2016 - broadband infraco soc · broadband infraco integrated report 2016 5 2.1 overview broadband...
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S H A R I N G O U R S U C C E S S E S
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BROADBAND INFRACO INTEGRATED REPORT 2016
Sharing our Successes…
THE IMPLEMENTATION OF BUILD, GROW AND EXPAND STRATEGY
2014• Secondanchorcustomeracquired• Five(5)openaccessPoPscompleted• PresidentialProclamationsignedon19September2014,effectivelytransferringBroadbandInfracofromtheDepartmentofPublicEnterprisestotheDepartmentofTelecommunicationsandPostalServices
• 89.47%AchievementofShareholders’Compact• Unqualifiedauditreport
2015• 83%AchievementofShareholders’Compact• 74%ofemployeesparticipatedinasatisfactionsurveyand70%weresatisfied• Overallawardand“A”ratingincompliance• “A”ratingininternalauditandinternalcontrol• Unqualifiedauditreport
2016• 87.50%AchievementofShareholders’Compact• Zeroirregularexpenditure• NOSAAccreditation• ISO18001successfulaudit• Unqualifiedauditreport• PositiveEBITDA
1BROADBAND INFRACO INTEGRATED REPORT 2016
CONTENTS
SECTION 11. Aboutthisreport 3
2. Overview 5
3. Whatwedo 7
4. Ourleadership 9
5. ReportfromtheChairmanandtheChiefExecutiveOfficer 11
6. ChiefFinancialOfficer’sReport 14
7. Highlights 16
8. PerformanceAgainstShareholders’Compact–2015/16 18
9. TechnicalEnvironment 22
10.BusinessDevelopment 24
11.StakeholderEngagements 26
12.CorporateSocialInvestment 28
13.Governance 30
14.LegalandRegulatory 42
15.PeopleManagement 43
16.SupplyChainManagement 48
17.Safety,Health,EnvironmentandQualityPerformance 49
SECTION 218. AnnualFinancialStatements2015/16 50
19.AcronymsandAbbreviations 89
20.GeneralCompanyInformation 91
SECTION 1
2 BROADBAND INFRACO INTEGRATED REPORT 2016
Broadband Infraco prides itself on excellence in service delivery
3BROADBAND INFRACO INTEGRATED REPORT 2016
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1. Introduction
The Board of Directors and Executive Management ofBroadband Infraco SOC Limited (“the Company”) arepleasedtopresenttheIntegratedReportoftheCompanyfor2016.BroadbandInfracoreportson itsactivitiesandperformance to the shareholders, namely the Ministerof Telecommunications and Postal Services (ExecutiveAuthorityintermsofthePublicFinanceManagementAct1of1999)inhiscapacityasashareholderrepresentativeon behalf of the government of South Africa, and tothe Industrial Development Corporation of South AfricaLimited(IDC)ofSouthAfrica,asthesecondshareholder.
The Company’s main accountability instruments are theCorporatePlan,Shareholders’CompactandPerformanceIndicators, Integrated Report, Quarterly Reports, AnnualFinancialStatementsandanyother informationthatmaybe requested by the shareholders from time to time.The Integrated Report is tabled annually in the NationalAssembly in compliance with the requirements of thePublicFinanceManagementAct29of1999asamended(the “PFMA”), the National Treasury Regulations issuedin termsof thePublic FinanceManagementActand theCompaniesActNo71of2008.
The aim of this Integrated Report is to provide insightintoBroadbandInfraco,itsvaluepropositionandstrategy,opportunitiesandrisks,itsbusinessmodelandgovernance.Furthermore, it provides details of the current yearperformanceagainstitsstrategicobjectivesinawaythatgivesstakeholdersaholisticviewoftheCompanyanditsfutureactivities.
TheIntegratedReportpresentedincludesforward-lookinginformation to allow stakeholders to make an informedassessment of the future value creation ability of theorganisation.ThisreportistabledagainstthebackgroundofaturnaroundintheCompanymanifested,amongothers,bythefollowingperformancevariables:
I. Economic and Strategy Performance Indicators• Achievingdouble-digitsyear-on-yearrevenuegrowth
of 24% (year ended 31 March 2016 amounts to R452million;previousyearR366million)inanindustrythatreflectssingle-digityear-on-yearrevenuegrowth.
• Continuingtodiversifyitscustomerbasebyincreasingitsnumberofcustomersfrom18inthepreviousyear,to23intheyearunderreview.
• Growingitscumulativeyear-on-yearSTM-1equivalentfrom1506STMeto2003STMe.
• Cementing its long-term partnership with the state,throughCustomer1becomingamajoranchorcustomer.
• SignificantlyincreasingitsshareofrevenuefromSouthAfrica’s biggest mobile network operator through along-term,multiple-linktransaction.
• Continuously attracting emerging Internet ServiceProviders(ISPs),utilisingefficientIP-basedservices.
II. Environmental PerformanceThe implementation and maintenance of Safety, Health,Environment andQuality (SHEQ) systems forms part ofthecoreoftheCompany’sstrategy.Thefollowingarethehighlightsfortheperiodunderreview:
• OSHAS18001:AuditsconductedsuccessfullyandSABSaccreditationconfirmed.
• The 2015/16 year ended without a fatality fromoperationalincidents.
• The Company has been applying ISO 9001 principlesandhasnowresolvedtoinitiatethecertificationprocess,ofwhich32%hasbeencovered.
• Reduction in direct energy consumption per energysource.
• Increasedpercentageofuseofrecyclablematerials.• Noenvironmentalincidentshavebeenreportedand/or
recorded.• Reductioninwaterconsumptioninprojectimplementation
programmes.• Environmentally friendly materials used during the
implementationofvariousprojectsofBroadbandInfraco.• Indirectenergyconsumptionreducedbyprimarysource
andenergysaveddue toconservationandefficiencyimprovement.
III. Social Performance IndicatorsTheCompanyenlisted thesupportofpartnershipswithinprivate and public companies to acquire and donate 60tablets to Seshigo High School. The tablets, donated tobenefitmainlythematriclearnersattheschoolandloadedwith an online content application, named 2Enable, weredeliveredtoensurethatthetoolsareateachingaidthatwillcomplementtheworkoftheteachers,whilesimultaneouslyproviding an audio-visual learning opportunity for thelearners.
The2Enableapplicationboaststhefollowingfeatures:
• Diagnosticself-assessments• Courseware• Coursesupport• SACECPTDtracking• Analyticsandreporting• Communicationandtrainingcalendar• Learningcircles/usergroups• Administration
1. ABOUT THIS REPORT
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Thetabletswerealsodeliveredwiththefollowingvalue-addedservicesatnocostfromtheserviceprovider:
• Simcardswith200MBdatafor12months.• WiFidataaccessfortwo(2)years.• Monitoringandevaluationimplementationprogramme.
IV. Network PerformanceBroadband Infraco has achieved numerous successesin the past financial year. Major positive changes havetakenplaceinthetechnicaloperatingenvironmentoftheCompany,includingcompletionofmanyprojects,allowingmuchrequiredautonomyandcostsaving.Similarly,manycustomerserviceshavebeenbuiltandprovisioned.Notableamongtheachievementsarethefollowinghighlights:
• CompletionoftheMultiwavelengthTransportServices(MTS) project together with the core networkoptimisationprojects,whichhave increased the totalnetwork capacity with more than 100% capacity insomecases.
• Thecompletionandmigrationofservicesfromsomethird-party closed points of presence (PoPs), thusallowing major cost of sales savings and networkautonomy.
• The completion of the Oberholzer to Ramatlabamalink Dense Wavelength Division Multiplex (DWDM)upgrade, allowing more services to be providedto neighbouring Botswana. This strengthens theBroadband Infraco mandate to improve regionalconnectivity.
• Thesuccessfulimplementationandtimelyprovisioningof key customer services to amajormobile networkoperator.
• Thebuilding,installationandprovisioningofservicesaspartofthefirstandsecondphasesoftheprojectforCustomer1.
• SuccessfulrelocationofBroadbandInfracoequipmentfrom Transnet Freight Rail sites, which contributesto better network maintainability and improvesrestoration times, thus improving overall networkperformance.
• A quality system programme has been initiated forimplementation, with a goal of reaching ISO9001accreditationinthenexttwo(2)years.
• National Occupational Safety Association (NOSA)accreditation.
1. ABOUT THIS REPORT CONTINUED
V. Socio-Economic PerformanceThe Supply Chain Management (SCM) department hassucceededindeployingsystems,policiesandproceduresspecifically designed to attract meaningful contributionfrom previously disadvantaged groups, and created anenvironmentwithintheCompanywheretheseindividualsenjoy preference in terms of the supply of goods andservices inallspheresofthesupplychain.Asastrategicbusinesspartner,SCMcontinuestohaveagreatimpactonthedeliveryoftheCompany’sobjectivesandmandate.Italsoplayedamajorroleintransformationbycontributingto the Broad-Based Black Economic Empowerment(B-BBEE),throughasupplychainmanagementsystemthatenabledallstakeholderstoparticipateinafair,equitable,transparent,competitiveandcost-effectivemanner.
Thesespecificintegratedreportingindicatorsarecontainedintherelevantsectionsbelow.
Shareholders’ Compact The Company and its Shareholders are bound by theShareholders’ Compact, which the two (2) partiesconclude annually, in terms of the Treasury Regulations.ThisrecordsthemandatedkeyperformancemeasuresandindicatorstobeattainedbyBroadbandInfracoasagreedbetween the Board and the Shareholders. The partiesare bound by the principles of Corporate Governancein the Public Sector (Protocol), the Broadband InfracoAct,2007,theCompaniesAct,thePFMAandapplicableTreasury regulations. The Company endeavours toenhanceeffectivebusinessperformanceandtomaintaingoodcorporategovernance, includingsubscribing to theprinciplescontainedintheKingIIIReport.
TheShareholders’CompactrecordstheobjectivesoftheCompanyasfollows:
ToensurethatBroadbandInfraco:
• Maintainsareliablenetwork;• Ensuresfinancialsustainability;• ImplementssoundHRpractices;and• Economictransformation.
5BROADBAND INFRACO INTEGRATED REPORT 2016
2.1 Overview
Broadband Infraco is a national asset that must beleveraged to drive national growth and industrialisation.Itsextensivefixednationalandinternationalinfrastructureis open to all competitive and public InformationCommunication Technology (ICT) operators engaged innationaldevelopmentthroughICT.
Broadband Infraco’s legislative mandate is set outin the Broadband Infraco Act No 33 of 2007 (theAct). The main objectives in terms of the Act are toexpand the availability and affordability of access toelectroniccommunications, including,butnot limitedto,underdeveloped and underserviced areas. These are inaccordancewith theElectronicCommunicationsActNo36 of 2005 and commensuratewith international bestpracticeandpricing, throughtheprovisionofelectroniccommunications network services and electroniccommunicationsservices.TheCompany isaSchedule2publicentityintermsofthePFMAandhastheDepartmentof Telecommunications and Postal Services (DTPS) andthe IndustrialDevelopmentCorporationofSouthAfricaLimited (IDC) as its shareholders. The Minister is theExecutiveAuthorityintermsofthePFMA.
Broadband Infraco’s mandate resonates with three (3)Strategic Infrastructure Projects, (SIP) 15 which focuseson expanding access to ICT, SIP 16 which focuses onthe Square Kilometre Array (SKA) andMeerkat, and SIP17 which focuses on regional integration for Africancooperationanddevelopment.AvailingthecapacityoftheWestAfricanCableSystem(WACS)totheDepartmentofScienceandTechnology(DST)isatthecoreofSIP16,whiletheCompanyalsohasanobligationtoconnectneighbouringcountries addressing ICT infrastructure requirements forSIP17.
The Company’s purpose is in line with the NationalDevelopmentPlan(NDP)ofestablishingnational, regionalandmunicipalfibre-opticnetworkstoprovidethebackboneforbroadbandaccess.Broadband Infracooperatesonthepremisethatthenational,provincialanddistrictbackhaulsrequirestateintervention,thusallowingprivateinvestmentstoleadthewayintheaccessmarket.
Broadband Infraco has 14 661 km of fibre networknationally and 156 PoPs. The national long-distancefibre-optic network currently utilises DWDM equipment,providing a number of 2.5 Gigabits, 10 Gigabits and 40Gigabitslambdasalongthemajorityoffibreroutes.
2.2 Vision Statement
BroadInfraco’svisionisasfollows:
“Toberecognisedasthewholesaleproviderofchoiceforbackhaulconnectivity.”
TheCompany’scriticalsuccessfactorsare:
• Toenable100%high-speedbroadbandconnectivityforallprovinces,districtsandmunicipalitiesinSouthAfrica;
• Toconnecttoallsix(6)neighbouringcountriesofSouthAfrica;and
• ToconnectcountriesonthewestcoastofAfricatotheWACS.
2.3 Mission Statement
BroadbandInfraco’sMissionisto:
• Enable national and regional private and publiccollaborationoninfrastructuredevelopment;
• Expandtheavailabilityandaffordabilityofaccesstoelectronic communications networks and services,including, but not limited to, underdeveloped andunderservicedareas;and
• Ensure that the high-capacity connectivity andbandwidth requirements for specific projects ofnationalinterestsaremet.
2.4 Values
• EngageStakeholders BroadbandInfracoproactivelyengagesitsstakeholders
tounderstandtheirongoingrequirements.
• Broadband Infraco prides itself on excellence inservice delivery
Broadband Infraco is dedicated to satisfying itscustomers’ needs. Broadband Infraco respects itscustomers, and understands their requirements byproviding them with quality services within agreedtimeframesandataffordableprices.
• BroadbandInfracoexecutesinasimpleandflexiblemanner
BroadbandInfraco’sdesignphilosophyistobeflexiblein order to accommodate customisation of solutionsforitscustomers.
• BroadbandInfracoactswithintegrityinallwedo Broadband Infraco’s directors and employees are
personally accountable for the highest standards ofbehaviour,includinghonestyandfairnessinallaspectsof their work. Broadband Infraco’s personnel willfulfil their commitments as responsible citizens andemployees. Broadband Infraco will consistently treatcustomerswiththerespectthattheydeserve.
2. OVERVIEW
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2.5 Opportunity Overview
The approved South African National Broadband Policyconsiders broadband as an ecosystem of high-capacity,high-speedandhigh-qualityelectronicnetworks,servicesapplicationsandcontent thatenhances thevariety, usesandvalueofinformationandcommunicationsfordifferenttypesofusers.
BroadbandInfracocurrentlyoperatesasthesecondlargestcommercial national long distance optic fibre network inSouthAfrica,withnearly14661kmor28%ofthecurrenttotalnetwork.
Broadband Infraco’s activities during the period underreviewweredirectedat:
• Repositioning its operations from a pure broadbandnetworkprovidertoanenablerofsolutionsthatimprovethequalityoflifeofthecitizensofSouthAfrica;
• Creatingopportunitytousepartnershipstoenabletheuseofaccessnetworksofpotentialpartners;
• Developing organisational capability through people,systems,andanongoingimprovementtothenetwork;and
• Cooperating with different partners to harvestbroadband networks that will grow the use ofbroadbandservices.
2. OVERVIEW CONTINUED
2.6 Organisational Development
Broadband Infraco has successfully transitioned from alimitedcustomerbasetoamoreopen-marketplayermodel,witha legislatedmandate.Thischange intheCompany’soperational model has provided unique challenges andrequiresresourcestoaddressthem,including:
• ThecomplexityaroundraisingfundsastheCompanyhasnohistoryofdebt;and
• Market price declines, which impact revenuesnegatively.
Sinceitslicensingin2009andtheconnectionofthefirstindependent customer in 2010, Broadband Infraco hascontinuedtodevelop itscapabilityandcapacitythroughthe implementationof theBuild-Grow-Expand strategy.Thisstrategyhasfocusedbothoninternalefficienciesandexternal service delivery. It executes the legal mandateand is also customer-centric. It supports the nationalbroadbandpolicybyensuringthat:
• Thecosttocommunicateiskeptaffordable;• High-capacitybandwidthisavailableforallthecitizens;• Optimalplanningdesignsavoidduplication;and• It works within the framework of the National
BroadbandPolicyinpartnershipwithprivateandpubliccollaborators.
7BROADBAND INFRACO INTEGRATED REPORT 2016
Our Core Business
Broadband Infraco is a licensed telecommunicationsservice provider of wholesale services to the industry.Ourservicesarebasedontheprovisionofhigh-capacitybandwidthfrompointofpresence(PoP)toPoPwithinourNationalLongDistanceFibreOpticNetwork.
TheBroadbandInfracobusinessisacombinationofthree(3)elements:
1. National Connectivity
Inlinewiththevisionfor“broadbandtoall”,andasindicatedearlier in the report, the Broadband Infraco fibre opticnetworkismadeupof14661kmoffibre.TheCompanyhasupgradedmajorportionsofthenetworkfromSynchronousDigitalHierarchy(SDH)toDWDMandInternetProtocol(IP)technology,which is the latest technology.Themaximumcapacityonsomeroutesnowgoesupto170Gb/s.
3. WHAT WE DO
Economic Hubs
Broadband Infraco’s National Long Distance Networkcovers the country’s nine (9) provinces andmostmajorcities and towns. The Network Master Plan has beenapprovedto improvethe resilienceandscalabilityof thenetworktoaccommodatetheincreasingmarketdemandandtocontinuetoexceedtheneedsandexpectationsofthewholesalemarket.Thecapitalinvestmentprogrammewill extend the reach of the network and improveaccessibilitytobothurbanandruralcommunities.
Major Products and Services
At present, customers are able to buymultiple units ofindividual(DWDM,IPandSDH)servicesbetweenanytwo(2)long-distancedrop-offpoints(orcities)connectedbytheBroadbandInfraconetwork.
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2. Regional Connectivity
Network extensions have also been implemented toprovide fibre connectivity to theneighbouring countriesofLesotho,Mozambique,Namibia,Swaziland,Zimbabweand Botswana. Broadband Infraco can link West Coastand East Coast international cable systems through itsterrestialnationalnetwork.
InlinewiththeSouthernAfricanDevelopmentCommunity(SADC) Protocol on transport, communications andmeteorologyandtheregionalinfrastructuredevelopmentmasterplanalignment,BroadbandInfracoisconnectedtoalltheneighbouringSADCcountries.
3. WHAT WE DO CONTINUED
3. International Connectivity
Broadband Infraco’s a tier-1, core investor in theWACSinitiative. The Company was instrumental in bringing allthepartiestogethertoaddresstheneedforinternationalconnectivity. Through Broadband Infraco’s investment,the government has direct access to internationalconnectivity,which:
• Provides lower cost, sustainable and efficientinternationalbandwidth;and
• Positions South Africa for future economic growthas itwill beable toconnect tokeyglobal knowledgeeconomies,includingNorthAmericaandEurope.
Key Customer Base
Broadband Infracohas three (3)anchorcustomers fromwhich80%of its revenue is derived. TheCompany alsoprovides key connectivity to SADC regional operators,internet service providers and other infrastructureoperators.Itscustomerbaseissetoutas:
• corporatecustomers;• thepublicsector;• mobilenetworkoperators;• internationaloperators;• SADCregionaloperators;• systemintegrators;and• internetserviceproviders.
Forallitscustomers,BroadbandInfracowill:
• Sustain a very high-level relationship/accountmanagementprogramme;
• Maintain the accounts that are targeted at masterservice agreement revenue levels as part of longertermnegotiations;
• Grow accounts through leveraging site-sharingopportunities;
• Identify strategic major risks and opportunitiesassociatedwitheachoftheanchorcustomers;and
• Assess the likelihood of each scenario; quantify theexpected impactofmost likelyscenario;anddevelopmitigationplans.
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4. OUR LEADERSHIP
The Board
BMCNgcoboChairpersonoftheBoard
Qualifications:
LLB(Natal),LLMinCompanyLaw(WITS),BusinessManagementProgramme(UCT)AdmittedAttorney
Expertise:
TelecommunicationsandBusinessManagement
SMabalayoChairperson:HumanResourcesandRemunerationCommittee
Qualifications:
BSc(ElectricalEngineering)(UCT),MBA(WITS)
Expertise:
Telecommunications,ProjectandGeneralManagement
N SelamolelaChairperson:Investment,Finance,TenderandProcurementCommittee
Qualifications:
BCom(Accounting)(North-WestUniversity),BCom(Honours)(UKZN)
Expertise:
Telecommunications,FinanceandGeneralManagement
M MaponyaChairperson:AuditandRiskCommittee
Qualifications:
BCom(Accounting)(WITS),BCom(Honours)(Natal)CA(SA),
Expertise:
Auditing,CorporateFinanceandTelecommunications
MMosweuChairperson:SocialandEthicsCommittee
Qualifications
BCompt(Hons)(UNISA) CA(SA),MBL
Expertise:
Project,CorporateFinanceandTelecommunicationsexpertise
P KweleChiefExecutiveOfficer
Qualifications:
BScHonours(WITS),PostgraduateDiplomainManagement(WITS), CertificateinFinancialManagement(UJ) CharteredMarketer(MarketingAssociationofSA)
Expertise:
TelecommunicationsandBusinessManagement,StrategyDevelopmentandExecution
II van NiekerkChiefFinancialOfficer
Qualifications:
B.Compt(Hons)(UNISA), CA(SA),CIBM(UNISA),CertificateinShort-termReservingTechniques(UP)
Expertise:
Telecommunications,FinancialManagement,CommercialManagementandStrategy
A GithiariIndependentNon-ExecutiveDirector
Qualifications:
PhD(ElectricalEngineering)(CambridgeUniversity), BSc(ElectricalEngineering)(UniversityofNairobi)
Expertise:
TelecommunicationsIndustrySpecialist
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4. OUR LEADERSHIP CONTINUED
ExecutiveCommittee
P KweleChiefExecutiveOfficer
Qualifications:
BScHonours(WITS),PostgraduateDiplomainManagement(WITS), CertificateinFinancial,Management(UJ)CharteredMarketer(MarketingAssociationofSA)
Expertise:
TelecommunicationsandBusinessManagement,StrategyDevelopmentandExecution
SMafuChiefMarketingandSalesOfficer
Qualifications:
BA;Post-GradDipManagement(UCT);MBA(Hull:UK);CharteredMarketer(MarketingAssociationofSA)
Expertise:
Telecommunications,SalesandMarketing,BusinessDevelopment,Strategy,Nationalsocioeconomicdevelopment
G ZowaChiefTechnicalOfficer
Qualifications:
BScElectricalEng(Hons),MBA(UniversityofPretoria),PrEng(ECSA),MSAIEE,MIEE(UK)
Expertise:
Telecommunications,(Switching,Transmission,Mobile(2G,3G,LTE,IP,IT).StrategicManagement,andBusinessManagement
M MopeliExecutive:HumanResources
Qualifications:ExecutiveDevelopmentProgramme(GIBS)MastersofManagementinHR(WBS)Honours-BachelorofLibrary&InformationScienceBA:PoliticalScienceandPublicAdministration
Expertise:
HR&GeneralManagement(Telecommunications&Manufacturing),OrganisationalDevelopmentandTransformationStrategy,EmployeeRelationsandLabourLegislation
M MojapeloExecutive:Compliance,RiskandAudit
Qualifications
B.Compt,GIA;PA.(S.A);EDP(ExecutiveDevelopmentProgram(Wits);LP(LeadershipProgrammeforSeniorManager(Univ.ofPTA);InternationalLeadershipDevelopmentProgram(ILDP)HenleyandPennStateBusinessSchool
Expertise:
InternalAuditing;Compliance;Risk;GovernanceandStrategy
F MohamedCompanySecretary(exofficio)
Qualifications:
BA(Law),PGDBM(HenleyUK)
Expertise:
CompanySecretariat,Governance,Administration,andStakeholderManagement
II van NiekerkChiefFinancialOfficer
Qualifications:
B.Compt(Hons)(UNISA), CA(SA),CIBM(UNISA),CertificateinShort-termReservingTechniques(UP)
Expertise:
Telecommunications,FinancialManagement,CommercialManagement,Strategy
Note:MrKMotlhabane(Executive:LegalandRegulatory)andMrVMaharaj(Executive:CapitalProgrammes)resignedfromBroadbandInfraco.
11BROADBAND INFRACO INTEGRATED REPORT 2016
The Chairman and Chief Executive Officer, on behalf ofthe Board of Directors, present the Broadband Infraco’sIntegratedAnnualReportfortheyearended31March2016.
This Integrated Report covers the total performance oftheCompany,itsfinancialandotherresources.Thisreportreflects theperformanceof theCompanyover thepastfour(4)years.Theexecutionofthestrategicthemeshasresulted in numerous successes, such as the continuousincreaseinrevenuegenerated(R452millionagainstaR366millionforthepreviousfinancialyear),reductionofcostofsales(17%)andachievementofnetworkautonomy.Thisisasaresultofoptimisingandcontainingcostswhilenothamperingservicedeliverytocustomers.
1.1 The Past Four Years: The Successes
Overthepastfour(4)yearstheCompanyhasexecutedits Build,Grow and Expand strategy,which has resultedinnumeroussuccesses.This is reflected in the followingtrajectory:
• Consistentlyachievinginexcessof80%Shareholders’Compact deliverables (87.5% for 2015/16; 83%2014/15).
• Consistently increased its revenue by double-digitsyear-on-year(fromR302m,R366mtoR452m).
• Consistentlygeneratedagrossprofit (R149m,R51mtoR192m).Theincreaseingrossprofitisasaresultofdecreasedcostofsales.
• Optimised33PoPstoachievenetworkautonomy.• Consistentlyinvestedverysignificantcapitalexpenditure
intheextensionandrefurbishmentofitsnationallong-distancenetworks(R199m,R148mtoR161m).
TheCompany’soverallstrategyovertheperiodhasevolvedtoalignittonewconditionsandtobetterexploitemergingopportunities.Thekeythemesthatwereimplementedinsupportofthestrategyinclude:
Strategic Thrust 3-YearStrategyEvolution
Revenue Diversificationofcustomerbaseandgrowthofcustomernumbers
Pricing AsoundPricingStrategydrivingprofitability
Cost of Sales Fromacceptingfixedexpensesasimmutable;torobustlyre-engagingwithleasingpartnerstoextractrealvalueformoneyandmassivecostreductions.Thisincludesconstantlyassessingthemostfeasibleoptiontodeployinfrastructure
Infrastructure Management and Maintenance
Optimisingourtechnicaldesignsandexecutionofsoundengineeringprinciplescomplementedbyre-engagingstrategicpartnersresultedinareductionofcostofsales
Human Capital
Aconstantcriticalreviewofproductivityandhigh-performancecontractingenforcementenableshonestconversationsinareasofimprovement
5. REPORT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER
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5. REPORT FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER CONTINUED
1.2 Results of the Year Under Review
• Shareholders’Compact
TheCompanyhasachieved87.5%ofitsShareholders’Compact targets for the financial year. The two (2)non-achievements are due to non-attainment ofrevenue,andtotalspendingonpeoplewithdisability-ownedenterprisetargets.
In total, 70% of the Company’s Annual PerformancePlan(APP)isfinancialinnature.Thefoundationofnon-financialindicatorshasbeensetandthisphaseisaboutfinancialsustainability.Whiletherevenuetargetswerenotachieved,criticaltargetslikethereductionofcostofsalesandoperatinglosswereachieved.
• UpdateonSHEQ
TheimplementationandmaintenanceofSHEQsystemsformspartofthecoreoftheCompany’sstrategy.Thefollowingarethehighlightsfortheperiodunderreview:
a. Safety: the Company was awarded NOSAaccreditation during the period under review andfor OSHAS18001 audit queries were resolvedsuccessfully and a recommendation to issue thecertificatehasbeensubmittedtoSABS.
b. The 2015/16 year endedwithout a fatality fromoperationalincidents.
c. TheCompanyhasbeenapplyingISO9001principlesand has now resolved to initiate the certificationprocess,ofwhich32%hasbeencovered.
d. No environmental incidents have been reportedand/orrecorded.
e. Therehasbeennothird-partyclaimasaresultofnon-compliancetoSHEQrequirements.
