vodacom group limited sustainability report

for the year ended 31 March 2009

Vodacom Group Limited Sustainability Report

This is Vodacom’s second sustainability report and covers the financial reporting period from 1 April 2008 to 31 March 2009. References made to ‘this financial year’, refer to the reporting period noted above. Likewise, references made to ‘the prior year’, refer to the reporting period 1 April 2007 to 31 March 2008. We report annually, our previous report being for the prior year. This is also the last year that Vodacom reports as a private limited company, owned jointly by Telkom SA Limited and Vodafone Group Plc. Vodacom listed on the JSE on 18 May 2009, binding itself to the JSE Listing Requirements.

Considering Vodacom SA’s dominance within the Group – its operation serves 27.6 million customers out of a total of 39.6 million for the Group – this report largely covers issues relating to Vodacom SA. Use of the term ‘Vodacom SA’ refers to issues relating to Vodacom SA, while the terms ‘Vodacom’, ‘Vodacom Group’ or ‘the Group’ imply governance of an issue across all our operations.

Other operating companies (OpCos) are reported on in more detail than last year but

not as comprehensively as Vodacom SA. Over time reporting will improve as we expand our sustainability programme to the various OpCos and as our operations grow outside of South Africa. However, South Africa will remain the main focus of the report for the foreseeable future. Considering the recent acquisition of Gateway in December 2008, no significant sustainability information is recorded for this entity this year.

Our reporting process is based on the Global Reporting Initiative’s G3 Sustainability Reporting Guidelines, and we self-declare a Level C GRI rating for this report.

We have not sought to have the report externally assured. We are currently focusing on improving our internal reporting structures as we establish our sustainability programme within the company. We intend moving towards assurance in the future.

For more information about sustainability at Vodacom or queries regarding this report, contact the Group Sustainability division by e-mail at [email protected].

About this report

ContentsBUSINESS OVERVIEW

2 Summary table of material issues

4 Message from the CEO

6 The Vodacom Group business

SUSTAINABILITY REVIEW

12 Sustainability governance and stakeholder engagement

14 Earning the trust of our customers and the public

19 Broad-based Black Economic Empowerment

26 A workplace for the highly skilled

32 Health, wellness and safety

34 Broadening the access base for communications

38 Our impact on the environment

44 Radio frequency emissions and health

46 The Vodacom Foundation and Group Corporate Social Investment (CSI)

50 Ethics and compliance

GRI and GLOSSARY

52 Reference to GRI G3 guidelines

IBC Glossary

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Sustainability Report 2009 1

Sustainability Report 2009

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MATERIAL ISSUE

Summary table of material issues

CHAPTER ISSUES STAKEHOLDERS AFFECTED

Sustainability governance and stakeholder engagement Stakeholder engagement All stakeholders

Earning the trust of our customers

Competition and the cost of communicationsCustomers

Public

Government

Regulators

Industry bodies

Clear and transparent pricing

Protecting vulnerable users and the public

Privacy of customer information

Broad-based Black Economic Empowerment

Level four contributor

Shareholders

Employees

Suppliers

Small enterprises

Communities

Equity ownership

Management control

Employment equity

Skills development

Preferential procurement

Enterprise development

Socio-economic development

A workplace for the highly skilled

Employee representation and engagement

EmployeesAttracting and retaining talent

Diversity management

Health, wellness and safetyWellness

Employees, families and dependents

HIV and Aids

Broadening the access base for communications

Socio-economic impact of mobile telecommunications

Communities

LSM 1-3 customers

Micro- and small enterprises

Vodafone

Network coverage

Affordable products and handsets

Reducing the level of preventable exclusion

Our impact on the environment

Consumption of resources Government

Regulators

Interest groups

Vodafone

Placement of base stations

Electronic waste

Radio Frequency emissions and health RF exposure Government, Regulators,

Interest groups, Vodafone

The Vodacom Foundation and Group CSI Leveraging the business to do good Communities, NGOs,

Government

Ethics and compliance Compliance to ethical standards All stakeholders

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SUMMARY OF STATUS AND RESPONSE PAGE

Vodacom conducted its first independent stakeholder survey on sustainability. We plan to improve our engagement processes further this year. 12

Market liberalisation is increasing competition. Government’s management of broadband spectrum will determine business strategy. Likewise with the implementation of the Regulation of Interception of Communications Act (RICA). 15

We await ICASA’s reissuing of handset subsidy regulations. We are responding to the anticipated Consumer Protection Bill (CPB) with simpler products and services. 16

The introduction of Location-based Services (LBS) has added to the risk of abuse, particularly by Wireless Application Service Providers (WASPs). This year, Wireless Application Service Providers Association (WASPA) has instituted stricter measures to ensure fair business practice, which we monitor.

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We have policies, procedures and processes in place to ensure that information is not unlawfully disclosed in terms of licence obligations, both internally and via our WASP business partners. 18

Vodacom SA improved its overall BBBEE score according to the DTI Codes from 68.03% to 69.13%. This year we aim to maintain a Level 4 rating. 19

We successfully concluded a R7.5 billion BBBEE transaction in Vodacom SA, representing 6.25% of the company. DTI CoGP score: 6.97/20 20

Black representation among executive directors decreased this year. DTI CoGP score: 6.94/10 22Submitted the annual EE report to the Department of Labour. We are working to meet race and gender representation targets, specifically at the Executive Head of Divisions and Managing Executive levels. Retention of black employees, and in particular black female employees, remains a challenge. DTI CoGP score: 9.53/15

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70% of all training this year was invested in the Black Designated Group. DTI CoGP score: 12/15 23By increasing internal targets, we are driving spend towards smaller entities. DTI CoGP score: 13.69/20 23

Consistent support of our Community Services Operators rates Vodacom SA as a Level 1 contributor to BBBEE. DTI CoGP score: 15/15 24

Our contributions are divided between the Universal Services Fund and direct Corporate Social Investment. DTI CoGP score: 5/5 25

Employee interests are formally represented by a system of local and national consultative committees. There is no formal recognition of unions as less than 12% of Vodacom SA’s workforce are unionised. 26

Vodacom invested R69.7 million in the training of employees, or 3.7% of payroll, and employee turnover dropped from 10.51% to 9.04% year on year. This year we aim to attract and retain more highly skilled people, measured against defined indicators.

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We appointed a new diversity management training supplier. 31

Changes in leadership and the uncertainty around the BEE deal impacted on employees during this year. In response, we adopted an integrated health, wellness and employee engagement management strategy. 32

50% of Vodacom employees participated in voluntary counselling and testing during the year under review, and 87 HIV-positive employees are on anti-retroviral therapy. 33

While the rapid uptake of mobile phones is evidence of its economic value, we undertake to report any findings of significance to our stakeholders as and when these are published in peer reviewed papers. 34

This year, Vodacom Tanzania extended its network by almost a third, 3G coverage in SA increased from 25% to 27.8% of the population, and WiMAX is being rolled out in key metro areas. 34

Tariffs are reducing (based on the customer’s location and time of day) and Ultra Low Cost handset prices are down by an average of 20%, to between R200 and R300. 35

We introduced three speaking phones to the market, namely the Nokia E51, E65 and N82, subsidising special software that converts the screen display to speech. 37

Following a significant increase in consumption last year as a result of business growth and infrastructure investment, increases this year have been contained by the adoption of a number of conservation initiatives. 38

A policy of sharing infrastructure between operators has assisted in reducing the number of new base stations erected. Local planning regulations provide for community engagement around proposed new masts. 42

We cannot yet accurately measure network equipment waste, but we have redesigned the equipment chain to include a formal system of collection, reuse and disposal. Approximately 12 400 cell phones were recycled this year. 43

Until the World Health Organisation (WHO) concludes its international risk assessment the Vodacom Group aligns its EMF policy with the WHO’s current best practice recommendations. We await the results of an external opinion survey of our engagement with various authorities and regulators.

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Vodacom SA contributed R67.4 million to CSI in the year under review. This year, we are adjusting our CSI focus to concentrate on leveraging Vodacom’s business skills and technology to improve socio-economic conditions in underprivileged communities.

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Our Ethics Along the Way Programme assesses ethics risks and strengthens our ethics through our Group Code, training and ethics institutions and champions. Likewise, our Anti-CMT Compliance Programme is implemented across the Group. This year, senior ethics and compliance officers were deployed to mentor and assist local ethics and compliance officers in Vodacom Mozambique and Vodacom Tanzania.

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Message from the CEO

What makes a company like the Vodacom Group sustainable? Our long-term survival is not protected by a constitution; there is no law that says we have to survive. As a company doing business, we have to earn the right to exist. And we can only earn the right to exist if we continue to meet the expectations of our stakeholders.

No matter how much the world changes around us, this basic law of survival does not change. In the past six months, there have been many significant changes in the world. The financial crisis has changed the way business works. We could even argue that some businesses lost their right to survive when they stopped meeting the expectations of their stakeholders. There are valuable lessons to be learnt from this.

In our own environment there have also been dramatic changes. With our listing on the JSE in May 2009 we now have more than 95 000 new shareholders who have invested in Vodacom because they believe in our sustainability. Our majority shareholder, Vodafone, has also shown confidence in our sustainability by investing R22.5 billion in their additional 15% share, especially as this comes shortly after the biggest financial downturn in decades.

Now we have an even bigger responsibility, not only to survive, but to be successful and generate healthy profits for our shareholders.

As Vodacom goes towards the future, our sustainability has to be built on sincere engagement with our stakeholders. We need to identify, understand and respond to the issues and needs that are important to our customers, shareholders, business partners,

employees, government, special interest groups and the general public.

To ensure that these issues and needs are addressed at the most senior level of management, we have established a Group Executive Committee (Exco) representing every area of our business. Three members of Exco, Shameel Joosub, Johan van der Watt and I, also serve on the Vodacom Group Board to ensure consistency between board and management decisions and actions.

A number of important sustainability issues are raised in this report, and I would like to highlight three of them.

1. We will be in business as long as our customers and the public trust us. It is as simple as that. We have to continue earning this trust and safeguard it as our most valuable asset. This includes our stakeholders’ trust in our way of doing business, their trust that what they are paying for is what they are getting and their trust that Vodacom will protect vulnerable users.

As our environment becomes more competitive, prices come under pressure and our market share is under attack, we must respond to the best of our ability, but never at the cost of our biggest asset – the trust our stakeholders have in us.

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2. In South Africa, Broad-based Black Economic Empowerment remains one of the most critical sustainability issues. Fifteen years into our democracy, we cannot afford to lose sight of the fact that our society is not yet fully inclusive, that millions of South Africans remain poor. Vodacom is a powerful enabling agent in our economy and our Broad-based BEE efforts can have a positive ripple effect to the furthest margins of society. And the more people flourish, the more it will improve our own sustainability. As an independently verified Level 4 contributor, Vodacom SA is committed to improve against each of the prescribed seven elements.

We are also in the ideal position that we can empower communities through technology, enabling them to cross the digital divide and access opportunities such as jobs and education that can drastically improve their lives.

3. Our employees are an important stakeholder group and the one most directly responsible for our sustainability. Our goal is to create the best working environment for the most highly skilled and motivated employees in the industry. Last year Vodacom invested almost R70 million in employee training, representing 3.7% of payroll, while the employee turnover rate improved marginally.

I am determined that we will further improve internal engagement with employees and attract and retain highly skilled people who are motivated not only to meet our stakeholders’ expectations, but to exceed them.

If we earn the right to exist by meeting our stakeholders’ expectations, we need to know what those expectations are. That is why sustainability is crucial to our future. We have identified the sustainability issues that are most important and outlines the areas where we can improve. The priority areas are the way we manage business relationships, establishing critical indicators of performance and measuring improvement.

I look forward to a year of strong progress as we improve in the critical areas we have identified, while building on Vodacom’s strength as a trusted brand.

Pieter UysChief Executive OfficerVodacom Group Limited

Sustainability highlights • Group Executive Committee responsible for sustainable development

• First independent stakeholder survey conducted

• Vodacom SA’s Broad-based Black Economic Empowerment (BBBEE) score for the DTI‘s Codes of Good Practice (Codes) increases from 55.24% to 68.03%, improving the company’s rating to a Level 4 contributor

• Vodacom SA concludes R7.5 billion BEE transaction, in terms of which YeboYethu Limited owns 3.44% of Vodacom SA

• More than two million affordable handsets (under R300 each) sold by the Group

• Vodacom SA launches handset recycling programme, with 12 400 handsets recycled in the financial year under review


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The Vodacom Group business

Products and servicesVodacom offers a wide range of communications products and services over a variety of technology platforms to consumer, corporate and wholesale customers. Although differences exist within each country in which Vodacom operates, the main services and products we offer are:

• Voice

• Mobile messaging

• Broadband data and connectivity

• Converged services

We continue to adapt and develop our range of products and services in order to attract and retain customers and increase average revenue per user (ARPU).

VoiceMobile voice services are the largest contributor to Vodacom’s revenue and include revenue generated by customers from outgoing and incoming traffic, international roaming, incoming visitor roaming, national roaming and carrier voice services.

Outgoing voice trafficVodacom had 35.3 million prepaid customers as at 31 March 2009, comprising 89.1% of the Group’s customer base. Prepaid customers are charged for voice services on a per minute or per second basis and do not pay a monthly subscription charge. Prepaid vouchers of various value denominations can be purchased from a range of retail outlets, physically and electronically across all of the countries in which the Group operates.

Vodacom had 4.0 million contract customers as at 31 March 2009, comprising 10.2% of the Group’s customer base. Subscription-based mobile service packages, tailored to individual country markets, include hybrid contracts (fixed value which can be topped up using prepaid vouchers), standard subscription packages, business packages, and packages targeting the small and medium enterprise market. Contract subscription is typically for an initial 24 month period with monthly subscription and call charges varying with each package.

In 1996 Vodacom SA developed community service telephone units designed to be used in communities which had limited access to telephone services. This

Vodacom’s strategy is to be a leading provider of total communications in sub-Saharan Africa, and in so doing, democratise access to world-class communications.

Group highlights• 16.5% growth in customers to 39.6 million

• 10.5% growth in EBITDA to R18.2 billion

• 28.8% growth in data revenue to R6.4 billion

• BEE transaction completed in South Africa in October 2008

• Acquired Gateway on 30 December 2008

• Listed on the JSE Limited on 18 May 2009

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has now developed into a successful business model and has been introduced into our other countries of operation. Vodacom had 284 401 community service telephones, comprising 0.79% of the Group’s customer base as at 31 March 2009. Community phone shops are run by entrepreneurs and some offer complementary services including internet and e-mail access.

Incoming voice trafficVodacom earns revenue when calls which originate outside of its networks terminate on its networks. These termination fees are either negotiated between telecommunications operators, or based on rates determined by local regulators. Vodacom has entered into interconnection agreements with fixed, mobile and value added network services (VANS) operators in each of its countries of operation.

International roamingVodacom offers its customers international roaming services which allow customers to make and receive calls whilst travelling abroad by using the networks of operators with whom Vodacom has entered into international roaming agreements. In addition to allowing Vodacom customers to roam whilst travelling internationally, Vodacom generates revenue from other international mobile network operator (MNO) customers roaming on its networks.

