Econet 2009 annual report


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Econet 2009 annual report

  1. 1. ANNUAL REPORT 2009 Expanding the frontiers of communication
  2. 2. Enlarge the place of your tent, stretch your tentcurtains wide, do not hold back; lengthenyour cords, strengthen your stakes.Isaiah 54 v 2 (NIV)
  3. 3. Expanding the frontiers of communicationWe are working relentlessly to achieve sustainable growththrough innovation and network expansion. We are committedto extend the frontiers of communication through thedeployment of relevant technologies such as GPRS, 3G, Wi-Fi andWi-Max. We believe that the accelerated growth programme willunlock value to all our stakeholders and open new horizons forour customers. Econet Wireless Holdings Limited Annual Report 2009 1
  4. 4. Contents Econet Today Financial Highlights 3 Organisational Vision 5 Board of Directors 6 Econet Corporate Profile 8 Chairmans Statement to the Shareholders 10 Chief Executive Officer’s Operations Review 12 Corporate Social Investment 15 Directors’ Report 16 Directors’ Responsibility for Financial Reporting 17 Corporate Governance 18 Certificate by Company Secretary 22 Report of the Independent Auditors 23 Financial Statements 26 Supplementary Information 62 Detachable Proxy Form for Annual General MeetingEconet Wireless Holdings Limited Annual Report 2009 2
  5. 5. Financial HighlightsSUMMARY (ZW$) 2009TRADING RESULTSTotal Revenue-Cellular Network Operations 803 421 944-Other Services 21 880 243Operating profit 126 071 889Loss before taxation (1 727 210 752)Loss attributable to shareholders (1 080 524 533)Cash utilised in operations (1 854 416 671)Capital Expenditure (34 195 449)Share performanceBasic loss per share (ZW$) (6 434)Headline loss per share (ZW$) (31 544)Market price per share 28 February 2009 (US cents) 80Number of shares in issue at 28 February 169 095 983Market capitalisation (US$) 135 276 786RatiosReturn on shareholders’ equity (2008-18.6%) (20%)Shareholders’ equity 5 491 763 214Debt to shareholders equity (2008-0%) 40%Operating statisticsConnected capacity 1 200 000Average minutes of use per subsciber (MOU) 98Average revenue per user (ARPU) US$ 8.69 subscribers Subscribers (thousands) 1 2001 200 000 654 640Connected Capacity 450 250 2005 2006 2007 2008 2009 Econet welcomes the dollarisation of the tariff regime with effect from January 2009. The charging of telecoms products and services in USD will ensure industry viability and increased foreign currency generating capacity for the nation, bringing about stability and predictability to the industry. Econet Wireless Holdings Limited Annual Report 2009 3
  6. 6. We owe our success to our customers because they havefuelled our growth. We strive to understand their needs andfind ways of delighting them in every single experience. As weexpand the frontiers of communication, we will continue to delightour customers with relevant consumer innovations such as mobileinternet and mobile email. Econet Wireless Holdings Limited Annual Report 2009 4
  7. 7. Organisational VisionOur VisionTo provide telecommunications to all the people of Zimbabwe.Our MissionTo serve Zimbabwe by pioneering, developing and sustaining reliable,efficient and high-quality telecommunications of uncompromisingworld-class standards and ethics.OUR VALUES Personal Internally we will always remember that we are a companyThe values we hold in common are: made up of individuals. These people are the Company. Each one is an intrinsically valuable member of the organisation,Pioneering irrespective of their gender, race or position. We will alwaysWe are a company committed to finding the best way show concern for each other in an atmosphere that is openforward in the fast moving and highly competitive and stimulates personal development, job satisfaction and atechnological field. To remain leaders in the field, we shall sense of responsibility. We believe in working in teams, inrelentlessly pursue innovative solutions and constantly grow effective and confident co-operation, in environments whereour knowledge base, with an uncompromising passion for honest praise, constructive criticism and fair reward haveexcellence. their place. Each one is an intrinsically valuable member.Professionalism Who we are inside the Company shall reflect who we areIn everything we do, both within Econet and in the externally. Our relationship with our customers will enthusecommunity, we always work in a customer and objective- with warmth and a genuine desire to meet their needs. Weoriented manner with clearly defined goals, in terms of will reach out to customers in a holistic and organic way thatquality of service. In all our professional areas and at all levels, makes them true stakeholders in Econet Wireless.we will carry out our duties skillfully and diligently. Econet Wireless Holdings Limited Annual Report 2009 5