• Enterprise Development and Corporate SocialInvestment
TheEnterpriseandSupplierDevelopmentStrategy isin the second year of implementation. This strategyhas been designed to provide conclusive enterpriseand supplierdevelopment througheffectiveplanningandsourcingofproductsandservices.Ithasalsobeenaligned to business objectives and targets. Themainfocusofthisstrategyisto:
• Increase black women and youth participation inthetelecommunicationsindustry;
• IncreaseskillscapacityandcapabilitywithintheICTsector;
• Achieveequitablerepresentationinallprocurementactivitiesandlevelsintheefforttodriveenterprisestoreachmaximumlevelsofparticipation;and
• Entrench preferential procurement as a tool todrivetransformation.
TheEnterpriseandSupplierDevelopmentProgrammehasyielded114% (113%: 2014/15) B-BBEE spent, ofwhich45%(33%:2014/15)wasspentonblackwomen-ownedenterprises,and10.7%onyouth-ownedenterprises.
Thestrategytosupportthelearningofmathsandscienceis still relevant and thus the Company has continued tosupport Seshigo High School in Limpopo and EzakheniHighSchool inMpumalanga.Overthefour(4)yearstheCompanyandourstrategicpartnershaveinvestedinICT
13BROADBAND INFRACO INTEGRATED REPORT 2016
to aid the learning of various subjects includingmathsandscience.InadditiontoTelematicsandthecomputerlab provided previously, Seshigo High School has nowbeen provided with tablets that have the approvedCurriculum and Assessment Policy Statement (CAPS)curriculumuploaded.
1.3 Network Improvement
Four(4)yearsago,80%ofthetransmissionwasold,andnowmajor projects to upgrade this network have beencompleted.TheseincludetheMTSandcoreoptimisationprojects.
With regard to regional connectivity, the RamatlabamaPoPhasbeenupgradedtothelatestDWDMequipment,allowing for higher capacity and enabling seamlesscommunicationbetweenSouthAfricaandBotswana.
1.4 Human Capital Management
TheBuild-Grow-ExpandStrategyrequiredstrategicrenewalofourHumanCapitalmanagementpractices.ThestrategicandoperationaloutputsofHumanResourceshavefocusedonenablingtheorganisationtorenewandreenergiseitselfthrougheffectivehumancapitalrevitalisationstrategies.
The Company has managed to address the challengesof balancing capacity and capability requirements forthe execution of critical aspects of the business and thebalancingoffinancialresourcestoaffordimperatives.
Thecriticalimperativeswere:
• Advancing the implementation of human resourcesdevelopment strategies to sharpen existing skills andbuildnewcompetency requirements in critical areasofwork;
• Retention of skills base, workplace morale andaccolades that are important for business reputationlike contribution to B-BBEE ratings (EmploymentEquityplan,WorkplaceSkillsPlanandstudyassistanceprogramme);and
• Innovative HR practices were explored and ways ofoptimisinghumanresourcescapacitytoavoidpossiblejob losses and to monitor labour costs within theconfines of the Company’s financial circumstanceswereimplemented.
Thesewere underpinned by a process of anHR capacitydatabasethatindicatedqualifications,competencies,yearsofserviceandexperiencesprofileofeachemployeewhichincludedthefollowing:
• The HR capacity database informed the rotation,secondment and temporary deployments that wereeffectedtomulti-skillandintensifytalentdevelopmentfor succession planning and career advancement at
variouslevelsoftheorganisationalstructure.• Atwelve-monthproductivityanalysiswasconducted
per functional area to assess where there wereshortagesandareaswithpossibleexcess.
Amongtheimperativesthatwereinstrumentalinbolsteringtheenhancementofpeoplemanagementpractices intheorganisationwerethefollowing:
• Approval of the framework for implementation ofthe temporarydeploymentstrategy foreffectiveHRoptimisation.
• Continuedtherealignmentofcriticaldivisionalstructuresfor optimisation and operational effectiveness fordepartmentssuchasInformationTechnology.
• Implementation of the automated performancemanagementsystem.
AllthesewereconductedandtheCompanystillmaintaineditscompliancetoallHRlegislativeimperatives.
Appreciation
A special thanks and appreciation is expressed to ourShareholders, the Minister of Telecommunications andPostalServices,DrSiyabongaCweleandhisdepartment,aswellastheChairpersonoftheIndustrialDevelopmentCorporation of South Africa, Ms B Mabuza, the IDCShareholderrepresentative,MsLizekaMatshekgaandherexecutiveteamfortheirongoingsupport.
To the Board:ThanksforhelpingnavigatethroughwatersbothcalmandtroubledandforalwaysputtingBroadbandInfraco’sinterestsfirst.YourprofessionalismembodiestheCompany’svaluesandphilosophyandyourhardworkisaninspirationtoallofus.
To Team Infraco: It’sonlyamatterof timebeforeyourcollectiveeffortswilltranslateintosustainable,operatingprofit. Your hardwork, perseverance and loyalty to theCompanyhavebecometheepitomeofstandingstrongandpunchingwayaboveyourweight.Thepositive feedbackfromthemarketpraisingyourcompetenceanddedicationwillpercolateintoadditionaldesiredgrowth.Thankyou.
ToourCustomers:Wordscanneverbeenoughtosaluteyou for trusting us with enabling you to provide SouthAfrica’s connectivity requirements. As we express ourgratitude,wedonotforgetthatthehighestappreciationisnottoutterwords,buttolivetheminthequalityofservicewerender.
MNgcobo PKweleChairmanoftheBoard ChiefExecutiveOfficer
14 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
ItiswithgreatpleasurethatIpresentherewiththefinancialreportfortheyearended31March2016.
Thishasbeenayearinwhichwesetabouttostabilisethebusiness,growrevenueandcontainandmanageourcosts.IampleasedtoreportthattheCompanyhasexceededthetargetsthatweresetaroundstabilisingthebusinessandcontainingcosts.Albeittherevenuegrewbyalmost24%,theCompanyisslightlybelowthetargetthatwasset,butwellonitswaytocontinuethisgrowthpattern.
Financialresults
Revenue – The Company has grown its customerbasefrom18to23inthecurrentyear.Ithasacquiredsignificant up-sales from existing customers andalso sold significant capacity to new customers. Ithas engaged customers strategically and reviewedtransactions stringently to ensure better returns pertransaction.Revenuegrewby24%duringthecurrentyearandisexpectedtogrowoverallby18%inthenextfinancialyear.
Cost of sales – Management undertook severaloptimisationexercisestoreducecostofsalesthroughre-negotiations of maintenance contracts and fibreleaseagreements,optimisationofroutes,andbuildingnew networks instead of leasing. This resulted in asustainable reduction in cost of sales in excess of R50millionperannumor17%onthepreviousfinancialyear.Thisreductionwillbecarriedthroughtothe2017financialyearwithafurtherreductionof3%incostofsalesbeingbudgetedfor.
Operational cost–Operatingexpenditureexcludingdepreciationfortheyearis17%lowerthanthepreviousyear, after providing for abnormal legal arbitrationcosts.Managementundertookafocusedcost-savingdrive during 2015/16 to reduce operational costsacross the Company. This resulted in sustainablereduction in operational costs excluding depreciationinexcessofR30million.Itisexpectedthatoperationalcostswillincreasebyinflationonanannualbasisfromthislowbase.TheNeotelmatterhasbeensettled.
Capex
Duringtheyearunderreview,theCompanycontinuedto roll outmajor capital projects for theprovisioningandimplementationofservicestostrategiccustomers.ThetotalcapitalspendfortheyearunderreviewwasR161million.ItisenvisagedthatatotalofR75millionwill be spent in the next financial year to completetheseprojects.Atotalof420kmnewfibrewasaddedandmorethan30pointsofpresence(POPs)optimised.
Cash flow
TheCompanyremainedcashpositivethroughoutthefinancialyear,withapositiveEarningsBeforeInterest,Taxes, Depreciation and Amortisation (EBITDA) of7% and generating net cash flows from operations.It isenvisagedthatthispositivepatternwillcontinueinto the future, and positive returns on EBITDA areexpectedinthenextfinancialyear.
Futureoutlookandsustainability
Driving revenue remains a key focus and priority of theCompanyandwillbedrivenhardnotonlybytheChiefSalesand Marketing Officer, but also by the Chief ExecutiveOfficerandeachExecutiveMember,asrevenueisthekeydifferentiatorinensuringthesustainabilityoftheCompany.
Thegoodfoundationthatwascreatedduringthecurrentfinancial year – positive and continued sales growth,cost of sales sustainable reduction and operating costoptimisations,willcontributefurthertoenableandensurethesustainabilityoftheCompany.
Although the forecast of Broadband Infraco remainspositive, the Company has embarked with renewedintensityonsourcingfundingtofurtherenhance liquidityand sustainability. The funding requests are to variouscommercialbanksanddevelopmental finance institutionsto fundworkingcapital, specific ring-fencedprojects forcustomersandselectivecriticalmaintenanceprojects.
Socio-Economic Development
The Supply Chain Management (SCM) department hassucceeded indeploying systems,policies andproceduresspecifically designed to attract meaningful contributionfrom previously disadvantaged groups, and created anenvironmentwithintheCompanywheretheseindividualsenjoyed preference in termsof the supply of goods andservices inall spheresof thesupplychain.Asastrategicbusinesspartner,SCMcontinuestohaveagreatimpactonthedeliveryoftheCompany’sobjectivesandmandate.ItalsoplayedamajorroleintransformationbycontributingtoB-BBEEthroughasupplychainmanagementsystemthatenabledallstakeholderstoparticipate inafair,equitable,transparent,competitiveandcost-effectivemanner.
6. CHIEF FINANCIAL OFFICER’S REPORT
15BROADBAND INFRACO INTEGRATED REPORT 2016
The total procurement spend for the year was almost R318million.Abreakdownofspendisindicatedbelow:
Numberofindirectjobscreated 686
AllocationofB-BBEEbudget 114%
Percentageincreaseonblack-ownedentitiesspend 54%
Percentagespendonyouth-ownedentities 11%
Percentagespendonwomen-ownedentities 45%
Percentageincreasespendonpeople-with-disabilities-ownedentities
0,1%
The focus going forward is to continuously improveefficiency in supply chain practices and compliance tolegislativerequirements,tomaintaincurrentB-BBEEspendandranking,amidchangesinlegislativeenvironment.
Funding
BroadbandInfracocontinuestofollowafundingstrategythatisdesignedtocaterforatransitioningbusinessmodelthat will enable sustainability. The Company’s businessmodel has transitioned from a single customer to onebased on multiple customers, ranging from the privateto the public sector. The Company’s planned capitalinvestmentprogrammeissupportiveoflong-termfinancialsustainability,withfour(4)keypriorities:
• Revenueprotectionprojects.• Revenuegeneratingprojects.• Mandateandlicenseobligationsprojects.• Essentialassetupgradesandrefurbishmentprojects.
The funding strategy is to source funding from theprivate commercial banking sector, DevelopmentFinanceInstitutions(DFIs)andselectivevendorfinancingalternatives.Commercialbanksaretargetedasasourceofshort-termcashandliquidity-provisioningfacilities,whiletheDFIsareexpectedtosupporttheCompanywithlong-termdebt capital and vendors to supportmedium- andlong-term balancing of operational costs with revenuethroughthefinancingoftechnologyenhancements.
Indeterminingthefundingstrategyfortheperiodunderreview, and aligning primarily to the capital investmentprogramme,theCompanyconsideredanumberoffundingmechanisms and sources, ultimately deciding on thefollowingthree(3)options:
• Project-based structured financing: PreviouslyBroadbandInfracowasnotabletosecurefundingforcustomer-generatedprojectsduetothelackofatrackrecord.TheCompanyisnowabletodemonstratethattheyareabletowin,planandexecutemajorprojectssuccessfully.Theseprojectsresultedinbothsignificantgrowthandcost-savings.TheCompanyispositivethat
itwillbeabletosecurefundingoffthebackoftheseprojects for future, customer-requested projectswhererevenuewillimprove.
• Development Finance Institutions facilities (including bank funding for bridging purposes):TheCompanyhasdemonstrateditsabilitytomanagecash optimally over the past twelve months. Thiswas achieved through proactively and continuouslyapplying cost optimisation strategies, engaging withsuppliers to extend payment terms and appealing tocustomerstopaytheCompanyasquicklyaspossible.ThiswillhaveapositiveeffectonfutureengagementwithsomeoftheDFIsandcommercialbanks.
• Vendor financing of technology upgrades: Duringthepastyear,theCompanyengagedwithmanyofitskeysuppliersandwasabletonegotiateextendedcreditterms with most of them. Many of these suppliershavenowindicatedthattheywillbewillingtoconsiderlonger-term financing of technology and customerenhancements,overtheuseful lifeoftheequipment.This type of funding could cover a significant partof the planned capital expenditure planned for the2016/17financialyear.
These options sought to secure funding for BroadbandInfracoeitherdirectlyontotheCompany’sbalancesheetoronanoff-balance-sheetbasis.
Conclusion
Duringtheforthcomingperiod,theCompanywillremainfocused on doingwhat it is doing now, only better.Wewill continue to drive revenue, ensure we maintain andoptimisecostlevels,andimproveefficienciesevenfurther.
Wearecommittedtooperatingwithinourfinancialmeans,and in a way that does not detract from our deliverycapability,norfromachievingoursustainabilitytarget.
IwanttotakethisopportunitytothankeveryBroadbandInfraco employee, contractor, executive and ourshareholdersfortheir tirelessefforts inassistingtohelpBroadband Infraco on the road to achieving financialsustainability. To the finance team, I thank you for yourprudenceanddiligence.
Ian van NiekerkChiefFinancialOfficer
16 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
Thefollowingsalientmilestoneswereachievedintheyearunderreview:
YEAR-ON-YEAR CUSTOMERS
From18to23growth
CAPITAL EXPENDITURE
FromR148mtoR161m
7. HIGHLIGHTS
NETWORK AUTONOMY
33open-access PoPsoptimised
CORPORATE SOCIAL INVESTMENT
60tabletsprocuredanddeliveredthrough
partnershipswithsuppliers
SHAREHOLDERS’ COMPACT
87.5%achieved
REVENUE: R452M
24%year-on-year growthachieved
17BROADBAND INFRACO INTEGRATED REPORT 2016
NETWORK SALEABILITY
497STM-1equivalent year-on-yeargrowth
achieved
NETWORK AVAILABILITY
Exceededindustrynorm by99.92%
PRODUCT DEVELOPMENTSuccessfullylaunched
RemotePeeringandMastColocationproducts
SHEQThe2015/16yearendedwithoutafatalityfromoperationalincidents
WATERReductioninwater
consumptioninprojectimplementationprogrammes
ENVIRONMENTNoenvironmentalincidents
havebeenreported and/orrecorded
18 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
Strategic Objective Weighting KPA KPI Sub-
weighting Baseline2015/16 Target
Q1Actual results
Q2Actualresults
Q3Actualresults
Q4Actualresults
YTD Status Comments
Ensure BusinessSustainability
30%
NetworkPerformanceRebates
Networkperformancerebatespaidaspercentageofgrossrevenue
12.50% 0.17% ≤0.3%ofcustomerrevenue 0.03% 0.10% 0.12% 0.13% 0.10% Achieved Serviceavailabilityimproved
Revenue Percentageincreaseofactualrevenue 7.50% R364mil 28%increasein
Revenue 65% 32% 10% 4.2% 23.6% NotAchieved
DelayinbillingcycleandlowerrecoveryfromWACS
CostofSalesPercentagedecreaseofcostofsalesexcludingdepreciation
5% R444mil 10%decreaseofCostofSales 98% -6% -53.30% -45.9% -17.6% Achieved Lowerfibremaintenancecosts
andrenegotiatedcontracts
NetProfitDecreasedamountofOperatingLoss 5% (R267mil) (R133mil)decrease
inOperatingLoss (R47.8million) (R29.1million) (R41.4million)
R26.9million
(R91.4million) Achieved
Loweremployee,marketingandadmincostsduetonaturalattritionandcostcontainment
Network Saleability
30% NetworkUtilisationNumberofSTM-1equivalentsold 30% 1484STM-
1160STM-1Equivalent
341.27STM-1Equivalent 74.45 80STM-1
Equivalent1.55STM-1Equivalent
497STM-1Equivalent Achieved
Network Improvement
20%
CustomerEnablement
NumberofKMoffibreaddedtotheNetwork 10% 14392.14 100kmby31
March 2016 202.60km 182.50km 15.49km 19.46km 420.05km Achieved RouteoptimisationandCustomer1connectivity
OberholzertoRamatlabamaLinkupgradedtoDWDM 5% –
OberholzertoRamatlabamaUpgradecompletedbyendofNov2015
In Progress In ProgressUpgradesuccessfullycompleted
Upgradesuccessfullycompleted
Upgradesuccessfullycompleted
Achieved
Projectscompleted NumberofProjectsontime,scopeandcost 5% – 5Projects In Progress In Progress In Progress 6Projects
completed6Projectscompleted Achieved
Economic Transformation
20%
ControlledTrainingSpend
Trainingspendaspercentageofpayroll 3% 3% 1% 0.10% 0.47% 0.76% 1.24% 1.33% Achieved
TrainingwasinaccordancewiththeWorkplaceSkillsPlanning(WSP)
MaximiseSocioeconomicContributions
Numberofindirectjobscreated 2% 182 60jobs 40 47 412 187 686 Achieved Agreementwithserviceproviders
tocreatejobs
AllocationofB-BBEEbudgetdiscretionaryspend 5% 117% 70% 111% 106% 117% 121% 114% Achieved Orderswereplacedwithlevel1
and3suppliers
PercentageincreaseonBlack-ownedentitiesspend 2% 35% 40%spendof
B-BBEE 34.10% 47.0% 69% 70.70% 54.1% Achieved ImplementationoftheEnterprisedevelopmentplan
PercentagespendofYouth-ownedentities 2% 8% 10%spendof40%
spendonBOE 2.1% 8.3% 13.6% 15.4% 10.7% Achieved Youthparticipationisincreasing
PercentagespendofWomen-ownedentities 2% 33% 10%spendof40%
spendonBOE 48.1% 51.7% 42.2% 43.1% 44.5% Achieved Womenparticipationinthesectoris increasing
PercentageincreasespendonPeoplewithDisabilities-ownedentities
2% R518k 1% 0% 0% 0.00% 1% 0.1% Notachieved
Thecertificatefordisabilityverifiedthattheserviceproviderwasonly35%
Enhancelearningenvironmentthroughtheuseofdigitallearningtools
Numberofdigitallearningtools 2% Interactive
boards 60tablets In Progress
DFAsponsorshipletterfor
R50000hasbeenreceived.
60tablets 60tablets60tabletsprocuredanddelivered
Achieved Partnershipwithserviceproviders
8. PERFORMANCE AGAINST SHAREHOLDERS’ COMPACT - 2015/16
19BROADBAND INFRACO INTEGRATED REPORT 2016
Strategic Objective Weighting KPA KPI Sub-
weighting Baseline2015/16 Target
Q1Actual results
Q2Actualresults
Q3Actualresults
Q4Actualresults
YTD Status Comments
Ensure BusinessSustainability
30%
NetworkPerformanceRebates
Networkperformancerebatespaidaspercentageofgrossrevenue
12.50% 0.17% ≤0.3%ofcustomerrevenue 0.03% 0.10% 0.12% 0.13% 0.10% Achieved Serviceavailabilityimproved
Revenue Percentageincreaseofactualrevenue 7.50% R364mil 28%increasein
Revenue 65% 32% 10% 4.2% 23.6% NotAchieved
DelayinbillingcycleandlowerrecoveryfromWACS
CostofSalesPercentagedecreaseofcostofsalesexcludingdepreciation
5% R444mil 10%decreaseofCostofSales 98% -6% -53.30% -45.9% -17.6% Achieved Lowerfibremaintenancecosts
andrenegotiatedcontracts
NetProfitDecreasedamountofOperatingLoss 5% (R267mil) (R133mil)decrease
inOperatingLoss (R47.8million) (R29.1million) (R41.4million)
R26.9million
(R91.4million) Achieved
Loweremployee,marketingandadmincostsduetonaturalattritionandcostcontainment
Network Saleability
30% NetworkUtilisationNumberofSTM-1equivalentsold 30% 1484STM-
1160STM-1Equivalent
341.27STM-1Equivalent 74.45 80STM-1
Equivalent1.55STM-1Equivalent
497STM-1Equivalent Achieved
Network Improvement
20%
CustomerEnablement
NumberofKMoffibreaddedtotheNetwork 10% 14392.14 100kmby31
March 2016 202.60km 182.50km 15.49km 19.46km 420.05km Achieved RouteoptimisationandCustomer1connectivity
OberholzertoRamatlabamaLinkupgradedtoDWDM 5% –
OberholzertoRamatlabamaUpgradecompletedbyendofNov2015
In Progress In ProgressUpgradesuccessfullycompleted
Upgradesuccessfullycompleted
Upgradesuccessfullycompleted
Achieved
Projectscompleted NumberofProjectsontime,scopeandcost 5% – 5Projects In Progress In Progress In Progress 6Projects
completed6Projectscompleted Achieved
Economic Transformation
20%
ControlledTrainingSpend
Trainingspendaspercentageofpayroll 3% 3% 1% 0.10% 0.47% 0.76% 1.24% 1.33% Achieved
TrainingwasinaccordancewiththeWorkplaceSkillsPlanning(WSP)
MaximiseSocioeconomicContributions
Numberofindirectjobscreated 2% 182 60jobs 40 47 412 187 686 Achieved Agreementwithserviceproviders
tocreatejobs
AllocationofB-BBEEbudgetdiscretionaryspend 5% 117% 70% 111% 106% 117% 121% 114% Achieved Orderswereplacedwithlevel1
and3suppliers
PercentageincreaseonBlack-ownedentitiesspend 2% 35% 40%spendof
B-BBEE 34.10% 47.0% 69% 70.70% 54.1% Achieved ImplementationoftheEnterprisedevelopmentplan
PercentagespendofYouth-ownedentities 2% 8% 10%spendof40%
spendonBOE 2.1% 8.3% 13.6% 15.4% 10.7% Achieved Youthparticipationisincreasing
PercentagespendofWomen-ownedentities 2% 33% 10%spendof40%
spendonBOE 48.1% 51.7% 42.2% 43.1% 44.5% Achieved Womenparticipationinthesectoris increasing
PercentageincreasespendonPeoplewithDisabilities-ownedentities
2% R518k 1% 0% 0% 0.00% 1% 0.1% Notachieved
Thecertificatefordisabilityverifiedthattheserviceproviderwasonly35%
Enhancelearningenvironmentthroughtheuseofdigitallearningtools
Numberofdigitallearningtools 2% Interactive
boards 60tablets In Progress
DFAsponsorshipletterfor
R50000hasbeenreceived.
60tablets 60tablets60tabletsprocuredanddelivered
Achieved Partnershipwithserviceproviders
8. PERFORMANCE AGAINST SHAREHOLDERS’ COMPACT - 2015/16
20 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
8. STRETCH TARGETS BY SHAREHOLDERS
Strategic Objective Weighting KPA KPI Sub-
weighting Baseline2015/16 Stretch Target
Q1Actual results
Q2Actualresults
Q3Actualresults
Q4Actualresults
YTD Status Comments
Ensure BusinessSustainability
70%
Revenue Percentageincreaseofactualrevenue 15% R364mil 32%increasein
Revenue 65% 32% 10% 4.2% 23.6% NotAchieved
DelayinbillingcycleandlowerrecoveryfromWACS
CostofSalesPercentagedecreaseofcostofsalesexcludingdepreciation
20% R444mil 12%decreaseofCostofSales 98% -6% -53.30% -45.9% -17.6% Achieved Lowerfibremaintenancecosts
andrenegotiatedcontracts
DebtorsCollection*Numberofdaysperoutstandingcustomerinvoices
5% - 45days 43days 27days 46days 26days 26days Achieved Improvementincollection
UnallocatedCreditors*
Numberofdaysforunallocatedcreditors 5% - Unallocatedcreditors
lessthan1weekAllocated
withinaweekAllocatedwithin
aweekAllocated
withinaweek
Allocated withinaweek
Allocatedwithinaweek Achieved
Network Saleability
10% NetworkUtilisationNumberofSTM-1equivalentsold 10% 1484STM-
1668STM-1Equivalent
341.27STM-1Equivalent 74.45 80STM-1
Equivalent1.55STM-1Equivalent
497STM-1Equivalent
NotAchieved
Increaseoftargetsbasedoncustomerupgrades
Network Improvement
10%
CustomerEnablement
NumberofkmoffibreaddedtotheNetwork 5% 14392.14 250kmby31
March 2016 202.60km 182.50km 15.49km 19.46km 420.05km Achieved RouteoptimisationandCustomer1connectivity
PointsofPresence(PoP)optimisation
NumberofPoPsoptimisedtofacilitatecustomerconnectionpoints
2.50% – 41PoPsoptimised In Progress In Progress 24PoPs optimised
9PoPs optimised
33PoPsoptimised
NotAchieved
Optimisationislinkedtocustomerconnectivitythatwillbeconcludedinthenewfinancialyear
*DebtorscollectionandunallocatedcreditorswerenewKeyPerformanceAreas(KPAs).
21BROADBAND INFRACO INTEGRATED REPORT 2016
Strategic Objective Weighting KPA KPI Sub-
weighting Baseline2015/16 Stretch Target
Q1Actual results
Q2Actualresults
Q3Actualresults
Q4Actualresults
YTD Status Comments
Ensure BusinessSustainability
70%
Revenue Percentageincreaseofactualrevenue 15% R364mil 32%increasein
Revenue 65% 32% 10% 4.2% 23.6% NotAchieved
DelayinbillingcycleandlowerrecoveryfromWACS
CostofSalesPercentagedecreaseofcostofsalesexcludingdepreciation
20% R444mil 12%decreaseofCostofSales 98% -6% -53.30% -45.9% -17.6% Achieved Lowerfibremaintenancecosts
andrenegotiatedcontracts
DebtorsCollection*Numberofdaysperoutstandingcustomerinvoices
5% - 45days 43days 27days 46days 26days 26days Achieved Improvementincollection
UnallocatedCreditors*
Numberofdaysforunallocatedcreditors 5% - Unallocatedcreditors
lessthan1weekAllocated
withinaweekAllocatedwithin
aweekAllocated
withinaweek
Allocated withinaweek
Allocatedwithinaweek Achieved
Network Saleability
10% NetworkUtilisationNumberofSTM-1equivalentsold 10% 1484STM-
1668STM-1Equivalent
341.27STM-1Equivalent 74.45 80STM-1
Equivalent1.55STM-1Equivalent
497STM-1Equivalent
NotAchieved
Increaseoftargetsbasedoncustomerupgrades
Network Improvement
10%
CustomerEnablement
NumberofkmoffibreaddedtotheNetwork 5% 14392.14 250kmby31
March 2016 202.60km 182.50km 15.49km 19.46km 420.05km Achieved RouteoptimisationandCustomer1connectivity
PointsofPresence(PoP)optimisation
NumberofPoPsoptimisedtofacilitatecustomerconnectionpoints
2.50% – 41PoPsoptimised In Progress In Progress 24PoPs optimised
9PoPs optimised
33PoPsoptimised
NotAchieved
Optimisationislinkedtocustomerconnectivitythatwillbeconcludedinthenewfinancialyear
22 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
9. TECHNICAL ENVIRONMENT
Operational Review1. Network Improvements
In the period under review, Broadband Infraco achievednumeroussuccesses.Manyprojectsthatwereininceptionphasehavenowbeencompleted,allowingmuchrequiredautonomy and cost-saving. Similarly, many customerserviceshavebeenbuiltandprovisioned.Notableamongtheachievementsarethefollowinghighlights:
• Finalisation of the MTS project together with thecompletionofthecorenetworkoptimisationprojects,which have increased the total network capacity bymorethan100%insomeinstances.