National roamingNational roaming agreements unilaterally enable the customers of third parties to make use of Vodacom networks to make and receive calls and to access other telecommunications services. Vodacom SA has a 15-year national roaming agreement in place with Cell C, which is terminable on or after 14 November 2016. Vodacom SA charges a fee to the third party based on the volume of traffic, subject to a minimum fee, which is originated by customers who are roaming on Vodacom SA’s network.

Carrier voiceOn 30 December 2008, Vodacom Group completed its acquisition of Gateway. Through Gateway’s carrier services business, the Group offers inbound and outbound connectivity as well as domestic backhaul services to telecommunications operators in Africa.

Mobile messagingVodacom offers its customers mobile messaging services such as SMS, MMS, premium rate SMS (including USSD) and MMS, SVS, bulk SMS and MMS and WAP services. These services are charged on a different basis, subject to the terms of the customer’s package.

SMSThe Group’s primary messaging service is SMS, which allows customers to send and receive short

text messages on mobile handsets and various other devices. In 2000, Vodacom SA launched the USSD-based Please Call Me service, which enables a customer to send a free SMS to another person to ask him/her to call back. Vodacom SA now transmits approximately 20 million Please Call Me messages per day. These messages facilitate a call back from the recipient that generates revenue for Vodacom. The Please Call Me messages include advertising messages.

SVSIn October 2008, Vodacom SA launched SVS (short voice service), which allows users to communicate by means of sending and receiving voice messages with a maximum length of 30 seconds. Within two months from launch, more than 1.6 million customers used this service. SVS provides customers with the flexibility of communicating in their preferred language and does not require sophisticated handsets or complex downloads.

MMSMMS messaging offers customers with compatible devices the ability to send and receive multi-media messages, such as pictures, music, sound, video and text.

Premium rate SMS and MMSPremium rate SMS and MMS content is largely developed by WASPs and focuses on competitions, sports, news and alert services. Revenue is shared with the WASPs.

Broadband data and connectivityVodacom offers broadband connectivity and internet access services in all the countries in which it operates, using various technologies, such as, GPRS, EDGE, 3G, HSDPA, HSUPA, WiMAX and VSAT.

In December 2004, Vodacom SA was the first operator to introduce a commercial 3G product in South Africa. The number of active 3G/HSDPA handsets on the South African network as at 31 March 2009 was 2.8 million. In March 2007, Vodacom Tanzania launched a 3G offering in Dar es Salaam and by 31 March 2009, more than 331 000 3G devices were registered on the Vodacom Tanzania network. Vodacom Lesotho is currently rolling out WiMAX and 3G broadband access in certain key areas.

The acquisition of Gateway reflects Vodacom’s strategy to reposition itself as a leading pan-African provider of communications services.

Pieter Uys, CEO Vodacom Group Limited

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The Vodacom group business continued

Additionally Gateway, through its business services division, offers data connectivity solutions to over 1 500 corporations across Africa including multi-nationals.

Converged servicesVodacom BusinessVodacom Business was launched in February 2008 and offers a total communications service portfolio to corporate customers. Vodacom Business has invested in significant infrastructure and has a Tier 1 internet network capability as well as a corporate grade national multiprotocol label switching (MPLS) virtual private network (VPN).

Vodacom Business services include next-generation IP voice, managed networks and infrastructure, internet access, hosting and storage. In 2008, Vodacom Business launched a dedicated internet access service and also a broadband internet access service. It also launched a managed MPLS VPN service together with a managed enterprise voice and voice over internet protocol (VoIP) gateway in April 2008 and May 2008 respectively. These service offerings are supported by a new data centre at the headquarters in Midrand, the development of a soft switch and the development of a client services operations centre.

The acquisition of Gateway provides an opportunity to leverage Vodacom Business across sub-Saharan Africa. Gateway currently serves major corporate clients in over 40 countries across Africa. Such services include wireless broadband access, internet, enterprise solutions, VPNs and enterprise voice and data over satellite infrastructure.

Other converged servicesVodacom is extending its service offerings to other converged areas, including financial services, digital

publishing, gaming, video on demand, music and telemetry services such as automated electricity meter reading.

Vodafone has developed a proprietary money transfer system to enable the use of mobile phones for money transfers. The service is currently offered by Vodafone in Kenya through Safaricom and through Vodacom in Tanzania. Vodacom intends to roll out money transfer services in other operating companies (including South Africa).

Mobile advertising has evolved into an important mass media channel, with more mobile phones in the world than the combined number of televisions and personal computers. Through this medium, advertisers can deliver targeted messages directly to consumers. Vodacom Mobile Media was launched in the 2008 financial year to capitalise on this growing market opportunity.

Equipment sales and other servicesIn addition to its provision of telecommunications services, Vodacom sells handsets and other telecommunications equipment and accessories. The sale of equipment is primarily a feature of Vodacom SA and has only limited financial impact in Vodacom’s operations outside of South Africa. Vodacom SA has a warehouse in Midrand that handles, on average, more than 160 000 units per day, 98% of which are delivered within 48 hours to major centres. This enables Vodacom SA to provide stock to its extensive distribution network on a just-in-time basis.

Equipment sales for Vodacom SA as at 31 March 2009 accounted for 10.9% of Vodacom SA’s total revenue. The number of handsets sold in the 12 months to 31 March 2009 was 5.5 million units, which represented year-on-year growth of 8.2%.

Vodacom’s pursuit of leadership in all our markets is inspired by our vision of democratising access to world-class communications. Our vision contemplates extending the revolutionary possibilities that ICT offers for socio-economic development in Africa and a better quality of life for all her people.


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Countries where Vodacom has operations

In 2008, Vodacom acquired the carrier services and business network solutions subsidiaries of Gateway Telecommunications SA (Pty) Ltd (“Gateway”) for an enterprise value of approximately US$675 million plus a make whole payment of approximately US$25 million in relation to Gateway’s high-yield bond.

Gateway is Africa’s largest independent provider of interconnection services via satellite and terrestrial network infrastructure for both African and international telecommunications companies. Gateway also provides an extensive range of high quality, end-to-end connectivity solutions to multinational corporations operating across Africa.

Gateway acquisition

Democratic Republic of Congo26.8% to 4.1 million

South Africa11.3% to 27.6 million

Lesotho31.1% to 518 thousand

Mozambique27.5% to 1.6 million

Tanzania34.7% to 5.6 million

Total customers16.5% to 39.6 million

Countries Gateway operates in(Gateway’s impact and performance excluded from this report.)

SUSTAINABILITY REVIEWEarning the right to exist by meeting the expectations of our stakeholders.


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MATERIAL ISSUE


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Sustainability governance and stakeholder engagement

GovernanceFor most of Vodacom’s history, corporate responsibility, or sustainability, was managed as a department within the Vodacom Foundation, where emphasis is on corporate social investment. Two years ago a dedicated officer was appointed and last year we produced our first sustainability report. In January 2009, following internal restructuring, sustainability now reports directly to the Chief Officer: Corporate Affairs, providing this function with a dedicated focus on sustainability as a holistic approach to business.

Sustainability relates to stakeholders’ trust in a company; it moves beyond economic risk to include reputational risk as well. Vodacom understands that by managing its sustainability in a proactive way (for instance by actively engaging with stakeholders and responding to reasonable suggestions) the company can manage its economic and reputational risks more effectively. By looking beyond risk, stakeholder engagement can expose marketing opportunities that, if embraced, can improve Vodacom’s competitive edge.

Stakeholder engagementVodacom’s achievements are testimony to generally successful relationships with its stakeholders. Our engagement with stakeholders on sustainability issues has largely been dictated by the strategic direction of the business. While issues receiving high-level attention are those that are close to core business operations, these are increasingly incorporating triple bottom-line elements discussed throughout this report. For further detail concerning specific stakeholders and the nature of our engagement with them, see the discussion described under each of the sections that follow (and indexed in the summary table of material issues on page 2 – 3). The Chief Officer: Corporate Affairs assumed direct responsibility for external relations from January 2009, which will provide added impetus in formalising and improving our engagement with stakeholders.

Building on Vodacom’s track record of value creation for its stakeholders (see charts on page 6), we look forward to establishing a more formal approach to the governance of sustainability and stakeholder engagement.

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Stakeholder perception surveyFollowing advice from external reviewers of the sustainability report for the year ending 31 March 2008, Vodacom contracted Trialogue, a sustainability consultancy, to conduct a stakeholder engagement exercise. This took the form of in-depth discussions with key stakeholders, mostly high level representatives chosen by Vodacom – government, the industry regulator ICASA, customers, suppliers, distributors, employees and interest groups – to hear their perceptions of Vodacom. The respondents gave feedback on their understanding of sustainability for Vodacom and the most material issues relevant to them; also their perception of Vodacom’s response to these issues and suggestions for communicating the company’s sustainability efforts.

The material issues that were raised in order of common importance to both stakeholders and Vodacom were:

• Leadership

• Customer service

• Pricing

• Employees

• Coverage

• Transformation

• Ethics

• Contribution to communities

• Health and environmental impacts

• Contribution to the South African telecommunications industry

Further to the issues raised above, almost all the stakeholders surveyed also described the following factors as underlying the issues identified above:

• Stakeholders are uncertain about the future of Vodacom, particularly with regard to leadership and strategy.

• Stakeholders described Vodacom as having an aggressive trading culture aimed at short-term gain. This has a negative impact on relationships with the company’s stakeholders and on sustainable growth in the future.

• There is a common perception that Vodacom does not respect or trust the stakeholders it deals with, in contrast to its competitors.

On the whole participants said that Vodacom has recognised the issues, acknowledged them and in some instances even changed policy. But actions are as yet inconsistent with the image being projected. All participants appreciated the independently conducted survey as being a good start to providing transparency in Vodacom’s sustainability efforts, and would like to see improved communication of Vodacom’s progress against sustainability issues going forward.

Global Pulse, the Reputation Institute’s research study of corporate reputation conducted with some 60 000 consumers in 27 countries, ranked Vodacom top among the 19 South African companies surveyed, indicating a strong reputation among the South African public. Our score has declined some 6% over the last three years.

In line with Vodafone Group’s acquisition of a majority share in Vodacom, a stakeholder engagement opinion survey relating to radio frequency emissions has been conducted by UK-based Nunwood Consulting. The report has yet to be circulated but is expected to provide valuable insight into our performance in strategic areas that pertain to stakeholders such as municipal authorities, key scientific institutes, Department of Health, Bureau of Standards, and regulatory bodies.

Looking forwardWe will be building on these inputs over the coming year to further understand the most important business and sustainability issues impacting on the company and its stakeholders, adjusting our approach and policies where necessary, and deriving indicators of our performance against which we will benchmark our progress going forward.

I am determined that Vodacom achieves leadership across a number of key sustainability indicators over the next 18 to 24 months. This will require a strong emphasis on defining indicators and measuring progress more accurately.

Bob Collymore, Chief Officer: Corporate Affairs

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Earning the trust of our customers and the public

Nurturing our relationship with customers, not only through the quality of our products and services, but also by the integrity with which we conduct our business in the marketplace, will win us the loyalty to sustain our growth in the long run. We have identified a number of issues that affect our reputation in the marketplace. These include competition and the cost of communications, clear pricing, privacy of customer information, and the need to protect vulnerable users.

Stakeholder engagementImportant stakeholders in the marketplace with whom we engage during the normal course of business include our customers, our business partners, regulatory bodies Independent Communications Authority of South Africa (ICASA) and the Competition Commission, as well as industry bodies such as WASPA. The two surveys noted earlier in this report indicate that while we enjoy a strong reputation amongst the South African public, we are perceived to be aggressive and distrustful in our dealings in the marketplace, falling short in customer service, pricing, contributing to the development of the telecommunications industry and ethics in business dealings, amongst others.

Clearly these are perceptions we can only address through consultative engagement with all our stakeholders, which we will focus on in the year ahead. We anticipate making a range of interventions, which will include embedding a new value system within the company, introducing new policies and goals for improvement across key issues of concern and measuring our performance against these. We plan to have made good progress by the time we publish our next sustainability report.

CustomersVodacom deals with its customers largely through its distribution channels, including retail stores, franchisees, community service operators and Wireless Application Service Providers (WASPs). Through our Customer Lifecycle Management programme, Vodacom interacts with customers to provide information, assess needs and measure satisfaction with our service. We also carry out customer focus groups, surveys, as well as monthly in-house and independent customer surveys. Vodacom’s call centres receive approximately 4 million calls a month, of which 73% are answered within 20 seconds. 81% of all calls are resolved in the first interaction. Approximately 25 000 e-mails are received per month, of which 80% are responded to within 11 hours. Vodacom customers are also serviced through Walk-in Customer Care centres, as well as more than 10 000 trade partners countrywide.

Business partnersOur Business Partner Conference, an annual Vodacom SA event held over two and-a-half days, is hosted for all business partners – suppliers (of handsets, etc), dealers, franchisees, national chains. The aim is to review the past year’s performance and to discuss the coming year’s plans and strategies around products, services, sales strategies, etc.

ICASA and the Competition CommissionICASA and the Competition Commission have concurrent jurisdiction in respect of competition issues affecting the sector. While the Competition Commission primarily investigates complaints, ICASA is currently more concerned with setting the regulatory framework for fair competition in the marketplace. Vodacom is proactive in its dealings with ICASA, engaging the regulator through hearings and informal conversation on a whole range of topical concerns such as: proposed regulations involving handset subsidies and contracts, Electrical Contractors Association (ECA) implementation, standard terms and conversion regulations, licence fee regulations and spectrum allocation.

WASPAWASPA was formed in 2004 as a forum for industry members to raise common concerns and find self-regulatory ways to ensure ethical behaviour in the industry. Vodacom (and the mobile cellular sector in general) supports WASPA in its efforts to ensure consumer protection in the sector, both in terms of financial resources and enforcement of the Code of Conduct. Vodacom is also a signatory to the Code of Conduct for Cellular Operators which commits the company to adhere to certain standards, ensuring protection of consumers against harmful behaviour by WASPs using Vodacom’s network.

Vodacom’s reputation depends on the trust we build with our customers and the public at large.

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MATERIAL ISSUECompetition and the cost of communicationsVodacom is aware of the perception that telecommunications costs are high in South Africa and the rest of the subcontinent. We continue to invest in new generation network technology that is more efficient and to apply other efficiency measures, such as group-wide procurement benefits, to ensure we provide increasing value to our customers.

Given Vodacom’s strong position in the market, we are working on educating top management on avoiding business practices that could be anti-competitive. Currently, the Competition Commission is investigating three complaints against Vodacom and others, two dealing with interconnection and one with the Common SMS short code product. Vodacom SA is cooperating fully in responding to concerns put to us by the Competition Commission.

The Group’s competitive environment is also changing, with market liberalisation a feature in all our operating markets. In South Africa, the implementation of the Electronic Communications Act (ECA) and Regulation of Interception of Communications Act (RICA) were notable.