  8. 8. Board of DirectorsAs at 28 February 2009T. Nyambirai S. T. Masiyiwa C. FitzgeraldChairman Group Chief Executive Officer Non-ExecutiveMr Nyambirai is the founder and Mr Masiyiwa spearheaded the Mr Fitzgerald joined Econet WirelessGroup Chief Executive Officer of TN formation of Econet Wireless International from a position ofFinancial Services, TN Asset (Private) Limited, Zimbabwe’s finance director at one of the largestManagement and TN Bank Limited. largest mobile network operator. farming inputs businesses in Zimbabwe.T.P. Mpofu (Mrs) D. Mboweni K.V. ChirairoNon-Executive Chief Executive Officer Finance DirectorMrs Mpofu joined Econet in February Mr Mboweni joined Econet Wireless Mr Chirairo joined Econet Wireless2001 as Finance Director from Coca- in 1996. He was a key member of the as Chief Accountant on 1 June 1998.Cola Central Africa. pioneering team that launched the Mascom Wireless network in Botswana and Econet Wireless Nigeria (EWN). Econet Wireless Holdings Limited Annual Report 2009 6
  9. 9. Board of DirectorsAs at 28 February 2009Z. M. T. Wazara J. G. B. Pattison P.J. CampbellNon-Executive Executive Non-ExecutiveMr Wazara joined Econet Mr Pattison joined Econet in June Mr Campbell was appointed to theWireless in December 1996 and 1998, with a wealth of experience in Econet Board on 31 January 2001.became heavily involved in all the GSM planning activities.R. Chidembo A. N. H. EastwoodNon-Executive Non-ExecutiveMr Chidembo joined Econet in Mr Eastwood was appointed to theFebruary 2000 and brought to the Econet Board on 31 January team a wealth of bothlocal and international experience. Econet Wireless Holdings Limited Annual Report 2009 7
  10. 10. Econet Corporate ProfileECONET WIRELESS HOLDINGS LIMITED Data Control and Systems (1996) (Private) Limited T/A EcowebEconet Wireless Holdings Limited (EWHL) is the holding Ecoweb is the largest internet service provider in Zimbabwe,company of businesses involved in cellular operations, offering broadband and dial-up services to both corporate andprovision of internet access and transaction processing individual customers. It has a presence in all the major cities andservices. The Group has an investment subsidiary, EEW towns in the country.Capital Holdings (Private) Limited, which holds interests in anumber of non-telecommunications companies. EWHL, Transaction Payment Solutions (Private) Limitedwhich is listed on the Zimbabwe Stock Exchange (ZSE), is The company is a leading provider of financial transactionZimbabwes leading technology company. It is one of the switching , point of sale and value-added services, that exploitlargest quoted companies in terms of market capitalisation, the convergence of banking, information technology andand directly and indirectly employs in excess of 1 500 staff. telecommunications. The company provides local and international financial institutions and telecommunicationsSUBSIDIARIES operators access to cutting-edge technology to enhance customer service, in partnership with one of the worlds leadingEconet Wireless (Private) Limited manufacturers of smart card-based point-of-sale systems.Econet Wireless (Private) Limited is EWHLs cellular networkoperator in Zimbabwe, with a subscriber base of 1 200 000 as ASSOCIATESat 28 February 2009. Demand remains strong, with excellentprospects for continued growth. Africa First ReNaissance (AFRE) Corporation Limited EWHL, through EW Capital Holdings (Private) Limited, is theEW Capital Holdings Limited second largest shareholder in Africa First Renaissance (AFRE)EW Capital Holdings (Private) Limited is EWHLs investment Corporation Limited, with 21.66% of the listed diversifiedvehicle through which the Group holds a variety of Zimbabwean insurance and financial services, carefully selected with the twin objectives ofgrowing earnings and preserving value for shareholders.Pentamed Investments (Private) LimitedEWHL through wholly owned Pentamed Investments (Private)Limited, acquired 66% of Mutare Bottling Company (Private)Limited in November 2007.Econet will continue to expand the frontiersof communication through relevant consumerinnovations. The launch of GPRS to post-paid customersand a successful 3G trial run is a clear commitment towardsmeeting evolving customer needs. Econet Wireless Holdings Limited Annual Report 2009 8
  11. 11. The business will continue innovating to meet the evolving needs of our customers; hence the investment in new technologies such as GPRS, 3G, Wi-Fi and Wi-Max. With our inspired brands, we foresee a bright future. We are moving ahead with renewed vigour and refreshed confidence, to open new frontiers of communication.Econet Wireless Holdings Limited Annual Report 2009 9