• Thecompletionandmigrationofservicesfromsomethird-party closed PoPs, thus allowingmajor cost ofsalessavingsandnetworkautonomy.
• The completion of the Oberholzer to Ramatlabamalink DWDM upgrade, allowing more services to beprovided to neighbouring Botswana. This improvesthe Broadband Infraco mandate to improve regionalconnectivity.
• Thesuccessfulimplementationandtimelyprovisioningofmajorcustomerservicestoamajormobilenetworkoperator.
• Thebuilding,installationandprovisioningofservicesaspartofthefirstandsecondphasesoftheprojectforCustomer1.
• SuccessfulrelocationofBroadbandInfracoequipmentfrom Transnet Freight Rail sites, which contributesto better network maintainability and improvesrestoration times thus improving overall networkperformance.
• A quality system programme has been initiated forimplementation, with a goal of reaching ISO 9001accreditationinthenexttwo(2)years.
• LTIFR – The lost-time injury frequency rate hasdroppedtozerosinceJanuary2016.
23BROADBAND INFRACO INTEGRATED REPORT 2016
2. Network Engineering Projects
Laboratory: From the test and training laboratory thatwassuccessfullyestablishedinthepreviousfinancialyear,Broadband Infraco has managed to run and successfullycomplete all DWDM and Synchronous Digital Hierarchy(SDH)interoperability tests with third-party suppliers inpreparationfordiversifyingsuppliersonthenetwork.
Route optimisation: After the successful completionof the latest DWDM equipment, both the new DWDMandtheoldSDHequipmentwererunninginparallel.Thisresultedindoubleconsumptionofpowerandspace,thusincreasingthemonthlyoperationalcosts.TheorganisationthenembarkedonnetworkoptimisationtoeliminatetheexistenceoftheparallelSDHandDWDMlinksforthemajoraffectedroutes.Thisoptimisationwascompletedandthusresulted inamoreefficientnetwork.Theoptimisation iscontinuingforroutesthatareoutstanding.
Corenetwork(MTS)upgrade:Duringthefinancialyear,the MTS upgrade project and associated sub-projects(core network upgrades and optimisation), were allcompleted.Therewasasignificantadditionofcapacityonthenetworkduetotheseupgrades.Asaresult,BroadbandInfraco is now providing services requiring significantcapacityfornewandexistingcustomers.
Othercustomerprojects:Theprojectstocompletetheredundancy links for other customers are ongoing andat various stages of progress. These are summarised asfollows:
• WutheringHeights:Fibrebuildisinprogress.
• Witbank: The protection fibre forWitbank has beenconstructed, testedandacceptedandtheprotectionservicesarenowrunning.
• RamatlabamaProject:TheprojecttoupgradenetworkcapacityontheborderwithBotswanawascompletedintime.
3. Network operations
3.1 Network Availability Trend
Theperformanceofthenetworkismeasuredthroughtheserviceavailabilityforcustomers.This isameasurementof the actual time that customer services are available(up and running). In 2015/16 the averaged BroadbandInfraco network service availability was 99.92%, whichis higher than the contracted SLA at99.50%. This is asaresultofsomeofthenetworkfailuresoccurringwheretherewere redundant links, thusprotectingtheservicesand improving the uptime for customer services. Thegraphbelowshowsthisperformanceincomparisontotheprevious year’s performance, and also in comparison tothecontractedSLA.
3.2 Mean Time To Restore (MTTR)
The MTTR is a measure of the average total time ittakestorestoreanetwork incident,which is inclusiveofadministrative delay (fault-logging), logistical delay andactualfaultrepairtime.
TheMTTRoverthepastfinancialyearremainedacceptablewithin the target of eight (08:00) hours. The actualaveragevaluewasaboutsix(06:10)hours.
3.3 Network Information
BroadbandInfracohas157PoPsitesand14661kmoffibre(overheadandunderground). Thebasic network layout isshownonthemap(page7).
Broadband Infraco National Network
3.4 Focus Areas
The following areas will be targeted for operationalimprovements:
a. Obsolete network technology: Whereas recentsuccessful network upgrades have resulted in morethan75%oftheactivenetworkbeingrevamped,therearestilloutstandingelementsinthenetworkthatwillneed to be refurbished or upgraded. In addition, theAdlash fibre will need to be upgraded in conjunctionwithEskom’srefurbishmentplans.
b. Information Technology network: Disaster recoveryplans have been completed and most of them havebeenimplementedalready.
24 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
Broadband Infraco’sbusinessdevelopmentsuccessesfortheyearunderreviewareasfollows:
Achieving double-digit year-on-year revenuegrowthofa24%increase(yearended31March2016amountsto R452 million; previous year of R366 million) inan industry that reflects single-digit year-on-yearrevenuegrowths.
Continuingtodiversifyitscustomerbasebyincreasingitsnumberofcustomersfrom18inthepreviousyearto23intheyearunderreview.
Growing its cumulative year-on-year STM-1equivalent growth from 1 506 STM-1 Equivalent inthelastyear,by497STM-1Equivalentduringtheyearunderreview,bringing ittoatotalannual increaseof 2003STM-1Equivalentfortheyear.
• Cementingitslong-termpartnershipintermsofbeingacoreprovidertopublicsectorconnectivitydemand.
• Consolidating itspositionasaproviderofallprimaryend-to-end links for a leading Mobile Networkoperator.
SignificantlyincreasingitsshareofrevenuefromSouthAfrica’s biggest mobile network operator revenuethroughalong-term,multiple-linktransaction.
• Continuously attracting the emerging ISPs utilisingefficientIP-basedservices.
Thesesuccessesarepremisedonthefollowingembeddedservicedeliveryprinciples:
• Broadband Infraco provides carrier-grade serviceavailability to all its customers that far exceeds thecontractedSLAofitscustomers.
• Each customer is allocated a full-time, dedicatedhumanresourceasafirstandcomprehensivepointofentrytotheirspecificneeds.
• Broadband Infraco’s decision-making is agile, andits structures are flat, which allows for expeditedconclusion of governance processes to enable thehighestlevelsofservicetocustomers.
• Broadband Infraco sees its customers as long-termpartnerscontributingtowardsmakingconnectivity inSouth Africa, a ubiquitous, affordable necessity. Thishas allowed the Company to cross-sell and up-sellsignificantservicestoitsexistingbase.
• BroadbandInfracodeployshighlytrainedstaffonthegroundinallprovincestoconductbothrestorativeandpreventativemaintenancetoitsnationallong-distancenetwork.
• Broadband Infraco’s products and services arecompetitively priced and reflect objective value formoney.
• TheCompanyisledbyexperiencedindustryveteranswhosemaindriveistodeliveraworld-classcustomerexperiencetothemarket.
10. BUSINESS DEVELOPMENT
25BROADBAND INFRACO INTEGRATED REPORT 2016
BroadbandInfracohadreceivedanoverwhelminglypositiveCustomerSatisfactionSurveyinits2014/15independentCustomerSatisfactionSurvey.Thishascontinuedthroughdirectcustomerfeedbackduringthelastyearwithregardtotheresponsivenessof itsNetworkOperationsCentre,dedication of its staff, competitive pricing and ease oftransactionwiththemarket.
Themajorcontributorsofitsrevenueoutcomesare:
Customer 1
BroadbandInfracohasbeenabletogrowitssliceofrevenuefromcustomer1throughnearlydoublingitscapacityfromthe timeof inception andendof the financial year. Thisenablescustomer1tointurndeliveraprotected,always-available, end-user experience to its portfolio of criticalservicedeliveryconnectivity.
Customer 2
Broadband Infraco continues to supply all primaryconnectivity links to customer 2’s terrestrial networkacrossallregionsofoperations.TheCompanyalsoprovidescolocationservicestocustomer2onalong-termbasis.
Customer 3
Broadband Infracocontinues toprovidecritical backhaulservicesenablingcustomer3toconductbusinesswithintheSAtelecommunicationsvaluechain.BroadbandInfracoenablescustomer3todeliverservicesatwholesale,retailand enterprise level providing critical services to theeconomyofthecountry.
Customer 10
BroadbandInfracohasintensifieditsstrategicpartnershipwith customer 10 due to its consistent delivery of animpeccable track record of high-quality of redundant,zero-disruptedexperience.BroadbandInfracoistheonlyproviderofend-to-endgig-Eservicestocriticalregionalandin-countrynodestocustomer10.
Customer 18
Broadband Infraco grew its volume of business fromcustomer 18 significantly within the past year, due tocustomer18’sexponentialmarketgrowth.Thispartnershipis likely to continue generating more opportunities forbothoperatorsintheforthcomingyear.
Emerging ISPs
Broadband Infraco has experienced a significant growthfrom the small to medium Internet Service Providers(ISPs).TheCompanyhasmanagedtoconcludecontractswithseveralnewInternetServiceProviderswhooperateinmarketsoverlookedbythebiggeroperators.BroadbandInfraco’s competitiveDWDM/IP product portfolio is thecornerstoneofsuchgrowthasthenatureoftheproductsissuchthattherevenuesinitiatedstartsteadyandbecomesignificantovertime.
BroadbandInfracoremainstheonlystate-ownedcompanycreated by an Act of Parliament solely for the purposeof rolling-out strategic broadband infrastructure andenabling national development. Broadband Infraco looksforwardtoalong-termstrategicpartnershipwithoneofthe country’s leadingnationalmobile networkoperatorsdrivingnationalbroadbandpenetration.
Pricing
In addressing the prevailing market conditions such ascustomers’ expectations for better pricing, heightenedcompetition in the backhaul market space and ensuringincreasedmarketshareandtheCompany’ssustainability,theCompanyembarkedonacomprehensivecostingandpricing review exercise. This review exercise resulted inaunitprice that isprofitable andcompetitiveaswell asa pricingmodel that will go a longway in ensuring thesustainabilityoftheCompany.Thisisoneofthegreatestmilestones achieved in the period under review as itplaces theCompanyontoa firmpathof sustainableyetresponsiblemarkettrade.
Product Development
The Company has successfully launched the colocationservice(hostingspaceandmast) inresponsetogrowingcustomer demands and also to intensify the “one-stopshop” for backhaul connectivity. In total, 17% of thecustomerbaseisalreadyutilisingthesecolocationservices.
BroadbandInfracoalsolaunchedthe“NOCasaService”(Phase 1 - Disaster Recovery NOC) in March 2016.BroadbandInfracoiscurrentlyusingitsNOCforitsowncustomers,connectedto itsnetwork.Thisconceptseesan opportunity to extend these NOC services to otheroperators whomay require them. This has potential tostimulatetheCompany’srevenuewithoutanyadditionalcapitalinvestment.
26 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
Stakeholdermanagemententailsproactivelyengagingourstakeholderstounderstandtheirexpressedandunexpressedneeds.
11. STAKEHOLDER ENGAGEMENTS
Building the brand through high-visibility stakeholder engagements
Provincial Youth, Career and Small, Medium Enterprise Development Events
Date Event Area BroadbandInfracoPurpose
DTPSLaunchofICTYouthandDisabilityinMpumalanga
3-5February2015
NgwenyamaLodge,WhiteRiverMpumalanga
TodisseminatecorporateinformationaboutBroadbandInfraco’sproductsandservicesandopportunitiesforyoungentrepreneursandICTcareeradvocacy.
DeputyPresidentYouthIndaba 20February2015
UniversityofJohannesburgSowetoCampus
TodisseminatecorporateinformationaboutBroadbandInfraco’sproductsandservicesandopportunitiesforyoungentrepreneursandICTcareeradvocacy.
JoziniYouthSummitandCareerExpo
14/15November2015
JoziniLocalMunicipality PresentationaboutBroadbandInfraco;Careeradvisetoyouth.
Wi-FiRoll-OutLaunch 19February2016
PotchefstroomTaxiRank,Tlokwe TodisseminatecorporateinformationaboutBroadbandInfraco’sproductsandservicesandpositionitasabackhaulproviderofchoicetoWi-Ficonnectivity.
TheseeventsareofteninitiatedatthelevelofthePresident;DeputyPresident;MinisterofTelecommunicationsandPostalServicesandhisDeputy,andinpartnershipwithkeyprovincialandmunicipalpartners.Careerexhibitionsinruralareas,suchasJoziniassistwithdirectempowermentopportunitiesandknowledgetransferandareanadvocacyplatformforICTcareers.
Broadband Infraco participates in Ministerial, Provincial,MunicipalandotherStakeholdereventsonaregularbasis.TheCompanyparticipatedinthefollowingpriorityeventsduringtheperiodunderreview:
27BROADBAND INFRACO INTEGRATED REPORT 2016
Co-creation of the Limpopo Provincial broadband strategy
Planning engagements between Broadband Infraco andthe Limpopo Department of Economic Development,Environment and Tourism (LEDET) continued duringthe period under review. The draft Limpopo ProvincialBroadband plan positions Broadband Infraco as thebackhaulproviderofchoicetotheprovince.TheCompanyhasconductedextensivedetailednetworkfeasibilityanddesignworkandhasprovidedsuchinformationtoLEDET.TheLimpopoProvincialBroadbandfeasibilitystudyisstilltobeapprovedandfinalisedinthe2016/17financialyear.
LEDEThasalsobeensupportiveofBroadbandInfracoCSIinitiatives in the province, e.g. the Seshigo High Schoolcomputerlablaunch,andthetabletsponsorshiplaunch.
Broadband Infraco continues to interact with all otherprovinces to various degrees of detail in termsof beingreadyandcapableofprovidingfortheirconnectivityneedsgiventheextensivenationalandinternationalfootprintoftheCompany.
Broadband Infraco’s positive brand-building events
Objectives:
• Toincreasebrandawarenesswithexistingandpotentialcustomers.
• TodifferentiateBroadband Infracofromcompetitors;thisencouragescustomerstofeelpositiveabouttheirassociation with Broadband Infraco and continue toconsumemore.
• To increase brand loyalty to Broadband Infraco’sproducts.
Strategies:
• Sponsorandparticipateinindustry-relatedevents.• Partnerwith other SOCs in support of shareholders’
initiatives.• Advertise in targeted niche media platforms, which
distributestopublicandICTsectors.
Highlightsduringtheyearunderreview:
• Broadband Infraco AfriCom 2015, at Cape TownICC
AfriCom is the biggest and best technology event inAfrica that gathers senior decision-makers from theentire digital ecosystem. Broadband Infraco acquiredbrand visibility for this event to connect with majorexisting and prospective customers. AfriCom is theperfectplatformforface-to-facemeetingswithsenior-levelbuyersandinfluencersfromtheregion’soperators.
BroadbandInfracoprocuredabrandedmeetingroomattheconference.TheCompany’sKeyAccountsManagerssucceeded in meeting with existing and potentialcustomers in a professional environment to positionBroadband Infraco’s brand and showcase its productsandservicesamongtheleadersoftheAfricanTelecoms,Media,andICTandBroadcastIndustry.
• BroadbandInfracoatGovTech2015
Govtech is the premium ICT platform for thoughtleadersandtheirassociatedinnovationsintheongoingquest to find practical and progressive solutions to adevelopingnationusingICTtools.
Broadband Infraco, as part of the sponsors for theevent, was afforded an opportunity to erect a fullcolour3X3 exhibition stand. The exhibition areawasused as a platform to display Company information,hostmeetingswith existing and potential customersandincreasebrandawarenesslevels.
The positive aspect of the stand is that BroadbandInfracosendspeoplewithdifferentskillstotheevent,which helps to address different enquiries from thepeople visiting the stand. Amongpeoplewho visitedBroadband Infraco’s stand were the Minister ofTelecommunicationsandPostalServices;Chairpersonof the Portfolio Committee,MsMmamoloko KubayiandtheDeputyMinister,ProfessorHlengiweMkhize.SITAlaunchedtheICTAwardsatthe2015conferencewithseven(7)categories.BroadbandInfracoCEO,MsPulengKwelewasthesecondrunner-upintheWomeninICTcategory.
• I-Week2015
iWeek is South Africa’s leading Internet industryconference, held annually since 2001. iWeekbrings together all of South Africa’s major Internetorganisations for a series of presentations, paneldiscussions, workshops, training sessions and socialevents.TheiWeekco-hostsare:
- InternetServiceProviders’Association(ISPA)
- InternetExchange–SouthAfrica(INX-ZA)
In addition, a number of partners are supporting iWeek2016by facilitatingcontentorhostingevents, includingAFRINIC,FID/IDEA,FPB,ISOC-Gauteng,ISOC-ZA,WAPA,Wi-FiForumSA,ZACRandZADNA.
Broadband Infracowas proud to have brand visibility atthisevent.
28 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
12. CORPORATE SOCIAL INVESTMENT
Strategies:
Broadband Infraco’s CSI strategies are to do thefollowing:
• Adoptschoolsforaperiodofthree(3)yearsinordertobeabletomonitorprogressattheschools.
• Take qualifying students through a leadershipprogramme.
• Conductneedsanalyseswithschoolsandprovidethebasicneedsfortheschoolstoruneffectively.
• Recruitwomenandyouthcompaniestoourdatabasebyhosting“BasadiinTelecommunications”events.
Highlightsduringtheyearunderreview:
TheCompanyenlistedthesupportofpartnershipswithinthe private and public companies to acquire and donate60tabletstoSeshigoHighSchoolas itsthird instalmentin itsongoingCSIsupportingprogramme incontributingtomathsandscienceskillcapacitation inthenation.Thetablets,donatedtobenefitmainlythematric learnersattheschoolandloadedwithanonlinecontentapplication,named2Enable,were delivered to ensure that the toolsareateachingaidthatwillcomplementtheworkof theteachers,while simultaneously providing an audio-visuallearningopportunityforthelearners.
Broadband Infraco’s Corporate Social Investment (CSI)Programmesincludethefollowing:
• Youthskillsdevelopmentprogramme:- Internships .- Adoptionofschools.
• Availingandencouragingbusinessopportunitieswithyouth-andwomen-ownedbusinesses.
Objectives:
• Ensurethatlearnersfromdisadvantagedbackgroundshaveanequalopportunityofbeingthebeststudentstheycanbe.
• Ensure quality leadership and teaching, adequateinfrastructure, community involvement and properacademicsupport.
• Promote youth- and women-owned businesses assuppliers in the Broadband Infraco supply chain asstipulated in Statement36 and37(c) of theB-BBEECodesFramework.
• Enhance Enterprise Development (ED) initiatives inBroadband Infraco to support youth- and women-ownedenterprises.
29BROADBAND INFRACO INTEGRATED REPORT 2016
The2Enableapplicationboaststhefollowingfeatures:
• Diagnosticself-assessments• Courseware• Coursesupport• SACECPTDtracking• Analyticsandreporting• Communicationandtrainingcalendar
Learning circles/user groups
Administration
Thetabletswerealsodeliveredwiththefollowingvalue-addedservicesatnocostfromtheserviceprovider:
• Simcardswith200MBofdatafor12months.• WiFidataaccessfortwo(2)years.• Monitoringandevaluationimplementationprogramme.
BroadbandInfracopridesitselfintheremarkablemannerinwhichithassustainedamutuallybeneficialrelationshipwithSeshigoHighSchool,withthecontinuedintentiontopositivelysupportandleveragetheuseofICTinteaching,learninganddevelopment.TheCompanywillcontinuetodeliver annual contributions to strengthening thismulti-partner(provincialdepartments;privatecompanies;localcommunity)partnershipestablishedoveryears.
The tablets that were delivered during the period underreviewwereaculminationofotherdeliverablesthathadbeenmadetotheschoolinthepast,whichincludedthefollowing:
• Theintroductionofinteractiveteachingandlearningaids,openinganewavenueintheclassroomenvironment.
• Portable,compact,durableteachingtools(interactivewhiteboards)were also acquired and supplied to theschools, offering new levels of curriculum access,interactivity and proficiency, thereby stimulatinglearnerparticipationandimprovingresults.
• ApartnershipwithTransnet,whichculminated in thebuilding and completion of a 35-seater computerlaboratory. The laboratory is equipped with desktopcomputersandaprojectorscreentoenablelearnerstoalsouseitasanadditionalvenueforTelematics(long-distancelearning)offeredbyStellenboschUniversity.
• The provision of scientific calculators has also gonea long way in ensuring that lessons are practicaland interesting for both teachers and learners. Thecalculators are for the use of the school and notindividuallearners,thusguaranteeingalongershelflifeandusebyagreaternumberoflearners.
• Buildingand renovationof43toilets forable-bodiedanddisabledlearnersatSeshigoHighSchool,ensuringthat learners in South Africa, regardless of raceand class, will be able to learn in environmentswithadequateinfrastructure.
30 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
13. GOVERNANCE
Our Governance
It is important to note upfront that Broadband Infraco isfully committed to good corporate governance and theethical principles of fairness, accountability, transparencyandresponsibility.
Duringtheperiodunderreview,BroadbandInfracocontinuedtoevolve itsgovernancestructuresandpractices tomakesurethatweachieveourvisiontodelivertoourcustomerseffectively, efficiently and transparently. We establishednewoperational committees accountable to the ExecutiveCommittee to enhance our compliance and strategicdeliverables,whicharealignedtogovernancepractices.
The Board of Directors’ responsibility is to ensure thatthe Company practises good corporate governance, issustainable and delivers on its corporate obligations andlegislative requirements. Broadband Infraco’s systemsof solid and sound corporate governance principles arecontinuallyevolvingasitstrivesforbestpracticeamidstthedevelopingneedsandexpectationsofstakeholders.
The Company is a proudly South African State-OwnedCompany(SOC)andourgovernance,riskandcomplianceinitiativesaredrivenbymorethanminimumrequirements,butratherafirmbeliefthatourlicencetooperatedependsonbeing responsiblecorporatecitizens.As such,we takedecisionsthatenableourstrategyandobjectives,ensureour
profitabilityandperformance,andconsiderourrisks,whilestrivingtomeetthe legitimate interestsandexpectationsof our stakeholders through actions that are socially andenvironmentallyresponsible.
Balancingtheseimperativesandensuringawell-governedand ethical organisation is one of the Chief ExecutiveOfficer’s key performance areas. This ensures thatgovernanceisalignedwiththeKingIIIprinciples.
BroadbandInfracomaintainsastrongcultureofcorporategovernance, which is an important consideration in itsday-to- day operations, and its Directors and ExecutiveManagementarefullycommittedtothehigheststandardsofcorporategovernanceintheconductofthebusiness.
Board Structure
Broadband Infraco’s Board of Directors is responsiblefor corporate governance and strategic direction of theCompanyandmonitoringtheCompany’sprogressagainstthebusinessstrategy.TheBoardalsodrivestheCompany’sgoaltobeagoodcorporatecitizenandisassistedbytheExecutiveCommittee(Exco).
Board members have a diverse profile that includestelecommunications industry experts, businessmanagement, sciences, engineering, law, finance,auditing, project and corporate finance, enterprise risk
31BROADBAND INFRACO INTEGRATED REPORT 2016
management and accounting skills and expertise. Themajority of the Board ismade up of independent Non-ExecutiveDirectorswhobringindependenceandprovideabalancedjudgementtotheCompany’sbusiness.TheaimistohaveaBoardwithanappropriatebalanceofskillsandexperience to support Broadband Infraco’s strategy andmeettherequirementstoleadtheCompanyeffectively.
TheCompany’sstrategicdirection isguidedbyaunitaryBoard (ie, a single Boardwith both Executive andNon-ExecutiveDirectors).TheChairpersonandChiefExecutiveareindependentofeachotherandnotthesameperson.
The Profiles of the Board of Directors are reflected onpage9.
Board Operation
TheBoardisresponsibletoshareholdersforconductingthebusinessoftheCompany.ItprovidesleadershipandvisiontotheCompanysothatshareholdervalueisenhancedandthe Company’s long-term sustainable development andgrowthareachieved.TheBoardapproves theCompany’sstrategy,reviewsCompanyperformance,approvesinterimand Annual Financial Statements, determines internaltreasury policies, riskmanagement policies and approvesmajorinvestmentsordisinvestments,amongstothers.
Non-Executive Directors are provided with sufficientinformation timeously to enable them to formulateindependent conclusions on allmatters brought to theirattentionatBoardmeetings.
The Board is ultimately accountable for BroadbandInfraco’sperformanceandaffairs.
Application of King III
During2015,Broadband Infraco continued to evolve itsgovernancestructuresandpracticestoensureweachieveourvisiontodeliveronourstrategyandtoourcustomerseffectively, efficiently and transparently. The applicationofandadherencetotheKingIIIprinciplescontinuetobeakeyfocus.In2015,theComplianceDepartmentreviewedthe Company’s application of the King III principles andwassatisfiedthat ithadsubstantiallyappliedtheKing IIIprinciples.
BroadbandInfracoiscommittedtoapplyingtheprinciplesandpractices intheKingreportongovernanceforSouthAfrica 2009 (King III). The Compliance Office assessestheapplicationofKingIIIonaquarterlybasisandprovidesreportstotheAuditandRiskCommitteeforconsideration.
BroadbandInfracobelieves ithascompliedwithKingIII inallmaterialrespectsandalsocomplieswiththeadditionalgovernancerequirementsaspertheProtocolonCorporate
Governance in the Public Sector, the Public FinanceManagementAct,andallrelevantaspectsoftheCompaniesAct (Act 71 of 2008). The Company is committedto continue the process of integrating our reporting tostakeholdersinamoremeaningfulandtransparentway.
Non-Financial Aspects
Broadband Infracocontinues tobeguidedby theGlobalReporting Initiative’s (GRI) sustainability reportingguidelines on economic, environmental and socialresponsibilityaspects.
Shareholders and Board of Directors
Broadband Infraco has two (2) shareholders namely; theDTPSandtheIDCofSouthAfrica.TheCompanyreportstotheMinisterofTelecommunicationsandPostalServicesasthe“ExecutiveAuthority”(intermsofthePFMA)andtheShareholderRepresentativeonbehalfof theGovernmentoftheRepublicofSouthAfricaandalsoreportstotheIDCShareholderRepresentative.
Changes in Board Composition
Duringtheperiodunderreview,therewerenochangestotheNon-ExecutivedirectorappointmentsontheBoard.
Cabinet approved the appointment of the new ChiefFinancial Officer of the Company, Mr Ian van Niekerkon 26 August 2015, and he commenced his duties andresponsibilities on 15 September 2015.Mr van NiekerkwasappointedasanExecutiveDirectorof theBoardon23March2016.
Director Induction
All new Directors receive appropriate and ongoingorientation and induction training, as well as directordevelopment training, focusing on Broadband Infraco’sbusiness,itsenvironment,keyrisks,fiduciarydutiesandsustainabilityissues.
Meetings of the Non-Executive Directors
AllDirectorshaveaccesstotheadviceandservicesoftheChairman,CEO,CFOandCompanySecretary.TheCompanySecretary is responsible to the Board for ensuring Boardand governance procedures are followed and applicableregulationsareadheredto.
Where a need arises, Non-Executive Directorsmeet andcommunicate independently via in-committee sessions,without ExecutiveDirectors present. Additionalmeetingsare convened should any matter arise that requiresconsiderationbytheBoardoutsideofscheduledmeetings.TheChairmanandCEOengagemonthlyormoreoften,asand when required, to discuss strategic and operationalmatterspertainingtotheCompany.
32 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
Corporate Governance Framework
Oneoftheessentialcomponents istheemphasisontheclarity of roles between the Board, shareholders andmanagement.
Broadband Infraco’s governance framework regulatestherelationshipbetweentheshareholders,theBoardandmanagement,andincludesthefollowing:
• MemorandumandArticlesofAssociation,whichsetoutcertainpowersoftheshareholdersandtheBoard.Broadband Infraco’s Memorandum of Incorporation(MoI)asrequiredintermsoftheCompaniesAct71of2008,isintheprocessofbeingfinalisedbetweentheShareholders.
• A strategic intent statement, which sets out theagreedmandateandstrategyforBroadbandInfraco.
• The Corporate Plan, which forms the basis ofBroadband Infraco’s operations and outlines theCompany’spurpose,valuesandstrategicobjectives.