Market liberalisationCost is also closely linked to competition, and the telecommunications industry is a highly regulated environment that is now undergoing market liberalisation. In August 2008, the Pretoria High Court

ruled in favour of Altech Autopage Cellular, clearing the way for VANS to build their own telecommunications networks. This year, approximately 250 individual electronic communications service (ECS) and electronic communications network service (ECNS) licences were awarded under the ECA, and ICASA is finalising legislation that will enable these new entrants to gain fair access to the network infrastructure of the incumbent operators (including Vodacom). While Vodacom SA welcomes this development, we are concerned about the pressure on the limited spectrum available and are engaging with ICASA to determine how this scarce resource should be allocated and most effectively utilised.

It is anticipated that ICASA will finalise this legislation in the near future and make it available for public comment.

Regulation of Interception of Communications ActThe government’s intention to implement RICA which requires operators to register customers prior to giving them access to their networks, as well as similar legislation in our other African markets, has major implications for the telecommunications industry. How operators respond to the Act’s requirements, will determine the impact on competition, considering that customers will tend to connect with operators where the registration process is easiest. Vodacom has been an active participant in the industry-wide RICA process and in most cases has led the initiatives around the registration process.


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Earning the trust of our customers and the public continued

to require providers to show clearly what each element costs, as well as the costs of opting out of these contracts. However, the first set of regulations gazetted by ICASA for implementation in August 2008 was, in Vodacom’s opinion, unclear. ICASA withdrew the regulations, but is expected to reissue the amended regulations during 2009.

Consumer Protection BillThe key provisions of the Consumer Protection Bill include the right to choose, the right to disclosure of information, fair and responsible marketing, honest dealing and fair agreements, fair value, and accountability of suppliers. The CPB specifically prohibits bundling, or tying of products and services, and provides for a cooling-off period, as well as cancellation by the consumer on 20 days’ notice, with the penalty for long-term agreements pegged at 10%. Vodacom SA is already responding to this legislation by introducing a range of simply defined products and services, specifically the introduction of the new Ultra Low Cost range of handsets in conjunction with Vodafone.

MATERIAL ISSUEClear and transparent pricing

One of the main factors driving the success of Vodacom’s pioneering prepaid business model has been the simplicity and clarity of the product on offer to the consumer. This, coupled with readily available notice of remaining time available, undoubtedly contributes to the loyalty this service now enjoys among some 23.5 million consumers in South Africa. However, in our more sophisticated products and services, the same level of clarity is more difficult to achieve. This is an issue we constantly seek to address. Two key developments – ICASA’s pending handset subsidy regulations and the Consumer Protection Bill (CPB), are set to improve the industry’s dealings with customers with respect to transparent pricing.

ICASA’s handset subsidy regulationsSouth Africa was one of the first countries to offer a handset plus airtime package, enabling many customers access to handsets by entering into 24-month contracts. Vodacom understands and supports ICASA’s intention

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Guidelines. Vodacom’s Regulatory division participates in all initiatives pertaining to policy and legislative developments relating to the protection of children against inappropriate content.

The following stakeholders are important for the effective management of issues that threaten vulnerable users:

• Films and Publications Board (FPB) – has the primary responsibility to classify content including films, publications and games in order to protect children against age-inappropriate content. During 2008 the Board organised a National Symposium on Prevention of Child Pornography. Vodacom participated in the Symposium.

• Department of Home Affairs Ministerial Task Team on Prevention of Child Pornography – was established by the Deputy Minister of Home Affairs in 2006. Vodacom is represented on this committee.

• Parliamentary Portfolio Committee on Home Affairs – deals with all legislative interventions on issues relating to protection of children against age-inappropriate content over mobiles and other modes of conduit. During 2007 Vodacom participated in the legislative process relating to the Films and Publications Amendment Bill, 2006.

• ICASA – regulates the communications industry and plays a supporting role to the FPB in its mandate.

• WASPA – regulates the providers of content services over mobile phones. Vodacom supports all WASPA initiatives, particularly those aimed at ensuring protection of consumers and children against age-inappropriate content.

MATERIAL ISSUEProtecting vulnerable usersWhile mobile phones have brought revolutionary benefits to society, adult or inappropriate content can be accessed through various channels such as SMS, MMS, USSD and the internet. The introduction of Location-based Services (LBS) has added to the risk of abuse, particularly by Wireless Application Service Providers (WASPs).

Since 2004, WASPA has played a critical role in governing this industry through the enforcement of the WASPA Code of Conduct, in terms of which consumers are protected from spam, subscription services, mobile content services (including adult content), and paying for adult content on the handset. This year, WASPA has instituted stricter measures to ensure fair business practice. These include the implementation of tighter rules, effective monitoring and control, and stricter sanctions against WASPs who breach the Code of Conduct. WASPA provides monthly reports which include the results of media monitoring, and surveys are conducted to gain customer insight into the services provided by WASPs.

Vodacom subscribes to Vodafone Group standards in our approach to adult content on our portals, with limited content equating to a PG13 rating for films. Various initiatives help to ensure responsible delivery of this content, including access control, warning screens, an ‘opt-out’ mechanism and parent’s guide to protecting children from harmful content. All WASPs utilising Vodacom’s network to provide content services must comply with all applicable laws (including the Films and Publications Act, 1996), the WASPA Code of Conduct and WASPA Advertising

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Earning the trust of our customers and the public continued

or termination of the service in question, or the termination of the WASP agreement for serious offences. These measures have restricted the violation of privacy rules on the Vodacom Network.

Vodacom SA (and the mobile communications sector in general) supports WASPA in its efforts to ensure consumer protection in the sector, both in terms of providing financial resources and by enforcing the industry Code of Conduct. Vodacom SA is also a signatory to the Code of Conduct for Cellular Operators which commits us to adhere to certain standards, ensuring protection of consumers against harmful behaviour by WASPs using the company’s network.

There are no forums for discussions of privacy protection in the South African regulatory framework, though the situation is expected to be resolved when the Protection of Personal Information Draft Act, 2005 is finalised. This will establish a regulatory body called the Information Protection Commission which will be solely responsible for all regulatory aspects pertaining to protection of personal information. The Draft Act also contemplates the promulgation of industry codes of conduct for various industries. Vodacom SA will participate extensively in the formation of the communications sector industry body and the promulgation of the industry Code of Conduct when the process commences.

Privacy of customer informationCustomer information can potentially be compromised in a number of areas, from the handling of billing information at our data centres to the various services being offered over our network through our distribution partners, in particular WASPs. This is governed by policy set by Vodafone, according to which Vodacom SA has a dedicated privacy officer – the Executive Director: Regulatory Affairs.

Vodacom has various policies, procedures and processes in place to ensure that information is not unlawfully disclosed in terms of licence obligations. This is furthermore included in the company’s disciplinary policy and code and a zero tolerance approach is followed regarding policy transgression. Vodacom employees may not intercept calls, SMSs or any other type of messages sent from one person to another. This information may only be intercepted if properly authorised in terms of the provisions of the Regulation of Interception of Communications and Provision of Communications-related Information Act, 2002 as amended.

Ethical behaviour of WASPs Through our relationship with WASPs, Vodacom conducts a vitally important channel of business, enabling WASPs to develop and deploy their own branded products using the Vodacom network. Services offered to WASPs include use of Vodacom bearers such as SMS, MMS, USSD and IVR. Other services include Location-based Services and billing services. Vodacom currently has 168 registered WASPs who are members of WASPA, and who are therefore governed by the WASPA Code of Conduct.

One of the most vulnerable areas for potential abuse of the customer is Location-based Services (LBS). Vodacom offers this service to Wireless Application Service Providers (WASPs), providing service users with the ability to locate assets and loved ones. Due to the potential infringement of customer privacy and customer protection associated with the use of LBS, Vodacom has instituted strict guidelines for its provision to WASPs. Providers have to perform a successful audit prior to the approval of the deployment of LBS and users have to provide consent prior to being tracked. WASPs are further required to provide monthly reminders to service users as an added measure of protection. Technology is used to enforce compliance and various sanctions, including the suspension or termination of service, may be imposed against the WASP in breach of Vodacom’s business rules. Depending on the degree or extent of non-compliance, sanctions may include the suspension

SPAM through WASPs SPAM is illegal and WASPA has issued fines to service providers who have sent these and has even suspended the messaging services of a few. Although the penalties for contravention of the policy against spam, as provided in the WASPA Code of Conduct and the Vodacom WASP agreement, help to control spam, more robust methods are being sought. On 1 August 2007, WASPA launched an opt-out mechanism whereby customers send “stop” and Service Providers are required to stop all communication to that customer. The WASPA opt-out mechanism has made it easier for customers to cancel WASP services. Approximately 30% of service cancellations are received through the WASPA opt-out mechanism.

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Level four contributorVodacom’s CoGP score does not reflect the company’s long history of commitment to transformation in South Africa. In June 1994, from the commencement of commercial service, Vodacom began investing in the government’s Joint Economic Development Programme, making the required R1 billion investment well ahead of the ten-year schedule. Vodacom SA recognises that

BBBEE is an integral part of any commercial strategy and not an adjunct to it. Therefore, BBBEE is viewed holistically and as an intrinsic part of our competitive positioning.

Since March 2007, Vodacom has a dedicated BBBEE unit responsible for guiding the respective functional groups responsible for the implementation of BBBEE and providing management with quarterly reviews of the progress within the company.


Scorecard summary

Vodacom SA is independently verified against its 2008 financial year as a Level 4 contributor according to the DTI’s BBBEE Codes of Good Practice (CoGP), with a score of 69.13.

Year ended 31 March

Issue Weighting

Actual Overall

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Overall BBBEE Score 100 69.13 68.03 55.24Direct Empowerment 30 13.91 14.67 9.76

– Equity ownership 20 6.97 6.57 1.90

– Management control 10 6.94 8.10 7.86

Human Resource Development 30 21.53 20.97 17.47

– Employment equity 15 9.53 8.97 8.31

– Skills development 15 12.0 12.0 9.16

Indirect Empowerment 35 28.69 27.38 23.01

– Preferential procurement 20 13.69 12.38 8.01

– Enterprise development 15 15.0 15.0 15.0

Residual 5 5.0 5.0 5.0

– Socio-economic development 5 5.0 5.0 5.0

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Broad-based Black Economic Empowerment continued

Equity ownership In October 2008, Vodacom SA successfully concluded a R7.5 billion BBBEE transaction in terms of which Royal Bafokeng Holdings (Proprietary) Limited and Thebe Investment Corporation (Proprietary) Limited, through their subsidiaries, the black public (as defined in the BBBEE Codes), business partners and employees acquired an aggregate of 6.25% of Vodacom SA. Of this total shareholding, 3.44% accrues to YeboYethu Limited, a BBBEE company established for this purpose, with 45% of YeboYethu Limited held by Vodacom employees via the Employee Share Ownership Scheme, and the remaining 55% held by black South African citizens. The YeboYethu employee share ownership plan gives employees access to a 3.4% ownership stake in the business. Vodacom SA now scores 6.97 out of 20 for the equity ownership pillar of the BBBEE Scorecard compared with the initial verification year’s score of 1.9.

Vodacom Group (pre the BEE transaction)

Vodacom Group (as at 31 March 2009)

This structure only includes major operating entities and holding companies.

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Details relating to YeboYethu ownershipFacilitation provided by Vodacom

• The BEE transaction was at a 10% discount to the value of Vodacom SA at the time of the transaction.

• The national vendor finance rate is a rate of 10% a year.

Restrictions placed on YeboYethu participants

• Participants cannot trade their shares during the first five years.

• Trading is restricted during the second five years, as participants can only sell their shares to other black people or black groups with the same or higher BEE status/rating as the seller (all sales are subject to approval and verification by Vodacom SA).

• Participants may not encumber their shares during the first 10 years.

• These restrictions are lifted after 10 years.

• The transfer secretary holds participants’ share certificates on their behalf.

Stakeholder engagement in advance of the BEE dealVodacom identified two areas where stakeholder engagement would be critical to making the BEE deal acceptable to and fair for all concerned: the government and its regulatory bodies regarding the overall structure of the deal, and employees, regarding their involvement in the employee scheme option.

On 14 July 2008, Vodacom hosted a meeting with the (then) Minister of Communications, Ivy Matsepe-Casaburri, her Deputy Minister, the Director General and the Director of Finance for the Department of Communications. Key representatives from Vodacom, Thebe Investment Corporation and the Royal Bafokeng presented the terms of the deal and fielded questions. Vodacom also engaged separately with the Deputy Director General of the DTI. Following this engagement process, Vodacom felt satisfied that these institutions were comfortable with the terms of the deal and its contribution towards the meaningful empowerment of black South African citizens.

Vodacom also made extensive use of its communications structures and training platforms to bring awareness on all the aspects of the scheme to its employees. The BEE transaction team conducted 98 training sessions and reached 3 012 employees. E- Learning and the YeboYethu website was developed to provide

continuous access to information that may be required in this regard. A source of frustration for the team during this campaign were the restrictions placed on divulging information around the deal as per Section 157 of the Company’s Act, 1973. This was particularly limiting in the company’s efforts to inform people in rural areas. Efforts were made to put across information using other organisations, such as the DTI and the National Empowerment Fund. Not being able to discuss the terms of the deal in detail did result in some negative feedback from this stakeholder engagement, as employees felt that the company was seeking to avoid being transparent to its stakeholders. Race labelling (e.g. the term ‘black’ to encompass a number of cultural groups) by government BBBEE legislation also caused a negative reaction in some quarters.

This transaction is good news for us. With the support of Vodafone as our lead shareholder, we can get stuck into the task of transforming Vodacom into a total communications company.


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Sale of equity stake by Telkom and the listing of Vodacom on the JSETelkom has sold a portion of its stake in Vodacom Group to Vodafone, which now becomes the company’s major shareholder with a 65% holding. At the same time, Telkom has passed its remaining 35% stake in Vodacom Group on to its shareholders.

While the transaction received the go-ahead from the Competition Tribunal, the Congress of SA Trade Unions (COSATU) instituted a court action against ICASA challenging the decision of ICASA not to require Vodacom to seek ICASA’s approval in respect of the transaction. Vodacom Group opposed this court action. On the day prior to listing, the High Court in Pretoria dismissed a joint application by COSATU and ICASA for an order interdicting Vodacom from listing.

Vodacom successfully listed on 18 May 2009, enabling Telkom shareholders in receipt of unbundled Vodacom Group shares to trade the shares on the JSE, and for the general public to buy shares in Vodacom Group for the first time.

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Employment equityThe Human Resources Group is totally committed to the letter and spirit of the DTI CoGP and to this end, we view the Codes’ requirements for employment equity as an integral part of our overall employment plan. The targets set in the DTI CoGP ensure a continued focus on employment equity. Although the country is facing serious skills shortages, especially in the Information, Communication and Technology (ICT) sector, Vodacom continues to set ambitious targets.

As a company we embrace the spirit of the Employment Equity Act No 55 of 1998 and we are continuously endeavouring to achieve full compliance therewith. With our ever changing technological business environment, it is often a challenge to find ICT-related specialist skills, especially in the designated groups.