  12. 12. Chairman’s Statement to the Shareholders I am pleased to present the Group’s audited financial results for the year ended 28 February 2009. Econet Wireless Holdings Limited has maintained its position as a leading provider of telecommunications services in Zimbabwe. OPERATIONS REVIEW The Group maintained its vision of ensuring the provision of telecommunications to all the people in Zimbabwe by increasing connected capacity to 1.2 million subscribers. The network rollout in Matabeleland and Bulawayo was successfully implemented after the commissioning of new equipment. A launch of data services (GPRS) was implemented and the Company is now in advanced stages of rolling out 3G services. FINANCIAL PERFORMANCE Group results include financial performance of Mutare Bottling Company (Private) Limited, a subsidiary, and Africa First ReNaissance (AFRE) Corporation Limited, an associate company. The fair value gain that had continued to anchor the performance of the business was significantly reduced inTAWANDA NYAMBIRAI the year under review, marking the return of the Group to its core business. The dollarisation of the economy ushered inChairman of the Board real revenue streams from operations, thereby enhancing business viability. Revenue Revenue for the year was US$87.9 million. Turnover remained subdued for the first ten months of the financial year due to“The Group maintained its vision controlled tariffs. However, the last two months of January and February recorded an improvement in revenues,of ensuring the provision of following the approval of a United States dollar- based tariff.telecommunications to all the Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA)people in Zimbabwe by increasing The EBITDA closed the period under review at US$26.6 million. Group performance was, however, negatively affected by theconnected capacity to 1.2 million first ten months when inflation reached astronomical heights. Loss per sharesubscribers.” The Groups basic loss per share was US$0,01. Limitations on financial reporting The Zimbabwe economic environment has created extraordinary challenges to financial reporting, as acknowledged by the Public Accountants and Auditors Board (PAAB), the Zimbabwe Accounting Practices Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE). Accordingly, the Econet Wireless Holdings Limited Annual Report 2009 10
  13. 13. Highlights Connected capacity Profit before tax (US$) 1,2 million US$3,1million Revenue Loss per share US$87,9 million US$0,01auditors report on the Group’s financial statements will be network, have made the prospects for the Group brighter thanan adverse opinion, a situation that has affected all quoted before.counters in Zimbabwe.CORPORATE SOCIAL INVESTMENT APPRECIATIONIn line with the Groups broad objective of participating in I would like to express my sincere appreciation to my fellowthe community through the “Econet in the Community” directors for their sterling contribution during the year andprogramme, the Group assisted in curbing the cholera also pay particular tribute to our customers, suppliers, businesspandemic through provision of requisite medical services partners, management and staff, who have performedand drugs. admirably under the difficult circumstances.Capernaum TrustThe Group continues to be mindful of the plight of orphanedchildren in Zimbabwe by assisting them through payment ofschool fees and other requirements.Joshua Nkomo Scholarship FundThe fund administers a scholarship programme for the top T. Nyambiraiten academically gifted Zimbabwean students from each of Chairman of the Boardthe countrys ten provinces every year. The funds vision is to 28 July 2009become the best national scholarship agency, which inspiresand facilitates the generation of transformational leaders ofintegrity, who shall become community builders and agentsof positive transformation in Zimbabwe and the region.OUTLOOKThe introduction of the use of multiple foreign currencies inthe economy, coupled with the pegging of tariffs in realterms, the stability of prices and the drive to expand the Econet Wireless Holdings Limited Annual Report 2009 11