• A Shareholders’ Compact, which sets out theobjectives and annual key performance indicatorsandtargets insupportofthestrategy.Totheextentnecessary,theshareholders’compactseekstoclarifytheobjectivesoftheCompany.
• Codes of good governance suchasKing IIIandtheProtocolonCorporateGovernanceinthePublicSector.BroadbandInfracohasendeavouredtoapplytheKingIIIprinciplesandpractices.
• Relevant legislation, including the Companies Act,thePublicFinanceManagementAct(PFMA),NationalTreasury Regulations, Broadband Infraco Act, andIndependent Communications Authority of SouthAfrica(ICASA)Regulations.
• Significance and Materiality Framework (SMF), which sets out the requirements regarding mattersneedingapproval.TheSMFalsosetsoutthefinancialthresholds and approvals limits of the Board,subcommitteesandExecutiveDirectorsandindicateswhen Executive Authority approval is required forprocuringservicesandgoodsasperthePFMA.
Relevant Policies and Procedures
• DelegationofAuthorityFramework,whichdelegatespower and authority from the Board to committeesandemployees.ThedelegationofauthorityframeworkwasapprovedbytheBoardandisbeingimplemented.
• Policy Approval Framework, which sets out theResponsible, Accountable, Consulted and Informed(RACI) matrix for which policies need approval atwhichlevel,i.e.approvalbytheBoard,committeesoratExecutivelevel.
• Stakeholder Management Framework, which setsouthowemployeesengageinterdepartmentally,withindustry,non-profitorganisations,communitygroups,stakeholdersandshareholders.This is importantas itallowsforBroadbandInfracotooperateinawaythatoptimises both interactionwith government and theimplementationofpolicy.
Committees
TheBoard’seffectivenessisimprovedbytheuseofBoardsubcommittees, towhich it delegates authoritywithoutdilutingitsownaccountability.Boardcommitteesconsistof a majority of independent Non-Executive Directorswhoexercisetheirauthorityinaccordancewithapprovedterms of reference, which are reviewed annually. Thesetermsofreferencedefineeachcommittee’scomposition,role, responsibilities and authority, and are aligned withregulatory requirements andbest-governance practices.TheBoardprovidesthestrategicdirection,whiletheChiefExecutive,whoisassistedbytheExecutiveCommittee,isaccountabletotheBoardforimplementingthestrategy.
13. GOVERNANCE CONTINUED
33BROADBAND INFRACO INTEGRATED REPORT 2016
ThediagrambelowsetsoutBroadbandInfraco’skeygovernancestructures:
Internal Controls Including Security and Combined Assurance
Internal controls
The Board, through the Audit and Risk Committee,ensuresthatinternalcontrolsareeffectiveandadequatelyreported on for auditing and regulatory purposes. Inlinewith King III, Broadband Infraco applies a combinedassurancemodeltogivetheauditandriskcommitteeanoverviewofsignificantrisks,aswellastheeffectivenessofcriticalcontrols tomitigate these risks.Theprinciplesfor the combined assurance model are embeddedin the Combined Assurance Framework. BroadbandInfraco’sinternalauditfunctionismanagedbyExecutive:Compliance, Risk and Audit,who reports directly to theAuditandRiskCommitteeChairperson.
Combinedassurance
Combined assurance assists management in identifyingduplication of assurance work, any potential assuranceshortfallandimprovementplansforthoseareasidentified.ItalsohelpsfocusassuranceproviderstobetterachieveconsensusonthekeyriskstheCompanyfacesandreducestheriskoffailingtoidentifysignificantrisks.
Compliance with Laws, Rules, Codes and Standards
TheBoardensuresthatBroadbandInfracocomplieswithapplicable laws and considers adherence to non-bindingrules,codesandstandards.Assuch,theBoardhastakenthenecessary steps toapproveall identified laws, rules,codes and standards applicable to the Company, byadopting the Company’s Compliance/Regulatory universe
SA Government Department of Telecoms and Postal Services
Shareholding 74%
Industrial Development Corporation (IDC)Shareholding 26%
Broadband Infraco SOCBoard of Directors
Investment, Finance, Tender and Procurement Committee
Human Resources and Remuneration Committee
Audit and Risk Committee
Social and Ethics Committee
Chief Executive Officer
Executive Management Committee (Exco)
34 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
Themembers’attendanceatmeetingsisreflectedinthetablebelow:
No. 1 2 3 4 5 6 7 8 9 10
Total
Meeting Date
14.04.15
26.05.15
29.06.15
10.07.15
15.09.15
26.10.15
18.12.15
27.01.16
23.02.16
17.03.16
Name of Director
BMCNgcobo1 √ √ √ √ √ √ √ √ √ √ 10/10MMMaponya √ √ A √ A A √ A √ A 5/10STMabalayo √ √ √ √ √ √ √ A √ √ 9/10NSelamolela √ √ A A √ √ √ √ √ A 7/10AGithiari A √ √ √ √ √ A A A A 5/10MMosweu √ A A √ A √ √ √ √ √ 7/10PKwele √ √ √ √ √ √ √ √ √ √ 10/10IIvanNiekerk* – – – – – √ √ √ √ √ 5/5TPama(ActingCFO)** √ √ √ √ – – – – – – 4/4Note:**MsTPama(ActingCFO)resignedfromtheCompanyand*MrIanvanNiekerkwasappointedandcommencedhisdutieson15September2015and
wasappointedasanExecutiveDirectoroftheBoardon23March2016.1ChairpersonoftheBoard √ Attendance A Absentwithapology
13. GOVERNANCE CONTINUED
and align it to the Corporate Compliance Plan. The Boardhas ensured that the Company has a Compliance PolicyFrameworkandprocessesinplace.Managementhasensuredthat the approved compliance policy and framework areembeddedCompany-wide.
Compliance is then achieved through integration withbusiness/organisational policies, processes, ethics andculture. A delegated compliance function is in place andensuresthattheCompanyisincompliancewithapplicablelaws, rules, codes and standards aswell as included as aregularitemontheagendaoftheAuditandRiskCommittee.
Board Meetings
Boardmeetingsareheldatleastquarterlyorasandwhenrequired.AllDirectorsareinvitedtoadditemstoagendasforBoardmeetings.DatesforBoardmeetingsaresetandapprovedbytheBoardinthefinalquarterofthefinancialyearforthefollowingyear.
Duringtheperiodunderreview,theBoardconvenedten(10)meetings.Five(5)meetingswere‘ordinary’meetingsasscheduledandtheremainingfive (5)meetingswere‘special’meetingsconvened todiscuss issuesof criticalimportancetothebusinessandshareholdersalike.
35BROADBAND INFRACO INTEGRATED REPORT 2016
Conflicts of Interest
Directors are required to inform the Board timeously ofconflictsorpotentialconflictsofinterestonanymattersontheagendafordiscussion.Directorsareobligedto recusethemselves from discussions or decisions on matters inwhichtheyhaveaninterest.Directorsarefurtherrequiredtodiscloseallotherdirectorshipsatthebeginningoftheyearbywayofadeclarationof interestform,andchangesaretabledwhentheyoccur.TheDeclarationofInterestRegisteriscirculatedateveryBoardmeetingforreviewbyMembers.
Evaluating the Board’s Performance
In consultation with the Shareholders and due to thechallenges experienced by the Company in the 2015/16financialyear,itwasagreedthatanevaluationoftheBoard’sPerformance will be conducted every three (3) years tocoincidewithdirectors’appointmentsforaperiodofthree(3)years.
Structure and Committees
Specific responsibilities have been delegated to variouscommittees of the Board. The Audit and Risk, HumanResources and Remuneration (also plays the role of theNominations Committee), Social and Ethics, Investment,Finance, Tender and Procurement committees assist theBoard in discharging its duties and report to the Boardregularly on their activities. Each committee acts inaccordancewithitsownwrittentermsofreference,underwhichcertainfunctionsoftheBoardaredelegatedforclearlydefined purposes. The Board, however, recognises thatdelegatingvariousfunctionsandauthoritiestocommitteesdoesnotabsolvetheBoardofitsdutiesandresponsibilities.
Thechairsofthevariouscommitteesarerequiredtoattendtheannualgeneralmeetingtoanswerquestionsraisedbyshareholders.TheBoardisempoweredtoformordisbandcommittees, as it may deem appropriate. The Boardevaluatestheperformanceandeffectivenessofeachofthecommittees.
Executive Management Structures
The Board has delegated specific authorities to the CEOto ensure the effective day-to-day management of theCompany.TheCEOhasestablishedanExecutiveCommittee(Exco) to assist with this task. She is accountable to theBoardformanagingtheCompanyandreportstotheBoardofDirectorsonanongoingbasis.
Executive Committee
TheExecutiveCommitteecomprisesthefollowingmembers:
PulengKwele–ChiefExecutiveOfficer,CommitteeChairmanIanvanNiekerk–ChiefFinancialOfficerGiftZowa–ChiefTechnicalOfficer
SammyMafu–ChiefSalesandMarketingOfficerMontsengMopeli–Executive:HumanResourcesMikeMojapelo–Executive:Compliance,RiskandAudit
ThemainpurposeofthecommitteeistoassisttheCEOwiththefollowing:
• The responsibility for day-to-daymanagement of theCompanyanditsdivisionsthatreportdirectlytotheCEO.
• Reviewing Company risks and providing assurance tothe CEO that risk management policies are operatingeffectively.
• ReviewingCompanyperformanceaswellascommercialandstrategicissuesaffectingtheCompany.
• Providing assurance to the CEO that the businessstrategysetbytheBoardisoperatingeffectively.
TheExecutiveCommitteemeetsonaweeklybasis.Additionaladhocmeetingsareconvenedasandwhennecessary.
The Executive Committee has also established the ExcoProcurement Subcommittee, Pricing Committee, ProductDevelopmentCommittee,andmostrecentlytheITOversightCommittee.Thesecommitteesconveneonanongoingbasisandmakeapprovalswithintheirdelegatedpowerslimitedaspertheirtermsofreferences,ormakerecommendationstoExcoforapproval.
Reporting Controls
The Company has comprehensive monthly financialaccountingandreportingroutinesforitsoperatingdivisions.Managementofcash,bankingrelationships,humancapitaland property-related matters are centralised. Formalmeetings are attended by the Executives to reviewperformance,commercialandstrategicissues.TheExecutiveCommitteealsomonitorstheinternalauditreports.
Board Committees and Attendance Reports
ThecommitteesormembersareappointedbytheBoardofDirectors toensure thateffective andefficient corporategovernancepreceptsarefulfilled.TheBoardofDirectorsofBroadbandInfracohasdelegatedsomeofitsresponsibilitiestotheBoardcommittees.BroadbandInfracoconsistsofthefollowingcommittees:
• AuditandRiskCommittee,• HumanResourcesandRemunerationCommittee,• Investment,Finance,TenderandProcurementCommittee;
and• SocialandEthicsCommittee.
Thecommittees’ responsibilitiesareclearlysetout intheirtermsofreferenceandtheapprovedDelegationofAuthorityPolicy.
36 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
Audit and Risk Committee Attendance 2015/16
TheMembers’attendanceisreflectedinthetablebelow:
No. 1 2 3 4
Meeting date
Name of Director 25.05.15
28.07.15
07.10.15
24.02.16
Total
MMMaponya1 √ √ √ √ 4/4
STMabalayo √ √ √ √ 4/4
NSelamolela √ A √ √ 3/4
AGithiari A A √ √ 2/4
Executives
PKwele √ A √ √ 3/4
IIvanNiekerk* – – – √ 1/1
TPama** √ √ – – 2/21 Chairperson √ Attendance A Absentwithapology* MrIanvanNiekerk(CFO)commencedhisemploymenton15September
2015
**MsTPama(ActingCFO)resignedfromtheCompany
Human Resources and Remunerations Committee Attendance 2015/16
As the chairperson of the Human Resources andRemunerationCommittee(HRRC),itismypleasuretosubmitthecommitteereportforthe2015/16financialyear.
During the period under review, the HRRC comprised ofthree (3) Independent Non-Executive Directors: Mr SMabalayo(Chairperson),MrMNgcobo,andMsMMosweu.
In line with good corporate governance precepts, thechairperson of HRRC rotated andMr SydneyMabalayowas appointedChairperson ofHRRC in2015. TheChiefExecutive Officer and the Executive: Human Resourcesare invited toattendthemeetingsof theHRRCandareexcused from themeetings if there are anymatters ofpotentialconflictsofinterest.
The main objectives of the HRRC are to address humanresources-related matters. The committee approves,guidesand influenceskeyHumanResources(HR)policiesandstrategies.ItmonitorscompliancewiththeHRPolicies,Labour Relations Act, Employment Equity Act and BasicConditions of Employment Act, amongst others. Thecommittee further guides strategies to achieve equityin Broadband Infraco. It is also approves the principlesregardingtherewardandincentiveschemes.
TheHRRCfurtherfulfilstheroleoftheBoardNominationsCommittee and makes recommendations to the Boardon matters pertaining to appointments, removals, andresignations of Executive and Non-Executive Directors.
TheCommitteewasactivelyinvolvedintheidentificationand recommendation of the current CFO’s appointmentduringthefinancialyear.
TheHRRCconvenedfive(5)timesduringtheperiodunderreview.Refertomeetingattendancetablebelow:
No. 1 2 3 4 5
Total
Meeting date
Committee member 1
8.05.15
24.11.15
23.02.16
23.02.16
(In-Com
mittee)
17.0318
(In-Com
mittee)
STMabalayo1 √ √ √ √ √ 5/5
BMCNgcobo √ √ √ √ A 4/5
MMosweu √ √ √ √ √ 5/5
Executives:
PKwele √ √ √ √ √ 5/5
MMopeli √ √ √ - - 3/31 Chairperson √ Attendance A Absentwithapology
Iamdelightedtoreportthatthecommitteetogetherwithmanagementwasabletoachieveanumberofthesetkeyperformanceobjectives.
Furthertotheabove,theHRRCalsoachievedthefollowing:
• Reviewed and considered the Optimisation of HRCapacity.
• Reviewed the HR Quarterly Status Updates frommanagement.
• Reviewed and approved the Executive ManagementStructure.
• Considered and recommended the approval of theappointmentoftheChiefMarketingandSalesOfficer(CMSO).
• Reviewed and recommended the approval of theExecutive Remuneration and Rewards Policy by theBoardofDirectors.
• Reviewed and revised the Company’s OrganisationalStructure(ExecutiveManagement) inordertoensurecapacityoptimisation.
• ConsideredtheEmploymentEquityReportfor2015/16.• ApprovedtheRewardandRecognitionPolicy.• Approved the employee Cost of Living Adjustment
2016/17.• ReviewedtheHRPoliciesdashboardandnotedtheHR
ComplianceAnalysis.• Considered and made recommendations on
managements relationship with the CommunicationsWorkersUnion(CWU).
• Considered the employee Performance Managementforthe2015/16FinancialYear.
• ConsideredandreviewedHumanResourceDevelopment(HRD)withintheorganisation.
13. GOVERNANCE CONTINUED
37BROADBAND INFRACO INTEGRATED REPORT 2016
• Actively participated and supported Management’sdriveforsecuringinternsfortheCompanythroughtheMICTSETA.
• Considered matters of Irregular, Fruitless and WastefulExpenditure as recommended by the Audit and RiskCommittee;andareintheprocessoffinalisingtheirreports.
It is my view, that the HRRC executed its roles andresponsibilitiesasperitstermsofreferenceasdelegatedtoitbytheBoardofDirectorsinthebestinterestoftheCompanyanditsshareholders.
I would like to commend the HR Function and theExecutiveManagementfortheirdiligenceinensuringthatthe Company complies with legislation and for puttinginterventions in place to create a stable environmentunderdifficultconditions.
MrSydneyMabalayoChairpersonHumanResourcesandRemunerationCommittee
Investment, Finance, Tender and Procurement Committee Attendance 2015/16
Duetoafreezeonnewinfrastructurespendinthe2015/16financialyearnoIFTPCommitteemeetingwasconvened.
Social and Ethics Committee Report for the year 2015/16
TheSocialandEthicsCommitteedidnotconveneduringthe2015/16financialyear.
Ethics
BroadbandInfracohasadoptedaCodeofEthicstoensuretheCompanyoperates,inallrespects,asagoodcorporatecitizen.ThecoderequiresCompanyemployeestoperformtheirdutiesingoodfaith,tobeuncompromisinglyhonestin all their dealings with customers, suppliers, eachother and all other stakeholders, thereby maintaining areputationforintegrityandresponsiblebehaviour.
The Company continues to adopt a zero-toleranceapproachtotheft,fraudandofferingoracceptingbribesand/orfavours.
Company Secretary
AllDirectorshaveaccesstotheCompanySecretary.TheCompany Secretary provides guidance to the Board asa whole and to individual Directors on discharging theirresponsibilities. The Company Secretary oversees theinduction of new Directors and also assists in settingBoardandcommitteeplansfortheyear.
Compliance, Risk and Audit
BusinessProcessManagement(BPM)
The Business Process Management (BPM) functioncontinuouslyengagesbusinessunits toensurethat theCompany’s operational efficiency and effectivenessis achieved. This is done through facilitating theestablishment of operational controls, and optimisingend to end processes between critical interdependentbusiness functions. It further engages in the BuildingEnterprise Effectiveness programme that ensuresthat legislative, mandatory policies and processesare formalised, standardised and embedded in theorganisation. During the year under review, BPM hasconcentratedinthefollowingareas:
•EnhancingEnterpriseProcessCapability
The Business Process Management (BPM) function hasfacilitated the development and approval of businessprocesses identified within the Enterprise OperatingModel. In the period under review, BPM managed toadvance the completion and finalisation of outstandingbusiness processes. It also facilitated the optimisationof approved business processes and compliance withapplicable processes and policies. This has ensured thatthe Company has the ability to process its operationalobjectiveswithinrequiredtimeframesatoptimisedcosts.
All the above interventions have resulted in significantimprovementinoperationalcontrols. Ithasalsoenforcedcrossfunctionalcollaboration.Thecrossfunctionalprocessmeetings and workshops are focused on evaluating,monitoring and improving performance of businessprocesessacrosstheorganisations.
Furthermore,BPMhasidentifiedISO9001accreditationrequirements, in parthership with the SHEQ team andhas established an aproach to ensure that a qualitymanagementsystemisinplace.
•InstitutionalisationofPoliciesandProcedures
The enterprise-wide policy and operational frameworksregister has been put in place in order to facilitateinstitutionalisation of policies and procedures, and toensurethereiscompliancewithapplicablelegislationandbusinessrequirements.
BPMhasrecordedatotalnumberof54policiesidentified,38policiesapprovedand implemented, ten (10)policiesrecommendedbyExcotobetabledatBoardcommittee,four(4)underreviewandtwo(2)newpoliciesindraft.
38 BROADBAND INFRACO INTEGRATED REPORT 2016
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13. GOVERNANCE CONTINUED
•EstablishmentofInformationSecurityPlatform
The Company established the Information TechnologyOversight committee facilitated by the BPM departmentwith theaimofensuring that theCompany information issecured.Theobjectivesofthecommitteeincludeamongstothers:minimiseoperationalrisk,compliancewithlawsandregulationsassuranceofoperationalcontinuity,safeguardingtheconfidentiality,integrityandavailabilityinformation.
Internal Controls including Security and Combined Assurance
Internal controls
The Company has established internal controls, whichincludealloftheprocessesandprocedurestohelpmakesure that its assets are protected and that CompanyactivitiesareconductedinaccordancewiththeCompany’spoliciesandprocedures.
Toensureeffectiveinternalcontrol,anintegratedassuranceframeworkhasbeenput inplace toassist in structuringand evaluating controls that address a broad range ofrisks.Theframeworkdefinesinternalcontrolasaprocess,effectedbyanentity’sBoardofDirectors,management,and other personnel, designed to provide reasonableassuranceregardingtheachievementofobjectivesrelatingtooperations,reporting,andcompliance.
IntegratedAssurance
Broadband Infraco has adopted a principle of integratedassurance process that integrates risk and assurancearrangements and provides a platform from which to
BPM has recorded a total number of 16 operationalframeworksandmethodologies,13operationalframeworkswere approved and implemented, two (2) operationalframeworks and methodologies are under review and indraftandone(1)operationalframeworkandmethodologyapprovedatExco.
Enterprise-wide Framework and Methodology Register
n Totalnumberofpoliciesapprovedandimplementedis38
n TotalnumberofpoliciesrecommendedbyExcotabledatBoardcommitteemeetingsis10
n Totalnumberofpoliciesunderreviewis4
n Totalnumberofpoliciesnewpoliciesindraftis2
Enterprise-wide Policy Register
n Totalnumberofoperationalframeworksandmethodologiesapprovedandimplementedis13
n Totalnumberofoperationalframeworksandmethodologiesindraftis 2
n TotalnumberofoperationalframeworksandmethodologiesapprovedatExcois1
70%
19%
7%4%
81%
13%
6%
39BROADBAND INFRACO INTEGRATED REPORT 2016
support governance and regulatory reporting such asIntegrated Reporting. The Company has embeddedintegratedassuranceasaprocess that leveragesoff theCompany’senterprise riskmanagementsystemsandtheassociatedvaluedrivers.Assuch,thereisdirectextensionof the ERM arrangements into the sphere of assuranceactivity,optimisingthecostandqualityofassuranceacrossallthelinesofdefence(Exco,Excosubcommittees;SHEQ;Risk,ComplianceDepartmentandInternalAudit)andcaterforconsolidatingaconclusionbasedon the resultsofalltheassuranceprovidersacrossmultipleassuranceyears.
The Integrated Assurance allowed Management andoversightstructuressuchastheAuditandRiskCommitteetofocusonthebusinessvalueofassuranceactivities, i.e.whether thecontrol structuresareadequate tomitigateriskexposurestoacceptablelevels.
CompliancewithLaws,Rules,CodesandStandards
ComplianceformsanintegralcomponentoftheBroadbandInfracogovernancestructuresandtheCompanyconsidersnon-compliancewith the legislative requirementsasakeyrisk,as itnotonlyexposestheCompanytofinesandcivilclaims,butcanalsoresultinthelossofoperationallicencesandreputationalharm.TheBoardensuresthatBroadbandInfraco complies with applicable laws and considersadherence to non-binding rules, codes and standards. Assuch,managementhastakenthenecessarystepstoidentifyalllaws,rules,codesandstandardsapplicabletotheCompany.The Board then approves the Company wide regulatoryuniversewhichisalignedtothecorporatecomplianceplan.
TheBoardhasensuredthattheCompanyhasacomplianceframework and processes in place. Management hasensured that the approved compliance policy andframework are embedded companywide. The CompanyhasestablishedaformalComplianceFunctionthatreportstoExecutive:Compliance,RiskandAudit.TheCompany’sCompliance Policy is reviewed annually or updated asand when necessary. The Compliance Policy forms thefoundationoftheCompany’sComplianceFramework.
Internal Control Environment
TheBoard,managementandotherpersonneltookownershipand effected processes to provide reasonable assuranceregarding the achievement of objectives in the followingcategories:
1.Effectivenessandefficiencyofoperations.2.Reliabilityoffinancialreporting.3.Compliancewithapplicablelawsandregulations.
Thecontrol environmentdevelopedensured that the toneset,influencedthecontrolconsciousnessofitspeople.Itisthefoundationforallothercomponentsofinternalcontrol,providingdisciplineandstructure.
The control environment includes factors such as theintegrity,ethicalvalues,organisationalculture,competenceofpeople,management’sphilosophyandoperating style,delegation of authority and responsibility, aswell as theintentionanddirectionprovidedbytheBoard.
Broadband Infraco complied with the Auditor-GeneralDashboard, using the following key control environmentpillars:• Leadership.• Financeandperformancemanagement.• Governance.
The InternalAudit Functionprovidedquarterly assuranceto management and the Board on the adequacy andeffectiveness of these control pillars using the followingassessmentdrivers:• Financial.• Performance.• Compliance.
ProgressreportsweresubmittedtoExcoandtheAuditandRiskCommitteeon a quarterly basis. Theoverall controlenvironmentratingforBroadbandInfracowasregardedasgood.
Internal Audit
Broadband Infraco has an independent internal auditdepartment, which has direct access to the Board’sChairperson and the Audit and Risk Committee. Thedepartment reports functionally to the Audit and RiskCommitteeandadministrativelytotheCEO.The internalaudit function has the necessary resources, budget, andstanding authority within the Company to enable it todischargeitsauthority.
The internal audit function operated in accordance witha charter approved by the Audit and Risk Committee.The Internal Audit charter formally defines the purpose,authorityandresponsibilityofthe internalauditfunction.ThecharterisalignedwiththeInstituteofInternalAuditors’principlesand is reviewedannuallybytheAuditandRiskCommittee.
The internal audit department operated in line with a Riskbased internal audit plan discussedwithmanagement andapproved by Audit and Risk Committee. The internal auditdepartmentformsanintegralpartofthecombinedassurancematrix and focuses on adding value to the operations ofBroadbandInfraco.Itperformsthefollowingfunctions:• Evaluates the appropriateness of and adherence to
Companypoliciesandprocedures.• Preventsfraud,unethicalbehaviourandirregularities.• Producesqualitymanagementinformation.• Ensures sound business processes and associated
controls.
40 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
13. GOVERNANCE CONTINUED
The Manager: Internal Audit reports to the Executive:Compliance,RiskandAuditwhoattendsallAuditandRiskCommitteemeetingsandsubmitsareportateachmeeting.
EffectivenessandAdequacyofInternalFinancialControls
Internal Audit conducted a Critical Financial ReportingControls review to test the adequacy and effectivenessof internal controls. The scope of the work covered thefollowingkeyareas:
• Financialcloseprocess.• Revenueandreceivables.• Procuretopay.• Properties,plantandequipment.• Payroll.
InternalAuditachieved90%coveragefortheperiodunderreview and completed all of the additional managementrequests, which formed part of consulting services. Theplannedauditsweretotesttheadequacyandeffectivenessofthesystemofinternalcontrolinordertomanageand/ormitigateriskexposures.
Correctiveactionplanswererecommendedtomanagementand agreed upon with Internal Audit in order to improvecontrolweaknessesidentifiedbyInternalAudit.
Enterprise Risk Management
Broadband Infraco is committed to effective Enterprise-Wide Risk Management (ERM). ERM is an integratedapproach that supports the alignment of strategy,processes, people and systems to allow the BroadbandInfracotoidentify,prioritiseandefficientlymanagerisk.
TheCompanyrecognisesthatthemanagementofbusinessriskiscrucialtocontinuedgrowthandsuccessandthatERMis central to the Broadband Infraco’s business as a goingconcern. Broadband Infraco developed comprehensivesystems and risk management processes to control andmonitorall itsactivities.WhilstultimateaccountabilityforrisklieswiththeBoard,riskiscloselymonitoredbytheERMdivisionandtherelevantriskmanagementcommittees.
TheCompanyfusesanERMframeworktoimplementtheriskmanagementstrategyacrosstheorganisation.This isastructuredanddisciplinedapproachtoriskmanagementthat aims toeffectivelybalance risk andcontrol.Aligningstrategy, processes, people, technology and knowledgeenables Broadband Infraco to evaluate and manage theopportunities,threatsanduncertaintiesthatitfaces.
The framework consists of policies, methodologies,governanceandreportingstructuresbasedonISO31000,the Committee of Sponsoring Organisations (COSO)governanceprinciples,theKingIIICode,andthePFMA.
Theprimaryobjectivesoftheframeworkareto:
• ProtecttheCompanyagainstpossiblelosses;• Provideearlywarningofadverseriskconditions;• Integrate risk management at all levels of decision-
making;• Anticipateandmitigateriskeventsbeforetheyoccur;• Ensureearningsstability;and• Optimisetheuseofcapital.
BroadbandInfracomaintainsandcontinuouslydevelopsitsformal risk policies and frameworks to helpmanagementaddresscategoriesofriskassociatedwith itsriskappetiteandbusinessoperations.
