinancialyearandthatarerelevanttoitsoperations:

AmendmenttoIAS24:Related-partydisclosures:annualimprovementsproject

Thedefinitionofarelatedpartyhasbeenamendedto include an entity, or anymember of a group ofwhich it is apart,whichprovideskeymanagementpersonnel services to the reporting entity or tothe parent of the reporting entity (“managemententity”).Disclosureisrequiredofpaymentsmadetothemanagement entity for these services but notofpaymentsmadebythemanagemententitytoitsdirectorsoremployees.

TheeffectoftheAnnualFinancialStatementshavenotbeenmaterial.

2.2 Standards and interpretations not yet effective andadoptedinthecurrentyear

The Company has chosen not to early adopt thefollowingstandardsand interpretations,whichhavebeen published and are mandatory for accountingperiodsbeginningonorafter1January2016orlaterperiods:

SECTION 2



IFRS 16: Leases New standard that introduces a single lessee

accountingmodelandrequiresalesseetorecogniseassetsandliabilitiesforallleaseswithatermofmorethan12months,unlesstheunderlyingassetisoflowvalue. A lessee is required to recognise a right-of-useassetrepresentingitsrighttousetheunderlyingleased asset and a lease liability representing itsobligationtomakeleasepayments.Alesseemeasuresright-of-use assets similarly to other non-financialassets(suchasproperty,plantandequipment)andlease liabilities similarly to other financial liabilities.Asaconsequence,a lesseerecognisesdepreciationof the right-of-use asset and interest on the leaseliability, and also classifies cash repayments of theleaseliability intoaprincipalportionandaninterestportionandpresentstheminthestatementofcashflowsapplyingIAS7StatementofCashFlows.

IFRS16containsexpandeddisclosurerequirementsforlessees.Lesseeswillneedtoapplyjudgementindeciding upon the information to disclose tomeettheobjectiveofprovidingabasisforusersoffinancialstatementstoassesstheeffectthatleaseshaveonthefinancialposition,financialperformanceandcashflowsofthelessee.

IFRS 16 supersedes the following Standards andInterpretations:(a) IAS17Leases.(b) IFRIC 4 Determining whether an Arrangement

containsaLease.(c) SIC-15OperatingLeases–Incentives.(d)SIC-27EvaluatingtheSubstanceofTransactions

InvolvingtheLegalFormofaLease.

The effective date of the Company is for yearsbeginningonorafter01January2019.

TheCompanyexpectstoadopttheamendmentforthefirsttimeinthe2020AnnualFinancialStatements.

TheDirectorsareassessingtheimpactofthisstandardontheCompany’sAnnualFinancialStatements.

Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of depreciation andamortisation

The amendment clarifies that a depreciation oramortisationmethodthatisbasedonrevenuethatis generated by an activity that includes the useof the asset is not an appropriate method. Thisrequirementcanberebuttedforintangibleassetsin very specific circumstances as set out in theamendmentstoIAS38.

The effective date of the amendment is for yearsbeginningonorafter01January2016.


It is unlikely that the amendment will have amaterialimpactontheCompany’sAnnualFinancialStatements.

Disclosure initiative: amendment to IAS 1: presentation of financial statements

Theamendmentprovidesnewrequirementswhenanentitypresentssubtotalsinadditiontothoserequiredby IAS1 in its Annual Financial Statements. It alsoprovides amended guidance concerning the orderofpresentationofthenotes intheAnnualFinancialStatements,aswellasguidanceforidentifyingwhichaccounting policies should be included. It furtherclarifies that an entity’s share of comprehensiveincome of an associate or joint venture under theequity method shall be presented separately intoits share of items that a) will not be reclassifiedsubsequently to profit or loss and b) that will bereclassifiedsubsequentlytoprofitorloss.

The effective date of the amendment is for yearsbeginningonorafter01January2016.


It is unlikely that the amendment will have amaterial impacton theCompany’sAnnual FinancialStatements.

IFRS9Financialinstruments

IFRS 9 issued in November 2009 introduced newrequirementsfortheclassificationandmeasurementof financial assets. IFRS 9 was subsequentlyamended inOctober2010to includerequirementsfor the classification andmeasurement of financialliabilities and for derecognition, and in November2013 to include the new requirements for generalhedge accounting. Another revised version ofIFRS 9 was issued in July 2014 mainly to includea) impairment requirements for financial assetsand b) limited amendments to the classificationand measurement requirements by introducinga “fair value through other comprehensive income”(FVTOCI)measurementcategoryforcertainsimpledebtinstruments.


KeyrequirementsofIFRS9:

• All recognised financial assets that are withinthe scope of IAS 39 Financial Instruments:Recognition and Measurement are required tobe subsequently measured at amortised cost orfairvalue.Specifically,debt investments thatareheldwithinabusinessmodelwhoseobjectiveistocollectthecontractualcashflows,andthathavecontractualcashflowsthataresolelypaymentsofprincipalandinterestontheoutstandingprincipalare generally measured at amortised cost atthe end of subsequent reporting periods. Debtinstrumentsthatareheldwithinabusinessmodelwhose objective is achieved by both collectingcontractualcashflowsandsellingfinancialassets,and that have contractual terms of the financialassetgiveriseonspecifieddatestocashflowsthatare solely payments of principal and interest onoutstandingprincipal,aremeasuredatFVTOCI.Allotherdebtandequity investmentsaremeasuredat fair value at the end of subsequent reportingperiods. In addition, under IFRS 9, entitiesmay make an irrevocable election to presentsubsequentchangesinthefairvalueofanequityinvestment (that isnotheld for trading) inothercomprehensiveincomewithonlydividendincomegenerallyrecognisedinprofitorloss.