  14. 14. Chief Executive Officer’s Operations Review OPERATING ENVIRONMENT The macroeconomic environment deteriorated throughout the year, posing serious challenges to the viability of the industry as a whole. The business environment for the period under review was characterised by hyperinflation, shortages of basic commodities, sub-economical pricing and foreign currency shortages. The introduction of multiple currencies and the authorisation to bill in foreign currency by the regulator in January 2009, helped to restore hope and viability to a distressed industry. OPERATIONS REVIEW Notwithstanding the difficulties indicated, the Group remained committed to ensuring the provision of telecommunications to all people in Zimbabwe, by increasing connected capacity to 1.2 million subscribers. Efforts to upgrade the network were implemented starting with swap outs and installation of new high capacity base stations in the two Matabeleland provinces and in Bulawayo city. Added to this, work on a new switch based in Bulawayo has already commenced. GPRS enabled dataDOUGLAS MBOWENI services were fully implemented and the Company is now progressing to roll out 3G technology to further enhance serviceChief Executive Officer on data. FINANCIAL PERFORMANCE Financial reporting in the period covered by our financial statements was significantly flawed due to the prevailingDuring the year Econet hyperinflationary environment and the resultant price distortions in our economy. These limitations have been extensively dealtexpanded its network capacity to with in media statements made by the Public Accountants and Auditors Board (PAAB), the Zimbabwe Accounting Practices1,2 million subscribers in order Board (ZAPB) and the Zimbabwe Stock Exchange (ZSE). Therefore, rather than to focus on our past performance, in thisto fully exploit the huge market commentary, I will focus on our prospects for the year ahead.potential. The dollarisation of The Group will deliver strong financial performance in the year ahead premised on the increase in our subscriber base.the tariff ensured business Significant progress has already been made in achieving our goal of 2.5 million subscribers by 28 February 2010.viability. Our focus on innovation and our relentless pursuit of customer satisfaction are the key attributes that will assist us in achieving our financial and operational targets. SUBSCRIBER GROWTH The subscriber base grew by 83% to 1.2 million during the 12 months to 28 February 2009. The increase in subscriber numbers Econet Wireless Holdings Limited Annual Report 2009 12
  15. 15. was due to expanded network capacity in Bulawayo and the sustainable growth through innovation and network expansion.two Matabeleland provinces. Because of the hyperinflation, The Company is committed to extending the frontiers ofthe Econet subscriber mix was significantly skewed towards communication through the deployment of new enablingthe prepaid offering. technologies and the provision of relevant communication solutions, simultaneously providing service excellence in theUSAGE improving economic circumstances. A combination of accelerated growth and innovation will unlock value for ourMinutes of user per subscriber are affected by tariff levels and shareholders and open new horizons for our customers.subscriber numbers. The low tariff regime that prevailedduring the first ten months of the financial year resulted inabnormal usage level of 260 minutes for post-paid customersand 150 minutes for prepaid customers. The high traffic levelscreated congestion on the network.INNOVATIONS D. MboweniDuring the year under review, Econet successfully launched Chief ExecutiveGPRS to selected customers. Trials of 3G were successfullyconducted in anticipation of the receipt of frequencies from 28 July 2009the regulator. These data-enabling technologies are beingcomplemented with Wi-Fi and broadband services that theEconet Group launched through its subsidiary, Ecoweb. Theinternational calling card, launched in October 2008, ensuredthat international calls were charged in foreign currency at atime that this resource was desperately needed. This helpedthe Group to meet some of its external obligations.PEOPLEThe business will continue to adopt progressive humanresources policies to attract and retain the best talent. Therehas been an exodus of human resources into the emergingmarkets of Africa, the Middle East and Asia. Econet hasrestructured its remuneration practices in such a way that ithas a competitive edge over other listed companies inZimbabwe. With the dollarisation, the business hasdeveloped staff retention packages that are competitive in theregion. The retention programme is linked to theperformance management system.LOOKING AHEADIt is hoped that the efforts and initiatives of Government,business and other players will create an enablingenvironment that will yield positive results in restoring viabilityfor the telecoms industry, thereby allowing it to be a catalystfor wider economic development. Econet is optimistic thatthe operating environment will continue to improve. Becauseof this, the business is working relentlessly to achieve Econet Wireless Holdings Limited Annual Report 2009 13