Risk-Management Approach
The ERM framework and policy were enhanced andapprovedbytheAuditandRiskCommittee.
TheERMdivisionoverseestheriskmanagementprocesses.The internalauditorsassisttheAuditandRiskCommitteein evaluating the effectiveness of the risk managementprocesses. Broadband Infraco’s risk managementframeworks – including projects risk management,compliance,ITgovernanceandenterpriseriskmanagement– are continuously reviewed to ensure they conform tointernationalbestpractice.TheCompanyappliesapracticaland systematic methodology to identify, analyse, assess,mitigateandmonitorallknownrisksthatmightaffecttheoperations.Thestrategicriskidentifiedintheperiodunderreviewarestatedinpage41(table).
BroadbandInfracoisresponsiblefortheriskmanagementprocesses, assisted by the Audit and Risk Committee.Managementisresponsibleformanagingriskanddesigningand discharging appropriate processes in support of thisfunction.
Risk Governance
TheERMframeworkandtheriskappetiteframeworkensurethatBroadband Infracohasawell-structuredapproachtoriskmanagement.Risksareidentified,measured,monitoredandrespondedtothroughvariouscontrolmechanisms.Theriskmanagementprocessisdesignedtoensurethat:
• All relevantrisksare identifiedandevaluated,basedontheirpotentialimpactandlikelihoodofoccurrence.
• RisksandtherequiredprocessesandcontrolstomanagethemareassessedinlinewiththeCompany’sriskappetite.
• Appropriate management information and monitoring.Processesareinplace,sothatnecessaryremedialactioncanbetaken.
• Annual risk assessments are conducted with BusinessUnits and quarterly risk reports are submitted to ExcoandtheAuditandRiskCommittee.
41BROADBAND INFRACO INTEGRATED REPORT 2016
No. Vulnerability(Riskdescription)Mitigatingactionplanstofurtheraddresstheresidualriskexposure/contingency actions
1 Likelihoodnottocontinueasagoing concern
1.a) Continuewiththesalesdrive. b)Negotiatelong-tenurerevenuecontracts.2.a) Renegotiationofkeysuppliercontracts. b) Rigorouscashmanagement.3. Continuetoapplyforfundingfromexternalparties.
2 Limitationsinresolvingfulfilmentvaluechain
1. Embedtheprojectmanagementmethodologyandpolicy.2.a) Processowners/sponsorstoformaliseimplementationofthecurrent
businessprocessapprovedintheirworkingenvironment. b) BusinessProcessManagementtoconductbusinessprocessperformance
assessmenttoascertaintheeffectivenessofapprovedandimplementedbusinessprocesses.
3 Marginpressure1. Embedandcontinuetooptimisepricingstrategy.2. Renegotiationofkeysupplier’scontracts.
4 The impact of Non ICT SOCs on thecosttocommunicate
1. ContinuetoengagenonICTSOCs.2. EngagetheregulatorstoensurethatnonICTSOCsaregovernedbythe
regulations.
5Lack of awareness for new imperatives in privacy and securityofinformation
1. SetuptheITgovernanceframework.2. Reinforcetheexternalcommunicationprotocol.3. Formalisecontrolsaroundlogicalandphysicalaccess.4. Socialisationofinformationregulationsandpolicies.
6 Difficultytoraisefunds1. Extendedcredittermswithmajorsuppliers(ratedandinternational
suppliers).2. Continuetoapplyforfundingfromexternalparties.
7 DamagetothereputationofBroadbandInfraco
1. Reinforcethecurrentcommunicationstrategy.2. HarmonisetheexternalcommunicationwiththeShareholders.3. Continuousengagementwithjournalist.
8 Lackofregulatorycertaintyonnew market services
1. Continuetoprovideinputsasperdefinedprocesses.2. AcquireECSlicence.
9 SlowevolutiontowardsIPtechnology
1. RolloutIPNetworkbyutilisingpossibleOEMfunding.
10 Difficultytoretainandattracttherequiredskills
1. RolloutofInternshipprogrammetoincludebothcoreandnon-coreunits.2. Continuewithemployeeengagementstrategy.
Risk Management Mechanisms
Broadband Infraco has made considerable progress inimplementing the risk mitigation strategies outlined inthe Corporate Plan. Risk management implementationis monitored through risk management and governancemechanisms,aswellasoversightbodies.
Risk Maturity
BroadbandInfracohasmadesignificantprogressinembeddingariskmanagementculture.However,moreemphasiswillbeplacedonprudentmanagementofenterpriserisktoachievethe 2016 Corporate Environment. Broadband Infraco hasinstitutionalisedriskmanagementasfollows:
• TheBoardchampionstheprocessofriskmanagement.• TheAuditandRiskCommitteeoverseesriskmanagement
processes.
• TheSeniorManagerRisk:coordinatesriskmanagementfunctions.
• Theriskregisteriscontinuallyreviewedandalignedwithcorporatestrategy.
• Thresholdsforkeyindicatorsinriskappetitearereviewedannually.
• Internal and external audits review how the riskmanagementstrategyisbeingdischarged.
Business Continuity Risk Management
TheBusinessContinuityManagement(BCM)strategyandpolicyaredesignedtoprovideaframeworkforoperationalresilience and to ensure the survival of the networkoperations in the event of natural disasters. BroadbandInfraco has separate BCM processes for key operationssuch as IT and Network Operation Centre. A process isunderwaytointegratetheseseparateprocesses.
42 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
State-Owned Company (SOC) Rationalisation
Broadband Infraco fully supports the process ofrationalisationofSOCsasoutlinedbytheDepartmentofTelecommunicationandPostalServices.
TheobjectivesofSOCsrationalisationincludestheneedtoensurethattheICTsectorisfundamentallytransformedandplacedin itsrightfulpositiontosupporteconomicgrowthandto rationalise the rolesandresponsibilitiesofSOCs intherolloutofvariousaspectsofthebroadbandcapability.
Broadband Infracowill endeavour toensure thevalueoftheCompanyispreserved.
Regulatory Developments
NationalIntegratedICTPolicyDiscussionDocumentDuringthe2015/16financialyear,theprincipalregulatorydevelopmentwastheDepartmentofTelecommunicationsandPostalServices’finalisationoftheNationalIntegratedPaperon InformationCommunicationsTechnology, (“thedraftWhite Paper on ICT”). The draftWhite Paper aimsto provide the necessary policy certainty to incentiviseprivateandpublicinvestmentintheICTsector.
TheScopeofthedraftWhitePaper is toaccomplishthefollowing:• Reviewthefunctioningofthepolicyandregulatory
framework of telecommunication, broadcasting,postal ande-commerce inSouthAfricaandassess itseffectivenessinachievingappropriatepolicyobjectivesfortheknowledge-basedsociety.
• Review the structure of the broadcasting,telecommunications, content, postal and e-commerceindustriesinSouthAfrica,andtheroleoftheIndependentCommunicationsAuthorityofSouthAfricaandtake intoaccounttheviewsandexpectationsofthepublicingeneral.
• Determine policy goals and strategies for ICT ResearchandDevelopment, applications development promotion,humancapitaldevelopment,investmentinICTmarketforgrowthanddevelopment.
• ProposeuniversalserviceanduniversalaccesspolicygoalsforSouthAfrica,includingmethodsofpolicyexecution.
• ProposeICTmarketregulation,andstructures,institutionalalignment for delivering universal access and universalservicepolicygoals.
Givenitsscopeandobjectives,thedraftWhitePaperwillfundamentallychangehowbusinessisdoneinthesectorandhowthesectorisstructuredandregulated.
ThedraftWhitePaperisduetobetabledbeforeCabinetinthenearfuturebeforebeingpublishedforpubliccomment.
NeotelArbitrationTheNeotelarbitrationmatterwassettledon27May2016afteramutualagreementwasnegotiatedandreached.
ECS Licence
Broadband Infraco has initiated processes regarding theacquisition, by the Company, of an Individual ElectronicCommunications Service (“I-ECS”) licence. The Company’srationaleforwantingtoacquireanI-ECSlicenceispremisedonitssocio-economicmandate.
Broadband Infraco’s socio-economic mandate stipulatesthat the Company shall expand the availability of accesstoelectroniccommunications, including,butnot limitedto,underdevelopedandunderservicedareasinaccordancewiththe ECA. TheCompany has, in fulfilment of thismandateandaspartofdeliveringonitsUniversalAccessobligationscontained in its Individual Electronic CommunicationsNetwork Service (“I-ECNS”) licence, rolled out28PoPs inunderservicedcommunities.However,mostof thesePoPsarecurrentlyutilisedfordiversifyingthemovementoftrafficonthenetworkanddonothaveanytraffic initiated fromthemdue toa lackof interest fromcommercialoperators.Commercial operators regard underserviced areas asunviablebusinessventures,whichdonotgeneratesufficientreturnsoninvestment.
WiththeacquisitionofanI-ECSlicence,BroadbandInfracowould be able to enter into Public-Private-Partnerships(PPP)withunlicensedSMMEs/ISPs located in these areas.Thatis,theCompanywouldsellitscapacitytotheSMMEs/ISPswhowould then package and re-sell it to end-users.Therefore,BroadbandInfracowill,withtheacquisitionofanI-ECS licence,givetangibleeffecttotheobjectivesoftheNational Broadband Policy by, not only extending internetconnectivity to underserviced communities, but also bystimulating the growth of (unlicensed) SMMEs located intheseareas.
Broadband Infraco has, through the deployment ofinfrastructure, established interconnections with SouthAfrica’sneighbouringcountriessuchasMozambique,Namibia,Lesotho,Swaziland,ZimbabweandBotswana.State-ownedoperators licensed in these countries (and who do notpossessSouthAfricanlicences)areincreasinglyapproachingtheCompanywitharequesttoterminatethetrafficinthecountry.BroadbandInfracowill,withanI-ECSlicence,beina position to fulfil this requirement, thereby expanding itsrevenuebaseaswellasenhancingregionalconnectivity.
Asmentioned,BroadbandInfracoisalsoaTier-1investorin the WACS. The Company utilises its WACS capacityto not only provide connectivity to projects of nationalimportance,butalsotoattractinternationaloperatorswhohaveestablishedapresence intheSouthAfricanmarket.An I-ECS licence will enable the Company to bundleits WACS offering with its national distance products,therebyofferinganend-to-endsolutiontoitsunlicensedinternationalcustomers.
14. LEGAL AND REGULATORY
43BROADBAND INFRACO INTEGRATED REPORT 2016
Executive Summary
OurHumanResource(HR)Strategy2015/16hasbeentheblueprintforourstrategicandoperationaloutputsensuringthe implementationof thekey strategicobjectives aimedatenablingtheorganisationtorenewandreenergiseitselfthrougheffectivehumancapitalrevitalisationstrategies.
TheHumanResourcedepartmenthasmanagedtoaddressthe challenges of balancing the Company’s capacity andcapability requirements for the execution of the criticalaspects of the business and the balancing of financialresourcestoaffordimperatives.Amongthemostsignificantwerethefollowing:
• Advancing the implementation of human resourcesdevelopmentstrategiestosharpenexistingskillsandbuildnewcompetencyrequirementsincriticalareasofwork.
• Retaining the skills base, workplace morale andaccoladesthatareimportantforbusinessreputation,likecontributiontoB-BBEEratings(EmploymentEquityPlan,WorkplaceSkillsPlanandStudyAssistanceProgramme).
• Exploringandimplementingcreativewaysofoptimisinghuman resources capacity to avoid possible job lossesandtomonitor labourcostswithintheconfinesoftheCompany’sfinancialcircumstances.
• Taking advantage of the rotation, secondment andtemporary deployments to multi-skill and intensifytalentdevelopmentforsuccessionplanningandcareeradvancement at various levels of the organisationalstructure.
Amongtheimperativesthatwereinstrumentalinbolsteringtheenhancementofpeoplemanagementpractices in theorganisationwerethefollowing:
• Approval of the framework for implementation ofthe temporary deployment strategy for effective HRoptimisation.
• Continuation of the realignment of critical divisionalstructuresforoptimisationandoperationaleffectivenessfordepartmentssuchasInformationTechnology.
• Implementation of the automated performancemanagementsystem.
Background
HR Strategic Undertaking
“Broadband Infraco will attract, retain, develop, deployand appropriately reward people with the right skills,experience, commitment and energywhowill proactivelyand enthusiastically implement its strategy. The HR unithas a mandate to facilitate the achievement of requiredperformancelevelsthroughacomprehensiveperformancemanagementframeworkandeffectivetalentmanagementstrategies.”
HRStrategicObjectives
Initsroleasastrategicbusinesssupportfunction,HRhassetitselfmilestonestoensuresuccessfulexecutionofthemandateandtheprimarybusinessstrategicgoals:
• Optimisationoforganisationalcapacityandcapability.• Inculcation of a culture of high performance and
individualaccountability.• Attractionandretentionofkeytalent.• Provision of an environment for sound employee
engagementandeffectivestakeholderrelations.
15. PEOPLE MANAGEMENT
44 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
Talent Sourcing
TheCompanycontinuedtheheadcountfreezestrategytocontaincostsandthis ledtominimalactivity intermsoftalentsourcing.Twocrucialpositionswerefilledexternallyand one internally. Two (2) of the appointments werein the finance environment, which included the criticalappointmentoftheChiefFinancialOfficer.
Terminations
A total of 37 terminations were processed during thefinancial year and of those, ten (10) were expiry ofintern contracts, 25 voluntary and two (2) involuntaryseparations.
15. PEOPLE MANAGEMENT CONTINUED
Headcount Statistics
Staff complement
Belowistheheadcountcalculationforthe2015/16financialyear.
HeadcountCalculationCategories Q1 Q2 Q3 Q4 FY 2015/16
Opening Balance 185 174 166 154 185
PermanentStaff 175 172 164 152 175
Contract(s) 0 0 1 1 0
InternshipStudents 10 2 1 1 10
Appointments 0 1 0 2 3
PermanentStaff 0 0 0 1 1
Contract(s) 0 1 0 1 2
InternshipStudents 0 0 0 0 0
Losses (11) (9) (12) (5) (37)
Resignations 3 8 10 4 25
InternshipStudents 8 1 0 1 10
InvoluntaryReductions 0 0 2 0 2
ClosingHeadcount 174 166 154 151 151
PermanentStaff 172 164 152 149 149
Contracts 0 1 1 2 2
InternshipStudents 2 1 1 0 0
AgeProfileByJobLevel
JobLevels Average Age
Executives 47
SeniorManagement 44
ProfessionalSpecialistandMiddleManagement 42
SupervisoryandJuniorManagement 38
Support 35
AverageCompanyAgeProfile 40
45BROADBAND INFRACO INTEGRATED REPORT 2016
With the exclusion of separations due to the expiry ofcontracts, reasons provided for the resignations weremainlycareeradvancement,bettersalariesandbenefits.TheCompany’sfutureuncertaintyhasalsobeenthekeyreasoncitedbyemployeesleavingtheorganisation.
Labourturnover
Labourturnover Q1 Q2 Q3 Q4FY
2015/16
Averagenumberofemployees (opening +closing/2)
180 170 160 153 168
Labourturnover(losses/average) 2% 5% 6% 3% 15%
Resignations 3 8 10 4 25
Performance Management
Inthe2015/16financialyeartheHRDepartmentworkedtirelessly to automate the performance managementsystem. This led to the final review process beingimplementedthroughtheHRInformationSystemandthecontractingprocessfor2016/17willthusbeperformedthrough the automated system. The performanceagreementsubmissionrateshowedanimprovementwithwellover90%ofthetotalstaffcomplementparticipating.TheHRDepartmentcontinuestoprovidesupporttostaffinrespectofperformancemanagementsystemssupport.ItisHR’sdesiretoreachapointwherethequalityoftheagreementsisalsoimproved.
0
2
4
6
8
10
12
14Total Separations
Executives Senior Management
MiddleManagement
Operational Support
n 2014/15 n 2015/16
46 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
15. PEOPLE MANAGEMENT CONTINUED
Human Resources Development
Despite the cost containment programme implementedacross the business, the Human Resource departmentfocused on the most critical and urgent traininginterventions requiredby thebusiness. This is indicativeof the Company’s commitment towards human capitaldevelopmentandcapacitatingthemostkeyfunctionsofthebusiness.
In the financial year 2015/16, the Company continuedwith its study assistance programme and awardedfinancial study assistance to 13 employees inclusiveof new applications and those who were continuing tofurther their academic studies. Three of those awardedstudy assistance, left the services of the Company andcostswererecoveredinaccordancewiththepolicy.Fourbeneficiaries are still in the Company’s employ as theywereeithernot successfulwith their studies, ordidnotsitfortheirexams.Theamountsawardedwererecoveredin accordance with the policy. Two (2) completed theirstudies;theotherfour(4)passedandarecontinuingwiththeirstudies.
Internship Programme
Thebusinesshadten(10)studentsandgraduateswhocompletedtheirinternshipprogrammeduringthefinancialyearunderreview.Duetofinancialconstraints,BroadbandInfraco could only absorb one intern as ofMarch 2016.OwingtotheintensivetrainingthattheyreceivedfromtheCompany’stechnicalenvironment,therestoftheinternsmanagedto immediatelysecurepermanentemploymentinthejobmarket.
Human Resource Information Systems (HRIS)
The implementation of the HRIS system continued tobe a critical milestone within the Human Resourcesdepartment. During the period under review, theHR division had managed to implement 80% of thee-performance management system, implemented thetrainingformanagersandusers,andensuredthecapturingof data for the skills development module. A furtherachievementwasthedefiningoftheaccesscontrolrightsfortherespectiveuserswithintheHumanResourcesandFinance Departments in keeping with the segregationof responsibility principle. The implementation is workin progress to ensure that the HR function is executedseamlessly,effectivelyandefficiently.
47BROADBAND INFRACO INTEGRATED REPORT 2016
Employee Remuneration And Benefits Management
Through the implementation of the second year of thethree-year substantive agreement on remuneration andconditionsofservice,theCompanyreducedlabourcostsfrom32%ofrevenueto24%bytheendofthefinancialyear.
The Company’s referred dispute to the Pension FundAdjudicator arising from the Fund Administrator’schallengesofadministratingtheFundwerefinallyresolvedon31March2016.Thenextprocess tobeundertakenbytheFundAdministrator istheallocationofrespectivemember investment losses to each of the affectedemployeesandthisprocesswillbefinalisedinthefinancialyear2016/17.
Employee Relations Environment
Employee relations climate
Therelationshipbetweentherecognisedorganisedtradeunionofficialsandmanagementcontinuestomaturefromtheadversarialleveltocooperativestage.
During the period under review, two (2) disciplinaryhearings were held ending in the dismissal of two (2)employees.TheseweresubsequentlyreferredtotheTheCommission for Conciliation, Mediation and Arbitration(CCMA) resulting in the matters settled at conciliationstage.Noformalgrievancewaslodgedintheperiodunderreview. The stable industrial peace is reached throughcommunication and engagement with key stakeholdersandensuringadherencetothelegislativeprescripts.
Legislative Compliance
The Employment Equity (EE) Report was submitted on15January2016followingtheconsultativeprocesswiththe Employment Equity Committee. The Organisationhas complied with legislative requirements in so far asthe related required annual submissions are concerned.The Workplace Skills Plan 2016/17 financial year andtheAnnualTrainingReport2016/17financialyearweresubmittedtotheMICTSETA.
48 BROADBAND INFRACO INTEGRATED REPORT 2016
SECTION 1
16. SUPPLY CHAIN MANAGEMENT
The SCM department has continuously succeeded inmaintaining itseffortstoempoweranddistributewealthtopreviouslydisadvantagedgroups.Thedepartmenthassignificantly exceeded its targeted spend on both Black-owned and Black-women-owned enterprises. Morejobswere created in this financial year compared to thepreviousyear.
Asastrategicbusinesspartner,SCMcontinuestohaveagreatimpactonthedeliveryoftheCompany’sobjectivesand mandate. SCM has upheld standards to ensureadherence to compliance to the legislative requirements.Tothisend,ithasconsistentlyachievedcleanaudits.
ThetotalprocurementcostsfortheyearareR318million.The focus for theyearhasbeenon sustainingefficiencyin supply chain practices and compliance to legislativerequirements.Thesehaveyieldedresultsthatareindicatedbelow:
Procurement and B-BBEE Spend
TotalB-BBEE spend
114%
Black-ownedenterprises
54%
Black-women-owned
45%
Black-youth-ownedenterprises
11%
Expenditureonpeoplewithdisabilities
0,1%
Totalnumber ofindirectjobs
created
686
The focus going forward is to strive to empower Black-ownedandvalue-addingenterprises,maintainefficiencyin supply chain practices and compliance to legislativerequirements.
49BROADBAND INFRACO INTEGRATED REPORT 2016
17. SAFETY,HEALTH,ENVIRONMENTANDQUALITY PERFORMANCE
1. Safety, Health, Environment and Quality
Therewereno repeataudit findings fromexternalauditsconducted this financial year within Broadband InfracopertainingtotheSHEQsystems.
2. Lost-time injury frequency rate
Definition and calculation of lost-time injury frequencyrates(LTIFR):
• The lost-time injury frequency rate is the number oflost-time injuries within a given accounting periodrelative to the total number of hours worked in thesameaccountingperiod.
The graph below shows the performance of theorganisation over the whole year. The graph trajectoryhas beengoingdownwards, culminating in a zero-ratinginthelastquarteroftheyear.Thisisagreatachievement,whichshowshowBroadbandInfracovaluesandprioritisesstatutoryrequirementspertainingtohumancapital.
As part of self-improvement for the organisation, arigorous quality system project has been initiated forimplementation over the next couple of years. All rolesand responsibilities as well as processes and procedureshavebeen identified foraction.Asa resultof this focus,no safety, environmentorquality-related incidentshavebeenreported.
0,80
5
0,80
1
0,81
0,40
0,40
0,41
0,41
0,40
7
0,41
0,00
0,00
0,00
BBI – LTIFR % (Lost-Time Frequency Injury Rates)2015/16
0,900
0,800
0,700
0,600
0,500
0,400
0,300
0,200
0,100
0,000Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
SECTION 1
50 BROADBAND INFRACO INTEGRATED REPORT 2016
CONTENTSReportoftheAuditandRiskCommittee 51
Company Secretary’s Certificate 52
Directors’ResponsibilitiesandApproval 53
Directors’ Report 54
IndependentAuditor’sReport 55
Statement of Financial Position 58
Statement of Comprehensive Income 59
StatementofChangesinEquity 60
Statement of Cash Flows 61
Notes to the Financial Statements 62
AcronymsandAbbreviations 89
BroadbandInfracoSOCLimited AnnualFinancialStatements fortheyearended31March2016
TheCompany’sAnnualFinancialStatementswereauditedintermsoftheCompaniesActNo.71of2008.
ThepreparationoftheCompany’sAnnualFinancialStatementsweresupervisedbytheChiefFinancialOfficer,IanvanNiekerk.
TheseAnnualFinancialStatementswereauthorisedbytheBoardofDirectorson21July2016.
ThereportsandstatementssetoutbelowcomprisetheAnnualFinancialStatementspresentedtothemembers.
SECTION 2
51BROADBAND INFRACO INTEGRATED REPORT 2016
REPORT OF THE AUDIT AND RISK COMMITTEE
Audit And Risk Committee Report For The 2015/16 Financial Year
TheAuditandRiskCommitteeisanindependentcommitteeconstituted to review the control, governance and riskmanagementoftheCompanyintermsofregulation27(1)ofthePublicFinanceManagementAct(1999)(PFMA),asamended;theAuditandRiskCommitteereportsthatithasdischargeditsresponsibilitiesascontainedintheAuditandRiskCommitteetermsofreference.
ThecommitteecomprisedMsMetaMaponya(Chairpersonand Independent Non-Executive Director),Ms NokuthulaSelamolela(Non-ExecutiveDirector),MrSydneyMabalayo(Non-Executive Director) and Dr Anthony Githiari (Non-ExecutiveDirector).TheAuditandRiskCommitteewasinplaceforthe2015/16financialyearandthememberswerere-appointedbytheShareholdersat theCompany’sAGMon23March2016asrequired intermsofsection94(2)theCompaniesAct7of2008.
TheAuditandRiskCommitteemeetsatleastfour(4)timesper annum, and has the authority to convene additionalmeetings as and when necessary. There were four (4)meetingsheldduringfinancialyearended2015/16.Criticalissues were discussed and minutes were recorded. Theminutes of theAudit andRiskCommitteemeetingsweremadeavailabletotheBoardonrequest.
No. 1 2 3 4
Meeting date
Name of Director 25.05.15
28.07.15
07.07.15
24.02.16
Total
MMMaponya1 √ √ √ √ 4/4
STMabalayo √ √ √ √ 4/4
NSelamolela √ A √ √ 3/4
AGithiari A A √ √ 2/4
Executives
PKwele √ A √ √ 3/4
IIvanNiekerk – – – √ 1/1
1 Chairperson √ Attendance A Absentwithapology**MrIanvanNiekerk(CFO)commencedhisemploymenton15September
2015
During the 2015/16 financial year, the Audit and RiskCommittee:
• Reviewedtheeffectivenessof internalcontrol systemsbyapprovingtheinternalauditplan,internalauditcharterandreviewingquarterlyinternalauditreportssubmitted;
• Consideredtheriskareasoftheoperationscoveredinthescopeofinternalandexternalaudits;
• Consideredaccountingandauditingconcerns identifiedasaresultofinternalandexternalaudits;
• Assessed the adequacy, reliability and accuracy offinancialinformationprovidedbymanagement;
• Assessedcompliancewithapplicablelegalandregulatoryrequirements;
• Reviewedtheeffectivenessoftheinternalauditfunction,complianceandriskdepartments,throughassessmentsofthequalityofthereportssubmittedtoAuditandRiskCommittee;
• Reviewed the financial statements and reporting forproper and complete disclosure of timely, reliable andconsistent information and confirmed that accountingpoliciesusedareappropriate;
• Reviewedtheexpertise,resourcesandexperienceoftheCompany’sfinancefunction;
• Reviewedthequarterlyprogressandupdateonlitigations;• ProvidedachannelofcommunicationbetweentheBoard
and management, the risk division, internal auditors,externalauditorsandthecomplianceofficer;
• Received regular reporting from each of the abovefunctionsandmonitoredtimely resolutionsof issuesorconcernsraisedbymanagement;
• LiaisedwiththeBoardCommitteesandmetasrequiredwith the regulators and separately with internal andexternalauditors;
• Ensuredthatthecombinedassurancemodelwasappliedtoprovideacoordinatedapproachtoallassuranceactivities;and
• Ensured that the combined assurance received wasappropriate toaddressall significant risks facedby theCompany.
TheAuditandRiskCommitteeensuredthattheCompany’sInternal Audit function was independent and had thenecessary resources, and standing authority in order toenabletheInternalAuditdepartmenttodischargeitsduties.
Havingconsidered,analysedandreviewedtheinformationprovidedbymanagement,InternalAudit,ExternalAuditandtheRiskandCombinedAssuranceCommittee,theAuditandRiskCommitteeconfirmsthat:
• TheinternalcontrolsoftheCompanywereeffectiveinmostmaterialaspectsthroughouttheyearunderreview;
• Appropriate policies, supported by reasonable andprudentjudgementsandestimateswereapplied;
• Properaccountingrecordsweremaintained;• Theadequacyandeffectivenessofcontrolsthatare in
placesafeguardedtheassets;• The financial statements comply, in all material
respects,withtherelevantprovisionsofthePFMAandInternationalFinancialReportingStandards;and
• Theskills,independence,auditplanreportingandoverallperformanceoftheexternalauditorswereacceptable.
SECTION 2
52 BROADBAND INFRACO INTEGRATED REPORT 2016
REPORT OF THE AUDIT AND RISK COMMITTEE CONTINUED
TheAuditandRiskCommitteenotedtheemphasisofmatterongoingconcernbytheexternalauditorsand issatisfiedwithmanagement interventions of cost optimisation andrevenuedrive.TheCompanycontinuesonitsefforttoraisefundingfromexternalsources.