• With regard to the measurement of financialliabilities designated as at fair value throughprofitorloss,IFRS9requiresthattheamountofchange in the fair value of the financial liabilitythatisattributabletochangesinthecreditriskofthe liability is presented in other comprehensiveincome, unless the recognition of the effect ofthe changes of the liability’s credit risk in othercomprehensiveincomewouldcreateorenlargeanaccountingmismatch in profit or loss.Under IAS39,theentireamountofthechangeinfairvalueof a financial liability designated as at fair valuethroughprofitorlossispresentedinprofitorloss.

• In relation to the impairment of financial assets,IFRS9requiresanexpectedcreditlossmodel,asopposed to an incurred credit loss model underIAS39.Theexpectedcreditlossmodelrequiresanentity to account for expected credit losses andchanges in those expected credit losses at eachreporting date to reflect changes in credit risksince initial recognition. It is therefore no longernecessary for a credit event to have occurredbeforecreditlossesarerecognised.

• Thenewgeneral hedgeaccounting requirementsretain the three (3) types of hedge accountingmechanisms currently available in IAS 39. Under

IFRS 9, greater flexibility has been introducedto the types of transactions eligible for hedgeaccounting, specifically broadening the types ofinstruments thatqualify forhedging instrumentsandthetypesofriskcomponentsofnon-financialitems that are eligible for hedge accounting. Inaddition,theeffectivenesstesthasbeenreplacedwith the principle of an “economic relationship”.Retrospectiveassessmentofhedgeeffectivenessis also no longer required. Enhanced disclosurerequirements about an entity’s riskmanagementactivitieshavealsobeenintroduced.

The effective date of the standard is for yearsbeginningonorafter01January2018.

TheCompanyexpectstoadoptthestandardforthefirsttimeinthe2019AnnualFinancialStatements.

It is unlikely that the standard will have a materialimpactontheCompany’sAnnualFinancialStatements.

IFRS15Revenuefromcontractswithcustomers

IFRS15supersedesIAS11Constructioncontracts;IAS18Revenue;IFRIC13CustomerLoyaltyProgrammes;IFRIC 15 Agreements for the construction of RealEstate;IFRIC18TransfersofAssetsfromCustomersandSIC31Revenue-BarterTransactionsInvolvingAdvertisingServices.

The core principle of IFRS 15 is that an entityrecognises revenue to depict the transfer ofpromised goods or services to customers in anamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitled inexchangeforthosegoods or services. An entity recognises revenue inaccordancewiththatcoreprinciplebyapplyingthefollowingsteps:

• Identifythecontract(s)withacustomer.• Identifytheperformanceobligationsinthecontract.• Determinethetransactionprice.• Allocatethetransactionpricetotheperformance

obligationsinthecontract.• Recogniserevenuewhen(oras)theentitysatisfies

a performance obligation. IFRS 15 also includesextensivenewdisclosurerequirements.

The effective date of the standard is for yearsbeginningonorafter01January2018.

TheCompanyexpectstoadoptthestandardforthefirsttimeinthe2019AnnualFinancialStatements.

It is unlikely that the standardwill have amaterialimpactontheCompany’sAnnualFinancialStatements.

SECTION 2



3. Property, plant and equipment

2016

R’0002015

R’000

CostAccumulated depreciation

Carrying value Cost

Accumulated depreciation

Carrying value

revaluation

Motorvehicles 5950 (1328) 4622 5168 (123) 5045

Officeequipment 10356 (4139) 6217 10320 (3102) 7218

Computerequipment 17414 (14444) 2970 17414 (13120) 4294

Networkinfrastructure 1964663 (846753) 1117910 1795641 (724615) 1071026

Sparesandtestequipment 15920 (12110) 3810 14878 (12576) 2302

Capital-workinprogress 161790 – 161790 214267 – 214267

Total 2 176 093 (878774) 1 297 319 2 057 688 (753536) 1 304 152

Reconciliationofproperty,plantandequipment-2016

R’000Opening balance Additions Transfers

Deprecia-tion Total

Motorvehicles 5045 782 – (1205) 4622

Officeequipment 7218 36 – (1037) 6217

Computerequipment 4294 – – (1324) 2970

Networkinfrastructure 1071026 – 167410 (120526) 1117910

Sparesandtestequipment 2302 – 2658 (1150) 3810

Capital-workinprogress 214267 117591 (170068) – 161790

1 304 152 118 409 – (125242) 1 297 319

Reconciliationofproperty,plantandequipment-2015

R’000Opening balance Additions Transfers

Deprecia-tion

Impairment loss Total

Motorvehicles – 5167 – (122) – 5045

Officeequipment 5112 3679 – (879) (694) 7218

Computerequipment 6072 948 – (2726) – 4294

Networkinfrastructure 1068517 12715 97581 (107787) – 1071026

Sparesandtestequipment 2775 7 206 (686) – 2302

Capital-workinprogress 198260 113794 (97787) – – 214267

1 280 736 136 310 – (112200) (694) 1 304 152


4. Intangible assets

2016 R’000

2015 R’000

Cost/ Valuation

Accumulatedamortisation

Carrying value

Cost/ Valuation

Accumulatedamortisation

Carrying value

Computersoftware 59496 (9631) 49865 16892 (5453) 11439

Servitudes 12487 (5203) 7284 12487 (4578) 7909

Total 71 983 (14834) 57 149 29 379 (10031) 19 348

Reconciliationofintangibleassets-2016

R’000Opening balance Additions Amortisation Total

Computersoftware 11439 42604 (4178) 49865

Servitudes 7909 – (625) 7284

19 348 42 604 (4803) 57 149

Reconciliationofintangibleassets-2015

R’000Opening balance Additions Transfers Amortisation Total

Computersoftware 1686 265 11322 (1834) 11439

Servitudes 8532 – – (623) 7909

Workinprogress – 11322 (11322) – –

10 218 11 587 – (2457) 19 348

Intangibleassetsconsistofpropertyservitudes,licencesandsoftwareacquiredandismeasuredatcostlessaccumulatedamortisationonastraight-linebasisoverexpectedusefullives.TheCompanyhasfullrightofuseoftheseassetswithoutanyrestriction.