  16. 16. Econet in the Community“Econet in the Community” has been actively involved in acommunity social health programme (“Stop Cholera Campaign”)and has continued to invest in education (Joshua NkomoScholarship) and social welfare (Capernaum Trust). The Group willcontinue to develop long-term partnerships with all thebeneficiaries of social investment initiatives. Econet Wireless Holdings Limited Annual Report 2009 14
  17. 17. Corporate Social InvestmentEconet believes its future depends on the sustainable development of our communities.We remain firm in our belief that a companys success cannot environmental awareness is now more than just a factor ofbe measured on financial performance alone. Our success also social responsibility, but rather a business imperative.lies in the positive transformation of our communities. Joshua Nkomo Scholarship FundWe believe that every business has a responsibility beyond its The Joshua Nkomo Scholarship Fund continued with itsbasic responsibility to its shareholders; it is a responsibility to valuable work in the provision of funding to the nations mostthe people of the communities in which it serves. gifted students, who are groomed to be leaders. There was fresh focus on supporting maths and science students as partAs a pioneering Company, we are moving beyond corporate of the Groups contribution to the development of technologysocial responsibility to social innovation. Econet believes that in that does not transform lives is irrelevant. We mustprovide a service that contributes meaningfully to the Christian Community Partnership Trustimprovement of the lives of members of the communities that As an institution grounded in faith, our support for evangelicalwe serve. work continues through the Christian Community Partnership Trust, which was established in partnership with otherOur social role is therefore constantly being reviewed in order Christian remain relevant to our communities. The Capernaum Trust‘National Healthcare Trust Zimbabwe’ (NHTZ) The Capernaum Trust was established in 1996 to transform theIn 2008, our social responsibility role took on a more direct and lives of orphaned children in economically disadvantagedurgent role. Under our health and welfare programme, Econet situations. The Trust continued its work to offer hope andprovided financial and logistical support to teams of dedicated inspiration to orphaned children. In the face of greater demandhealth workers that were involved in fighting the cholera For welfare intervention, the Trusts work continued in theepidemic that affected the country during the later part of provision of scholarships, food packs and life skills training to2008. over 26 000 orphans nationwide.We employed our wide airtime distribution network to spread Our involvement goes beyond the provision of materialawareness by printing anti-cholera messages on our recharge support, as the trust runs a deliberate and planned programmecards. designed to empower beneficiaries with life skills and activities to restore their self-esteem and groom them into inspiredOur involvement in fighting the cholera crisis opened our eyes the urgent need to make our intervention in health caremore focused. Econet therefore established the National HIV/AIDS POLICYHealthcare Trust Zimbabwe in December 2008. Econet is convinced that HIV and AIDS have the potential toThe Trusts immediate task was in the procurement of essential waste valuable trained human resources and reducemedicines and equipment needed for delivery of basic productivity. We continue to recognise the huge impact of HIVhealthcare services, and in the provision of key support in the and AIDS on the wellbeing of our employees. This includes theirareas of communication. welfare outside the workplace, where staff face the burden of committing effort and resources to care and provide for familyRather than merely reacting to crisis, the Trust will implement a members. Policies and structures therefore continue to bemore proactive and sustained strategy for the rehabilitation followed to address this concern. Econet Wireless continues toand long-term maintenance of Zimbabwes health sector. The provide anti-retroviral drugs for the infected employees andTrust seeks to build and maintain capacity within the health other members of their immediate family. Through the “Live 2sector in Zimbabwe. Love” programme, the Company continued to encourage open dialogue among staff on HIV/AIDS. By encouraging openEnvironment debate on HIV and AIDS, we help remove the stigma attachedDuring the year, Econet also came up with a comprehensive to HIV and AIDS and increase access to critical information onEnvironmental and Waste Management Policy. Econet believes the pandemic. Econet Wireless Holdings Limited Annual Report 2009 15