The Audit and Risk Committee has noted paragraph 19and22oftheexternalauditorsreportrelatingtomaterialmisstatements and perceived inadequate managementreview on performance information. The Audit and RiskCommitteeissatisfiedthatmanagementwasreviewingtheperformanceinformationreportsonaquarterlybasisagainstboththeapprovedannualperformanceplanthatwastabledinparliamentandtheshareholdersapprovedstretchtarget.
Meta MaponyaChairpersonAuditandRiskCommittee
In termsofSection88(2)(e)of theCompaniesAct,No.71of2008,asamended,IcertifythattheCompanyhaslodgedwiththeRegistrarofCompaniesallsuchreturnsasarerequiredofapubliccompanyintermsoftheAct,andthatallsuchreturnsaretrue,correctanduptodate.
The Audit and Risk Committee concurs with the Boardof Directors andmanagement that the adoption of thegoingconcernprincipleinthepreparationofthefinancialstatements isappropriate,andagreeswith thedetails intheDirectors’report.
F MohamedCompanySecretary
COMPANY SECRETARY’S CERTIFICATE
53BROADBAND INFRACO INTEGRATED REPORT 2016
DIRECTORS’ RESPONSIBILITIES AND APPROVALfortheyearended31March2016
ThedirectorsarerequiredintermsoftheCompaniesAct71of2008tomaintainadequateaccountingrecordsandareresponsibleforthecontentandintegrityoftheAnnualFinancial Statements and related financial informationincluded in this report. It is their responsibility toensurethat the Annual Financial Statements fairly present thestateofaffairsoftheCompanyasattheendofthefinancialyearand the resultsof itsoperationsandcash flows forthe period then ended, in conformity with InternationalFinancial Reporting Standards. The external auditors areengagedtoexpressanindependentopinionontheAnnualFinancialStatements.
TheAnnualFinancialStatementsarepreparedinaccordancewith International Financial Reporting Standards and arebased upon appropriate accounting policies consistentlyapplied and supported by reasonable and prudentjudgementsandestimates.
The directors acknowledge that they are ultimatelyresponsible for the system of internal financial controlestablished by the Company and place considerableimportanceonmaintainingastrongcontrolenvironment.Toenablethedirectorstomeettheseresponsibilities,theboardsetsstandardsforinternalcontrolaimedatreducingthe risk of error or loss in a cost-effectivemanner. Thestandardsincludetheproperdelegationofresponsibilitieswithinaclearlydefined framework,effectiveaccountingproceduresandadequatesegregationofdutiestoensureanacceptable levelof risk.Thesecontrolsaremonitoredthroughout theCompanyandall employeesare requiredtomaintain thehighestethical standards inensuring theCompany’sbusiness isconducted inamannerthat, inallreasonable circumstances is above reproach. The focusof risk management in the Company is on identifying,assessing, managing and monitoring all known forms ofriskacross theCompany.Whileoperating riskcannotbefullyeliminated,theCompanyendeavourstominimiseitbyensuringthatappropriateinfrastructure,controls,systemsand ethical behaviour are applied and managed withinpredeterminedproceduresandconstraints.
Thedirectorsareoftheopinion,basedontheinformationandexplanationsgivenbymanagement,thatthesystemofinternalcontrolprovidesreasonableassurancethatthefinancial recordsmaybe reliedon for thepreparationof
theAnnualFinancialStatements.However,anysystemofinternalfinancialcontrolcanprovideonlyreasonable,andnotabsolute,assuranceagainstmaterialmisstatementorloss.
Duringtheyearunder review,theDirectors retainedfulland effective control over the Company andmonitoredmanagement in implementing the approved plans andstrategies.TheDirectorsareoftheopinionthattheAnnualFinancialStatementsfairlypresentthefinancialpositionofBroadbandInfracoandtheresultsoftheiroperationsandcashflowsfortheyearended31March2016.
TheBoardofDirectorshasconsideredwhether thegoingconcern assumption is appropriate for the Company inthe preparation of the Annual Financial Statements. ThedirectorshavereviewedtheCompany’sforecastedfinancialperformance for the year 31March 2017 aswell as 31March2018.Inlightofthisreviewandthecurrentfinancialposition,theyaresatisfiedthattheCompanyhasaccesstoadequateresourcestocontinueitsoperationalexistencefortheforeseeablefuture.
Thegoingconcernisdiscussedinmoredetailonthesectionbelowthisreport.
The external auditors are responsible for independentlyauditingandreportingontheCompany'sAnnualFinancialStatements. The Annual Financial Statements have beenexamined by the Company's external auditors and theirreportispresentedonthelattersectionofthereport.
TheAnnual FinancialStatements setoutonpages58 to88,whichhavebeenpreparedonthegoingconcernbasis,underthesupervisionof IanvanNiekerk,wereapprovedby theboardon21 July2016andweresignedon theirbehalfby:
BMCNgcoboChairmanoftheBoard
P Kwele ChiefExecutiveOfficer
SECTION 2
54 BROADBAND INFRACO INTEGRATED REPORT 2016
DIRECTORS’ REPORTfortheyearended31March2016
ThedirectorshavepleasureinsubmittingtheirreportontheAnnualFinancialStatementsofBroadbandInfracoSOCLimitedfortheyearended31March2016.
1. Reviewoffinancialresultsandactivities
TheAnnualFinancialStatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandardsandtherequirementsoftheCompaniesAct71of2008.Theaccountingpolicieshavebeenappliedconsistentlycomparedtotheprioryear.AllamountsareinSouthAfricanthousandRands.
TheCompany recordedanet lossafter tax for theyearended31March2016ofR91,394.This representedadecreaseof63%fromthenetlossaftertaxoftheprioryearofR244,693.
Companyrevenueincreasedby24%fromR365,511intheprioryeartoR451,650fortheyearended31March2016mainlyduetoadditionalrevenuefromexistingcustomers.
Companycashflowsfromoperatingactivitiesincreasedby190%from(R152,532)intheprioryeartoR137,163fortheyearended31March2016.
BroadbandInfracocontinuestodrivecostoptimisationsinbothcostofsalesandoperationalcosts.
2. Share capital
Therehavebeennochangestotheauthorisedorissuedsharecapitalduringtheyearunderreview.
3. Directorate
Thedirectorsinofficeatthedateofthisreportareasfollows:
Directors Office Designation Changes
BMCNgcobo Chairperson Non-ExecutiveDirectorSDMabalayo Other Non-ExecutiveDirector
MMMaponya Other Non-ExecutiveDirector
NSelamolela Other Non-ExecutiveDirectorAGithiari Other Non-ExecutiveDirectorMMosweu Other Non-ExecutiveDirectorPKwele ChiefExecutiveOfficer ExecutiveDirectorIIvanNiekerk ChiefFinancialOfficer ExecutiveDirector Appointed23March2016
4. Events after the reporting period
Thedirectorsarenotawareofanymaterialevent,whichoccurredafterthereportingdateanduptothedateofthisreport.
5. Going concern
TheAnnualFinancialStatementshavebeenpreparedonthebasisofaccountingpoliciesapplicabletoagoingconcern.Moredetailsaroundthegoingconcernprinciplesappliedareinnote26oftheAnnualFinancialStatementssection.
6. Auditors
NexiaSAB&TcontinuedinofficeasauditorsfortheCompanyfor2016.
7. Secretary
TheCompanySecretaryisMrFahimMohamed.
BMCNgcoboChairmanoftheBoard
P Kwele ChiefExecutiveOfficer
55BROADBAND INFRACO INTEGRATED REPORT 2016
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT TO PARLIAMENT AND THE SHAREHOLDERS THE DEPARTMENT OF TELECOMMUNICATIONS AND POSTAL SERVICES AND THE INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH AFRICA ON BROADBAND INFRACO SOC LIMITED
Report on the Annual Financial Statements
Introduction
1. WehaveauditedtheAnnualFinancialStatementsofBroadbandInfracoSOCLimited(Infraco)setoutonpages58to88whichcomprisethestatementoffinancialpositionasat31March2016,thestatementofprofitorlossandothercomprehensiveincome,statementofchangesinequityandstatementofcashflowsfortheyearthenended,aswellasthenotes,comprisingasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.
Accountingauthority’sresponsibilityfortheAnnualFinancialStatements
2. The board of directors, which constitutes the accounting authority, is responsible for the preparation and fairpresentationoftheseAnnualFinancialStatements inaccordancewith InternationalFinancialReportingStandards(IFRS)andthe requirementsof thePublicFinanceManagementActofSouthAfrica,1999(ActNo.1of1999)(PFMA),andtheCompaniesActofSouthAfrica,2008(ActNo.71of2008)(CompaniesAct),andforsuchinternalcontrolastheaccountingauthoritydeterminesisnecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.
Auditor’sresponsibility
3. Our responsibility is to express an opinion on these financial statements based onmy audit.We conducted ourauditinaccordancewithInternationalStandardsonAuditing.Thosestandardsrequirethatwecomplywithethicalrequirements,andplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.
4. Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements. The procedures selected depend on the auditor’s judgement, including the assessment of the risksofmaterialmisstatementoftheAnnualFinancialStatements,whetherduetofraudorerror. Inmakingthoseriskassessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation ofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionon theeffectivenessof theentity’s internalcontrol.Anauditalso includesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.
5. Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisformyauditopinion.
Opinion
6. Inouropinion,theAnnualFinancialStatementspresentfairly,inallmaterialrespects,thefinancialpositionofInfracoasat31March2016anditsfinancialperformanceandcashflowsfortheyearthenended,inaccordancewithIFRSandtherequirementsofthePFMAandtheCompaniesAct.
Emphasis of matter
7. Wedrawattentiontothematterbelow.Ouropinionisnotmodifiedinrespectofthismatter.
Going concern
8. Wedrawattentiontonote26onpage85oftheAnnualFinancialStatements,whichindicatesthatInfracoincurredanetlossduringtheyearended31March2016andprioryearsandInfracoiscurrentlytradingatamonthlycashshortfall.Theseconditions,alongwithothermattersassetforthintheAnnualFinancialStatements, indicatetheexistenceofamaterialuncertaintythatmaycastsignificantdoubtontheCompany’sabilitytooperateasagoingconcern.
SECTION 2
56 BROADBAND INFRACO INTEGRATED REPORT 2016
INDEPENDENT AUDITOR’S REPORT CONTINUED
Additional matters
9. Wedrawattentiontothemattersbelow.Ouropinionisnotmodifiedinrespectofthesematters.
OtherreportsrequiredbytheCompaniesAct
10. Aspartofourauditofthefinancialstatementsfortheyearended31March2016,wehavereadtheDirectors’Report, theAuditCommittee’sReportandtheCompanySecretary’sCertificate for thepurposeof identifyingwhethertherearematerial inconsistenciesbetweenthesereportsandtheauditedfinancialstatements.Thesereportsaretheresponsibilityoftherespectivepreparers.Basedonreadingthesereportswehavenotidentifiedmaterial inconsistencies between the reports and the audited financial statements.We have not audited thereportsandaccordinglydonotexpressanopiniononthem.
Audittenure
11. IntermsoftheIRBARulepublishedinGovernmentGazetteNumber39475dated04December2015,wereportthatNexiaSAB&ThasbeentheauditorofInfracoforfouryears.
Report on other legal and regulatory requirements
12. InaccordancewiththePublicAuditActofSouthAfrica,2004(ActNo.25of2004)(PAA)andthegeneralnoticeissued in terms thereof,we have a responsibility to report findings on the reported performance informationagainstpredeterminedobjectivesforselectedobjectivespresentedintheannualperformancereport,compliancewith legislationandinternalcontrol.Theobjectiveofourtestswasto identifyreportablefindingsasdescribedundereachsubheadingbutnottogatherevidencetoexpressassuranceonthesematters.Accordingly,wedonotexpressanopinionorconclusiononthesematters.
Predetermined objectives
13. WeperformedprocedurestoobtainevidenceabouttheusefulnessandreliabilityofthereportedperformanceinformationforthefollowingselectedobjectivespresentedintheannualperformancereportofInfracofortheyearended31March2016:
Objective1:Ensurebusinesssustainabilityonpages18to19Objective2:Networksaleabilityonpages18to19Objective3:Networkimprovementonpages18to19Objective4:Economictransformationonpages18to19
14. WeevaluatedtheusefulnessofthereportedperformanceinformationtodeterminewhetheritwaspresentedinaccordancewiththeNationalTreasury’sannualreportingprinciplesandwhetherthereportedperformancewasconsistentwiththeplannedobjectives.Wefurtherperformedteststodeterminewhetherindicatorsandtargetswerewelldefined,verifiable,specific,measurable,timeboundandrelevant,asrequiredbytheNationalTreasury’sFrameworkformanagingprogrammeperformanceinformation(FMPPI).
15. Weassessedthereliabilityofthereportedperformanceinformationtodeterminewhetheritwasvalid,accurateandcomplete.
16. Wedidnotidentifyanymaterialfindingsontheusefulnessandreliabilityofthereportedperformanceinformationforthefollowingprogrammes:
Objective1:Ensurebusinesssustainabilityonpages18to19Objective2:Networksaleabilityonpages18to19Objective3:Networkimprovementonpages18to19Objective4:Economictransformationonpages18to19
57BROADBAND INFRACO INTEGRATED REPORT 2016
Additional matter
17. Wedrawattentiontothemattersbelow.Ouropinionisnotmodifiedinrespectofthesematters.
Achievement of planned targets
18. Refertotheannualperformancereportonpages18to19for informationontheachievementoftheplannedtargetsfortheyear.
Adjustment of material misstatements
19. We identifiedmaterialmisstatements in theannualperformancereportsubmittedforauditing.Thesematerialmisstatements were on the reported performance information of Objective 1: Ensure business sustainability,Objective2:NetworksaleabilityandObjective3:Networkimprovement.Asmanagementsubsequentlycorrectedthe misstatements, we did not raise any material findings on the usefulness and reliability of the reportedperformanceinformation.
Compliance with legislation
20. We performed procedures to obtain evidence that Infraco had complied with applicable legislation regardingfinancialmatters,financialmanagementandotherrelatedmatters.Wedidnotidentifyanyinstancesofmaterialnon-compliancewithspecificmattersinkeylegislation,assetoutinthegeneralnoticeissuedintermsofthePAA.
Internal control
21. Weconsideredinternalcontrolrelevanttomyauditofthefinancialstatements,annualperformancereportandcompliancewithlegislation.Themattersreportedbelowarelimitedtothesignificantinternalcontroldeficiencies
thatresultedinouropinion,thefindingsontheannualperformancereportincludedinthisreport.
Financial and performance management
22. AfterthetablingoftheCorporatePlaninParliament,theshareholderchangedtheperformancetargetsfortheCompany.Thesestretchedtargets,presentedonpages20and21,wereusedbymanagementwhenpresentingtheCompany’sperformanceinthequarterlyreportssubmittedforthe2015/16financialyear.Asaresult,significantmaterialmisstatementswerenotedbetweentheapprovedcorporateplanandreportedpredeterminedobjectives.
NexiaSAB&TPer:TJDeKockDirectorRegisteredAuditor21July2016
STATEMENT OF FINANCIAL POSITIONat 31 March 2016
SECTION 2
58 BROADBAND INFRACO INTEGRATED REPORT 2016
Note
2016 2015
R’000 R’000
ASSETS
Non-currentassets
Property,plantandequipment 3 1 297 319 1304152
Intangibleassets 4 57 149 19348
Tradeandotherreceivables 6 13 587 14715
1 368 055 1 338 215
Currentassets
Tradeandotherreceivables 6 48 729 256583
Cashandcashequivalents 7 141 626 156668
190 355 413251
Total assets 1 558 410 1 751 466
EQUITY AND LIABILITIES
Equity
Sharecapital 8 – –
Shareholders’loans 9 1 829 530 1829530
Accumulateddeficit (957266) (865872)
872 264 963 658
LIABILITIES
Non-currentliabilities
Deferredincome 12 502 857 546 830
Currentliabilities
Tradeandotherpayables 11 99 067 158536
Deferredincome 12 71 759 70529
Provisions 10 12 463 11913
183 289 240 978
Totalliabilities 686 146 787 808
Totalequityandliabilities 1 558 410 1 751 466
STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 March 2016
59BROADBAND INFRACO INTEGRATED REPORT 2016
Note
2016 2015
R’000 R’000
REVENUE 13 451 650 365511
Cost of sales 14 (259 573) (314849)
Gross profit 192 077 50 662
Operatingexpenses 15 (292130) (310622)
Operatingloss (100053) (259960)
Investmentrevenue 16 8 808 15269
Financecosts 17 (149) (2)
Loss for the year (91394) (244693)
Taxation 18 – –
Lossfortheyearaftertax (91394) (244693)
Other comprehensive income – –
Total comprehensive loss for the year (91394) (244693)
SECTION 2
60 BROADBAND INFRACO INTEGRATED REPORT 2016
STATEMENT OF CHANGES IN EQUITYfortheyearended31March2016
Shareholders’ loansR’000
Accumulatedloss Totalequity
Note R’000 R’000
Balance at 01 April 2014 1 829 530 (621179) 1 208 351
Lossfortheyear – (244 693) (244693)
Othercomprehensiveincome – – –
Total comprehensive loss for the year – (244693) (244693)
Balance at 01 April 2015 1 829 530 (865872) 963 658
Lossfortheyear – (91394) (91394)
Othercomprehensiveincome – – –
Total comprehensive loss for the year – (91394) (91394)
Balance at 31 March 2016 1 829 530 (957266) 872 264
9
61BROADBAND INFRACO INTEGRATED REPORT 2016
STATEMENT OF CASH FLOWSfortheyearended31March2016
Note
2016 2015
R’000 R’000
Cash flows from operating activities
Cashgeneratedfromoperations 21 137312 (152530)
Financecosts 17 (149) (2)
Net cash from operating activities 137 163 (152532)
Cash flows from investing activities
Purchaseofproperty,plantandequipment 3 (118409) (136310)
Purchaseofotherintangibleassets 4 (42604) (11587)
Interestincome 16 8808 15 269
Net cash from investing activities (152205) (132628)
Total cash movement for the year (15042) (285160)
Cashatthebeginningoftheyear 156668 441828
Total cash at end of the year 7 141 626 156 668
SECTION 2
62 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTSfortheyearended31March2016
1. Presentation of Annual Financial Statements
TheAnnualFinancialStatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards,andtheCompaniesAct71of2008.TheAnnual Financial Statements have been preparedon the historical cost basis, and incorporate theprincipalaccountingpoliciessetoutbelow.TheyarepresentedinSouthAfricanthousandRands.
These accounting policies are consistent with thepreviousperiod.
1.1 Corporate information
Broadband Infraco SOC Limited is a Companydomiciled and incorporated in South Africa. Theaddress of the Company’s registered office isCountry Club Estate, Building 9, 21 WoodlandsDrive,Woodmead, 2146. The Company is ownedby the South AfricanGovernment and is primarilyinvolved in the establishment of a national long-distancefibre-opticnetworkandtheestablishmentofan internationalmarine-cablenetworkdeployedbetweenSouthAfricaandtheUnitedKingdom.
1.2 Functionalandpresentationcurrency
These financial statements are presented in SouthAfrican Rand, which is the Company’s functionalcurrency.FinancialinformationpresentedisinSouthAfricanRand,roundedtothenearestthousand.
1.3 Significantjudgementsandsourcesofestimationuncertainty
In preparing the Annual Financial Statements,management is required to make estimates andassumptions that affect the amounts representedin the Annual Financial Statements and relateddisclosures. Use of available information and theapplicationofjudgementisinherentintheformationofestimates.ActualresultsinthefuturecoulddifferfromtheseestimateswhichmaybematerialtotheAnnualFinancialStatements.Significantjudgementsinclude:
Tradereceivablesandloansandreceivables The Company assesses its trade receivables, held
tomaturity investmentsand loansand receivablesforimpairmentattheendofeachreportingperiod.In determiningwhether an impairment loss shouldbe recorded in profit or loss, theCompanymakesjudgementsastowhetherthereisobservabledataindicating ameasurable decrease in the estimatedfuturecashflowsfromafinancialasset.
Impairment testing TheCompanyreviewsandteststhecarryingvalue
ofassetswheneventsorchangesincircumstancessuggest that the carrying amount may not berecoverable.Ifthereareindicationsthatimpairmentmay have occurred, estimates are prepared ofexpectedfuturecashflowsfortheassets.
Provisions Provisionswereraisedandmanagementdetermined
an estimate based on the information available.Additionaldisclosureoftheseestimatesofprovisionsareincludedinnote10-Provisions.
1.4 Property,plantandequipment
Property, plant and equipment are tangible assets,which the Company holds for its own use or forrentaltoothersandwhichareexpectedtobeusedformorethanoneyear.
An item of property, plant and equipment isrecognised as an asset when it is probable thatfutureeconomicbenefitsassociatedwiththe itemwillflowtotheCompany,andthecostoftheitemcanbemeasuredreliably.
Property,plantandequipmentareinitiallymeasuredat cost. Cost includes all of the expenditure,which is directly attributable to the acquisition orconstructionoftheasset,includingthecapitalisationofborrowingcostsonqualifyingassets.
Expenditureincurredsubsequentlyformajorservices,additions to or replacement of parts of property,plantandequipmentarecapitalised if it isprobablethat future economic benefits associated with theexpenditurewill flow to theCompanyand the costcanbemeasuredreliably.Day-to-dayservicingcostsareincludedinprofitorlossintheyearinwhichtheyareincurred.
Property, plant and equipment are subsequentlystated at cost less accumulated depreciation andanyaccumulatedimpairmentlosses.
Depreciationofanassetcommenceswhentheassetis available for use as intended by management.Depreciation is charged to write off the asset’scarryingamountoveritsestimatedusefullifetoitsestimatedresidualvalue,usingamethodthatbestreflects thepattern inwhich the asset’s economicbenefits are consumed by the Company. Leasedassetsaredepreciated inaconsistentmannerover
63BROADBAND INFRACO INTEGRATED REPORT 2016
the shorter of their expected useful lives and theleaseterm.Depreciationisnotchargedtoanassetifitsestimatedresidualvalueexceedsorisequaltoitscarryingamount.Depreciationofanassetceasesattheearlierofthedatethattheassetisclassifiedasheldforsaleorderecognised.
The useful lives of items of property, plant andequipmenthavebeenassessedasfollows:
ItemDepreciation
methodAverage usefullife
NetworkInfrastructure
Straightline 20years
Capital-WorkinProgress
Notdepreciated
–
Sparesandtestequipment
Straightline 5-15years
Officeequipment Straightline 10years
Computerequipment
Straightline 3-6years
Motorvehicles Straightline 5years
The residual value, useful life and depreciationmethod of each asset are reviewed at the end ofeachreportingyear.Iftheexpectationsdifferfromprevious estimates, the change is accounted forprospectivelyasachangeinaccountingestimate.
Thedepreciationchargeforeachyearisrecognisedinprofitor lossunless it is included inthecarryingamountofanotherasset.
Impairmenttestsareperformedonproperty,plantandequipmentwhenthereisanindicatorthattheymaybe impaired.Whenthecarryingamountofanitemofproperty,plantandequipment isassessedtobehigherthantheestimatedrecoverableamount,an impairment loss is recognised immediately inprofit or loss to bring the carrying amount in linewiththerecoverableamount.
An item of property, plant and equipment isderecognised upon disposal or when no futureeconomicbenefitsareexpectedfromitscontinueduse or disposal. Any gain or loss arising from thederecognition of an item of property, plant andequipment is included in profit or loss when theitem isderecognised.Anygainor lossarisingfromthederecognitionofanitemofproperty,plantandequipmentisdeterminedasthedifferencebetweenthenetdisposalproceeds, if any, and thecarryingamountoftheitem.
WorkinProgress(WIP)referstothenetworkunderconstruction.WIPisrecordedatthecostpriceatthestage of completion and transferred to equipmentoncetheassetisreadyforuse.
1.5 Intangibleassets
Anintangibleassetisrecognisedwhen:
• itisprobablethattheexpectedfutureeconomicbenefits that are attributable to the asset willflowtotheentity;and
• the cost of the asset can bemeasured reliably.Intangibleassetsareinitiallyrecognisedatcost.
Intangible assets are carried at cost less anyaccumulated amortisation and any impairmentlosses.
Anintangibleassetisregardedashavinganindefiniteusefullifewhen,basedonallrelevantfactors,thereis no foreseeable limit to the period over whichtheasset isexpectedtogeneratenetcashinflows.Amortisation is not provided for these intangibleassets,buttheyaretestedforimpairmentannuallyandwhenever there isan indication that theassetmay be impaired. For all other intangible assetsamortisationisprovidedonastraight-linebasisovertheirusefullife.
The amortisation period and the amortisationmethod for intangible assets are reviewed everyperiod-end.
Reassessingtheusefullifeofanintangibleassetwithafiniteusefullifeafteritwasclassifiedasindefiniteis an indicator that the assetmaybe impaired. Asaresulttheasset istestedfor impairmentandtheremaining carrying amount is amortised over itsusefullife.
Internally generated brands,mastheads, publishingtitles,customer listsanditemssimilar insubstancearenotrecognisedasintangibleassets.
Amortisationisprovidedtowritedowntheintangibleassets,onastraightlinebasis,totheirresidualvaluesasfollows:
Item Usefullife
Servitudes 20years
Computersoftware 5-7years
SECTION 2
64 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
1.6 Financialinstruments
Classification TheCompanyclassifiesfinancialassetsandfinancial
liabilitiesintothefollowingcategories:• Loansandreceivables.• Financialliabilitiesmeasuredatamortisedcost.
Classificationdependsonthepurposeforwhichthefinancial instruments were obtained/incurred andtakesplaceatinitialrecognition.
Derecognition Financial assets are derecognisedwhen the rights
to receive cash flows from the investments haveexpiredorhavebeentransferredandtheCompanyhastransferredsubstantiallyallrisksandrewardsofownership.
Impairment of financial assets At each reporting date the Company assesses
all financial assets, other than those at fair valuethroughprofitorloss,todeterminewhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetshasbeenimpaired.
ForamountsduetotheCompany,significantfinancialdifficultiesofthedebtor,probabilitythatthedebtorwillenterbankruptcyanddefaultofpaymentsareallconsideredindicatorsofimpairment.
Impairmentlossesarerecognisedinprofitorloss.
Impairment losses are reversed when an increasein the financial asset’s recoverable amount canbe related objectively to an event occurring afterthe impairment was recognised, subject to therestrictionthatthecarryingamountofthefinancialasset at the date that the impairment is reversedshall not exceedwhat the carrying amountwouldhavebeenhadtheimpairmentnotbeenrecognised.
Tradeandotherreceivables Tradereceivablesaremeasuredatinitialrecognition
at fair value, and are subsequently measured atamortised cost using the effective interest ratemethod. Appropriate allowances for estimatedirrecoverable amounts are recognised in profitor losswhen there is objective evidence that theasset is impaired. Significant financial difficultiesofthedebtor,probabilitythatthedebtorwillenterbankruptcyor financial reorganisation,anddefaultor delinquency in payments (more than 30 daysoverdue) are considered indicators that the tradereceivable is impaired. The allowance recognised
ismeasuredasthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuture cash flows discounted at the effectiveinterestratecomputedatinitialrecognition.
Thecarryingamountoftheassetisreducedthroughtheuseofanallowanceaccount,andtheamountofthelossisrecognisedinprofitorlosswithinoperatingexpenses.Whenatradereceivableisuncollectable,it is written off against the allowance accountfor trade receivables. Subsequent recoveries ofamountspreviouslywrittenoffarecreditedagainstoperatingexpensesinprofitorloss.
Tradeandother receivablesareclassifiedas loansandreceivables.
Tradeandotherpayables Trade payables are initiallymeasured at fair value,
andaresubsequentlymeasuredatamortisedcost,usingtheeffectiveinterestratemethod.