Noneoftheintangibleassetshavebeenpledgedassecurity.

Therearenocontractualcommitmentsoutstandingatthereportingperiod.

SECTION 2



2016R’000

2015R’000

5. Deferred tax Deferredtaxasset

Adeferred taxassethasnotbeen raisedas it is considered improbable that temporarydifferenceswill reverse in theforeseeablefuture.

Reconciliationofdeferredtaxasset

Movementintemporarydifferences 11 187 (24261)

Deferredtaxassetsnotrecognised (11187) 24261

At the end of the year – –

Deferredtaxrates

Thedeferredtaxrateappliedwas28%(2015:28%).

Recognised

Straight-liningofleaseassets – 302

Straight-liningofleaseliabilities (29) 75

Capitalallowances (97551) (44396)

Prepayments (1559) (692)

Provisionforbaddebts 419 645

Leavepayaccrual 1 114 1564

Bonusprovision 2 370 2 216

Otherprovisions – 1 120

Deferredincome 161 194 125642

Deferredtaxassetnotrecognised (65958) (86476)

– –

6. Trade and other receivables

Tradeandotherreceivablesconsistsof:Long-termandcurrenttradereceivablesandprepayments.

Non-currentassets

Prepayments–IrrefutableRightsofUse 13 587 14 715

Currentassets

Tradereceivables 36 152 247972

Prepayments 5 460 2375

Deposits 2 162 2521

VAT 1 286 –

Foreigntaxcredits 3 041 3041

Accruedinterest 526 674

Straightliningofoperatingleases 102 –

Tradeandotherreceivablespledgedassecurity 48 729 256 583

Noneofthetradeandotherreceivableshavebeenpledgedassecurity.


2016R’000

2015R’000

6. Trade and other receivables (continued)

Tradeandotherreceivablesthatarepastduebuthavenotbeenimpairedare as follows:

Tradereceivables 596 168252

Deposits 2 162 2521

2 758 170 773

Tradeandotherreceivablesimpaired

Asof31March2016,tradeandotherreceivablesofR1498(2015:R2305)wereimpairedandprovidedfor.

Factorstakenintoaccountwhenconsideringimpairmentincludedtheageofthedebtandthelikelihoodofrecovery.

Movementsofthedoubtfuldebtallowanceisasfollows:

Balanceatthebeginningoftheyear 2 305 2454

Reversalofimpairmentlossfromprioryear (807) (149)

Balance at the end of the year 1 498 2 305

7. Cash and cash equivalents

Cashandcashequivalentsconsistofthefollowing:

Currentaccounts-StandardBank 1 575 512

Short-termdeposits-FirstNationalBank(bearinginterestat6%-6.95%) 30 348 40006

Short-termdeposits-Nedbank(bearinginterestat6%-6.8%) 40 682 40000

Short-termdeposits-StandardBank(bearinginterestat5.9%-6.5%) 69 021 76150

141 626 156 668

8. Share capital

Authorised

Ordinary 1 1

Issued

Ordinary* – –

Sharesareheldasfollows:

• 74ordinarysharesheldbytheState,representedbyDepartmentofTelecommunicationsandPostalServices.• 26ordinarysharesheldbytheIndustrialDevelopmentCorporationofSouthAfrica.

UnissuedsharesarecontrolledbytheExecutiveAuthority.

*AmountslessthanR1000.

SECTION 2



10. Provisions

Reconciliation of provisions - 2016

R’000Opening Balance Additions Total

Legalproceedings 4000 – 4000

Performancebonus 7913 550 8463

11 913 550 12 463

Reconciliation of provisions - 2015

R’000Opening Balance Additions

Utilised duringthe

year Total

Legalproceedings – 4000 – 4000

Performancebonus 8250 8125 (8462) 7913

8 250 12 125 (8462) 11 913

Legal proceedings

Theprovisionraisedrelatestoafibreusagedisputewithakeyserviceprovideronthenetwork,wherethequantumofserviceswasnotagreed.Anoutofcourtsettlementagreementhasbeensubsequentlyreached,howevertheprovisionmadereflectstheestimatedlegalfeesthatmayarisefromclosingthematter.

Performancebonus

The performance bonus provision relates to performance agreements completed with qualifying personnel based onindividuals’andCompany’sperformance.PayoutsareapprovedbytheBoard.

2016R’000

2015R’000

9. Shareholders’ loans

DepartmentofTelecommunicationsandPostalServices 1 351 130 1351130

IndustrialDevelopmentCorporationofSouthAfrica 478 400 478400

1 829 530 1 829 530

Theloansareunsecuredandhavenofixedtermsofrepaymentandbearnointerest.TheShareholders’loanagreementstatesthattheloanmayberepaidsubjecttotheavailabilityoffundsfromtimetotime,howeverthisisbasedonamutualagreementbetweentheShareholdersandtheCompany.Consequently,theloansareclassifiedasequity.