  18. 18. Directors’ ReportThe directors have pleasure in presenting their eleventh Pension FundAnnual Report and the Audited Financial Statements of The Groups pension fund scheme is administered by a Board ofEconet Wireless Holdings Limited and its subsidiaries for the Trustees. The Trustees manage the assets of the pension fund,year ended 28 February 2009. In the report “Group” refers to which are held separately from those of the Group. TheEconet Wireless Holdings Limited and its subsidiary pension scheme funds are handled only in accordance with thecompanies. rules of the pension fund.Principal Activities Corporate Social InvestmentThe Groups principal activities remained the same during the The Group continued with its commitment to the economicyear, namely the provision of cellular services, the provision and social development of the country. This commitmentof internet access services, transaction processing services derives from the Groups own commitment to Christian valuesand mobile banking services. and at the root of it is the desire to uphold and improve the quality of life of the people of Zimbabwe.The Group also maintained its investments in its subsidiaryand associated companies. It also continued to oversee the Through its “Econet in the Community” programme the Groupmanagement of these companies. continued with its social investment initiatives in education, environmental matters, health and social welfare and religiousConsolidated Results organisations.The statements of the Chairman and the Chief ExecutiveOfficer adequately cover the Groups financial results and its Donations to Political Partiesactivities during the year. The Group, as a matter of policy, does not contribute to any political party.Post-Balance Sheet eventsAn Extraordinary General Meeting of shareholders was held Auditorson 27 March 2009 at which shareholders approved a Shareholders will be asked to approve the remuneration of thetransaction whereby the Group entered into an instalment auditors for the year ended 28 February 2009. The auditors,sale agreement with Econet Wireless Global Limited for the Messrs Deloitte and Touche, have indicated their willingness topurpose of acquiring telecommunications equipment. continue in office. Approval for their reappointment will beDetails of the transaction were set out in the relevant circular sought at the Annual General Shareholders. By order of the BoardDividendsNo final dividend was declared to cater for the recovery of thebusiness.Share CapitalThe authorised share capital of the Group remained T. Nyambiraiunchanged during the year. CHAIRMANReservesThe movements in the reserves of the Group are shown in theStatement of Changes in Shareholder Equity.Directors S.T. MasiyiwaThe board membership stood at 11 during the year. Messrs DIRECTORJ.G.B. Pattison, T. Nyambirai and S.T. Masiyiwa will retire byrotation at the Groups Annual General Meeting and, beingeligible, offer themselves for re-election.At the Annual General Meeting shareholders will be asked toapprove payment of directors fees. C.A. BandaBorrowing Powers GROUP COMPANY SECRETARYThe details of the Groups borrowing powers are set out inNote 36 to the financial statements. 28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 16
  19. 19. Directors’ Responsibility ForFinancial ReportingThe Directors of Econet Wireless Holdings Limited and its reviewed the performance and financial position of the Groupsubsidiary companies are responsible for the maintenance of to the date of signing of these financials and the prospects,adequate accounting records, the preparation, integrity and based on the budgets, and are satisfied that the Group is afair presentation of the financial statements and related going concern and therefore continue to adopt the goinginformation. The financial statements have not been concern assumption in the preparation of these financialprepared in accordance with International Financial statements.Reporting Standards in so far as the inflation indices have notbeen published since July 2008 and therefore these financial The financial statements set out on pages 26-60 were approvedstatements have not been adjusted to be in line with the by the Board of Directors on 28 July 2009 and are signed on itsrequirements of International Financial Reporting Standards behalf by:-(IAS 29) "Financial Reporting in Hyperinflationary Economies".Econet Wireless Holdings Limited and its subsidiarycompanies independent external auditors Messrs Deloitte &Touche, have audited the financial statements and theirreport appears in this annual report. T. Nyambirai CHAIRMANThe directors are also responsible for the systems of internalcontrol. These are designed to provide reasonable, but notabsolute, assurance as to the reliability of the financialstatements, and to safeguard, verify and maintainaccountability over assets, and to prevent and detect material S.T. Masiyiwamisstatements and losses. The systems are implemented and DIRECTORmonitored by suitably trained personnel with an appropriatesegregation of authority and duties. Nothing has come to theattention of the directors to indicate that any materialbreakdown in the functioning of these controls, proceduresand systems has occurred during the year under review. C.A. BandaAs a result of the uncertainties more fully described in note GROUP COMPANY SECRETARY4.3, the directors advise caution on the use of these financialstatements for decision-making purposes. The directors have 28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 17