We are continuously introducing innovative initiatives to attract talent. Some of these initiatives are specifically aimed to attract disabled applicants and black women with engineering, information technology and telecommunications skills.

Management controlWhereas black representation among executive directors rose from 63% in 2007 to 73% in the financial year ending 31 March 2008, in the year under review, black representation decreased to 54.5%. Unfortunately, following growth in black female representation reflected in the prior year, no black women executive directors were represented on the board in the financial year under review. This resulted in Vodacom SA’s score decreasing to 6.94 out of 10 for the management control pillar of the BBBEE Scorecard, compared with 8.10 in the prior year.

Performance against suitable benchmarksIllustrating our commitment to redressing the imbalances of the past, a total of 69% of new appointments in the financial year under review were black candidates, bringing overall black representation in the workforce to 70%. Representation of the various race groups in senior, middle and junior management is 27.3% African, 21.3% Coloured, 14.6% Indian and 36.6% White. Work still remains to be done to meet race and/or gender representation targets at certain management levels in the organisation, specifically the Executive Head of Divisions and Managing Executive levels.

The proportion of disabled employees has risen from 0.52% in 2008 to 1.2% in the financial year under review, and Vodacom will endeavour to reach 2% in the current financial year. Retention of black employees, and in particular black female employees, remains a challenge. The current attrition rate in the Black Designated Group is 37% of all leavers, down from 39% last year. Vodacom SA now scores 9.53 out of 15 for the employment equity (EE) element of the BBBEE Scorecard compared with the prior year’s score of 8.97.

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Black Designated Group new hires increased by less than 1% from 2008 to the financial year under review, and new appointments of black females increased by 2%. The main reasons for the marginal increase in black appointments are:

• An extended recruitment moratorium was imposed on the business. Only highly specialised and critical positions were recruited for during the period under review.

• A competitive market and an industry with a shortage of telecommunications skills combined to create a shortage in supply of candidates, especially in the Designated Groups.

• Vodacom acquired new companies and established additional internal ventures.

During 2010, our aim is to maintain the number of black appointments.

Skills developmentIn the financial year under review, Vodacom has invested over R95 million in the training of employees, of which R68.8 million was spent on the training of the Black Designated Group (R38.7 million on black females, this amount includes all direct and indirect training costs as per the BBBEE verification guidelines). This represents an investment of 3.06% of the total leviable amount over and above the 1% the company contributes to the National Skills Levy Fund. Of the total employee complement of 5 000 which forms the baseline, 273 learnerships and/or category B, C and D learning programmes for black employees were identified for the period under review.

Vodacom SA retained a score of 12 out of 15 for the skills development pillar of the BBBEE Scorecard compared with the prior year.

Increase in preferential procurement for designated entities

MATERIAL ISSUEPreferential procurementCode 500 of the DTI’s Codes of Good Practice is aimed at encouraging the transformation of the South African formal economy through the increased involvement of black suppliers in the supply chain. Procurement from BBBEE-accredited suppliers amounted to R6.6 billion out of a total procurement spend of R14.5 billion. Within this spend range Vodacom directed R748 million to Qualifying and Exempt Micro Enterprises (QSEs), R450 million to 51% black-owned businesses and R51.67 million to 30% black women-owned businesses. Vodacom’s internal target for preferential procurement is increasing annually, driving spend towards smaller entities. Demonstrating our commitment to preferential procurement, the target for the financial year under review was raised from 12 to 13 (amounting to an additional R3.5 billion), which was achieved with a score of 13.69 out of 20.

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2009 2008

QSEs R748 million R600 million

51% black-owned businesses

R450 million R200 million

30% black women-owned businesses

R52 million R33 million


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As a high-tech company with a large procurement spend, Vodacom recognises that it faces a number of challenges in effecting substantial change. The company’s total procurement bill is R14.5 billion, much of which is spent on high-tech equipment not available in South Africa. Thus, even a relatively small order placed with a South African supplier will automatically move that supplier into the category of a large business, thus making it harder to achieve BBBEE points on the DTI scorecard.

While almost all Vodacom’s high-tech imported services are impossible to procure within South Africa, the company is constantly working to improve this situation by improving the level of skills within South Africa, and finding opportunities for local BBBEE companies to provide inputs that are normally imported. For example, the growth of Vodacom Business and the building of our new fixed-line network infrastructure is increasing local spend.

Aside from increasing procurement from local suppliers, we are also working to increase the proportion of registered BBBEE suppliers, currently only half the total. A newly appointed procurement unit liaison officer is contacting all large suppliers and encourage them to register, or improve their status towards at least a Level Four, sometimes through contractual obligations.

Finally, we are looking to improve the weighting of the company’s procurement, i.e. increase the proportion of spend with Qualifying and Exempt Micro Enterprises, 51% black-owned businesses and 30% black women-owned businesses. We are offering skills training to QSEs and emerging micro enterprises (through the Enterprise Development Code) to enable them to win more of our business; and we are setting internal targets for the procurement department, forming a significant part of the remuneration package. Our internal target for preferential procurement is increasing annually, driving spend towards smaller entities.

Challenges facing us as we seek to further improve our preferential procurement score are:

• Many small companies don’t have the resources to pay for BBBEE ratings.

• The small business sector is characterised by a high failure rate, consequently, we have to continue looking for alternatives when suppliers go out of business.

• Considering the vast scale for growth in our supply chain, small businesses that succeed as suppliers to Vodacom will very quickly become large businesses, thus losing their status.

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• Considering there are as yet very few black female-owned businesses in the supply chain, it will take a long time before this component (worth 3 points out of 20) will grow to its potential.

• A number of businesses that score poorly against the codes have nonetheless built their businesses in partnership with Vodacom over many years. We need to be sensitive to these relationships as we seek to transform.

In conclusion, Vodacom’s large local procurement spend inevitably drives emphasis towards working with larger suppliers. In this way, the company can focus on quality, service, and efficiencies of scale. While we understand that this presents challenges in meeting the requirement to promote small businesses through direct engagement, the trickledown effect of the DTI CoGP, noted above, will ensure the participation of small and emerging businesses in our supply chain.

Enterprise developmentEnterprise development, Code 600 of the DTI CoGP, is defined as monetary or non-monetary contributions made with the objective of contributing to the development, or sustainable independence, of black empowered businesses. Vodacom SA meets the requirements of a Level 1 contributor to BBBEE in the enterprise development pillar (scoring 15 out of 15), through discounts offered to its Community Services Telephone Operators (CSTOs) of more than R400 million in the financial year under review. Through their business association with Vodacom, our enterprise partners in the distribution chain are developed as described below.

Community ServicesWhen Vodacom was granted its cellular telecommunications licence in the early 1990s, one of the conditions was for the company to deploy 22 000 subsidised public cellular telephones in under-serviced and rural areas. This formed the basis of the company’s Community Services operation, whereby CSTOs were set up with converted shipping containers and earned – and continue to earn – a 50% margin on Community Services airtime sales.

In the last four years this model has evolved with the emergence of ‘super dealers’ responsible for a number of operators each, as well as numerous ‘stand-alone’ operators. This has allowed the initial investment for a new operator to be reduced from R3 500 (for the original container model) to a mere R800. This new structure has led to a substantial increase in new entrepreneurs. There are now over 133 000

MATERIAL ISSUESocio-economic development Code 700 of the DTI CoGP recognises that companies have a role to play in the transformation of communities and individuals beyond their direct business activities. Traditionally, this form of development is achieved through a company’s Corporate Social Investment. Of Vodacom SA’s R98 million spend on socio-economic development, over R30 million is allocated from the CSI budget of the Vodacom Foundation. The remaining allocation is made up of a contribution that Vodacom makes annually to the Universal Services Agency, a portfolio organisation of the Department of Communications, tasked with the rollout of ICT infrastructure in the country. Tow

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Community Services public phones services through 4 000 containers and other retail outlets, such as rural and peri-urban spaza shops.

The next step, already initiated, is to offer Community Services entrepreneurs a wider range of products to sell to their customers, including airtime, starter packs, and even internet access. This will allow the micro-entrepreneur to progress from a subsistence level operation towards a more profitable and formal enterprise.

Retail franchiseesThe Vodashop franchise model has become an ideal vehicle for transformation through black enterprise development. Since 2000, the model was changed to ensure that all new franchisees would be at least 51% black-owned, and that all existing shop owners that wanted to acquire a new shop now have to take on a black partner. These stores receive support in a variety of forms, including training, rental support, shopfitting and advertising. The number of Vodashop stores with a minimum of 25% black ownership increased by 36% this year, from 84 to 114.

Wireless Application Service Providers (WASPs)From 2002, WASPs have been developing branded products using the Vodacom network as the transport medium. This is a significant market niche, catering for the 18 to 35 year range of customers, often with disposable income and sensitive to brand quality and reputation. While this growth area presents exciting opportunities for BBBEE entrepreneurs, uptake has been very slow. In the year under review, four out of a total of 168 WASPs on the Vodacom SA network were black-owned. Revenues from WASP services have grown 10% during the reporting period. Start-up WASP businesses also receive assistance from Vodacom SA in the form of free or subsidised rental, training and other services that help them gain a competitive edge in the marketplace.

The Universal Services Agency (USA)The agency is mandated by the Telecommunications Act (1996) to manage the Universal Services Fund. The fund, with monies appropriated by Parliament, is used for infrastructure for the universal services area licensees, as well as providing infrastructure for telecentres and school cyberlabs (computer laboratories with ICT equipment which enable access to the internet and provide multimedia services).


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A workplace for the highly skilled

Governance Human resources is headed by the Chief Human Resources Officer who, together with her extended team, has ultimate responsibility for all people strategies, policies and practices inside the company. The Chief Human Resources Officer is a permanent member of Vodacom’s Executive Committee, chaired by the CEO.

Vodacom Group supports and directs the human resources activities of the non-SA operations through its International Human Resources division in terms of collaborative consulting, capacity building and skills transfer. The objective is to create a consistent group-wide approach to human resources while remaining sensitive to the unique challenges faced in each country.

All remuneration-related decisions in the non-SA operations are subject to formal approval by the Remuneration Committee of each operation, including the management of headcount. These committees also consider general operational human resources metrics during their quarterly meetings.

Vodacom draws on the expertise, talent and commitment of its 5 000 permanent South African employees and nearly 2 000 employees in our international operations to deliver customer service excellence and value to all stakeholders.

Vodacom’s success depends largely on the ability of our employees to be productive, innovative and forward-thinking. Our people are our most important competitive advantage.

MATERIAL ISSUEEmployee representation and engagementEmployee interests are formally represented by 33 local consultative committees which meet on a monthly basis. The aim of the consultative committee mechanism is to create a channel of cooperative interaction between management and employees. This non-statutory structure aims to involve employees in strategic aspects of decision-making that effect their work environment, as well as to enhance cooperative management in the wealth creation process. There is a specific focus on employment equity as detailed in the Employment Equity Act No 55 of 1998.

A defined number of formal representatives are democratically elected per Vodacom functional group every third year. These, together with local executive management representatives, form the local consultative committees. One member is also elected to represent the particular constituency at the quarterly National

Headcount per companyas at 31 March 2009

Permanent Headcount

Contractors/Assignees/Expat

ContractTotal

Headcount

SA CompaniesVodacom Group Limited 264 36 300

Vodacom (Pty) Ltd 3 783 65 3 848

Vodacom Service Provider Company (Pty) Ltd 949 25 974

Vodacom Ventures (Pty) Ltd 4 1 5

Sub-totals 5 000 127 5 127

Non-SA CompaniesVodacom Mauritius 3 1 4

Vodacom Lesotho 73 11 84

Vodacom Tanzania 671 18 689

Vodacom DRC 624 48 672

Vodacom Mozambique 175 13 188

Sub-totals 1 546 91 1 637

Gateway Communications 341 48 389

Sub-totals 1 887 139 2 026

Overall headcount 6 887 266 7 153

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Consultative Committee (NCC) with the Vodacom SA Managing Director as the dedicated chairperson.

Examples of issues raised in the consultative committees during the past year include:

• Diversity profile (race, gender and disability) at some levels,

• YeboYethu EE Share Options Scheme design and implementation,

• Feedback on a number of policy changes and updates related to allowances, e.g. travel allowance,

• Medical aid alternative options for Vodacom,

• Headcount moratorium and the associated impact on productivity,

• Employee morale and motivation.

Employees are invited to resolve any issues they might have within their local structures with their management. This is done via a formal grievance procedure whose objective is to remedy issues quickly and mend relationships where applicable. Issues can also be raised via the consultative committee infrastructure where local representatives can table the issue for resolution by the committee. Should an issue remain unresolved, this will then be referred to the next National Consultative Committee meeting for discussion and decision-making. Any employee can also refer an issue to the mechanisms provided for in the Labour Relations and Employment Equity Acts.

NCC members are formally trained to represent their constituents. New employees are also inducted in terms of the particulars of the Employment Equity Act and key policies and procedures available to them, e.g. grievance policy. Every employee in the company has a dedicated personal development plan which guides development on the job as well as to prepare the individual for future job assignments.

New NCC elections will be held during 2010 and the consultative committee infrastructure will be maintained given its effectiveness. Regular meetings for the registered committees will continue as per current practice.

Two registered trade unions currently represent a combined 601 employees, or just less than 12% of the combined Vodacom SA employee workforce. During the prior year, one of the two registered unions, representing around 562 members, resorted to industrial action to gain formal recognition from the company. The matter was duly settled, their membership being significantly below the threshold previously agreed upon for formal recognition. We do not have a recognised collective bargaining agreement with these two trade unions.

Vodacom does have a collective agreement with the Communications Workers Union pertaining to specific issues, such as access to buildings for meetings and employee deductions for membership subscription. Ad hoc meetings take place between Group Legal and the two trade unions, and the trade unions may meet with their membership as per formal agreement with the company.

MATERIAL ISSUE


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A workplace for the highly skilled continued

Vodacom training initiativesYebo Bursary ProgrammeThe Vodacom Yebo Bursary Programme provides permanent employees with the opportunity to advance their careers. During the past year the Yebo Bursary Scheme awarded 706 (2008: 484) bursaries to full-time Vodacom employees with an associated investment of R8.2 million (2008: R4.4 million).

Vodacom Foundation BursaryThe Vodacom Foundation provides bursaries in the ICT and engineering sectors to high achieving students from disadvantaged communities. Students who receive a Vodacom Foundation Bursary are also able to participate in Vodacom’s Vacation Work Programme and the Vodacom Foundation Graduate Programme to ensure that they understand the Vodacom business. During the financial year under review the Vodacom Foundation Bursary Scheme benefitted 140 disadvantaged students with an investment of R 6.9 million.

Young Achievers Programme (YAP)Launched in 2007 in partnership with the Centre for Software Engineering at WITS University, YAP is a twelve-month in-service programme aimed at providing young Vodacom employees with the fundamentals of the value chain and the evolution of convergence within ICT at an early stage in their careers. This is an interdisciplinary programme that assists young employees to understand Vodacom’s business from a customer perspective through intensive exposure to the total value chain. Since the inception of the programme, 110 candidates have completed the programme, while 80 candidates are currently participating.