12. Deferred incomeDeferred income relates to Irrefutable Rights of Use (IRU) contracts overvarious periods. These amounts are received in advance and revenue isrecognisedoverthecontracttermastheservicesarebeingrendered.

Non-currentliabilities 502 857 546830

Currentliabilities 71 759 70529

574 616 617 359

13. Revenue

Theamountsincludedinrevenuearisingfromexchangesofgoodsorservicesareasfollows:

Saleofbroadbandservices 381 052 304155

IrrefutableRightofUseincome 47 096 33981

Operationsandmaintenance 23 502 27375

451 650 365 511

14. Cost of sales

Rendering of services 259 573 314 849

2016R’000

2015R’000

11. Trade and other payables

Tradepayables 75 767 124104

Tradepayables–Neotelsettlement 15 789 –

VAT – 23804

Straightliningofleases – 270

Accruedleavepay 3 978 5584

Servicesnotcommissioned 154 40

Internalaudit – 1008

Externalaudit 1 000 1280

PAYE 2 379 2446

99 067 158 536

SECTION 2



2016R’000

2015R’000

15. Operating expenses

Operatingexpenses 292 130 310 622

Employeeexpenses

Salaries 102 300 103444

Otherbenefits 321 11500

102 621 114 944

Directorsemoluments

Non-executivedirectors 2 468 2570

Executivedirectors 4 316 3535

6 784 6 105

Service fees

Legalfees 19 034 9628

Consultingandprofessionalfees 2 168 7291

Externalauditfees 266 871

Internalauditfees (224) 1547

21 244 19 337

Generalandadministrativeexpenses

Repairsandmaintenance 10 446 12700

Marketing 372 3353

Travelcosts 2 375 6708

Recoveries-travelreimbursement(WACS) (4379) (831)

Insurance 957 733

Telephoneandfax 669 732

Training 837 1991

ITexpenses 3 855 2939

Licencefees 1 745 1563

Otherexpenses-deductible 6 390 13333

23 267 43 221

Operating leases

Leaserentalsonoperatinglease 8 169 11 665

Depreciation,amortisation,impairmentandwrite-off

Property,plantandequipment 125 242 112 200

Writeoffandimpairmentofequipment – 694

Intangibleassets 4 803 2457

130 045 115 350


2016R’000

2015R’000

16. Investment revenueBank 8 808 15 269

17. Finance costs

Realisedloss/(profit)onforeignexchangetransaction 146 (6)

Interestpaid 3 8

149 2

18. Taxation

Reconciliationofthetaxexpense

Reconciliationbetweenaccountingprofitandtaxexpense

Accountingloss (91394) (244693)

Taxattheapplicabletaxrateof28%(2015:28%) (25590) (68514)

Taxeffectofadjustmentsontaxableincome

Taxlossesrecognised 15 629 61303

Permanentdifferences (1226) (232)

Deferredtaxnotrecognised 11 187 7443

– –

19. Auditors’ remuneration

Externalaudit 266 871

Internalaudit (224) 1547

42 2 418

20. Operating lease Non-cancellableoperatingleaserentalsarepayableasfollows:

Lessthanoneyear 7 886 13216

Betweenoneandfiveyears 4 757 10410

12 643 23 626

SECTION 2



2016R’000

2015R’000

21. Cash generated from operationsLossbeforetaxation (91394) (244693)

Adjustmentsfor:

Depreciation,amortisationandimpairment 130 045 115350

Interestreceived-investment (8808) (15269)

Financecosts 149 2

Movementinprovision 550 3662

Movementindeferredincome (42743) 6874

Changes in working capital:

Tradeandotherreceivables 208 982 88993

Tradeandotherpayables (59469) (107449)

137 312 (152530)

22. Related parties

Relationships

UltimateholdingCompany TheState,representedbytheDepartmentofTelecommunicationsandPostalServices

Shareholderwithsignificantinfluence IndustrialDevelopmentCorporationofSouthAfrica

Majorpublicentities TelkomSA(SOC)Ltd,SITA(SOC)Ltd

Relatedpartybalances

Loanaccounts–Owingtorelatedparties

DepartmentofTelecommunicationsandPostalServices (1351130) (1351130)

IndustrialDevelopmentCorporationofSouthAfrica (478400) (478400)

Amountsincludedintradereceivables/(tradePayable)regardingrelated parties

TelkomSOCLimited (57) (30)

SITASOCLimited 11 703 11314

Related-party transactions

Purchasesfrom/(salesto)relatedparties

SITASOCLimited (147045) (80385)

TelkomSOCLimited 422 4002

Compensation to directors and other key management

Short-termemployeebenefits-Non-ExecutiveDirectors 2 468 2570

Short-termemployeebenefits-ExecutiveDirectors 4 316 3535

Short-termemployeebenefits-Keymanagement 9 510 10527

16 294 16 632


23. Directors’ and prescribed officer’s emoluments

Executive

2016

R’000 Service as

Service period in months

Basic salary

Expensesand other

allowances Total

PKwele ChiefExecutiveOfficer** 12 2674 30 2 704

TPama InterimChiefFinancialOfficer* 5 604 10 614

IIvanNiekerk ChiefFinancialOfficer 7 982 16 998

4 260 56 4 316

*Thebasicsalaryisthenetamountafterthedeductionofanearly-terminationpenaltyrecovered.**Thisincludesthree(3)years’retrospectivecostoflivingadjustments.

2015

R’000 Service as


Basic salary

Expensesand other

allowances Total

PKwele ChiefExecutiveOfficer 12 2343 30 2 373

TPama InterimChiefFinancialOfficer 5 768 13 781

IIHassen* InterimChiefFinancialOfficer 2 381 – 381

3 492 43 3 535

*MajorityoftheinterimCFOremunerationwasonaconsultancybasisthroughErnst&Young.