  20. 20. Corporate GovernanceCommitment to good corporate governance remains one of In the exercise of the above responsibilities, the Board executesthe guiding principles of Econet Wireless Holdings Limited full and effective control over the Group and monitorsand its subsidiary companies. The organisational values and executive management. It meets formally at least four times aethical behaviour within the business is testimony to this year to review the Groups performance.commitment. The commitment manifests itself by the strictobservance of the principles of transparency, responsibility The Board delegates certain specific responsibilities to aand accountability as set out in the Principles for Corporate number of committees and the boards of subsidiaryGovernance in Zimbabwe: Manual of Best Practice, the companies. It reviews and ratifies the appointment of directorsCadbury Report of the United Kingdom and the King Reports to the subsidiary boards.of South Africa. The Group also maintained its associationwith the Institute of Directors of Zimbabwe and continued Rights To facilitate the exercise of their responsibilities all directorswith its financial support for the institute. have unrestricted access to management, including the GroupTHE BOARD OF DIRECTORS Company Secretary, and to the Groups records and other information as and when they so require. The directors alsoComposition and appointment have authority to seek independent professional adviceFor the year ended 28 February 2009 the Board comprised regarding the Groups operations as well as those of its11 members with a broad range of business and industry subsidiaries.experience. Seven members of the Board are non-executivedirectors. A non-executive director chairs the Groups Board. Directors names The following are the directors who served during the year:Appointment of the non-executive directors is on the basis of Mr T. Nyambirai (Chairman), Mr S.T. Masiyiwa*, Mr P.J.their skills and experience or expertise in their respective Campbell, Mr R. Chidembo, Mr K.V. Chirairo*, Mr A.N.H.fields, the ultimate objective being to bring a balanced and Eastwood, Mr C. Fitzgerald, Mr D. Mboweni*, Mr J.G.B.independent judgement to the Groups business. The non- Pattison*, Mrs T.P. Mpofu and Mr Z.M.T. Wazara.executive directors are subject to election by shareholders. *ExecutiveAll directors retire by rotation and stand for re-election as Dr James Myers was appointed to the board of the Companyprovided for in the Companys Articles of Association. on 27 May 2009. Messrs Rugare Chidembo and ZacharyAccountability and delegated functions Wazara, both of whom were long-serving members of theThe Board of Directors is accountable for the Groups overall Board, retired from the Companys Board in May 2009.welfare and general outlook. It provides leadership and Directors interestssound judgement in directing the Group to achieve its As is the practice each year, the directors are required toobjectives and sustainable prosperity and uphold the best indicate in writing, whether they have any material interest ininterests of all the Groups stakeholders. The Board any contract of significance with the Group or any of itsformulates strategic objectives and key policies and has subsidiaries, which could give rise to a related conflict ofoverall responsibility for the following specific areas: interests. Directors are also required to disclose their other review and approval of the Groups strategic business business interests. With the exception of Mr T. Nyambirai, plans, incorporating operating and capital expenditure none of the directors had a material interest in any contract of budgets; setting of corporate objectives and performance significance to which the Group was a party during the year, targets; other than their service contracts. review and approval of major acquisitions and disposals; reviewing the share capital of the Group and subsidiaries Mr Nyambirai is the Group Chief Executive Officer of TN and recommending alteration thereof; Financial Services, which is one of the Groups financial reviewing annual financial statements and significant advisors. Mr Nyambirai is also the head of TN Medical scheme; changes in accounting policies; and a significant number of the Groups employees are members of monitoring and reviewing the Groups overall the scheme. He is also a partner in Mtetwa and Nyambirai performance. Legal Practitioners, a firm that provides legal services to the Group. Econet Wireless Holdings Limited Annual Report 2009 18