Virtual Learning Centre (VLC)With the Virtual Learning Centre (VLC), the Group continued to use e-learning to train employees on new technologies and the offering was extended to include function-specific training in other areas of the business.

Attracting and retaining talentThe general shortage of skilled employees like technicians in the ICT industry is one of the most critical long-term sustainability risks facing the company. Vodacom seeks to attract and retain employees with not only the right qualifications and experience, but also with unique qualities that contribute to our culture of diversity and innovation. We are constantly looking to the company’s future, and its expected requirements for business and technical skills.

Interventions supporting this quest include: leadership, business and skills training; and progressive remuneration and rewards practices. In addition, an employee referral process has been established to assist in identifying potential candidates for development and promotion. Vodacom also provides comprehensive wellness programmes and employee volunteer programmes as a retention incentive. In combination, these initiatives serve to provide a talent pipeline to meet the Group’s current and future human capital requirements.

Staff Turnover2009 9.04%2008 10.5%2007 11.6%

TrainingIn the 2009 financial year, Vodacom SA invested R69.7 million (2008: R43.9 million) in training employees, or 3.2% of payroll. This amount reflects only the actual training cost and not the indirect training cost associated with venues, flights, accommodation for trainers and participants attending the training. Employees received on average 5.8 training days per year in 2008 and 2009. The average training spend increased from R10 400 per employee in 2008 to R14 400 in 2009. The Group also invests substantially in the development of technical and other required skills in our international operations.

Vodacom remunerates critical skills at the upper quartile of the market in order to attract and retain the best people.

Lungi Ndlovu, Chief Human Resources Officer

““

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During the year, 15 712 courses were accessed and completed on the VLC. On average, more than 12% of employees used the service on a monthly basis. Following this success, the VLC platform has been launched in operations outside South Africa, where it is expected to yield benefits to employees who otherwise have difficulty accessing quality training programmes. Our flexi-employees within our South African call centres have also been given an opportunity to access the VLC platform.

Conversations in Leadership ProgrammeThe company launched the Conversations in Leadership Programme in 2005, providing a platform for developing leadership capabilities in topical business areas and creating an enabling platform for exchanging ideas. More than 70% of our executives have attended different workshops covering strategy, leadership and transformation, corporate ethics, personal mastery, customer centricity and talent management. The programme was further enhanced with the inclusion of top international speakers to stimulate conversation on topical issues in the business.

Vodacom Advanced Executive ProgrammeVodacom Advanced Executive Programme (VAEP) was launched in 2003 and is run in partnership with Unisa. This programme provides a platform for developing our executive pipeline, by preparing high-potential Vodacom leaders to enrich their capabilities and contribute more to the company. Since the launch 74

high potential leaders have completed the programme and 25 candidates are currently participating.

Learners and internsVodacom has a vested interest in contributing to the country’s ICT skills base, guided by the Skills Development Act and the national imperatives for growth and development set out by government. In the financial year under review, Vodacom continued to participate in the enhancement of skills for the ICT industry in partnership with the ISETT SETA. During this period there was a total of 463 learners and interns in the business, spread across the entire value chain.

Developing women in ICTIn 2006 Vodacom launched the Graduate Programme for Females in Technology (GPFT) now playing a crucial role as a vehicle for the advancement and integration of women into the technological arena and business at large. In the first two years following the launch, we focused exclusively on building the pipeline of high potential females within technology areas. As a result of the previous years’ success and growth of the GPFT, we have launched a multi-pronged Graduate Development Programme anchored around the core functions of the business, i.e. engineering and technology, billing & IT and commercial. With a new intake of 22 candidates being added to the 70 graduates currently in the candidate pool for this programme, it is anticipated that by the end of calendar 2009 Vodacom will have spent R25 million on GPFT.


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A workplace for the highly skilled continued

performance management, learning and personal growth and the work environment, are at all times aligned to the strategic direction and business-specific value drivers of the Group. The Group seeks to create a compelling employee value proposition aimed at attracting and retaining top talent. This is achieved through participation in a range of niche salary surveys, as well as customised surveys to obtain appropriate market benchmarks.

To ensure the retention of skills and the alignment of the Group’s goals with those of individual employees, Vodacom offers short-term and long-term incentive schemes. As part of its annual remuneration strategy review, the Group introduced various initiatives to enhance its benefit offering as well as introduce flexibility in these benefits. Compensation and benefits are benchmarked against industry standards and guided by the relevant labour legislation.

Employee rewards and remunerationThe Group recognises that remuneration is a business issue as it has a direct impact on operational expenditure, company culture, employee behaviour and morale and ultimately the sustainability of the organisation. The Group has a Remuneration Committee (RemCo) that is charged with the responsibility of overseeing, on behalf of the Board, the Group’s compensation policy, reward strategy and the compensation and benefit programmes of senior management and employees in general. The RemCo seeks to provide rewards and incentives that are highly leveraged to performance and clearly linked to the Group’s results and individual performance. To achieve this, the Group rewards employees in a way that reflects the dynamics of the market and the context in which it operates. All five components of the reward strategy, including the guaranteed pay portion, variable pay,

Lifelong learning Vodacom’s commitment to lifelong learning is demonstrated by the array of learning platforms available to employees on a continuous basis. These platforms include mentorship, coaching, class room based training, and e-learning. The programme catalogue is designed to give employees an opportunity to gain the functional and leadership skills required for both their current and future employment opportunities. Career counselling forms an essential part of upskilling employees across the business and tools have been designed to ensure that employees have access to these in managing their career choices.

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Employee benefitsCompulsory pension fund membership for retirement savings and death and disability benefits

Medical aid scheme including a full-time, on-site consultant

Performance-related incentives and bonuses

Leave benefits include maternity, paternity, family responsibility and adoption leave

Special mobile phone benefits, including access to e-mail and intranet

Flexible working arrangement policy

Subsidies for meals and transport (for night shifts)

MATERIAL ISSUEDiversity managementVodacom values diversity and recognises employees as unique individuals with their own characteristics and talent. Diverse teams add value to our organisation and we promote an all-inclusive work environment. Black designated appointments have remained at 70% for 2008 and 2009, down from 79% in 2007. The decrease was largely owing to the sudden demand for highly skilled individuals in technical occupations as a result of the establishment of Vodacom Business, as well as the integration of staff from companies that were acquired during the reporting period. Total female appointments remained steady at 45%.

During the second quarter of 2008 we successfully procured a new diversity management training supplier. Numerous employees have undergone diversity training sessions which will continue throughout 2009 and 2010. To further the understanding of EE, human resources conducts regular employment equity training sessions with all business units and consultative committee members.


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Health, wellness and safety

talented workers. The overall aim of the wellness programme is to reduce absenteeism, medical aid expenses and corporate health risk exposure while at the same time increase employees morale, talent retention, engagement and productivity. Vodacom’s wellness programme provides for the reduction of lifestyle diseases such as hypertension, high cholesterol, diabetes, physical inactivity, poor nutrition and obesity. Medical aids and group life insurance providers also partake and contribute in this holistic programme.

Yebo Health ChallengeThe Yebo Health Challenge initiative in the financial year under review proved to be a great success, with 60% of employees participating in this educational programme. Employees read articles (51 000), watched videos (11 500) and completed quizzes (26 500) in an internet-based challenge that supported lifestyle changes. Several employees reported their improved state of health and a total of 1 400 kgs of weight was lost by the company as a whole. In future the Yebo Health Challenge initiative will be extended into an integrated health, wellness and employee engagement management programme.

Executive Wellness ProgrammeThe Executive Wellness Programme consists of annual medical assessments to establish the risk to the business of the chronic diseases of lifestyle: high cholesterol, diabetes, high blood pressure, obesity, cancer, smoking and sedentary lifestyles. Out of 115 executives assessed, 69 are reported to have 2 – 5 health risk factors. Executives with modifiable health risks are encouraged to participate in health and wellness initiatives.

Occupational and Primary Health CareOccupational and Primary Health Care in Vodacom is available to permanent, flexi and contractor employees. These services include emergency medical treatment, Vitamin B injections, family planning, flu vaccinations, occupational medical surveillance, travel medicine and assistance in incapacity management. A total number of 7 540 permanent employees and contractors utilised the Primary Health Care Clinic services nationally during the financial year under review. 464 individuals underwent occupational medical surveillance during the same financial year.

Positive, committed and passionate employees are more motivated to achieve business success, and this in turn leads to increased satisfaction levels in the workplace.

MATERIAL ISSUEWellnessEvery year we measure the state of employee wellness in the organisation through the results of the Employee Assistance Programme (EAP). Data from the Group’s independent counselling and advisory services (ICAS), is used (in the strictest confidence) to track wellness trends and identify high risk groups, as well as to shape human resources policies.

During the financial year under review, 19% of our employees made use of the advice, counselling and psychological support offered, compared with 22.3% for the prior year. Impacting on the levels of stress this year were the changes in the leadership of the company, as well as uncertainty surrounding the BEE deal, in particular its impact on employee shareholding.

In 2008, Vodacom adopted an integrated health, wellness and employee engagement management strategy that forms one of the cornerstones of the Human Resources Strategy. This strategy includes a corporate wellness & employee engagement programme, HIV/Aids management, an employee assistance programme, executive wellness and occupational and primary health care.

Governance of wellness, health and safety is driven through 11 Health and Safety committees functioning across the company. Balanced representation of the organisation is ensured through 233 employee appointees and 57 management members.

Programmes to promote employee wellbeingVodacom promotes employee wellbeing through talent management, leadership development and wellness management, as well as the Yebo Heroes and Yebo Wellness campaigns. Yebo Heroes is an outreach programme that focuses on underdeveloped communities. Employees make time in their busy schedules to volunteer for initiatives like building houses, planting vegetable gardens and facilitating cancer fund raising initiatives. Yebo Wellness Champions on the other hand focus internally on developing the holistic wellbeing of Vodacom employees. These dedicated groups of employees act as peer educators assisting Vodacom employees to manage their overall health and wellness.

Wellness Programme Vodacom acknowledges and accepts the opportunity to provide health and wellness managed care to its employees. The wellness programme promotes greater alignment with the Vodafone Human Resource Management strategy in order to attract and retain

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Health and SafetyThe telecommunications industry offers a relatively healthy and safe work environment, and no work-related fatalities, or major health and safety incidents occurred during the financial year under review, giving a Disabling Injury Frequency Rate (DIFR) of less than one.

Vodacom benchmarks its compliance in relation to the Occupational Health and Safety Act 85 of 1993 and the OHSAS18001 standard. An average score of 88.9% was obtained during the 2008 external Health and Safety Legal Compliance audit, and the company has unconditionally retained its OHSAS18001 certification during the re-certification audit in October 2008.

Following a detailed comparison with Vodafone, Vodacom will be aligning its policies and procedures to ensure consistency of management and reporting. This year we used the enterprise-wide risk assessment tool, CURA, to populate and manage all occupational health and safety related risks.

MATERIAL ISSUEHIV and Aids Vodacom is committed to tackling the issue of HIV and Aids. In 2003, an independent assessment of the company predicted a 5% prevalence rate for Vodacom, but actual results indicate a rate of 2.3%, well below national prevalence levels. The figure may increase as more employees participate in the VCT programme.

Following this baseline, we embarked on a sustained HIV and Aids campaign focusing on raising awareness, encouraging employees to know their status through voluntary counselling and testing initiatives, and providing comprehensive treatment and health monitoring services. All permanent Vodacom employees can make use of the free Direct AIDS Intervention (DAI) programme, which includes Voluntary Counselling and Testing (VCT), HIV support and treatment, doctor’s visits and anti-retroviral therapy (ART). 50% of Vodacom employees participated in voluntary counselling and testing during the financial year under review, and 87 HIV-positive employees are on anti-retroviral therapy, receiving care, support and ongoing monitoring.


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Vodacom is determined to be the leading provider of total communications in sub-Saharan Africa, broadening access to all citizens.

MATERIAL ISSUE

providing services that are key to commerce as well as specific products and services for those excluded from mainstream communication channels.

Network coverageVodacom SA’s network comprised 7 481 2G and 2 880 3G base stations at the end of March 2009, covering about 98% of the population with 2G services and 27.8% of the population with 3G services. This not only meets the requirements of our licence agreement, but also the demand for mobile communications from a growing number of customers across South Africa. The number continues to increase not only due to expanding network coverage, but also to the rollout of the new generation 3G network (and the data and internet services they support). In the year under review, Vodacom SA built 316 2G base stations, an increase of 5.35%, and 322 3G base stations, an increase of 11.18% over the financial year. Vodacom SA has also rolled out a WiMAX network comprising a total of 118 base stations in the key metro areas of Pretoria, Johannesburg, Durban and Cape Town.

During the year under review, Vodacom Tanzania has extended its network by almost a third, focusing extensively on increasing coverage in rural regions throughout the country. We continue to invest in expanding network coverage and quality in all our international operations, with more than 360 new base stations added during the year in the four countries. Tanzania and Mozambique were the main beneficiaries of this investment, followed by Lesotho where we commenced 3G services.

MATERIAL ISSUE

This strategy is in direct harmony with the pressing need to bridge the digital divide and extend access to mobile communications to those who are still marginalised from the significant socio-economic benefits they provide.

Socio-economic impact of mobile telecommunicationsA growing body of research shows that mobile telecommunications has the potential to change people’s lives for the better by promoting economic development. Considering the rapid uptake of mobile communications in Africa, there is no doubt as to the economic value of voice, data and internet services. The Group grew its customer base to close on 40 million, up 16.5% on the prior year. The graph below was derived from a sample of data produced in 2006 by the South African Advertising Research Foundation in the course of a market study which correlated mobile phone usage against other LSMs. Although up-to-date data is not currently available, the general pattern is still relevant. (Note that the penetration figures were in respect of an adult population sample.) The graphic depicts that the potential for growth in voice service is highest in LSM 1-3 (the least affluent), but with the least purchasing power to realise such growth. Furthermore, this market segment’s contribution to the overall revenue is small. Increasing service in rural areas is therefore a challenge.

A number of key issues contribute to extending services to new customers: the extent of network coverage Vodacom offers, distribution models that allow access to our products and services in remote communities, more affordable products (particularly airtime) and handsets,

MATERIAL ISSUE

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Vodacom continues to roll out next generation communication services, including broadband and data transfer networks, both mobile and fixed line. We provide customers and other stakeholders with periodic updates on network coverage through various channels, including the annual report, monthly Vodaworld magazine, and online (at www.vodamap.net/3G).

Affordable products and handsetsVodacom’s pioneering pre-paid service is credited with being the primary enabler for extending mobile communications to more customers. While call charges were initially much higher than for post-paid contracts, this difference has been reduced over the past five years. Vodacom’s vision is that pre-paid and post-paid customers should have access to the same services at the same price, the only difference being the way that users choose to pay. With frequent

very low denomination top-ups, pre-paid is indeed the fundamental service enabler for the poor. As we introduce each lower denomination voucher, it rapidly becomes the dominant one in the market. Recently, we have reduced the lowest denomination voucher from R12 to R5 and seen an immediate uptake. Market penetration statistics show that the R5 vouchers had reached 33% of sales volumes and 11% of usage value by March 2009. By comparison the R12 vouchers comprised 43% of sales volumes and 34% of usage value.