Non-Executive

2016

R’000 Service asService period

in monthsDirectors’

fees Total

BMCNgcobo Boardchairperson 12 803 803

SDMabalayo Boardmember 12 423 423

MMMaponya Boardmember 12 332 332

AGithiari Boardmember 12 288 288

NSelamolela Boardmember 12 317 317

MMosweu Boardmember 12 305 305

2 468 2 468

SECTION 2



23. Directors’ and prescribed officer’s emoluments (continued)

Non-Executive

2015

R’000 PositionService period

in monthsDirectors’

fees Total

BMCNgcobo Boardchairperson 12 798 798

SDMabalayo Boardmember 12 372 372

MMMaponya Boardmember 12 273 273

AGithiari Boardmember 12 247 247

NSelamolela Boardmember 12 267 267

SAUMeer* Boardmember 6 133 133

MMosweu* Boardmember 6 126 126

SA Essa Boardmember 6 166 166

XKakana Boardmember 6 188 188

2 570 2 570

*PaidtotheIDCasnomineedirectorintermsofemployment.

Key management

2016

R’000 Position


Basic salary

Expensesand other

allowances Total

GZowa ChiefTechnicalOfficer 12 1994 30 2024

VMaharaj Executive:CapitalProgramme 12 1854 30 1884

KMotlhabane Executive:Legal 12 1663 30 1692

STMafu ActingChiefMarketingandSalesOfficer 12 1501 26 1528

MMopeli Executive:HumanResources 12 1177 30 1207

MMojapelo Executive:Compliance,RiskandAudit 12 1145 30 1175

9 334 176 9 510


23. Directors’ and prescribed officer’s emoluments (continued)

Key management

2015

R’000 Position


Basic salary

#Bonusesand

commissions

Expensesand other

allowances Total

GZowa ChiefTechnicalOfficer 12 1916 305 30 2251

VMaharaj Executive:CapitalProgramme 12 1748 249 30 2027

KMotlhabane Executive:Legal 12 1571 240 30 1841

STMafu ActingChiefMarketingandSalesOfficer 10 1400 174 24 1598

MMopeli Executive:HumanResources 12 1223 194 30 1447

MMojapelo Executive:Compliance,RiskandAudit 8 738 – 20 758

RHamilton ChiefMarketingandSalesOfficer* 2 602 – 3 605

9 198 1 162 167 10 527

*Theamountpaidconstitutesfixedsalaryfortwo(2)monthspaidtotheChiefMarketingandSalesOfficerandanadditionalfour(4)months’grossearningsinlieuofamutualseperationagreement.#Theperformancebonuspayoutin2014/15relatestotheCompany’sperformanceforthe2013/14financialyear.

24. Categories of financial instruments – 2016

R’000 Note

Financial assets at amortised

cost

Equityandnon-financial assets andliabilities Total

Assets

Non-currentassets

Property,plantandequipment 3 – 1297319 1297319

Tradeandotherreceivables 6 – 13587 13587

Intangibleassets 4 – 57149 57149

Totalnon-currentassets – 1 368 055 1 368 055

Currentassets


Cashandcashequivalents 7 141626 – 141626

Totalcurrentassets 183 609 6 746 190 355

Total assets 183 609 1 374 801 1 558 410

SECTION 2



24. Categories of financial instruments – 2016 (continued)

R’000 Note

Financial liabilitiesat

amortised cost


Equityandliabilities

Equity

Equityattributabletoequityholdersofparent:

Shareholders’loans 9 – 1829530 1829530

Retainedincome – (957266) (957266)

Totalequity 872 264 872 264

Liabilities


Deferredincome 12 – 502857 502857

Currentliabilities

Tradeandotherpayables 11 99067 – 99067


Provisions 10 – 12463 12463

Totalcurrentliabilities 99 067 84 222 183 289

Totalliabilities 99 067 587 079 686 146

Totalequityandliabilities 99 067 1 459 342 1 558 410

24. Categories of financial instruments – 2015

R’000 Note

Financial assets at amortised

cost


Assets

Non-currentassets

Property,plantandequipment 3 – 1304152 1304152

Intangibleassets 4 – 19348 19348

Tradeandotherreceivables 6 – 14715 14715

Totalnon-currentassets – 1 338 215 1 338 215

Currentassets


Cashandcashequivalents 7 156668 – 156668

Totalcurrentassets 410 876 2 375 413 251

Total assets 410 876 1 340 590 1 751 466


24. Categories of financial instruments – 2015 (continued)

R’000 Note

Financial liabilitiesat

amortised cost


Equityandliabilities

Equity

Equityattributabletoequityholdersofparent:

Shareholders’loans 9 – 1829530 1829530

Retainedincome – (865872) (865872)

Totalequity 963 658 963 658

Liabilities



Currentliabilities

Tradeandotherpayables 11 158536 – 158536


Provisions 10 – 11913 11913

Totalcurrentliabilities 158 536 82 442 240 978

Totalliabilities 158 536 629 272 787 808

Totalequityandliabilities 158 536 1 592 930 1 751 466

25. Risk management Financial risk management

TheCompany’sactivitiesexposeittoavarietyoffinancialrisks:marketrisk(includingcurrencyrisk,fairvalueinterestraterisk,cashflowinterestrateriskandpricerisk),creditriskandliquidityrisk.