Cashandcashequivalents Cashandcashequivalentscomprisecashonhand
and notice deposits, and other short-term highlyliquid investments that are readily convertibletoaknownamountofcashandare subject toaninsignificant risk of changes in value. These areinitiallyandsubsequentlyrecordedatfairvalue.
1.7 Tax
Currenttaxassetsandliabilities Currenttaxforcurrentandpriorperiodsis,tothe
extentunpaid,recognisedasaliability.Iftheamountalreadypaidinrespectofcurrentandpriorperiodsexceeds the amount due for those periods, theexcessisrecognisedasanasset.
Currenttaxliabilities(assets)forthecurrentandpriorperiodsaremeasuredattheamountexpectedtobepaid to (recovered from) the tax authorities, usingthetaxrates(andtax laws)thathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiod.
Deferredtaxassetsandliabilities Adeferredtax liability isrecognisedforall taxable
temporary differences, except to the extent thatthe deferred tax liability arises from the initialrecognitionof an assetor liability in a transactionwhichatthetimeofthetransaction,affectsneitheraccountingprofitnortaxableprofit(taxloss).
65BROADBAND INFRACO INTEGRATED REPORT 2016
Adeferredtaxassetisrecognisedforalldeductibletemporary differences to the extent that it isprobablethattaxableprofitwillbeavailableagainstwhichthedeductibletemporarydifferencecanbeutilised.Adeferredtaxassetisnotrecognisedwhenit arises from the initial recognitionof an assetorliability in a transaction which at the time of thetransaction, affects neither accounting profit nortaxableprofit(taxloss).
A deferred tax asset is recognised for the carryforwardofunusedtaxlossestotheextentthatitisprobablethatfuturetaxableprofitwillbeavailableagainstwhichtheunusedtaxlossescanbeutilised.
Deferred tax assets and liabilities are measuredatthetaxratesthatareexpectedtoapplytotheperiodwhen the asset is realisedor the liability issettled,basedontaxrates(andtaxlaws)thathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiod.
Current and deferred taxes are recognised asincomeoranexpenseandincludedinprofitorlossfor the period, except to the extent that the taxarisesfrom:• atransactionoreventwhich is recognised, inthe
sameoradifferentperiod,toothercomprehensiveincome,or
• abusinesscombination.
Current tax and deferred taxes are charged orcreditedtoothercomprehensiveincomeifthetaxrelatestoitemsthatarecreditedorcharged,inthesameoradifferentperiod,toothercomprehensiveincome.
Current tax and deferred taxes are charged orcredited directly to equity if the tax relates toitemsthatarecreditedorcharged,inthesameoradifferentperiod,directlyinequity.
1.8 Leases
Aleaseisclassifiedasafinanceleaseifittransferssubstantiallyall therisksandrewards incidentaltoownership.Aleaseisclassifiedasanoperatingleaseifitdoesnottransfersubstantiallyalltherisksandrewardsincidentaltoownership.
Operating leases – lessee Operating lease payments are recognised as an
expenseonastraight-linebasisovertheleaseterm.The difference between the amounts recognised
as an expense and the contractual payments arerecognisedasanoperatingleaseasset.Thisliabilityisnotdiscounted.
Any contingent rents are expensed in the periodtheyareincurred.
1.9 Impairment of assets
TheCompanyassessesateachendofthereportingperiodwhetherthereisanyindicationthatanassetmaybe impaired. Ifanysuch indicationexists, theCompanyestimatestherecoverableamountoftheasset.
If there is any indication that an asset may beimpaired, the recoverable amount is estimated fortheindividualasset.Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,therecoverableamountofthecash-generatingunittowhichtheassetbelongsisdetermined.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value lesscoststosellanditsvalueinuse.
If the recoverable amountof anasset is less thanits carrying amount, the carrying amount of theasset is reduced to its recoverable amount. Thatreductionisanimpairmentloss.
An impairment loss of assets carried at cost lessany accumulated depreciation or amortisation isrecognisedimmediatelyinprofitorloss.
Anentityassessesateachreportingdatewhetherthere is any indication that an impairment lossrecognised in prior periods for assets other thangoodwillmaynolongerexistormayhavedecreased.If any such indication exists, the recoverableamountsofthoseassetsareestimated.
The increased carrying amount of an asset otherthan goodwill attributable to a reversal of animpairment loss does not exceed the carryingamount thatwould havebeendeterminedhadnoimpairment loss been recognised for the asset inpriorperiods.
Areversalofanimpairmentlossofassetscarriedatcostlessaccumulateddepreciationoramortisationother than goodwill is recognised immediately inprofitorloss.
SECTION 2
66 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
1.10 Sharecapitalandequity
Anequityinstrumentisanycontractthatevidencesa residual interest in the assets of an entity afterdeductingallofitsliabilities.
1.11 Shareholders’ loans
Loans made by Shareholders to the Company, insubstance,representadditionalcapitalcontributionsbytheShareholdersassettlementofsuchloansisneitherplannednorlikelytooccurintheforeseeablefuture.
1.12 Employeebenefits
Short-termemployeebenefits
The cost of short-term employee benefits, (thosepayablewithin12monthsaftertheserviceisrendered,such as paid vacation leave and sick leave, bonuses,and non-monetary benefits such as medical care),are recognised in the period inwhich the service isrenderedandarenotdiscounted.
The expected cost of compensated absences isrecognisedasanexpenseastheemployeesrenderservices that increase their entitlement or, in thecase of non-accumulating absences, when theabsenceoccurs.
The expected cost of profit sharing and bonuspayments isrecognisedasanexpensewhenthereis a legal or constructive obligation tomake suchpaymentsasaresultofpastperformance.
Definedcontributionplans Paymentstodefinedcontributionretirementbenefit
plansarechargedasanexpenseastheyfalldue.
1.13 Provisions and contingencies
Provisionsarerecognisedwhen:• theCompanyhasapresentobligationasaresult
ofapastevent;• it is probable that an outflow of resources
embodyingeconomicbenefitswillberequiredtosettletheobligation;and
• areliableestimatecanbemadeoftheobligation.
The amount of a provision is the present value oftheexpenditureexpected tobe required tosettletheobligation.
Where some or all of the expenditure required tosettle a provision is expected to be reimbursed byanother party, the reimbursement is recognisedwhen, and onlywhen, it is virtually certain that
reimbursementwillbereceived iftheentitysettlesthe obligation. The reimbursement is treated asa separate asset. The amount recognised for thereimbursementshallnotexceedtheamountoftheprovision.
Provisionsarenot recognised for futureoperatinglosses.
If an entity has a contract that is onerous, thepresentobligationunderthecontractisrecognisedandmeasuredasaprovision.
1.14 Revenue
When the outcome of a transaction involving therendering of services can be estimated reliably,revenue associated with the transaction isrecognisedbyreferencetothestageofcompletionofthetransactionattheendofthereportingperiod.The outcome of a transaction can be estimatedreliablywhenallthefollowingconditionsaresatisfied:
• Theamountofrevenuecanbemeasuredreliably.• It is probable that the economic benefits
associatedwith the transactionwill flowto theCompany.
• The stage of completion of the transaction attheendofthereportingperiodcanbemeasuredreliably.
• The costs incurred for the transaction andthe costs to complete the transaction can bemeasuredreliably.
Whentheoutcomeofthetransactioninvolvingtherenderingof servicescannotbeestimated reliably,revenue is recognised only to the extent of theexpensesrecognisedthatarerecoverable.
Contractrevenuecomprises:
• the initial amount of revenue agreed in thecontract;and
• variationsincontractwork,claimsandincentivepayments:- totheextentthatitisprobablethattheywill
resultinrevenue;and- theyarecapableofbeingreliablymeasured.
Revenue is measured at the fair value of theconsiderationreceivedorreceivableandrepresentsthe amounts receivable for goods and servicesprovided in the normal course of business, net oftrade discounts and volume rebates, and value-addedtax.
67BROADBAND INFRACO INTEGRATED REPORT 2016
1.15 Cost of sales
Therelatedcostofprovidingservicesrecognisedasrevenueinthecurrentperiodisincludedincostofsales.Contractcostscomprise:
• coststhatrelatedirectlytothespecificcontract;• coststhatareattributabletocontractactivityin
generalandcanbeallocatedtothecontract;and• suchothercostsasarespecificallychargeableto
thecustomerunderthetermsofthecontract.
1.16 Translationofforeigncurrencies
Foreigncurrencytransactions
Aforeigncurrencytransactionisrecorded,oninitialrecognition inSouthAfricanRands,byapplyingtotheforeigncurrencyamountthespotexchangeratebetween the functional currency and the foreigncurrencyatthedateofthetransaction.
Attheendofthereportingperiod:
• foreigncurrencymonetary itemsare translatedusingtheclosingrate;
• non-monetary items that are measured intermsofhistoricalcostinaforeigncurrencyaretranslatedusingtheexchangerateatthedateofthetransaction;and
• non-monetary items that are measured at fairvalue in a foreign currency are translatedusingthe exchange rates at the date when the fairvaluewasdetermined.
Exchangedifferences arisingon the settlementofmonetary items or on translatingmonetary itemsat rates different from those atwhich theyweretranslated on initial recognition during the periodor in previous Annual Financial Statements arerecognised in profit or loss in the period inwhichtheyarise.
Cash flows arising from transactions in a foreigncurrency are recorded in South African Randsby applying to the foreign currency amount theexchange rate between the Rand and the foreigncurrencyatthedateofthecashflow.
1.17 Related parties
Related-party transactions are defined astransactions with entities that have the samecontrolling shareholder as the Company andtransactions with directors and key managementand their families andentities controlledor jointlycontrolledbytheseindividuals.
1.18 Offset
Wherealegallyenforceablerightofoffsetexistsforrecognised financial assets and financial liabilities,and there is an intention to settle the liability andrealisetheassetsimultaneously,orsettleonanetbasis,allrelatedfinancialeffectsareoffset.
1.19 Deferredrevenue
Deferred income relates to revenue receivedunder Irrefutable Right of Use (IRU) agreementsofwhich servicesareprepaidby thecustomeroncommissioningoftheservices.Therevenuewillberecognisedonamonthlybasiswhentheservice isprovidedovertheperiodoftheagreement.
1.20 Operating segments
TheCompany’soperatingactivities areconductedin one segment and there are no product andgeographicalsegmentstoreporton.
2. New Standards and Interpretations
2.1 Standards and interpretations effective and adoptedinthecurrentyear
In the current year, the Company has adopted thefollowing standards and interpretations that areeffectiveforthecurrentfinancialyearandthatarerelevanttoitsoperations:
AmendmenttoIAS24:Related-partydisclosures:annualimprovementsproject
Thedefinitionofarelatedpartyhasbeenamendedto include an entity, or anymember of a group ofwhich it is apart,whichprovideskeymanagementpersonnel services to the reporting entity or tothe parent of the reporting entity (“managemententity”).Disclosureisrequiredofpaymentsmadetothemanagement entity for these services but notofpaymentsmadebythemanagemententitytoitsdirectorsoremployees.
TheeffectoftheAnnualFinancialStatementshavenotbeenmaterial.
2.2 Standards and interpretations not yet effective andadoptedinthecurrentyear
The Company has chosen not to early adopt thefollowingstandardsand interpretations,whichhavebeen published and are mandatory for accountingperiodsbeginningonorafter1January2016orlaterperiods:
SECTION 2
68 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
IFRS 16: Leases New standard that introduces a single lessee
accountingmodelandrequiresalesseetorecogniseassetsandliabilitiesforallleaseswithatermofmorethan12months,unlesstheunderlyingassetisoflowvalue. A lessee is required to recognise a right-of-useassetrepresentingitsrighttousetheunderlyingleased asset and a lease liability representing itsobligationtomakeleasepayments.Alesseemeasuresright-of-use assets similarly to other non-financialassets(suchasproperty,plantandequipment)andlease liabilities similarly to other financial liabilities.Asaconsequence,a lesseerecognisesdepreciationof the right-of-use asset and interest on the leaseliability, and also classifies cash repayments of theleaseliability intoaprincipalportionandaninterestportionandpresentstheminthestatementofcashflowsapplyingIAS7StatementofCashFlows.
IFRS16containsexpandeddisclosurerequirementsforlessees.Lesseeswillneedtoapplyjudgementindeciding upon the information to disclose tomeettheobjectiveofprovidingabasisforusersoffinancialstatementstoassesstheeffectthatleaseshaveonthefinancialposition,financialperformanceandcashflowsofthelessee.
IFRS 16 supersedes the following Standards andInterpretations:(a) IAS17Leases.(b) IFRIC 4 Determining whether an Arrangement
containsaLease.(c) SIC-15OperatingLeases–Incentives.(d)SIC-27EvaluatingtheSubstanceofTransactions
InvolvingtheLegalFormofaLease.
The effective date of the Company is for yearsbeginningonorafter01January2019.
TheCompanyexpectstoadopttheamendmentforthefirsttimeinthe2020AnnualFinancialStatements.
TheDirectorsareassessingtheimpactofthisstandardontheCompany’sAnnualFinancialStatements.
Amendments to IAS 16 and IAS 38: Clarification of acceptable methods of depreciation andamortisation
The amendment clarifies that a depreciation oramortisationmethodthatisbasedonrevenuethatis generated by an activity that includes the useof the asset is not an appropriate method. Thisrequirementcanberebuttedforintangibleassetsin very specific circumstances as set out in theamendmentstoIAS38.
The effective date of the amendment is for yearsbeginningonorafter01January2016.
TheCompanyexpectstoadopttheamendmentforthefirsttimeinthe2017AnnualFinancialStatements.
It is unlikely that the amendment will have amaterialimpactontheCompany’sAnnualFinancialStatements.
Disclosure initiative: amendment to IAS 1: presentation of financial statements
Theamendmentprovidesnewrequirementswhenanentitypresentssubtotalsinadditiontothoserequiredby IAS1 in its Annual Financial Statements. It alsoprovides amended guidance concerning the orderofpresentationofthenotes intheAnnualFinancialStatements,aswellasguidanceforidentifyingwhichaccounting policies should be included. It furtherclarifies that an entity’s share of comprehensiveincome of an associate or joint venture under theequity method shall be presented separately intoits share of items that a) will not be reclassifiedsubsequently to profit or loss and b) that will bereclassifiedsubsequentlytoprofitorloss.
The effective date of the amendment is for yearsbeginningonorafter01January2016.
TheCompanyexpectstoadopttheamendmentforthefirsttimeinthe2017AnnualFinancialStatements.
It is unlikely that the amendment will have amaterial impacton theCompany’sAnnual FinancialStatements.
IFRS9Financialinstruments
IFRS 9 issued in November 2009 introduced newrequirementsfortheclassificationandmeasurementof financial assets. IFRS 9 was subsequentlyamended inOctober2010to includerequirementsfor the classification andmeasurement of financialliabilities and for derecognition, and in November2013 to include the new requirements for generalhedge accounting. Another revised version ofIFRS 9 was issued in July 2014 mainly to includea) impairment requirements for financial assetsand b) limited amendments to the classificationand measurement requirements by introducinga “fair value through other comprehensive income”(FVTOCI)measurementcategoryforcertainsimpledebtinstruments.
69BROADBAND INFRACO INTEGRATED REPORT 2016
KeyrequirementsofIFRS9:
• All recognised financial assets that are withinthe scope of IAS 39 Financial Instruments:Recognition and Measurement are required tobe subsequently measured at amortised cost orfairvalue.Specifically,debt investments thatareheldwithinabusinessmodelwhoseobjectiveistocollectthecontractualcashflows,andthathavecontractualcashflowsthataresolelypaymentsofprincipalandinterestontheoutstandingprincipalare generally measured at amortised cost atthe end of subsequent reporting periods. Debtinstrumentsthatareheldwithinabusinessmodelwhose objective is achieved by both collectingcontractualcashflowsandsellingfinancialassets,and that have contractual terms of the financialassetgiveriseonspecifieddatestocashflowsthatare solely payments of principal and interest onoutstandingprincipal,aremeasuredatFVTOCI.Allotherdebtandequity investmentsaremeasuredat fair value at the end of subsequent reportingperiods. In addition, under IFRS 9, entitiesmay make an irrevocable election to presentsubsequentchangesinthefairvalueofanequityinvestment (that isnotheld for trading) inothercomprehensiveincomewithonlydividendincomegenerallyrecognisedinprofitorloss.
• With regard to the measurement of financialliabilities designated as at fair value throughprofitorloss,IFRS9requiresthattheamountofchange in the fair value of the financial liabilitythatisattributabletochangesinthecreditriskofthe liability is presented in other comprehensiveincome, unless the recognition of the effect ofthe changes of the liability’s credit risk in othercomprehensiveincomewouldcreateorenlargeanaccountingmismatch in profit or loss.Under IAS39,theentireamountofthechangeinfairvalueof a financial liability designated as at fair valuethroughprofitorlossispresentedinprofitorloss.
• In relation to the impairment of financial assets,IFRS9requiresanexpectedcreditlossmodel,asopposed to an incurred credit loss model underIAS39.Theexpectedcreditlossmodelrequiresanentity to account for expected credit losses andchanges in those expected credit losses at eachreporting date to reflect changes in credit risksince initial recognition. It is therefore no longernecessary for a credit event to have occurredbeforecreditlossesarerecognised.
• Thenewgeneral hedgeaccounting requirementsretain the three (3) types of hedge accountingmechanisms currently available in IAS 39. Under
IFRS 9, greater flexibility has been introducedto the types of transactions eligible for hedgeaccounting, specifically broadening the types ofinstruments thatqualify forhedging instrumentsandthetypesofriskcomponentsofnon-financialitems that are eligible for hedge accounting. Inaddition,theeffectivenesstesthasbeenreplacedwith the principle of an “economic relationship”.Retrospectiveassessmentofhedgeeffectivenessis also no longer required. Enhanced disclosurerequirements about an entity’s riskmanagementactivitieshavealsobeenintroduced.
The effective date of the standard is for yearsbeginningonorafter01January2018.
TheCompanyexpectstoadoptthestandardforthefirsttimeinthe2019AnnualFinancialStatements.
It is unlikely that the standard will have a materialimpactontheCompany’sAnnualFinancialStatements.
IFRS15Revenuefromcontractswithcustomers
IFRS15supersedesIAS11Constructioncontracts;IAS18Revenue;IFRIC13CustomerLoyaltyProgrammes;IFRIC 15 Agreements for the construction of RealEstate;IFRIC18TransfersofAssetsfromCustomersandSIC31Revenue-BarterTransactionsInvolvingAdvertisingServices.
The core principle of IFRS 15 is that an entityrecognises revenue to depict the transfer ofpromised goods or services to customers in anamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitled inexchangeforthosegoods or services. An entity recognises revenue inaccordancewiththatcoreprinciplebyapplyingthefollowingsteps:
• Identifythecontract(s)withacustomer.• Identifytheperformanceobligationsinthecontract.• Determinethetransactionprice.• Allocatethetransactionpricetotheperformance
obligationsinthecontract.• Recogniserevenuewhen(oras)theentitysatisfies
a performance obligation. IFRS 15 also includesextensivenewdisclosurerequirements.
The effective date of the standard is for yearsbeginningonorafter01January2018.
TheCompanyexpectstoadoptthestandardforthefirsttimeinthe2019AnnualFinancialStatements.
It is unlikely that the standardwill have amaterialimpactontheCompany’sAnnualFinancialStatements.
SECTION 2
70 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
3. Property, plant and equipment
2016
R’0002015
R’000
CostAccumulated depreciation
Carrying value Cost
Accumulated depreciation
Carrying value
revaluation
Motorvehicles 5950 (1328) 4622 5168 (123) 5045
Officeequipment 10356 (4139) 6217 10320 (3102) 7218
Computerequipment 17414 (14444) 2970 17414 (13120) 4294
Networkinfrastructure 1964663 (846753) 1117910 1795641 (724615) 1071026
Sparesandtestequipment 15920 (12110) 3810 14878 (12576) 2302
Capital-workinprogress 161790 – 161790 214267 – 214267
Total 2 176 093 (878774) 1 297 319 2 057 688 (753536) 1 304 152
Reconciliationofproperty,plantandequipment-2016
R’000Opening balance Additions Transfers
Deprecia-tion Total
Motorvehicles 5045 782 – (1205) 4622
Officeequipment 7218 36 – (1037) 6217
Computerequipment 4294 – – (1324) 2970
Networkinfrastructure 1071026 – 167410 (120526) 1117910
Sparesandtestequipment 2302 – 2658 (1150) 3810
Capital-workinprogress 214267 117591 (170068) – 161790
1 304 152 118 409 – (125242) 1 297 319
Reconciliationofproperty,plantandequipment-2015
R’000Opening balance Additions Transfers
Deprecia-tion
Impairment loss Total
Motorvehicles – 5167 – (122) – 5045
Officeequipment 5112 3679 – (879) (694) 7218
Computerequipment 6072 948 – (2726) – 4294
Networkinfrastructure 1068517 12715 97581 (107787) – 1071026
Sparesandtestequipment 2775 7 206 (686) – 2302
Capital-workinprogress 198260 113794 (97787) – – 214267
1 280 736 136 310 – (112200) (694) 1 304 152
71BROADBAND INFRACO INTEGRATED REPORT 2016
4. Intangible assets
2016 R’000
2015 R’000
Cost/ Valuation
Accumulatedamortisation
Carrying value
Cost/ Valuation
Accumulatedamortisation
Carrying value
Computersoftware 59496 (9631) 49865 16892 (5453) 11439
Servitudes 12487 (5203) 7284 12487 (4578) 7909
Total 71 983 (14834) 57 149 29 379 (10031) 19 348
Reconciliationofintangibleassets-2016
R’000Opening balance Additions Amortisation Total
Computersoftware 11439 42604 (4178) 49865
Servitudes 7909 – (625) 7284
19 348 42 604 (4803) 57 149
Reconciliationofintangibleassets-2015
R’000Opening balance Additions Transfers Amortisation Total
Computersoftware 1686 265 11322 (1834) 11439
Servitudes 8532 – – (623) 7909
Workinprogress – 11322 (11322) – –
10 218 11 587 – (2457) 19 348
Intangibleassetsconsistofpropertyservitudes,licencesandsoftwareacquiredandismeasuredatcostlessaccumulatedamortisationonastraight-linebasisoverexpectedusefullives.TheCompanyhasfullrightofuseoftheseassetswithoutanyrestriction.
Noneoftheintangibleassetshavebeenpledgedassecurity.
Therearenocontractualcommitmentsoutstandingatthereportingperiod.
SECTION 2
72 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
2016R’000
2015R’000
5. Deferred tax Deferredtaxasset
Adeferred taxassethasnotbeen raisedas it is considered improbable that temporarydifferenceswill reverse in theforeseeablefuture.
Reconciliationofdeferredtaxasset
Movementintemporarydifferences 11 187 (24261)
Deferredtaxassetsnotrecognised (11187) 24261
At the end of the year – –
Deferredtaxrates
Thedeferredtaxrateappliedwas28%(2015:28%).
Recognised
Straight-liningofleaseassets – 302
Straight-liningofleaseliabilities (29) 75
Capitalallowances (97551) (44396)
Prepayments (1559) (692)
Provisionforbaddebts 419 645
Leavepayaccrual 1 114 1564
Bonusprovision 2 370 2 216
Otherprovisions – 1 120
Deferredincome 161 194 125642
Deferredtaxassetnotrecognised (65958) (86476)
– –
6. Trade and other receivables
Tradeandotherreceivablesconsistsof:Long-termandcurrenttradereceivablesandprepayments.
Non-currentassets
Prepayments–IrrefutableRightsofUse 13 587 14 715
Currentassets
Tradereceivables 36 152 247972
Prepayments 5 460 2375
Deposits 2 162 2521
VAT 1 286 –
Foreigntaxcredits 3 041 3041
Accruedinterest 526 674
Straightliningofoperatingleases 102 –
Tradeandotherreceivablespledgedassecurity 48 729 256 583
Noneofthetradeandotherreceivableshavebeenpledgedassecurity.
73BROADBAND INFRACO INTEGRATED REPORT 2016
2016R’000
2015R’000
6. Trade and other receivables (continued)
Tradeandotherreceivablesthatarepastduebuthavenotbeenimpairedare as follows:
Tradereceivables 596 168252
Deposits 2 162 2521
2 758 170 773
Tradeandotherreceivablesimpaired
Asof31March2016,tradeandotherreceivablesofR1498(2015:R2305)wereimpairedandprovidedfor.
Factorstakenintoaccountwhenconsideringimpairmentincludedtheageofthedebtandthelikelihoodofrecovery.
Movementsofthedoubtfuldebtallowanceisasfollows:
Balanceatthebeginningoftheyear 2 305 2454
Reversalofimpairmentlossfromprioryear (807) (149)
Balance at the end of the year 1 498 2 305
7. Cash and cash equivalents
Cashandcashequivalentsconsistofthefollowing:
Currentaccounts-StandardBank 1 575 512
Short-termdeposits-FirstNationalBank(bearinginterestat6%-6.95%) 30 348 40006
Short-termdeposits-Nedbank(bearinginterestat6%-6.8%) 40 682 40000
Short-termdeposits-StandardBank(bearinginterestat5.9%-6.5%) 69 021 76150
141 626 156 668
8. Share capital
Authorised
Ordinary 1 1
Issued
Ordinary* – –
Sharesareheldasfollows:
• 74ordinarysharesheldbytheState,representedbyDepartmentofTelecommunicationsandPostalServices.• 26ordinarysharesheldbytheIndustrialDevelopmentCorporationofSouthAfrica.
UnissuedsharesarecontrolledbytheExecutiveAuthority.
*AmountslessthanR1000.
SECTION 2
74 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
10. Provisions
Reconciliation of provisions - 2016
R’000Opening Balance Additions Total
Legalproceedings 4000 – 4000
Performancebonus 7913 550 8463
11 913 550 12 463
Reconciliation of provisions - 2015
R’000Opening Balance Additions
Utilised duringthe
year Total
Legalproceedings – 4000 – 4000
Performancebonus 8250 8125 (8462) 7913
8 250 12 125 (8462) 11 913
Legal proceedings
Theprovisionraisedrelatestoafibreusagedisputewithakeyserviceprovideronthenetwork,wherethequantumofserviceswasnotagreed.Anoutofcourtsettlementagreementhasbeensubsequentlyreached,howevertheprovisionmadereflectstheestimatedlegalfeesthatmayarisefromclosingthematter.
Performancebonus
The performance bonus provision relates to performance agreements completed with qualifying personnel based onindividuals’andCompany’sperformance.PayoutsareapprovedbytheBoard.
2016R’000
2015R’000
9. Shareholders’ loans
DepartmentofTelecommunicationsandPostalServices 1 351 130 1351130
IndustrialDevelopmentCorporationofSouthAfrica 478 400 478400
1 829 530 1 829 530
Theloansareunsecuredandhavenofixedtermsofrepaymentandbearnointerest.TheShareholders’loanagreementstatesthattheloanmayberepaidsubjecttotheavailabilityoffundsfromtimetotime,howeverthisisbasedonamutualagreementbetweentheShareholdersandtheCompany.Consequently,theloansareclassifiedasequity.
75BROADBAND INFRACO INTEGRATED REPORT 2016
12. Deferred incomeDeferred income relates to Irrefutable Rights of Use (IRU) contracts overvarious periods. These amounts are received in advance and revenue isrecognisedoverthecontracttermastheservicesarebeingrendered.