Other products introduced during the financial year under review to improve affordability include:

• Yebo4Less – Launched in May 2008, this prepaid tariff plan offers customers variable discounts (up to 99%) based on the customer’s location and time of day. By the end of March 2009, Yebo4less had a subscriber base of 4.8 million. The success of Yebo4Less was extended to include two new Top-up Packages in September 2008.


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Broadening the access base for communications continued

• Ad-funded “Please Call Me” service – This service provided by Vodacom allows a customer to send a free SMS to a recipient across any network asking them to “please call me”. The service is sponsored by advertising revenue and enjoys volumes of over 600 million messages per month.

• Short voice service (SVS) – Aimed at people who find it difficult to type an SMS, SVS converts voice messages to SMS and is available to all Vodacom customers (no subscription or activation is required). Messages of up to 30 seconds are allowed at a cost of R0.90 per SVS. More than 2 million messages have been sent since the launch in October 2008.

The affordability of handsets is still a major barrier to entry for many customers in all our markets and for this reason Vodacom has been working on introducing more affordable handsets. Ultra Low Cost handsets were first introduced in South Africa in 2007, immediately selling nearly a million units. During 2008, these handsets were introduced in Tanzania, Lesotho, Mozambique and DRC. This year, prices have come down by an average of 20%, to between R200 and R300 per handset, and our volumes reached two million handsets sold, mostly through large discount retailers. Further categories include the ‘entry level’ phone (below R600), and the affordable smart phones, now available at below R1 300 each. These phones offer all the business and entertainment features that most high-end

M-Pesa TanzaniaPresident Kikwete, as well as the Minister for Finance for Tanzania, have publicly endorsed M-Pesa for its role in enabling over R40 million worth of economic activity each month.

phones currently enjoy. By continuing to reduce the costs of entry-level handsets, we are confident of reaching an increasing proportion of potential customers throughout our African markets.

Mobile banking for the unbankedAccess to affordable banking services for the unbanked population has been a challenge facing countries across the developing world. In addition, carrying cash represents a high risk and constrains commercial activity. Following the successful launch in Kenya of M-PESA by Vodafone’s affiliate, Safaricom, Vodacom launched a similar mobile money transfer product in Tanzania in the year under review. With over 210 000 subscribers already registered for the service, Vodacom has appointed some 680 agents to facilitate the registration of subscribers and to support cash-in and cash-out activities. The target is to appoint over 2 000 agents in the current financial year.

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MATERIAL ISSUE

for the Blind in Pretoria, St. Dunstan’s in Cape Town and the Worcester Institute for the Blind. A total of 600 visually-impaired persons attended these road shows, learning the features through direct experience.

Engaging with our supply chain, we hosted product awareness training sessions with 256 employees between October 2008 and February 2009, and participated at Vodacom’s Business Partner Exhibition in February 2009.

The aim is also to launch Vodacom’s Specific Needs products and services to its African networks. Research has already begun at disability organisations in Tanzania to investigate the roll-out of the speaking phones. The Specific Needs Contact Centre can be reached on 12580, free from any Vodacom cell phone, or on 082 12580 from any other phone (standard rates apply), or an SMS can be sent to 12580 from a Vodacom cellphone or an e-mail can be sent to [email protected]. Further Information is available on the Vodacom website, under the Specific Needs section (audio information is also available).

M-PESA in Kenya and Tanzania currently enables over R40 million worth of economic activity each month, saving customers time and money in their financial dealings. Following the success of this product, Vodacom intends to launch a similar product for the South African market this year. The product will comply with FICA regulations.

Reducing the level of preventable exclusionIn 2004, Vodacom became the first mobile operator in Africa to provide cellular communications products and services for the disabled and the elderly. In May 2007 a new department was created in Human Resources with the aim of researching and launching new products and services for the blind, partially sighted, deaf, hard of hearing, people with limited hand functionality and the elderly.

On 17 September 2008 we re-launched the speaking phone offering by introducing three speaking phones to the market, namely the Nokia E51, E65 and N82. Vodacom has subsidised special software that converts the information displayed on the cell phone screen to speech, so the user pays no extra fees for this utility.

During November 2008 we held three road shows with visually impaired members of The National Society


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Our impact on the environment

Vodacom focuses on reducing these impacts at the stages where it has direct control. This section focuses on three environmental issues where Vodacom has the ability to reduce its impact:

• Consumption of resources

• Placement of base stations

• Electronic waste

As a responsible corporate citizen, Vodacom acts within the required internationally-accepted environmental practices and national regulations. Vodacom achieved a rating of 78.5% following an external audit for compliance to South African environmental legislation, as conducted by Lexis-Nexis-Butterworths in August 2008, down from 90.8% achieved in February 2008. The reduced score can be ascribed to the bigger sample of Vodacom South Africa operations that was used for the audit compared to the previous year.

Vodacom received one notice regarding non-compliance to environmental regulations (directive issued in terms of Section 19 of the National Water Act No 36 of 1998, Preventing and Remedying the effects of pollution). A diesel leak was detected from one of our buildings into a continuation pond which landed in the storm water drainage system. A full clean- up and rehabilitation action plan was put in place. The diesel installation was re-engineered to prevent any further incidents.

Cellphones and the networks that connect them have environmental impacts at every stage of their lifecycle – from manufacture and use through to disposal.

MATERIAL ISSUE

Vodacom had its environmental management system certified by an external third party, Dekra Certification GmbH, in November 2008. No findings were raised by the auditor and Vodacom SA unconditionally retained its ISO 14001 systems certification. This reflects Vodacom’s commitment to maintain and improve its environmental management system, enforce its environmental policy and comply with laws and regulations.

Consumption of resourcesVodacom’s consumption of energy, water, paper and fuel is shown in the table below. The figures show a slight drop in the consumption of petrol and a significant drop in the amount of water used. The reason for the high level of water usage in the prior year is unclear but can be attributed to a specific three month period and could be due to inaccurate record keeping or readings supplied by the municipality.

Business expansion is contributing to an increase in Vodacom’s energy consumption despite improvements in equipment efficiency.

Vodacom has a number of initiatives in place to try and contain, and ultimately reduce, the consumption of energy and other resources. The initiatives are described in this section.

Year ended 31 March

2009 2008 2007

Electricity buildings (million kWh) 80.6 74.1 61

Electricity sites (million kWh)* 188.6 163 112.3

Water (kl) 216 721 335 990 137 502

Paper (kg) 174 497 160 000 105 482

Diesel (million litres) 0.95 0.68 0.47

Petrol (million litres) 1.27 1.3 0.94

* Electricity consumption at sites is an approximate value based on the use of averages. Vodacom is working on more accurate consumption measures.

Consumption of resources

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Governance and policyVodacom does not currently have a policy defining its approach to energy usage. It is considering the establishment of a dedicated Energy Management Team that can look at all areas of the business, starting with an energy usage policy.

Vodacom’s National Facilities and Security (NFS) attended the first Green Building Council of South Africa (GBCSA) Convention and are in the process of adopting policy guideline initiatives in 2009 for review by management. The policy guidelines will follow the GBCSA Green Start rating framework.

Stakeholder engagementTwo important local stakeholders are the energy supplier, Eskom, and the national energy regulator of South Africa (NERSA). Vodacom has registered its free

cooling project with Eskom’s Demand-Side Management (DSM) group in an attempt to share capital expenditure and speed up the deployment of free cooling systems.

Suppliers of energy solutions are the other main category of external stakeholders with whom Vodacom has engaged on consumption of resource issues. These include suppliers of equipment such as motion detectors, suppliers of alternative energy sources and energy design consultants.

Vodacom has also engaged with a number of Vodafone groups on the consumption of resources. These include: Vodafone EMAB (Emerging Market Advisory Board), Vodafone Best Practices Group, Vodafone R&D, Vodafone Infrastructure Development Group and the Vodafone Green Technology Programme. Vodacom has joined Vodafone in Green Energy Trials with the aim of increasing the economic viability of going green.

Actions and initiatives• Reducing energy consumption

• Using renewable energy

• Greening our buildings

• Reducing powered air-conditioning

• Improving generator usage

• Upgrading IT equipment

• ‘Greening’ our catering facilities

• Reducing water consumption


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Actions and initiativesReducing energy consumption Vodacom is committed to both improve our energy efficiency as well as reduce our consumption of energy. A three-year strategic roadmap of target savings in energy consumption and reduction of CO2 emissions from base stations has been formulated. The roadmap shows a cumulative power saving of 82 644 MWh resulting in a reduction of operating expenditure of an estimated R56 million. It further shows 73 718 tonnes less CO2 emissions over the three-year period.

Together with Vodafone, Vodacom has established that a realistic target of 70% savings in energy consumption of 3G base stations can be achieved. Consumption at our current 2G base stations can also be reduced by up to 40% by renewing our current equipment. Every other item of our existing radio network, as well as our core network is being re-evaluated in terms of energy consumption and will be included in all future decisions for roll-out and replacement.

Vodacom continues to work on systems to improve the accuracy of the way we measure our energy usage in order to determine the areas within which we would be able to make an impact in terms of decreased energy consumption. For example, Vodacom has plans to deploy remote energy meters at 10% of its base stations.

There are a number of measures Vodacom is taking to achieve the base station reduction targets and to reduce energy consumption at our buildings. These measures are described below.

Using renewable energyVodacom continues to experiment with the use of renewable sources (fuel cells, solar, wind power) to power its network equipment and has projects in place to explore the economic viability of each of these technologies’ applicability in mass deployment.

One such initiative is the installation of fuel cells to power 40 base stations when electricity is unavailable. These are a significant improvement over diesel generators, as they make use of hydrogen and oxygen, releasing only water and heat.

Vodacom is constantly exploring the cost-effectiveness of products like methanol/water mixtures and ammonia as fuel sources. These fuels are much easier, safer and easier to transport.

‘Greening’ our buildingsMost of the concepts and technology of GBCSA are focused on new buildings. There are two main areas in which improvements can be made to existing buildings: better management of water usage (i.e. waterless urinals) and energy efficiency (i.e. intelligent lighting solutions). The cost of these initiatives requires a phased approach and needs to be factored into Vodacom’s strategy to make existing buildings greener.

Our impact on the environment continued

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The first building for which we are considering implementing green technology is the new office building in Durban. The lighting and air-conditioning solution is the most efficient for this type of environment. In our existing buildings we are taking a number of steps to reduce consumption and these are detailed in the following sections.

Reducing powered air-conditioning‘Free cooling’ technology provides an opportunity to reduce the usage of air-conditioning systems at base stations. Up to 60% reduction in air-conditioning energy usage is achievable with free cooling. Vodacom installed 280 free cooling units in 2008 and plans to install a further 1 000 in 2009.

Further reduction of heat load in base stations, and therefore of air-conditioning, will be achieved with the use of remote radio heads. Outdoor cabinet usage also reduces active cooling dependency and as such this deployment regime would attract higher priority in future roll-out decisions.

In its buildings, Vodacom has a number of initiatives to reduce the use of air-conditioning:

• Using white vinyl stickers in the main reception area at Midrand to reduce and deflect sunlight from the large glass enclosure, thus minimising the energy used to run the air-conditioning units. White interiors were used to further retain coolness.

• Reducing the duty cycle of diesel-generated air-conditioning units in one of our buildings.

• Investigating alternative energy-efficient air-conditioning using new technology called absorption chillers.

• Renewing old IT equipment with equipment in our data centres that requires reduced power and air-conditioning demands.

• Reducing the physical number of servers by implementing virtualisation technologies.

• Better design and layout of our data centres to optimise heating, ventilation and air-conditioning capacities.

Improving generator usageVodacom aims to reduce carbon emissions from diesel fuel by using generators in a battery-generator hybrid fashion thus reducing generator runtime and fuel consumption. Generators are also being specified to real needs and thus, by using the generator in a more efficient power band, also saving fuel.

Upgrading IT equipmentVodacom intends to replace and purchase notebooks with lower power consumption and longer battery lives. This will allow employees to work longer in the event of power failures and other outages and will reduce energy consumption.

‘Greening’ our catering facilitiesA number of measures have been implemented in Vodacom’s catering facilities to reduce energy usage and waste. These include:

• Switching all equipment off immediately after use.

• Using gas catering appliances in one of our buildings.

• Arranging for the monthly collection of old oil from our kitchens for the manufacture of soaps and cleaning agents. Approximately 1 368 litres are collected per annum, reducing environmental spillage to drain water.

• Sending food waste from the main kitchen to the designated collection area.

• Using bio-degradable chemicals.

• Fitting all extraction canopies with filters to reduce heat, smoke and pollution.

• Reducing fatty waste by using a special tank to degrease and eliminate fatty substances from our production line.

• Fitting all kitchens with fat traps to reduce the debris from leaving the production wash-up areas into the sewage system.

Reducing water consumptionMeasures to reduce water consumption at Vodacom’s buildings include:

• Reducing evaporation from water features by installing timers so that they only run from 7h30 until 17h00.

• Decreasing water surface exposed to sunlight by introducing aquatic plants.

• Reducing irrigation time and irrigating during the night to reduce evaporation and increase water absorption by plants.

• Mulching all flower beds with organic matter to decrease the temperature of the soil and feed the plants.

• Designing new gardens and upgrading existing ones with indigenous plants that require less water.


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erected. These regulations provide for engagement with the community. The procedure of placing base stations and engaging the community is as follows:

• Vodacom identifies where it would like to erect a base station and negotiates with the property or land owners in this regard.

• Where stipulated by legislation, Vodacom informs interested and affected parties, as defined by legislation, of its proposal to build a base station. The notifications include onsite advertisements, registered letters to interested and affected stakeholders and notifications in the local newspaper. The notifications are published in the format prescribed by the national or provincial authorities.

• Stakeholders may object to the building of the base station within the period stipulated in the legislation. Objections are received from various sources, including residents, home owner associations and local environmental groups. Vodacom received objections to some 30 or so applications submitted for approval in 2008.

• The objections are generally resolved by engaging with the objecting parties to address their specific concerns. This could include the possibility of relocating the site, disguising the structure or conducting specialist studies.

• Should the concerns not be resolved, the matter is referred to the relevant authority.

Our impact on the environment continued

MATERIAL ISSUEPlacement of base stationsVodacom has almost 8 000 base stations across South Africa (including micro sites). The placement of these stations raises a number of concerns including: their impact on biodiversity, their location with respect to communities and the visual pollution they create. This latter point was raised during the external stakeholder engagement process conducted by Trialogue in February 2009.

Governance and policyIn 2006, Vodafone developed a group policy requiring all operating companies to have action plans for minimising environmental impacts from their networks during design, operation and decommissioning. Vodacom has a policy in place to guide the positioning of base stations, drawing on demographic studies, research results and customer requests to determine the next appropriate location for new base stations.