The Company’s overall riskmanagement program focuses on the unpredictability of financialmarkets and seeks tominimisepotentialadverseeffectsontheCompany’sfinancialperformance.Riskmanagementiscarriedoutbythefinancedepartmentgovernedbypoliciesapprovedbytheboard.TheCompanyidentifiesandevaluatesfinancialrisksincloseco-operationwiththeCompany’soperatingunits.Theboardprovideswrittenprinciplesforoverallriskmanagement,aswellaswrittenpoliciescoveringspecificareas,suchasforeignexchangerisk,interestraterisk,creditrisk,non-derivativefinancialinstrumentsandinvestmentofexcessliquidity.

Liquidityrisk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability offundingthroughanadequateamountofcommittedcreditfacilitiesandtheabilitytocloseoutmarketpositions.Duetothedynamicnatureoftheunderlyingbusinesses,Companytreasurymaintainsflexibility infundingbymaintainingavailabilityundercommittedcreditlines.

TheCompany’srisktoliquidityisaresultofthefundsavailabletocoverfuturecommitments.TheCompanymanagesliquidityriskthroughanongoingreviewoffuturecommitmentsandcreditfacilities.

Cashflowforecastsarepreparedandadequateshortterminvestmentsaremonitored.

SECTION 2



25. Risk management (continued)

Thefollowingarethecontractualmaturitiesoffinancialliabilities.

R’000Carrying amount

Contractualcash flows

6 months or less

6-12 months

2016

Tradeandotherpayables 99 067 99 067 (99067) –

2015

Tradeandotherpayables 158536 158536 (152952) (5584)

Interest rate risk

AstheCompanyhasnosignificantinterest-bearingassets,theCompany’sincomeandoperatingcashflowsaresubstantiallyindependentofchangesinmarketinterestrates.

Credit risk

Creditriskconsistsmainlyofcashdeposits,cashequivalentsandtradedebtors.TheCompanyonlydepositscashwithmajorbankswithhighqualitycreditstandingandlimitsexposuretoanyonecounter-party.

Managementevaluatedcreditriskrelatingtocustomersonanongoingbasis.Customersarerequiredtoundergoavettingprocesswheretheirliquidityisinvestigated.TheCompanyalsoperformmonthlyfollowupswithdebtorstoensurethattheypaywithinagreedpaymentterms,thisisevidentbythe98%ofdebtorsthatarewithin60days.

Financialassetsexposedtocreditriskatyearendwereasfollows:

By geographical area

2016R’000

2015R’000

By geographical area

Domestic 35 834 81190

International 318 712

36 152 81 902

Bycustomertype

Telecomserviceprovidercompanies 36 152 81 902

Ageing

Notpastdue 35 556 79544

60days 17 17

90days 579 2341

36 152 81 902


25. Risk management (continued) Foreignexchangerisk

TheCompanyoperatespredominantlyinitsfunctionalcurrencyofSouthAfricanRand(ZAR).Certaintransactionstakeplaceinforeigncurrencies,primarilywithrespecttotheUSDollar.TheCompany’smainUSDollarexposureisinrespectofitsongoinginvestmentintheWestAfricanCableSystem.TheCompanyisexposedtotheriskoffluctuatingexchangeratesandseekstomanagethisexposurewithapprovedpolicyparametersbyenteringintoforwardexchangecontractswithmajorSouthAfricanbanks.Fluctuationsinexchangerates,directlyaffectprofits/(losses)oftheCompany.

Foreigncurrencysensitivityanalysis:

ThefollowingdetailstheCompany’ssensitivitytoan8%changeintheZAR/USDexchangerate.Thesensitivityrateof8%representsmanagement’sassessmentofthepossiblechangeinforeignexchangerates.Thesensitivityanalysisincludesoutstandingforeigncurrencydenominatedmonetaryitemsandcommitmentsandadjuststheirtranslationattheperiodendforan8%changeinforeigncurrencyrates.

20168%

strengthening

20168%

depreciation

20158%

depreciation

20158%

depreciation

Foreigndebtors

SouthAfricanRands (25) 25 (23) 23

2016 2015

US Dollar Rates Used:

Closing Rate R14,82 R12,15

Average Rate R13,77 R11,06

26. Going concern

IAS1prescribesthattheBoardofDirectorsandmanagementoftheCompanyshouldthoroughlyassessthefinancialsustainabilityofthebusinessandensurethatthebusinesswillcontinuewithoutthethreatofliquidationfortheforeseeablefuture,usuallyregardedasatleastwithin12monthsafterreportingdate.ItalsorequirestheboardandmanagementtodeclaretheintentiontokeeptheCompanyascontinuinginbusinessfortheforeseeablefuturewithneithertheintentiontoceasetradingnorseekingprotectionfromcreditorspursuanttolawsorregulation.Thegoingconcernassumptionisafundamentalprincipleinthepreparationoffinancialstatements.Underthegoingconcernassumption,anentityisordinarilyviewedtorealiseitsassets,dischargeitsliabilities,andobtainrefinancinginthenormalcourseofbusiness.

BroadbandInfracoSOC,hasprepareditsfinancialstatementsfortheyearended31March2016onthebasisthatitwillcontinueasagoingconcernfortheforeseeablefuture,thusatleastthenext12months.

This basis presumes that fundswill be available to finance future operations and that the realisation of assets andsettlementofliabilities,contingentobligationsandcommitmentswilloccurintheordinarycourseofbusiness.

The Board of Directors has considered whether the going concern assumption is appropriate for the Company inthe preparation of the Annual Financial Statements. The directors have reviewed the Company’s forecast financialperformancefortheyear31March2017aswellas31March2018andinlightofthisreviewandthecurrentfinancialposition,theyaresatisfiedthattheCompanyhasaccesstoadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture,takingintoaccountaccesstosomefundinginthemediumtermisobtained.

