VCL defies noose around its neck, grows customers



MASERU – Despite an axe hanging over its head, Vodacom Lesotho (VCL) has seen customer numbers surge in the financial year which ended on March 31 this year. The number of customers increased from 1 464 000 in 2018 to 1 660 000 in 2019, which is an improvement from 2018, when Vodacom Lesotho lost about 123 000 customers. Vodacom Lesotho is a subsidiary of the Vodacom Group Limited, a South African mobile communications company, providing voice, messaging, data and converged services to over 55 million customers.

Vodacom Group holds an 80 percent stake in Vodacom Lesotho, with the remainder is held by the Sekhametsi Investment Consortium, a conglomerate of local businesses. According to the Vodacom Group Limited’s integrated report for the financial year ended March 31, 2020, Vodacom Lesotho’s revenue also grew by 5.3 percent from about M1.3 billion in 2018 to 1.37 billion in 2019. The financial statements indicated that the increase in revenue was driven by growth in data and M-Pesa revenue.

Launched in Lesotho in July 2013, M-Pesa is a mobile phone-based money transfer service, which provides people with a safe, secure and affordable way to send and receive money, top-up airtime, make bill payments and even receive salaries. “M-Pesa revenue was up 27 percent, supported by a pleasing 49.5 percent increase in M-Pesa customers,” read the financial statements. This is despite that in the same financial year, VCL’s license was threatened by the Lesotho Communications Authority (LCA) for allegedly violating regulatory compliance regulations. So tense was the situation that Vodacom Group had to dispatch an envoy to Lesotho to intervene in the crisis.

The group’s non-executive chairman, Jabu Moleketi, came to Lesotho in February and met with the minister of communication, science and technology Thesele ’Maseribane and the Chief Executive Officer (CEO) of LCA, ’Mamarame Matela, among others. “In December 2019, LCA issued a notice of enforcement against Vodacom Lesotho premised on its view that the company’s statutory external auditors were not independent, as required by the Companies Act,” Vodacom stated in its financial statements. It added: “The statutory external auditors of Vodacom Lesotho are not affiliated to the group’s auditors, Ernest & Young Inc.”

In a statement in February, LCA said from as far back as 2015, Vodacom Lesotho directors and shareholders failed to appoint independent auditors as specified in section 97(2) (g) of the Companies’ Act. It said the company’s external auditor was a relative of the chairman of the board. Section 97(2) (g) of the Lesotho Companies Act, 2011, prohibits a company from appointing as its auditor, a person related to a member of such a company’s board of directors.

This is probably because the auditor participates in board meetings dealing with the financial statements, where the auditor explains his or her views on issues such as the company’s accounting policies, risk areas, internal control routines and accounting processes. The Vodacom Group also disclosed in its financial statements that LCA had directed VCL to show cause why its communications license could not be withdrawn. It said: “Vodacom Lesotho has made written representations against the revocation of its license. The LCA is yet to issue a final decision on the matter.” Vodacom said it was continuing to engage with regulatory authorities regarding enforcement proceedings of the LCA relating to the alleged lack of independence of its external auditors.

“These and other regulatory developments across the markets have resulted in a heightened focus on ensuring even stronger governance processes and compliance measures across the group, as well as an accelerated emphasis on implementing the Vodacom Social Contract initiatives,” it said. Public Eye reported on June 12, that the 90-day period that was given to Vodacom Lesotho to justify why its license could not be revoked had lapsed, and talks were being held behind the scenes in an effort to secure the future of Vodacom. “The 90 days’ period that was given to Vodacom Lesotho to justify why its licence cannot be revoked has lapsed but the company made its submission within that stipulated period,” LCA CEO Matela told this paper.

Matela added: “Vodacom is one of companies offering essential services in the country and its licence cannot just be revoked abruptly. We are now in talks with the company trying to reach a mutually beneficial agreement, to ensure that it does not lose its licence.” She further vowed that LCA would update the nation as soon as the talks had been completed. Despite the imminent danger of its license being revoked, Vodacom said its data customers increased by 15.4 percent from 734 000 to 847 000. “Smartphone penetration increased to 60.7 percent of our customer base, up from 57.4 percent in the previous year, aided by access to better, low-cost smart devices,” it said.

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