A policy of sharing infrastructure between operators has assisted in reducing the number of new base stations erected. The policies and process around the placement of base stations are drafted by Vodacom’s Safety, Health, Environment and Quality (SHEQ) division. The process is implemented by the regional operations teams, i.e. regional planning and property management.

Stakeholder engagementAll cellular telephone companies have to comply with local planning regulations before base stations may be

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MATERIAL ISSUE

IT wasteVodacom intends to launch an E-waste recycling programme with its IT vendors that will allow for the recycling of old equipment under a formalised and controlled process. This will ensure that old IT equipment is disposed of responsibly and does not enter into waste dumps and landfills.

Handset wasteHandsets sent to our Vodacare outlets that are beyond repair are collected for recycling. After sorting for recyclable parts, the handsets are sent for dismantling and further sorting into component materials that are either recycled, or disposed of responsibly. During the financial year under review, 12 400 handsets were recycled. In March 2008, Vodacom SA also introduced a waste disposal process allowing customers to dispose of their unwanted cell phones and accessories in an environmentally friendly way. Uptake of this service has been poor thus far.

Environmental Impact Assessments (EIA)As required by national legislation, independent consultants are appointed to conduct environmental assessments related to site builds. Vodacom is committed to preserving biodiversity and draws on the expertise of over 13 environmental impact assessment consultants.

Where applicable, Vodacom’s proposed site builds are subjected to a basic assessment, or to a more thorough scoping and EIA process, depending on the sensitivity of the site. Non-sensitive sites (for example, rooftop sites) are more likely to be subject to a basic assessment whereas sites in ecologically sensitive rural areas may be subject to a scoping or EIA process. Where Vodacom occupies another party’s mast, no assessment is required. The legislation is currently under review and will be amended in respect to the various categories and the respective types of assessment required.

Following the EIA process, the relevant authority will either grant or refuse authorisation for Vodacom to proceed with its proposed course of action. Vodacom estimates that its regions made in excess of 160 applications in the financial year under review, with 108 approvals and 17 recorded rejections. The remaining applications are awaiting approval.

Reducing visual pollutionVodacom has devised ways to help base stations blend in with the surrounding environment. Over 100 disguised structures have been erected in all regions to date, including windmills, trees (various species), billboards and flagpoles.

Studies on bird habitation and nesting are done on request.

Electronic waste Electronic waste arises at a number of points through Vodacom’s business. This section considers network equipment, IT and handset waste.

Network equipment wasteVodacom has not yet managed to accurately measure network equipment waste, but we have tracked and recorded the waste stream. Further, we have redesigned the equipment chain to include a formal system of collection, reuse (some is reconditioned for on-sale to other African operations) and disposal.


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Radio frequency emissions and health

The latest researchThe WHO database shows that there are more than 1 900 published scientific articles on the biological and health effects of radio frequency electromagnetic fields, and more than 630 studies on radiofrequencies specifically used by mobile phone networks. There is no evidence to convince experts that exposure below the guidelines set by ICNIRP carries any health risks, for adults or children.

However, integral to the scientific process, there are identified gaps in knowledge that still need to be addressed before the WHO will conclude its international EMF risk assessment programme. The WHO states that: “While no health effects are expected from exposure to RF fields from base stations and wireless networks, research is still being promoted by the WHO to determine whether there are any health consequences from the higher RF exposures from mobile phones.”

The WHO is awaiting the publication of the Interphone study before it makes its full health risk assessment. This study comprises a series of multi-national case-control studies to assess whether RF exposure from mobile phones is associated with cancer risk. The International Agency for Cancer Research (IARC), a specialised agency of the WHO, has coordinated the study. Participating countries are Australia, Canada, Denmark, Finland, France, Germany, Israel, Italy, Japan, New Zealand, Norway, Sweden and the UK.

Until the WHO concludes its international risk assessment the Vodacom Group aligns its EMF policy with the WHO’s contemporary best practice recommendations. As a responsible business, Vodacom ensures that the company stays abreast of all developments in scientific research and communicates significant findings to the public.

Vodacom’s response to RF exposureGovernanceThe Vodacom Group has an EMF Council that meets three to four times a year. Members of the Council need to be ‘risk owners’ and there are representatives from Group Marketing, Regulatory, Legal, Operations, Communications, CSI and Health and Safety. The operating companies are represented at the Council by the EMF leader for the Group who reports on Vodafone EMF requirements, best practice and current research. The minutes of the EMF Council are reported to Vodacom’s CEO by the Council Chairman.

Group internal audit works with the EMF leader to ensure that EMF risks are harnessed and managed, and

Mobile phones, together with the base stations that provide the network coverage, emit energy known as electromagnetic fields (EMF) or radio frequency (RF) fields. This phenomenon has created public concern.

MATERIAL ISSUE

A plethora of non-peer reviewed reports on supposed health matters associated with EMF have created some public concern. However, current scientific evidence indicates that exposure levels typical of mobile equipment are very unlikely to induce or promote cancer.

RF exposure A mobile phone is a low-power radio transmitter and receiver that emits low levels of RF energy when turned on. The International Commission for Non-Ionizing Radiation Protection (ICNIRP) guidelines establish permitted levels of RF exposure and mobile phones are designed to operate within these stringent levels. The levels include a safety margin designed to assure the safety of all persons, regardless of age and health.

The RF exposure for a person living near to a base station is typically much lower than that experienced by a mobile phone user. Furthermore, base station exposure levels in areas where members of the public typically have access are orders of magnitude below the established international safety limits.

The World Health Organisation (WHO) states: “Guidelines have been developed by the International Commission on Non-Ionizing Radiation Protection (ICNIRP, 1998) to ensure protection against the scientifically established health effects associated with RF fields. The public exposure levels associated with base station technology are typically orders of magnitude below the ICNIRP recommendation and handset devices are designed to operate well within those limits likewise stated by the WHO as safe.”

Limiting exposureApart from infrequent signals used to maintain links with nearby base stations, handsets transmit RF energy only while a call is being made. A good signal from a nearby base station will mean a reduction in RF fields around a mobile phone handset.

RF exposure to a user of a mobile phone located a short distance from the head (as when used with a hands-free appliance) is far lower than to a user placing the headset against the head. RF exposure to people nearby is very low. New services, like text messaging, picture messaging, internet and e-mail, also reduce our exposure to RF, because we hold the phones further away from our bodies during operation of such services. The WHO suggests further measures one can make to reduce exposure such as keeping calls short and keeping the mobile phone away from the head and body.

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that the efficacy of the controls is constantly assessed and reported on. They audit the individual areas of the business and determine whether or not controls are adequate and effective and the risk is adequately managed. Group internal audit reports to the Vodacom Board through the Risk Management Committee.

Stakeholder engagementIn line with the recent acquisition by Vodafone of a majority shareholding in Vodacom, a stakeholder engagement opinion survey has been conducted by Nunwood Consulting. The report is yet to be disseminated but the content is expected to provide Vodacom with a keen insight into its performance in such strategic stakeholder engagement areas as municipal authorities, key scientific institutes, Department of Health, Bureau of Standards and regulatory bodies.

Vodacom currently engages with its stakeholders on the issue of RF emissions in the following ways:

• Vodacom actively engages with the Directorate for Radiation Control in the South African Department of Health. It does this to encourage industry-wide compliance with ICNIRP and to keep abreast of any developments in local regulation. Vodacom would welcome South African regulation around EMF that removes mobile communications from the Hazardous Substances Act.

• Vodacom is working with officials in Tanzania on EMF policies and regulation.

• The EMF toolkit is an internal communication channel and tool around EMF issues that was developed by Vodafone. It contains a computer-based instruction manual as well as a training course that will be rolled out across the Vodacom Group.

• Vodacom provides its customers with important information on EMF exposure via the ‘base station safety’ section of its website, www.vodacom.co.za. Guidelines on exposure and Specific Absorption Rate (SAR) values on a variety of cell phones are provided on the site. Additionally, the values of base station field measurements recorded from across the Vodacom network are available at http://emf.vodacom.co.za/.

• Vodacom engages with local communities as part of its responsible network deployment process. An extensive corporate communications plan is in place to facilitate better relationships with municipalities. Furthermore, Vodacom plans to train representatives of local communities (for example, parent/teacher body representatives) on the use of the EMF toolkit, after which they will be given a password to access the system.

• Vodacom, as part of the Vodafone family of operating companies, supports the centralised approach to corporate funding of fire-walled research spear-headed by Vodafone.

Base stationsVodacom has employed an internationally recognised South African-based consultancy, EMS&S, to ensure that the Vodacom base station network is compliant with the ICNIRP RF Health & Safety recommendations that are endorsed by the WHO. It is expected that at least ninety-five percent of Vodacom’s South African network will be certified as ICNIRP compliant by the end of June 2009.

EMS&S is also responsible for ensuring adequate EMF compliance training of Vodacom’s operational employees (including radio planners, property managers, maintenance employees and radio optimisers).

MATERIAL ISSUE


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The Vodacom Foundation and Group Corporate Social Investment (CSI)

of spare capacity in other parts of the company. For example, this year the Foundation ran the ‘Tries for Smiles’ campaign in conjunction with the marketing division, to leverage our rugby sponsorships, which benefitted children needing facial reconstruction operations. The current governance structure, presently in place, will be maintained.

Stakeholder engagement While project selection decisions are taken by the Vodacom South Africa Foundation Advisory Board (which receives an annual budget allocation from the company), these decisions are not taken in isolation. The Vodacom Foundation has strong relationships with government departments, such as education and health, at national, provincial and local levels. Programmes are normally also delivered by a number of implementing partners, each providing specific expertise, and the Foundation enjoys a close working relationship with institutions such as the SA National Council for the Blind, Netcare and the Pretoria Eye Institute. In June 2009, the Vodacom Foundation launched its website to serve as an interactive communication portal for its engagement with stakeholders ranging from government and implementing partners to communities and individuals.

Leveraging the business to do goodWe recognise our duty to assist government and communities not only with financial contributions but also through the innovative application of our technical skills and operational capacity. The application of mobile communications in education and health in particular, can be broadened to deliver much needed services to the citizens of the countries in which we operate. It is for this reason that Vodacom has established Foundations in most of our countries of operation.

Celebrating its tenth year of existence, The Vodacom Foundation in South Africa disbursed R67.4 million during the financial year under review, a 2% increase over the prior year. This brings the Foundation’s total investment since its inception a decade ago to approximately R400 million. An additional R125 million has also been invested in CSI from other divisions within Vodacom SA.

Governance An examination of the benefits of managing CSI activities through a stand-alone trust versus an internal business unit of Vodacom SA, has shown no significant advantages. On the contrary, the Foundation’s position within Vodacom SA has allowed it to take advantage

Vodacom has a ten-year track record of investing in the development of the communities in which we operate.

Since 2002, Vodacom has invested R6,2 million into the Cell-Life organisation towards the development of technology-based solutions for the management of HIV/Aids. These solutions focus on the promotion of awareness and education about HIV/Aids as well as to facilitate an effective treatment programme.

These funds initially assisted Cell-Life in the development of cellphone software that helps manage the treatment regime of HIV patients. The investment also enabled Cell-Life to help

improve efficiency in the dispensing of Anti-Retroviral Treatment (ART) to patients, through the development of an Intelligent Dispensing of ART, which has been rolled out in 20 clinics.

The ‘Cellphone for HIV’ project was developed to provide information and communication to infected and affected persons, as well as other relevant stakeholders in this field. This will go a long way towards minimising the stigma about HIV/Aids. The project also supports adherence, counselling and monitoring of HIV.

Cell-Life

In my book, there is nothing more fulfilling than being part of a corporate that earns the trust of the communities in which it operates, by being with them through both good and bad times. An organisation like ours that chooses to be a force for

good is accordingly, my kind of company.Mthobi Tyamzashe, CEO of the Vodacom Foundation

““

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Penreach Mobile Science Lab The Ndzalo – meaning “wealth in education” – Mobile Science Lab is developing science education in schools in Mpumalanga by enabling learners and educators to conduct practical experiments and research in the laboratory. Initially, the laboratory is travelling between six schools in the province – three high schools and their feeder primary schools – visiting each fortnightly. The value of Vodacom’s contribution is R1.1 million. These schools currently experience difficulty in undertaking portfolio work with their learners, due to a shortage of equipment. The laboratory will ensure that learners are able to complete their portfolios. Laptops with wireless internet connections have also been deployed in the laboratory, which will assist educators to use the science education software to design lessons appropriate for their environment and learners to access scientific information not previously available to them. The equipment will allow learners to work in pairs and achieve meaningful results even in overcrowded classroom situations. Educators from the partner schools will undergo a development programme so that they have the necessary skills to use the equipment.

Approach Vodacom Foundation support takes the form of cash, in-kind giving, time and skills:

• Cash support usually consists of once-off donations, as well as one to three-year grants. Additionally, monthly contributions are deducted from over 1 200 payroll contributors through the company’s ‘Payroll-Giving’ platform, bringing the total since inception in December 2006 to more than R1 million.

• In-kind support comprises collections, driven by the company’s 1 729 employees volunteers, our Yebo Heroes, typically in the form of books, clothing, blankets and other much-needed items.

• Time and skills contributions are driven by Yebo Heroes, taking the form of relief duty, gardening and painting, tree-planting and other contributions of “sweat-equity”. Employees completed 75 volunteer projects this year. The criteria for dispensing Foundation support include the potential to use ICT to solve social problems, the degree of impact, partnerships, sustainability, sound governance, track record and solvency. Currently, the bulk of its funding goes towards projects that offer a social return, e.g. mobile labs and clinics, life-changing operations (facial reconstruction, cataracts, cardiac surgery), as well as those that require ongoing funding, such as feeding schemes and bursaries. In the future Vodacom will be looking to increase the proportion of spending on projects that are more closely aligned to our business competency. Good examples are described in the accompanying sidebars.


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The Vodacom Foundation and Group CSI continued

Providing IT access to secondary schools in MozambiqueDuring the 2009 financial year, Vodacom Mozambique funded infrastructure investments in the education sector by building IT rooms in 13 secondary schools (and one university) throughout the country. Each IT room consists of 25 computers, a printer, a modem, a server, a virtual library licence and a 24-month warranty for the IT equipment. The IT rooms were installed in the provinces of Maputo, Sofala, Manica, Zambézia, Tete, Cabo Delgado, Gaza and Inhambane. The value of this investment was Meticais 11 641 250 (approximately USD 447 740). The funding of the IT rooms is a project carried out in partnership with the Um Olhar de Esperança project, a programme of the Mozambican Ministry of Education and Culture.

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Jabavu LibraryIn March 2008, the Vodacom Foundation, Joburg City Council and Department of Public Works officially opened the R14 million Jabavu Library – the largest and best equipped of its kind in Soweto. Vodacom Foundation has provided financial resources of R3.1 million – made up of a R1.6 million contribution to the construction of the children’s wing of the library, and R1.5 million towards IT equipment and furniture.