SECTION 2



26. Going concern (continued)Management intervention on operations for the year ended 31 March 2016

AlthoughtheCompanyiscurrentlyinasolventandliquidposition,thegoingconcernprincipleisunderconsiderationduetothefollowingsignificantmaterialuncertainties:

• Tradinglossessinceinceptionandinthecurrentyear.• Revenuestreamsintheshorttermisnotadequatetocoverallcosts,resultinginamonthlycashbreak-evenshortfall.

Theassessmentconsideredbelowexamines interventionsbytheCompanyandshareholderstosubstantiatewhythegoingconcernassumptioninpreparingtheAnnualFinancialStatementsfortheyearended31March2016isconsideredappropriate.

Duringtheprecedingfinancialyearmanagement,undertheguidanceoftheBoardofDirectors,revieweditsbusinessmodel,cashflowforecasting,break-evenanalysisandtheCompany’scorporateplan.

Duringthepast12monthsmanagementundertookseveraloptimisationexercisestoreducecostofsalesandoperationalcosts.ThisresultedinsignificantsustainablereductionofcostofsalesandoperationalcostsascanbeseenintheAnnualFinancialStatements.

Non-investmentincapitalexpenditurewillposeminimumriskinthegenerationofrevenue,duetothesweatingoftheexistingassetprinciple.Aset-upfeetobepayableupfrontfromallnewcustomershasbeenintroducedaspartofthenewsalescontractingmodel.Theset-upfeewillrepresentapercentageofthetotalcontractvalue.

TheCompanyhasbeenabletosecurevendorfinancingfromoneofitsmajorsuppliersandiswelladvancedinconcludingasimilaragreementwithasecondsupplier.ThiswillassisttheCompanyinmanagingthecashflowwhenspecificcustomercapitalexpenditureormaintenanceisrequired.

ThetotalnewsalesconcludedduringthefirstquarterofthenewfinancialyeartotalledalmostR65million.R12millionofthisthatcanberecognisedasrevenueduringthenewfinancialyear.Managementisworkinganddrivingsaleshardtoensurethismomentumcontinues.

Alloftheabovearepartoftheoverallimprovementsintheoperatingefficiencyandcostmanagementenvironmentofthebusinessandhasresultedinanimprovedcashflowposition.

27. Capital commitments

2016R’000

2015

R’000

Capitalcommitmentsapprovedandcontracted 5 205 89 434

28. Events after the reporting period

Therehasnotbeenanysignificanteventsbetween1April2016and21July2016.

29. Irregular, fruitless and wasteful expenditure

Irregularexpenditure

Section1ofthePublicFinanceManagementActNo.1of1999,asamended,definesirregularexpenditureasexpenditure,otherthanunauthorisedexpenditure,incurredincontraventionoforthatisnotincurredinaccordancewitharequirementofanyapplicablelegislation.Thefollowingamountshavebeendisclosedasbeingirregularexpenditure,intermsofSection55(2)(b)ofthePublicFinanceManagementAct.No.1of1999.


29. Irregular, fruitless and wasteful expenditure (continued)


2016R’000

2015R’000


Openingbalance 3 010 136544

Incurredinthecurrentyear – 38

Identifiedinthecurrentyearrelatingtopreviousyears 118 80

Removalfromregister (926) –

Condonedduringtheyear (372) (133652)

Closingbalance* 1 830 3 010

*Internalprocessestoresolvethesemattersareinprogress.

Irregularexpendituredetail2016

R’000 ActionExpenditure

identifiedAmountscondoned

Amountsremoved

from register

Remaining expendi-ture

Expenditureidentifiedand/orincurredinthecurrentyear

Expenditureincurredintransgressionofcommercialprocesses,policies

Mattersarebeing/havebeenratified

118 (118) – –

Identifiedinpreviousyears


Mattersareintheprocessofbeingratified

3010 (254) (926) 1830

3 128 (372) (926) 1 830

Irregularexpendituredetail2015

R’000 ActionExpenditure

identifiedAmountscondoned

Remaining expenditure

Expenditureidentifiedand/orincurredinthecurrentyear



118 – 118

Identifiedinpreviousyears



136544 (133652) 2892

136 662 (133652) 3 010

SECTION 2


29. Irregular, fruitless and wasteful expenditure (continued)

Fruitlessandwastefulexpenditure

Lossesrecoveredorwrittenoff

Section1ofthePublicFinanceManagementAct,No.1of1999,asamended,definesfruitlessandwastefulexpenditureasexpenditurethatwasmadeinvainandwouldhavebeenavoidedhadreasonablecarebeenexercised.

Thefollowing losses, throughfruitlessandwastefulexpenditurehavebeen identifiedasbeingreportable intermsofSection55(2)(b)(iii)ofthePublicFinanceManagementAct,No.1of1999,asamended,fortheyearunderreview:

2016R’000

2015R’000

Fruitlessandwastefulexpenditure

Openingbalance – 377

Identifiedinthecurrentyear 3 8

Writtenoff (3) (8)

Removalfromregister – (377)

– –

R’000 ActionLosses

identifiedLosses

written off

Fruitlessandwastefulexpenditureindetail2016

Interestincurredfromsuppliers Losseswrittenoff 3 (3)

Fruitlessandwastefulexpenditureindetail2015

Openingbalance Losseswrittenoff 377 (377)

Interestincurredfromsuppliers Losseswrittenoff 8 (8)

385 (385)