Non-currentliabilities 502 857 546830
Currentliabilities 71 759 70529
574 616 617 359
13. Revenue
Theamountsincludedinrevenuearisingfromexchangesofgoodsorservicesareasfollows:
Saleofbroadbandservices 381 052 304155
IrrefutableRightofUseincome 47 096 33981
Operationsandmaintenance 23 502 27375
451 650 365 511
14. Cost of sales
Rendering of services 259 573 314 849
2016R’000
2015R’000
11. Trade and other payables
Tradepayables 75 767 124104
Tradepayables–Neotelsettlement 15 789 –
VAT – 23804
Straightliningofleases – 270
Accruedleavepay 3 978 5584
Servicesnotcommissioned 154 40
Internalaudit – 1008
Externalaudit 1 000 1280
PAYE 2 379 2446
99 067 158 536
SECTION 2
76 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
2016R’000
2015R’000
15. Operating expenses
Operatingexpenses 292 130 310 622
Employeeexpenses
Salaries 102 300 103444
Otherbenefits 321 11500
102 621 114 944
Directorsemoluments
Non-executivedirectors 2 468 2570
Executivedirectors 4 316 3535
6 784 6 105
Service fees
Legalfees 19 034 9628
Consultingandprofessionalfees 2 168 7291
Externalauditfees 266 871
Internalauditfees (224) 1547
21 244 19 337
Generalandadministrativeexpenses
Repairsandmaintenance 10 446 12700
Marketing 372 3353
Travelcosts 2 375 6708
Recoveries-travelreimbursement(WACS) (4379) (831)
Insurance 957 733
Telephoneandfax 669 732
Training 837 1991
ITexpenses 3 855 2939
Licencefees 1 745 1563
Otherexpenses-deductible 6 390 13333
23 267 43 221
Operating leases
Leaserentalsonoperatinglease 8 169 11 665
Depreciation,amortisation,impairmentandwrite-off
Property,plantandequipment 125 242 112 200
Writeoffandimpairmentofequipment – 694
Intangibleassets 4 803 2457
130 045 115 350
77BROADBAND INFRACO INTEGRATED REPORT 2016
2016R’000
2015R’000
16. Investment revenueBank 8 808 15 269
17. Finance costs
Realisedloss/(profit)onforeignexchangetransaction 146 (6)
Interestpaid 3 8
149 2
18. Taxation
Reconciliationofthetaxexpense
Reconciliationbetweenaccountingprofitandtaxexpense
Accountingloss (91394) (244693)
Taxattheapplicabletaxrateof28%(2015:28%) (25590) (68514)
Taxeffectofadjustmentsontaxableincome
Taxlossesrecognised 15 629 61303
Permanentdifferences (1226) (232)
Deferredtaxnotrecognised 11 187 7443
– –
19. Auditors’ remuneration
Externalaudit 266 871
Internalaudit (224) 1547
42 2 418
20. Operating lease Non-cancellableoperatingleaserentalsarepayableasfollows:
Lessthanoneyear 7 886 13216
Betweenoneandfiveyears 4 757 10410
12 643 23 626
SECTION 2
78 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
2016R’000
2015R’000
21. Cash generated from operationsLossbeforetaxation (91394) (244693)
Adjustmentsfor:
Depreciation,amortisationandimpairment 130 045 115350
Interestreceived-investment (8808) (15269)
Financecosts 149 2
Movementinprovision 550 3662
Movementindeferredincome (42743) 6874
Changes in working capital:
Tradeandotherreceivables 208 982 88993
Tradeandotherpayables (59469) (107449)
137 312 (152530)
22. Related parties
Relationships
UltimateholdingCompany TheState,representedbytheDepartmentofTelecommunicationsandPostalServices
Shareholderwithsignificantinfluence IndustrialDevelopmentCorporationofSouthAfrica
Majorpublicentities TelkomSA(SOC)Ltd,SITA(SOC)Ltd
Relatedpartybalances
Loanaccounts–Owingtorelatedparties
DepartmentofTelecommunicationsandPostalServices (1351130) (1351130)
IndustrialDevelopmentCorporationofSouthAfrica (478400) (478400)
Amountsincludedintradereceivables/(tradePayable)regardingrelated parties
TelkomSOCLimited (57) (30)
SITASOCLimited 11 703 11314
Related-party transactions
Purchasesfrom/(salesto)relatedparties
SITASOCLimited (147045) (80385)
TelkomSOCLimited 422 4002
Compensation to directors and other key management
Short-termemployeebenefits-Non-ExecutiveDirectors 2 468 2570
Short-termemployeebenefits-ExecutiveDirectors 4 316 3535
Short-termemployeebenefits-Keymanagement 9 510 10527
16 294 16 632
79BROADBAND INFRACO INTEGRATED REPORT 2016
23. Directors’ and prescribed officer’s emoluments
Executive
2016
R’000 Service as
Service period in months
Basic salary
Expensesand other
allowances Total
PKwele ChiefExecutiveOfficer** 12 2674 30 2 704
TPama InterimChiefFinancialOfficer* 5 604 10 614
IIvanNiekerk ChiefFinancialOfficer 7 982 16 998
4 260 56 4 316
*Thebasicsalaryisthenetamountafterthedeductionofanearly-terminationpenaltyrecovered.**Thisincludesthree(3)years’retrospectivecostoflivingadjustments.
2015
R’000 Service as
Service period in months
Basic salary
Expensesand other
allowances Total
PKwele ChiefExecutiveOfficer 12 2343 30 2 373
TPama InterimChiefFinancialOfficer 5 768 13 781
IIHassen* InterimChiefFinancialOfficer 2 381 – 381
3 492 43 3 535
*MajorityoftheinterimCFOremunerationwasonaconsultancybasisthroughErnst&Young.
Non-Executive
2016
R’000 Service asService period
in monthsDirectors’
fees Total
BMCNgcobo Boardchairperson 12 803 803
SDMabalayo Boardmember 12 423 423
MMMaponya Boardmember 12 332 332
AGithiari Boardmember 12 288 288
NSelamolela Boardmember 12 317 317
MMosweu Boardmember 12 305 305
2 468 2 468
SECTION 2
80 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
23. Directors’ and prescribed officer’s emoluments (continued)
Non-Executive
2015
R’000 PositionService period
in monthsDirectors’
fees Total
BMCNgcobo Boardchairperson 12 798 798
SDMabalayo Boardmember 12 372 372
MMMaponya Boardmember 12 273 273
AGithiari Boardmember 12 247 247
NSelamolela Boardmember 12 267 267
SAUMeer* Boardmember 6 133 133
MMosweu* Boardmember 6 126 126
SA Essa Boardmember 6 166 166
XKakana Boardmember 6 188 188
2 570 2 570
*PaidtotheIDCasnomineedirectorintermsofemployment.
Key management
2016
R’000 Position
Service period in months
Basic salary
Expensesand other
allowances Total
GZowa ChiefTechnicalOfficer 12 1994 30 2024
VMaharaj Executive:CapitalProgramme 12 1854 30 1884
KMotlhabane Executive:Legal 12 1663 30 1692
STMafu ActingChiefMarketingandSalesOfficer 12 1501 26 1528
MMopeli Executive:HumanResources 12 1177 30 1207
MMojapelo Executive:Compliance,RiskandAudit 12 1145 30 1175
9 334 176 9 510
81BROADBAND INFRACO INTEGRATED REPORT 2016
23. Directors’ and prescribed officer’s emoluments (continued)
Key management
2015
R’000 Position
Service period in months
Basic salary
#Bonusesand
commissions
Expensesand other
allowances Total
GZowa ChiefTechnicalOfficer 12 1916 305 30 2251
VMaharaj Executive:CapitalProgramme 12 1748 249 30 2027
KMotlhabane Executive:Legal 12 1571 240 30 1841
STMafu ActingChiefMarketingandSalesOfficer 10 1400 174 24 1598
MMopeli Executive:HumanResources 12 1223 194 30 1447
MMojapelo Executive:Compliance,RiskandAudit 8 738 – 20 758
RHamilton ChiefMarketingandSalesOfficer* 2 602 – 3 605
9 198 1 162 167 10 527
*Theamountpaidconstitutesfixedsalaryfortwo(2)monthspaidtotheChiefMarketingandSalesOfficerandanadditionalfour(4)months’grossearningsinlieuofamutualseperationagreement.#Theperformancebonuspayoutin2014/15relatestotheCompany’sperformanceforthe2013/14financialyear.
24. Categories of financial instruments – 2016
R’000 Note
Financial assets at amortised
cost
Equityandnon-financial assets andliabilities Total
Assets
Non-currentassets
Property,plantandequipment 3 – 1297319 1297319
Tradeandotherreceivables 6 – 13587 13587
Intangibleassets 4 – 57149 57149
Totalnon-currentassets – 1 368 055 1 368 055
Currentassets
Tradeandotherreceivables 6 41983 6746 48729
Cashandcashequivalents 7 141626 – 141626
Totalcurrentassets 183 609 6 746 190 355
Total assets 183 609 1 374 801 1 558 410
SECTION 2
82 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
24. Categories of financial instruments – 2016 (continued)
R’000 Note
Financial liabilitiesat
amortised cost
Equityandnon-financial assets andliabilities Total
Equityandliabilities
Equity
Equityattributabletoequityholdersofparent:
Shareholders’loans 9 – 1829530 1829530
Retainedincome – (957266) (957266)
Totalequity 872 264 872 264
Liabilities
Non-currentliabilities
Deferredincome 12 – 502857 502857
Currentliabilities
Tradeandotherpayables 11 99067 – 99067
Deferredincome 12 – 71759 71759
Provisions 10 – 12463 12463
Totalcurrentliabilities 99 067 84 222 183 289
Totalliabilities 99 067 587 079 686 146
Totalequityandliabilities 99 067 1 459 342 1 558 410
24. Categories of financial instruments – 2015
R’000 Note
Financial assets at amortised
cost
Equityandnon-financial assets andliabilities Total
Assets
Non-currentassets
Property,plantandequipment 3 – 1304152 1304152
Intangibleassets 4 – 19348 19348
Tradeandotherreceivables 6 – 14715 14715
Totalnon-currentassets – 1 338 215 1 338 215
Currentassets
Tradeandotherreceivables 6 254208 2375 256583
Cashandcashequivalents 7 156668 – 156668
Totalcurrentassets 410 876 2 375 413 251
Total assets 410 876 1 340 590 1 751 466
83BROADBAND INFRACO INTEGRATED REPORT 2016
24. Categories of financial instruments – 2015 (continued)
R’000 Note
Financial liabilitiesat
amortised cost
Equityandnon-financial assets andliabilities Total
Equityandliabilities
Equity
Equityattributabletoequityholdersofparent:
Shareholders’loans 9 – 1829530 1829530
Retainedincome – (865872) (865872)
Totalequity 963 658 963 658
Liabilities
Non-currentliabilities
Deferredincome 12 – 546830 546830
Currentliabilities
Tradeandotherpayables 11 158536 – 158536
Deferredincome 12 – 70529 70529
Provisions 10 – 11913 11913
Totalcurrentliabilities 158 536 82 442 240 978
Totalliabilities 158 536 629 272 787 808
Totalequityandliabilities 158 536 1 592 930 1 751 466
25. Risk management Financial risk management
TheCompany’sactivitiesexposeittoavarietyoffinancialrisks:marketrisk(includingcurrencyrisk,fairvalueinterestraterisk,cashflowinterestrateriskandpricerisk),creditriskandliquidityrisk.
The Company’s overall riskmanagement program focuses on the unpredictability of financialmarkets and seeks tominimisepotentialadverseeffectsontheCompany’sfinancialperformance.Riskmanagementiscarriedoutbythefinancedepartmentgovernedbypoliciesapprovedbytheboard.TheCompanyidentifiesandevaluatesfinancialrisksincloseco-operationwiththeCompany’soperatingunits.Theboardprovideswrittenprinciplesforoverallriskmanagement,aswellaswrittenpoliciescoveringspecificareas,suchasforeignexchangerisk,interestraterisk,creditrisk,non-derivativefinancialinstrumentsandinvestmentofexcessliquidity.
Liquidityrisk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability offundingthroughanadequateamountofcommittedcreditfacilitiesandtheabilitytocloseoutmarketpositions.Duetothedynamicnatureoftheunderlyingbusinesses,Companytreasurymaintainsflexibility infundingbymaintainingavailabilityundercommittedcreditlines.
TheCompany’srisktoliquidityisaresultofthefundsavailabletocoverfuturecommitments.TheCompanymanagesliquidityriskthroughanongoingreviewoffuturecommitmentsandcreditfacilities.
Cashflowforecastsarepreparedandadequateshortterminvestmentsaremonitored.
SECTION 2
84 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
25. Risk management (continued)
Thefollowingarethecontractualmaturitiesoffinancialliabilities.
R’000Carrying amount
Contractualcash flows
6 months or less
6-12 months
2016
Tradeandotherpayables 99 067 99 067 (99067) –
2015
Tradeandotherpayables 158536 158536 (152952) (5584)
Interest rate risk
AstheCompanyhasnosignificantinterest-bearingassets,theCompany’sincomeandoperatingcashflowsaresubstantiallyindependentofchangesinmarketinterestrates.
Credit risk
Creditriskconsistsmainlyofcashdeposits,cashequivalentsandtradedebtors.TheCompanyonlydepositscashwithmajorbankswithhighqualitycreditstandingandlimitsexposuretoanyonecounter-party.
Managementevaluatedcreditriskrelatingtocustomersonanongoingbasis.Customersarerequiredtoundergoavettingprocesswheretheirliquidityisinvestigated.TheCompanyalsoperformmonthlyfollowupswithdebtorstoensurethattheypaywithinagreedpaymentterms,thisisevidentbythe98%ofdebtorsthatarewithin60days.
Financialassetsexposedtocreditriskatyearendwereasfollows:
By geographical area
2016R’000
2015R’000
By geographical area
Domestic 35 834 81190
International 318 712
36 152 81 902
Bycustomertype
Telecomserviceprovidercompanies 36 152 81 902
Ageing
Notpastdue 35 556 79544
60days 17 17
90days 579 2341
36 152 81 902
85BROADBAND INFRACO INTEGRATED REPORT 2016
25. Risk management (continued) Foreignexchangerisk
TheCompanyoperatespredominantlyinitsfunctionalcurrencyofSouthAfricanRand(ZAR).Certaintransactionstakeplaceinforeigncurrencies,primarilywithrespecttotheUSDollar.TheCompany’smainUSDollarexposureisinrespectofitsongoinginvestmentintheWestAfricanCableSystem.TheCompanyisexposedtotheriskoffluctuatingexchangeratesandseekstomanagethisexposurewithapprovedpolicyparametersbyenteringintoforwardexchangecontractswithmajorSouthAfricanbanks.Fluctuationsinexchangerates,directlyaffectprofits/(losses)oftheCompany.
Foreigncurrencysensitivityanalysis:
ThefollowingdetailstheCompany’ssensitivitytoan8%changeintheZAR/USDexchangerate.Thesensitivityrateof8%representsmanagement’sassessmentofthepossiblechangeinforeignexchangerates.Thesensitivityanalysisincludesoutstandingforeigncurrencydenominatedmonetaryitemsandcommitmentsandadjuststheirtranslationattheperiodendforan8%changeinforeigncurrencyrates.
20168%
strengthening
20168%
depreciation
20158%
depreciation
20158%
depreciation
Foreigndebtors
SouthAfricanRands (25) 25 (23) 23
2016 2015
US Dollar Rates Used:
Closing Rate R14,82 R12,15
Average Rate R13,77 R11,06
26. Going concern
IAS1prescribesthattheBoardofDirectorsandmanagementoftheCompanyshouldthoroughlyassessthefinancialsustainabilityofthebusinessandensurethatthebusinesswillcontinuewithoutthethreatofliquidationfortheforeseeablefuture,usuallyregardedasatleastwithin12monthsafterreportingdate.ItalsorequirestheboardandmanagementtodeclaretheintentiontokeeptheCompanyascontinuinginbusinessfortheforeseeablefuturewithneithertheintentiontoceasetradingnorseekingprotectionfromcreditorspursuanttolawsorregulation.Thegoingconcernassumptionisafundamentalprincipleinthepreparationoffinancialstatements.Underthegoingconcernassumption,anentityisordinarilyviewedtorealiseitsassets,dischargeitsliabilities,andobtainrefinancinginthenormalcourseofbusiness.
BroadbandInfracoSOC,hasprepareditsfinancialstatementsfortheyearended31March2016onthebasisthatitwillcontinueasagoingconcernfortheforeseeablefuture,thusatleastthenext12months.
This basis presumes that fundswill be available to finance future operations and that the realisation of assets andsettlementofliabilities,contingentobligationsandcommitmentswilloccurintheordinarycourseofbusiness.
The Board of Directors has considered whether the going concern assumption is appropriate for the Company inthe preparation of the Annual Financial Statements. The directors have reviewed the Company’s forecast financialperformancefortheyear31March2017aswellas31March2018andinlightofthisreviewandthecurrentfinancialposition,theyaresatisfiedthattheCompanyhasaccesstoadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture,takingintoaccountaccesstosomefundinginthemediumtermisobtained.
SECTION 2
86 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
26. Going concern (continued)Management intervention on operations for the year ended 31 March 2016
AlthoughtheCompanyiscurrentlyinasolventandliquidposition,thegoingconcernprincipleisunderconsiderationduetothefollowingsignificantmaterialuncertainties:
• Tradinglossessinceinceptionandinthecurrentyear.• Revenuestreamsintheshorttermisnotadequatetocoverallcosts,resultinginamonthlycashbreak-evenshortfall.
Theassessmentconsideredbelowexamines interventionsbytheCompanyandshareholderstosubstantiatewhythegoingconcernassumptioninpreparingtheAnnualFinancialStatementsfortheyearended31March2016isconsideredappropriate.
Duringtheprecedingfinancialyearmanagement,undertheguidanceoftheBoardofDirectors,revieweditsbusinessmodel,cashflowforecasting,break-evenanalysisandtheCompany’scorporateplan.
Duringthepast12monthsmanagementundertookseveraloptimisationexercisestoreducecostofsalesandoperationalcosts.ThisresultedinsignificantsustainablereductionofcostofsalesandoperationalcostsascanbeseenintheAnnualFinancialStatements.
Non-investmentincapitalexpenditurewillposeminimumriskinthegenerationofrevenue,duetothesweatingoftheexistingassetprinciple.Aset-upfeetobepayableupfrontfromallnewcustomershasbeenintroducedaspartofthenewsalescontractingmodel.Theset-upfeewillrepresentapercentageofthetotalcontractvalue.
TheCompanyhasbeenabletosecurevendorfinancingfromoneofitsmajorsuppliersandiswelladvancedinconcludingasimilaragreementwithasecondsupplier.ThiswillassisttheCompanyinmanagingthecashflowwhenspecificcustomercapitalexpenditureormaintenanceisrequired.
ThetotalnewsalesconcludedduringthefirstquarterofthenewfinancialyeartotalledalmostR65million.R12millionofthisthatcanberecognisedasrevenueduringthenewfinancialyear.Managementisworkinganddrivingsaleshardtoensurethismomentumcontinues.
Alloftheabovearepartoftheoverallimprovementsintheoperatingefficiencyandcostmanagementenvironmentofthebusinessandhasresultedinanimprovedcashflowposition.
27. Capital commitments
2016R’000
2015
R’000
Capitalcommitmentsapprovedandcontracted 5 205 89 434
28. Events after the reporting period
Therehasnotbeenanysignificanteventsbetween1April2016and21July2016.
29. Irregular, fruitless and wasteful expenditure
Irregularexpenditure
Section1ofthePublicFinanceManagementActNo.1of1999,asamended,definesirregularexpenditureasexpenditure,otherthanunauthorisedexpenditure,incurredincontraventionoforthatisnotincurredinaccordancewitharequirementofanyapplicablelegislation.Thefollowingamountshavebeendisclosedasbeingirregularexpenditure,intermsofSection55(2)(b)ofthePublicFinanceManagementAct.No.1of1999.
87BROADBAND INFRACO INTEGRATED REPORT 2016
29. Irregular, fruitless and wasteful expenditure (continued)
Irregularexpenditure
2016R’000
2015R’000
Irregularexpenditure
Openingbalance 3 010 136544
Incurredinthecurrentyear – 38
Identifiedinthecurrentyearrelatingtopreviousyears 118 80
Removalfromregister (926) –
Condonedduringtheyear (372) (133652)
Closingbalance* 1 830 3 010
*Internalprocessestoresolvethesemattersareinprogress.
Irregularexpendituredetail2016
R’000 ActionExpenditure
identifiedAmountscondoned
Amountsremoved
from register
Remaining expendi-ture
Expenditureidentifiedand/orincurredinthecurrentyear
Expenditureincurredintransgressionofcommercialprocesses,policies
Mattersarebeing/havebeenratified
118 (118) – –
Identifiedinpreviousyears
Expenditureincurredintransgressionofcommercialprocesses,policies
Mattersareintheprocessofbeingratified
3010 (254) (926) 1830
3 128 (372) (926) 1 830
Irregularexpendituredetail2015
R’000 ActionExpenditure
identifiedAmountscondoned
Remaining expenditure
Expenditureidentifiedand/orincurredinthecurrentyear
Expenditureincurredintransgressionofcommercialprocesses,policies
Mattersareintheprocessofbeingratified
118 – 118
Identifiedinpreviousyears
Expenditureincurredintransgressionofcommercialprocesses,policies
Mattersareintheprocessofbeingratified
136544 (133652) 2892
136 662 (133652) 3 010
SECTION 2
88 BROADBAND INFRACO INTEGRATED REPORT 2016
29. Irregular, fruitless and wasteful expenditure (continued)
Fruitlessandwastefulexpenditure
Lossesrecoveredorwrittenoff
Section1ofthePublicFinanceManagementAct,No.1of1999,asamended,definesfruitlessandwastefulexpenditureasexpenditurethatwasmadeinvainandwouldhavebeenavoidedhadreasonablecarebeenexercised.
Thefollowing losses, throughfruitlessandwastefulexpenditurehavebeen identifiedasbeingreportable intermsofSection55(2)(b)(iii)ofthePublicFinanceManagementAct,No.1of1999,asamended,fortheyearunderreview:
2016R’000
2015R’000
Fruitlessandwastefulexpenditure
Openingbalance – 377
Identifiedinthecurrentyear 3 8
Writtenoff (3) (8)
Removalfromregister – (377)
– –
R’000 ActionLosses
identifiedLosses
written off
Fruitlessandwastefulexpenditureindetail2016
Interestincurredfromsuppliers Losseswrittenoff 3 (3)
Fruitlessandwastefulexpenditureindetail2015
Openingbalance Losseswrittenoff 377 (377)
Interestincurredfromsuppliers Losseswrittenoff 8 (8)
385 (385)
NOTES TO THE ANNUAL FINANCIAL STATEMENTS CONTINUEDfortheyearended31March2016
89BROADBAND INFRACO INTEGRATED REPORT 2016
ACRONYMS AND ABBREVIATIONSAGM AnnualGeneralMeetingARC AuditandRiskCommitteeBCM BusinessContinuityManagementBEE BlackEconomicEmpowermentB-BBEE Broad-BasedBlackEconomicEmpowermentBYO Black-Youth-OwnedBWO Black-Women-OwnedBPM BusinessProcessManagementCAPS CurriculumandAssessmentPolicyStatementCCMA TheCommissionforConciliation,MediationandArbitrationCEO ChiefExecutiveOfficerCFO ChiefFinancialOfficerCMSO ChiefMarketingandSalesOfficerCOSO CommitteeofSponsoringOrganisationCPM CapitalProgrammeManagementCPTD ContinuingProfessionalTeacherDevelopmentCSI CorporateSocialInvestmentCTO ChiefTechnicalOfficerCWU CommunicationsWorkersUnionDFI’s DevelopmentFinanceInstitutionsDST DepartmentofScienceandTechnologyDTPS DepartmentofTelecommunicationsandPostalServicesDWDM DenseWavelengthDivisionMultiplexingEBITDA EarningsBeforeInterest,Taxes,Depreciation,AmortisationED EnterpriseDevelopmentEE EmploymentEquityERM EnterpriseRiskManagementExco ExecutiveCommitteeEXCOPs ExecutiveCommitteeProcurementSubcommitteeECA ElectronicCommunicationsActECNS ElectronicCommunicationsNetworkServicesFMPPI FrameworkforManagingProgrammeforPerformanceInformationFOC Fibre-OpticCableGRI GlobalReportingInitiativesHRIS HumanResourcesInformationSystemHRRC HumanResourcesandRemunerationCommitteeIAS InternalAccountingStandardsICASA IndependentCommunicationsAuthorityofSouthAfricaICT InformationCommunicationsTechnologyI-ECNS IndividualElectronicCommunicationsNetworkServicesI-ECS IndividualElectronicCommunicationsServicesIDC IndustrialDevelopmentCorporationIFC InvestmentandFinanceCommitteeIFRS InternationalFinancialReportingStandardsIFTPC InvestmentFinanceTenderandProcurementCommitteeINX-ZA InternetExchange-SouthAfricaIP InternetProtocolIRBA IndependentRegulatoryBoardofAuditorsISPs InternetServiceProviders
SECTION 2
90 BROADBAND INFRACO INTEGRATED REPORT 2016
IRU IndefeasibleRightsofUseISO InternationalStandardsOrganisationISPA InternetServiceProvidersAssociationKAMs KeyAccountsManagersKPA KeyPerformanceAreaKPI KeyPerformanceIndicatorMoU MemorandumofUnderstandingMSA MasterServicesAgreementMTEF Medium-TermExpenditureFrameworkMTTR MeanTimeToRepairMTS MultiwavelengthTransportServicesLD LongDistanceLEDET LimpopoDepartmentofEconomicDevelopment,EnvironmentandTourismLTIFR Lost-TimeInjuryFrequencyRateMICT SETA Media,InformationandCommunicationTechnologiesSectorEducationandTrainingAuthorityNDP NationalDevelopmentPlanNT NationalTreasuryNED Non-ExecutiveDirectorNOC NetworkOperationsCentreNOSA NationalOccupationalSafetyAssociationPAA PublicAuditActPAYE PayasYouEarnPFMA PublicFinanceManagementActNo.1of1999asamendedPoP PointofPresencePoPI ProtectionofPersonalInformationActPWD PeopleLivingwithDisabilitiesRSA RepublicofSouthAfricaRACI Responsible,Accountable,ConsultedandInformedSACE SouthAfricanCouncilofEducatorsS&E SocialandEthicsSADC SouthernAfricanDevelopmentCommunitySDH SynchronousDigitalHierarchySHEQ Safety,Health,EnvironmentandQualitySIP StrategicInfrastructureProjectSITA StateInformationTechnologyAgencySKA SquareKilometreArraySLA ServiceLevelAgreementSMF SignificanceandMaterialityFrameworkSNO SecondNetworkOperatorSOC State-OwnedCompanySTM SynchronousTransportModuleT&P TenderandProcurementUSD UnitedStatesDollarsWACS WestAfricaCableSystemWiP WorkinProgressWSP WorkplaceSkillsPlanningVAT ValueAddedTaxYoY Year-on-YearZAR SouthAfricanRand
ACRONYMS AND ABBREVIATIONS CONTINUED
91BROADBAND INFRACO INTEGRATED REPORT 2016
REGISTERED OFFICE AND BUSINESS ADDRESSRegisteredOfficeandBusinessAddressCountryClubEstateBuildingNumber9No.21WoodlandsDriveWoodmeadSandton2146
PostalAddress:PostnetSuite321PrivateBagX26Sunninghill2157
COMPANY SECRETARYFahimMohamed(Office)+27112351600(Fax)+27866874273
PublicRelationsandMediaManagementSammyMafu(Office)[email protected]
COMPANY REGISTRATION NUMBER1989/001763/07
WEBSITEwww.infraco.co.za
BANKERSStandardBank
EXTERNAL AUDITORSNexiaSAB&T(onbehalfoftheAuditor-GeneralofSouthAfrica)RegisteredAuditorCharteredAccountants(SA)
GENERAL COMPANY INFORMATION
92 BROADBAND INFRACO INTEGRATED REPORT 2016
NOTES
Physical addressCountry Club Estate Building no 9 21 Woodlands Drive Woodmead Sandton
Postal addressPostnet Suite 321 Private Bag X26 Sunninghill 2157
Tel: +27 11 235 1600
www.infraco.co.za
RP222/2016ISBN: 978-0-621-44727-9
Title of publication Broadband Infraco Integrated Report 2016