Focus areasEducation and Healthcare remain Vodacom’s main focus areas, while projects in areas such as security, arts and culture, community sport, and the environment are granted funding on a case-by-case basis. We also place emphasis on vulnerable groups like children, the youth, the empowerment of women and the disabled.

Performance and evaluation The Vodacom Foundation in South Africa established a monitoring and risk management department with a mandate to improve a number of key performance areas:

• Accreditation of beneficiary organisations

• Addressing bottlenecks

• Contracting and reporting

• Milestone payments

• Systems compliance

• Early warning systems.

Projects recommended by the Advisory Board are visited and scored by independent service providers. Regular visits by Foundation employees are conducted during implementation. Post-project audits are also conducted to inform decisions to renew, or discontinue projects.

Future commitments This year the Foundation will embark on rolling out ICT resource centres with the aim of assisting schools through e-learning. These facilities will be community-based, providing general internet services, a range of computer training programmes primarily for the teachers and also the community at large. Two centres will be rolled out this year. The intention is to provide seven more such facilities in the next few years, with the aim being one resource centre in each of the nine provinces.


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Ethics and compliance

Awareness and training in related programmes: The Ethics and Compliance Group has initiated various other awareness and training programmes that are being implemented within the Group. For example, a basic ethics briefing session is included in Vodacom’s employee orientation programmes. Other programmes in the areas of human resource development and risk management also address perceived ethical risks identified in the risk assessment process. Executives responsible for the implementation of these programmes are members of the Group Ethics Committee.

The Group Code of Ethics The Vodacom Group Code of Ethics (“the Code”) continues to be appropriated and applied in various companies, so that it can be related to their day-to-day operations. The Code has been translated into French and Portuguese for employees in the DRC and Mozambique. Through the initiatives mentioned above, management and employees learn how to apply the Code to their specific job environments. The Code will be reviewed by the ethics committees of the various companies during the 2010 financial year, and will be suitably tailored to address specific cultural concerns and ethical challenges that are unique to that country and company.

Institutionalisation of EthicsAs indicated above, a Group (including Vodacom SA) Ethics Committee has been established, and similar committees have been established in Vodacom Mozambique, Tanzania, Lesotho and Vodacom Congo. These committees are composed of representatives from the operations, human resource, risk management and ethics and compliance groups and divisions. The main functions of the Group Ethics Committee are to: • approve the overall strategy for ethics management;• provide strategic oversight of the implementation

of the Ethics Along the Way Programme and other related programmes;

• enhance commitment to ethics by championing the business case for ethics and setting the tone for ethics, demonstrating support and respect for adherence to the Vodacom Way and the Code of Ethics, and showing zero tolerance for unethical and other non-compliant acts committed by Vodacom employees;

• ensure the quality, integrity and effectiveness of internal controls (codes, policies and procedures, etc.) relating to ethics and overseeing the quality and application of policies, procedures, programmes and external ethics management;

• maintain oversight of and provide guidance to the operating company ethics committees;

• ensure the performance of bi-annual reviews of internal and external ethics management to establish the ethics risk profile of the Group; and

MATERIAL ISSUECompliance to ethical standardsThe Ethics and Compliance Group is responsible for implementing two risk management programmes: the Ethics Along the Way Programme and the Anti-Corruption, Money Laundering and Financing of Terrorism (CMT) Compliance Programme.

EthicsThe management of ethical risk is a critical requirement for corporate sustainability and success. Vodacom’s ethics development programme, Ethics Along the Way, continues to be implemented in the Vodacom Group and all operating subsidiaries. The Vodacom Way, which sets forth Vodacom’s key strategic, job and ethical values, serves as the focal point for the programme. The establishment of such a programme is consistent with the recommendations of the King Committee and international best practice.

The first phase of the programme was to conduct ethics risk assessments for the Group and its five operating subsidiaries. Based on the findings of the risk assessments regarding the opportunities and threats facing the subsidiaries, the Ethics and Compliance Group designed a second phase of the programme aimed at enhancing strengths and correcting weaknesses in two main areas: thinking about ethics, and institutionalising and managing ethics.

The main internal interventions that are being implemented in the Group and its network operating subsidiaries are described below.

Ethics TrainingTraining of management: Ethics training for management in the non-South African operating companies has been completed for Lesotho and Mozambique. In South Africa, Tanzania and the DRC, 66%, 77% and 89% of management, respectively, have received ethics training. Once trained, managers are expected to utilise the newly acquired skills in making ethical decisions and in improving their general management practices. They are also expected to collaborate with the Ethics and Compliance Group and newly established company ethics committees in implementing their ethics-related programmes.

Training of employees: Ethics training for employees has been completed in Lesotho and Mozambique. In South Africa, Tanzania and the DRC, 48%, 80% and 85% of employees, respectively, have received training. The goal is to have all employees share in the ownership of Vodacom’s ethical values and standards.

Maintaining high standards of ethics and compliance requires ongoing training and adherence to a well-defined set of codes and standards that applies across all operating divisions.

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operating subsidiaries. Based on the findings, CMT risk management strategies and programmes are modified to manage the various levels of risk.

ImplementationThe Group Anti-CMT Code of Compliance continues to be implemented in the Group and all network operating subsidiaries. The responsibilities of the various Directors, officers and executives are regularly emphasised in this regard. Ethics and compliance officers continue in their various roles within the Group and the operating subsidiaries to assist and advise on the implementation of the programme. Country-specific Anti-CMT policies and procedures have been put into place to inform and guide the implementation of the Group Anti-CMT Code of Compliance.

During this financial year, senior ethics and compliance officers were deployed to mentor and assist local ethics and compliance officers in Vodacom Mozambique and Vodacom Tanzania. Conversely, Vodacom Congo’s current, expatriate senior governance officer will soon take on a local, junior governance officer for mentoring during the next financial year.

The country Anti-CMT policies and procedures continue to be implemented by line management in respect of their various functional groups and divisions, according to their risk profile, in four basic steps. Firstly, Anti-CMT requirements are incorporated into various functional policies and procedures. Secondly, appropriate due diligence processes are developed for the function. The due diligence process is then initiated in respect of new and existing business relationships. Finally, based on the results of the due diligences, appropriate Anti-CMT clauses are inserted into new and existing contracts and agreements.

In terms of Group policies and procedures on the receiving and giving of gifts and hospitality, Vodacom Group companies are required to implement a formal approval process and maintain registers of gifts and hospitality received or given by personnel. The SA gifts receiving register, which was implemented during the previous financial year, continues to be updated by employees as they receive gifts. Information is being extracted from the gifts receiving register, and submitted to the Group Remuneration Committee for scrutiny on an annual basis. During the 2009 financial year, 252 declarations of gifts received were made. An electronic system to register the giving of gifts and hospitality is currently in the process of being designed and will be implemented in SA and the non-SA operating companies during the next financial year.

The Ethics and Compliance Group also conducts governance and CMT risk assessments and due diligences in respect of proposed investment opportunities in various countries and companies.

ConclusionThe implementation of the programmes, policies and procedures highlighted above is continuing to improve the governance profile and performance of the Vodacom Group of companies.

Embedding our values – the Vodacom Way The Vodacom Way continues to be emphasised, appropriated and applied throughout the Group of companies. This has been achieved through the abovementioned training, as well as various communications and campaigns. During this financial year, ethics awareness campaigns included the inclusion of ethics articles in company publications, the distribution of posters and “table talkers” aimed at highlighting Vodacom values, and the need for all employees to live these values in the workplace. These types of initiatives help inculcate company values throughout the Group of companies.

• ensure the establishment of a comprehensive system of ethics reporting, which will be included in Vodacom’s sustainability/corporate social responsibility reporting.

The operating company ethics committees have similar functions at their level.

The Group Ethics Committee met on three occasions during the financial year. The ethics committees of the non-SA operating companies each had four meetings during the same period.

Ethics ChampionsEthics Champions have been appointed in all Groups and operating subsidiaries. They will serve to raise ethical awareness in their various Groups and operating subsidiaries, encouraging ethics-talk and facilitating the Ethics and Compliance Group’s ethics management initiatives. Ethics champions do not provide advice on dealing with ethical issues; ethical issues are referred to line management or the Ethics and Compliance, Legal or Human Resource Groups. During the next financial year, focus will be placed on consolidating the Ethics Champions initiatives in the Group and its operating companies.

Anti-CMT Compliance ProgrammeInternational best practice indicates that corporate ethics and compliance programmes are key elements of any risk management strategy aimed at the prevention and detection of CMT. The Anti-CMT Compliance Programme includes the following elements:

Knowledge BaseInternational and country data-bases on CMT risk and CMT policy, law and administration continue to be updated and improved. Specialist legal counsel provides advice on CMT risk management in operating countries. Various governance and CMT indicators are regularly monitored in these countries, as well as those in which possible investments are being contemplated or pursued.

Risk Assessment and Risk Management Strategy and DesignCountry and company CMT risk assessments are updated annually for Vodacom Group and all network


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Reference to GRI G3 guidelines

GRI Index Table by Chapter

Chapter within the Sustainability Report or other source

Section GRI indicator Page

About this report Report Parameters 3.1 – 3.8, 3.11

Inside front cover

3.10, 3.12 52

Message from the CEO Strategy and Analysis 1.1 – 1.2 4

The Vodacom Group business Organisational Profile 2.1 – 2.9 6

Economic performance indicators EC1 6

2.10 N/A

Sustainability governance and stakeholder engagement

Governance, Commitments and Engagement – Stakeholder engagement

4.14 – 4.17 12

Earning the trust of our customers and the public

Social performance indicators – society SO7 15

Social performance indicators – product responsibility

PR5 14

PR6 18



EC7 24

A workplace for the highly skilled Social performance indicators – labour practices and decent work

LA1 28

LA11 30

LA12 32

Health, wellness and safety Social performance indicators – labour practices and decent work

LA8 32



Social performance indicators – labour practices and decent work

LA13 22

Our impact on the environment Environmental performance indicators EN1, EN3, EN23, EN28

38

EN6, 40

Radio frequency (RF) emissions and health

Social performance indicators – product responsibility

PR1 44

The Vodacom Foundation and Group Corporate Social Investment


Ethics and compliance Governance, commitments and engagement

4.6, 4.8, 4.9 50

Vodacom Group Annual Financial Report

Governance, commitments and engagement

4.1 – 4.4 AR

The following index shows where to find information relating to the Global Reporting Initiative (GRI) G3 Guidelines.

3G Third Generation Mobile Communications Technology

AIDS Acquired Immune Deficiency SyndromeARPU Average Revenue Per UserARV Anti-Retro ViralBEE Black Economic EmpowermentBBBEE Broad-based Black Economic EmpowermentCMT Corruption, Money Laundering and TerrorismCPB Consumer Protection BillCSI Corporate Social InvestmentCSTO Community Services Telephone OperatorCUASA Communication Users Association of South AfricaDAI Direct Aids Intervention DIFR Disabling Injury Frequency RateDRC Democratic Republic of CongoDTI Department of Trade and IndustryDTI CoGP Department of Trade and Industry’s Codes of Good

PracticeEAP Employee Assistance ProgrammeEBITDA Earnings Before Interest, Taxes, Depreciation and

AmortisationECA Electrical Contractors’ AssociationECS Electronic Communication ServicesECNS Electronic Communication Network ServiceEDGE Enhanced Data Rates for Global EvolutionEE Employment EquityEIA Environmental Impact Assessment EMF Electromagnetic FieldsERM Enterprise Risk ManagementFASA Franchise Association of South AfricaFPB Film and Publications BoardGBCSA Green Building Council of South AfricaGPFT Graduate Programme for Females in TechnologyGPRS General Packet Radio ServiceGPS Global Positioning SystemGRI Global Reporting InitiativeGSM Global System for Mobile CommunicationsHDI Historically Disadvantaged IndividualsHIV Human Immunodeficiency VirusHR Human ResourcesHSDPA High Speed Downlink Packet AccessHSUPA High Speed Uplink Packet AccessIARC International Agency for Research on CancerICAS Independent Counselling and Advisory ServiceICASA Independent Communications Authority of South AfricaICT Information, Communication and Technology

Glossary

ICT Charter Empowerment Charter for the ICT IndustryICNIRP International Commission on Non-ionising Radiation

ProtectionIOD Institute of DirectorsISETT SETA Information Systems, Electronics and Telecommunications

Technologies Sector Training and Education AuthorityISO International Organisation for StandardisationIVR Interactive Voice ResponseJSE Johannesburg Stock ExchangeLBS Location-based ServicesMMS Multimedia Messaging ServiceMNO Mobile Network OperatorMNP Mobile Number PortabilityMPLS Multiprotocol Label SwitchingOHSAS Occupational Health and Safety Assessment SeriesOpCos Operating CompaniesPDI Previously Disadvantaged IndividualsPUSANO Provincial Underserviced Area Network OperatorQSE Qualifying and Exempt Micro-EnterpriseREMCO Remuneration CommitteeRF Radio FrequencyRICA Regulation of Interception of Communications Act SAR Specific Absorption RateSARPSA South African Reserve Police Service AssociationSHEQ Safety, Health, Environment and QualitySIM Cards Subscriber Identification Module CardsSMS Short Messaging ServiceSVS Short Voice ServiceTSI Technology Strategy InitiativeUSA Universal Services AgencyUSAL Under-serviced Area LicenceUSSD Unstructured Supplementary Services DataVAEP Vodacom Advanced Executive ProgrammeVANS Value Added Network ServicesVIP Vodacom Incentive ProgrammeVLC Virtual Learning CentreVCT Voluntary Counselling and TestingVoIP Voice over Internet ProtocolVPN Virtual Private NetworkVSAT Very Small Aperture TerminalVSP Vodacom Service Provider CompanyWASP Wireless Application Service ProviderWASPA Wireless Application Service Providers AssociationWiMAX Worldwide Interoperability for Microwave AccessWHO World Health OrganisationYAP Young Achievers Programme

Copyright © 2009 Vodacom Group Limited All rights reserved

Report compiled by TrialogueDesign by GroundPepper

Report Application Level C C+ B B+ A A+

Report on: 1.1 2.1 – 2.10 3.1 – 3.8 3.10 – 3.12 4.1 – 4.4, 4.14 – 4.15

Report on all criteria listed for level C plus: 1.2 3.9 – 3.13 4.5 – 4.13, 4.16 – 4.17

Same as requirement for Level B

Not required Management Approach Disclosures for each Indicator Category

Management Approach Disclosures for each Indicator Category

Report on a minimum of 10 Performance Indicators, including at least one from each of: social, economic, and environment

Report on a minimum of 20 Performance Indicators, including at least one from each of: economic, environment, human rights, labour, society, and product responsibility

Respond on each Core G3 and Sector Supplement indicator with due regard to the Materiality Principal by either: a) reporting on the indicator or b) explaining the reason for its omission

GRI G3 Application Level requirementsVodacom is self-declaring a C level of application. The following table provides a summary of the GRI’s requirements for different levels of compliance.

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G3 Profile disclosures

G3 Management Approach

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G3 Performance Indicators and

Sector Supplement Performance

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