ACRONYMS AND ABBREVIATIONSAGM AnnualGeneralMeetingARC AuditandRiskCommitteeBCM BusinessContinuityManagementBEE BlackEconomicEmpowermentB-BBEE Broad-BasedBlackEconomicEmpowermentBYO Black-Youth-OwnedBWO Black-Women-OwnedBPM BusinessProcessManagementCAPS CurriculumandAssessmentPolicyStatementCCMA TheCommissionforConciliation,MediationandArbitrationCEO ChiefExecutiveOfficerCFO ChiefFinancialOfficerCMSO ChiefMarketingandSalesOfficerCOSO CommitteeofSponsoringOrganisationCPM CapitalProgrammeManagementCPTD ContinuingProfessionalTeacherDevelopmentCSI CorporateSocialInvestmentCTO ChiefTechnicalOfficerCWU CommunicationsWorkersUnionDFI’s DevelopmentFinanceInstitutionsDST DepartmentofScienceandTechnologyDTPS DepartmentofTelecommunicationsandPostalServicesDWDM DenseWavelengthDivisionMultiplexingEBITDA EarningsBeforeInterest,Taxes,Depreciation,AmortisationED EnterpriseDevelopmentEE EmploymentEquityERM EnterpriseRiskManagementExco ExecutiveCommitteeEXCOPs ExecutiveCommitteeProcurementSubcommitteeECA ElectronicCommunicationsActECNS ElectronicCommunicationsNetworkServicesFMPPI FrameworkforManagingProgrammeforPerformanceInformationFOC Fibre-OpticCableGRI GlobalReportingInitiativesHRIS HumanResourcesInformationSystemHRRC HumanResourcesandRemunerationCommitteeIAS InternalAccountingStandardsICASA IndependentCommunicationsAuthorityofSouthAfricaICT InformationCommunicationsTechnologyI-ECNS IndividualElectronicCommunicationsNetworkServicesI-ECS IndividualElectronicCommunicationsServicesIDC IndustrialDevelopmentCorporationIFC InvestmentandFinanceCommitteeIFRS InternationalFinancialReportingStandardsIFTPC InvestmentFinanceTenderandProcurementCommitteeINX-ZA InternetExchange-SouthAfricaIP InternetProtocolIRBA IndependentRegulatoryBoardofAuditorsISPs InternetServiceProviders

SECTION 2


IRU IndefeasibleRightsofUseISO InternationalStandardsOrganisationISPA InternetServiceProvidersAssociationKAMs KeyAccountsManagersKPA KeyPerformanceAreaKPI KeyPerformanceIndicatorMoU MemorandumofUnderstandingMSA MasterServicesAgreementMTEF Medium-TermExpenditureFrameworkMTTR MeanTimeToRepairMTS MultiwavelengthTransportServicesLD LongDistanceLEDET LimpopoDepartmentofEconomicDevelopment,EnvironmentandTourismLTIFR Lost-TimeInjuryFrequencyRateMICT SETA Media,InformationandCommunicationTechnologiesSectorEducationandTrainingAuthorityNDP NationalDevelopmentPlanNT NationalTreasuryNED Non-ExecutiveDirectorNOC NetworkOperationsCentreNOSA NationalOccupationalSafetyAssociationPAA PublicAuditActPAYE PayasYouEarnPFMA PublicFinanceManagementActNo.1of1999asamendedPoP PointofPresencePoPI ProtectionofPersonalInformationActPWD PeopleLivingwithDisabilitiesRSA RepublicofSouthAfricaRACI Responsible,Accountable,ConsultedandInformedSACE SouthAfricanCouncilofEducatorsS&E SocialandEthicsSADC SouthernAfricanDevelopmentCommunitySDH SynchronousDigitalHierarchySHEQ Safety,Health,EnvironmentandQualitySIP StrategicInfrastructureProjectSITA StateInformationTechnologyAgencySKA SquareKilometreArraySLA ServiceLevelAgreementSMF SignificanceandMaterialityFrameworkSNO SecondNetworkOperatorSOC State-OwnedCompanySTM SynchronousTransportModuleT&P TenderandProcurementUSD UnitedStatesDollarsWACS WestAfricaCableSystemWiP WorkinProgressWSP WorkplaceSkillsPlanningVAT ValueAddedTaxYoY Year-on-YearZAR SouthAfricanRand

ACRONYMS AND ABBREVIATIONS CONTINUED


REGISTERED OFFICE AND BUSINESS ADDRESSRegisteredOfficeandBusinessAddressCountryClubEstateBuildingNumber9No.21WoodlandsDriveWoodmeadSandton2146

PostalAddress:PostnetSuite321PrivateBagX26Sunninghill2157

COMPANY SECRETARYFahimMohamed(Office)+27112351600(Fax)+27866874273

PublicRelationsandMediaManagementSammyMafu(Office)[email protected]

COMPANY REGISTRATION NUMBER1989/001763/07

WEBSITEwww.infraco.co.za

BANKERSStandardBank

EXTERNAL AUDITORSNexiaSAB&T(onbehalfoftheAuditor-GeneralofSouthAfrica)RegisteredAuditorCharteredAccountants(SA)

GENERAL COMPANY INFORMATION


NOTES

Physical addressCountry Club Estate Building no 9 21 Woodlands Drive Woodmead Sandton

Postal addressPostnet Suite 321 Private Bag X26 Sunninghill 2157

Tel: +27 11 235 1600

[email protected]

www.infraco.co.za

RP222/2016ISBN: 978-0-621-44727-9

Title of publication Broadband Infraco Integrated Report 2016

mailto:[email protected]

www.infraco.co.za

2016 - ellipsis · broadband infraco integrated report 2016 ... africa’s biggest mobile network...

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