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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
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12
Understanding material matters
Fluctuating economic
conditions, including political,
social and environmental
conditions in South Africa
and on the international front
These factors can affect consumer
health, and in turn could have an
adverse effect on revenue and
profitability, in spite of the Group’s
historical resilience to adverse
economic conditions.
It has been the Group’s experience
that the diversity of its mix of products
and services and distribution channels
has limited its exposure to economic
downturns. Consumers appear to be
unwilling to reduce spending on
utilities, transport and airtime. In this
regard the Group’s products continue
to be in demand and remain resilient
to downturns. The Group is focusing
on its existing platforms, both locally
and internationally. Its vast geography
of point-of-sale presence afford
continuous opportunities to provide
additional products and services to be
expedited on these expanding points
of presence.
Margin compression
The network operators determine
the margins to the prepaid airtime
distribution channel. The Group may
not always be able to pass on to the
retailer, merchant or customer any
margin compression enforced by the
network operators.
Management is confident, that based
on historical trends, the Group will
be able to continue to pass on any
margin compression to the distribution
channel. Any margin compression
is also likely to eliminate inefficient
distributors out of the distribution
channel. In addition, the Group is
constantly looking to introduce new
product and service offerings at
comparatively higher margins than
its traditional business, through the
leverage of its significant distribution
footprint and merchant relationships.
Interest rates
Fluctuations in interest rates have
an impact on the cost of Group
borrowings.
Foreign exchange rates
Fluctuations in exchange rates have an
impact on the results reported from,
and any refinancing required by,
associate and joint venture companies
located in India, Mauritius and Mexico.
Non-compliance with
legislation
Non-compliance with legislation
applicable to the Group could lead
to fines and negative reputational
impact, i.e. POPI, CPA, WASPA
legislation, Companies Act, Income
Tax Act, Value Added Tax Act,
JSE Listings Requirements, OHSA, BEE
Act, Employment Equity Act, industry
charters and scorecards.
Legislation that affects the Group is
identified, analysed and categorised
according to its impact and relevance.
The process is ongoing in order to test
and ensure total compliance at an
operational level.
The compliance function is managed
by Group Legal and Company
Secretarial, as assisted by the
internal auditor.
Ability to attract and retain
skilled resources
The Group’s future performance will
depend largely on the efforts and
abilities of its key personnel and
employees. The existing Group
Executive Management pioneered
the mass prepaid market and
established the Group’s business
model. The Group’s future success
will depend, in part, upon its ability
to continue to attract, retain, motivate
and reward personnel, including
executive officers and certain other
key and specialised employees. There
is a dearth of suitable technical skills
in the ITC sector.
The joint CEOs and co-founders are
both substantial shareholders and
are dedicated to the sustainability
and growth of the Group.
Key members of the management
team are bound by service and
restraint agreements and in most
instances they are shareholders of
Blue Label via the forfeitable share
scheme. Executive Management has
implemented talent management and
succession planning in key areas of
the Group. Appropriate skills transfer
activities are ongoing through on the
job and other training programmes.
The RNC has approved remuneration
policies which include long-term
retention benefits, short-term
incentives and an outperformance
bonus. In addition, key components
of the Group’s remuneration policy
include retention.