  21. 21. The Group Company Secretary Financial Reporting Standards and facilitates the developmentAll Directors have access to the advice and services of the of new and improved accounting practices in the business. TheGroup Company Secretary. committee meets with the external auditors, management and internal auditors regularly to review internal accountingDirectors remuneration controls, auditing and risk management matters and financialThe remuneration of directors and senior executives is reporting.reviewed by the Audit and Remuneration Committee, whichis constituted of non-executive directors and chaired by a The committees primary functions are to review the Groupsnon-executive director. financial statements and submission thereof to the Board for approval; to assess the effectiveness of internal systems andBOARD COMMITTEES controls; to ensure preservation of, and accountability for, the assets of the Group. It also reviews the fees of the GroupsThe Board delegates certain of its responsibilities to a external auditors.number of committees. The committees operate withindefined terms of reference laid down by the Board. Members of the Audit and Remuneration Committee are: Mr P.J. Campbell (Chairman), Mr K.V. Chirairo, Mr A.N.H.The members of the Econet Wireless Holdings Limited Board Eastwood, Mr C. Fitzgerald, Mrs M. Harris, Mr D. Mboweni,record of attendance at Board and committee meetings Mrs T.P. Mpofu and Mr Z.M.T. Wazara (since resigned).which they were eligible to attend, is set out below: Investments CommitteeAudit and Remuneration Committee The Investments Committee is responsible for the formulationThe Audit and Remuneration Committee of the Group and and recommendation of the Groups investments policy to theits subsidiary companies is constituted of non-executive Board for consideration and approval. It evaluates potentialdirectors and chaired by a non-executive director. It meets investments, expansion and development of the network andnot less than four times a year. The Chief Executive Officer new products. It also examines the technical aspects ofand the Financial Director are ex-officio members of the acquisitions, mergers and reconstructions, and reviewscommittee. security controls of the technical and engineering operations.Through this committee the Group achieves meaningful and Members of the Investments Committee are: Mr C. Fitzgeraldresponsible reporting by way of comprehensive and open (Chairman), Mr S.T. Masiyiwa, Mr K.V. Chirairo, Mrs M. Harris,disclosure and explanation of its financial results. In Mr D. Mboweni, Mrs T.P. Mpofu, Mr J.G.B. Pattison and Z.M.T.conjunction with the Groups external auditors, the Wazara (since resigned).committee carries out regular reviews of International EWHL AUDIT AND INVESTMENTS SUBSIDIARY BOARD MEETINGS REMUNERATION COMMITTEE COMMITTEE NON-EXECUTIVE EXECUTIVE Meetings held 4 4 3 4 16 S.T. Masiyiwa 3 N/A 3 N/A N/A T. Nyambirai 3 N/A N/A N/A N/A P.J. Campbell 3 3 3 N/A N/A R. Chidembo 3 1 N/A 3 N/A A.N.H. Eastwood 3 4 3 N/A N/A C. Fitzgerald 3 1 3 N/A N/A K.V. Chirairo 3 4 3 N/A 11 D. Mboweni 3 4 3 N/A 11 T.P. Mpofu 3 4 2 N/A 9 J.G.B. Pattison 3 N/A 1 N/A 4 Z.M.T. Wazara 2 1 1 2 N/A Econet Wireless Holdings Limited Annual Report 2009 19
  22. 22. Corporate GovernanceForeign Loans Committee employees are regularly and systematically seconded toThe committee reviews the Groups major foreign loans overseas and regional operations to ensure retention of suchobligations and puts forward recommendations on the skills.servicing of these obligations. It is the Groups policy to promote the highest standards ofInvestor Relations ethical behaviour among its employees. Employees areCommunication with the public and shareholders remains a required to observe the highest ethical standards in theprimary policy of the Group. The Groups executive meets execution of their duties.with the shareholders and investment analysts at least bi-annually after the release of the Groups results. Insider tradingThe Groups Annual Report and other corporate publications The Group complies with the Zimbabwe Stock Exchange listingare available on the corporate website requirements in relation to transactions by directors and employees in securities issued by the Group. No director orAt the Groups Annual General Meeting each substantial employee or his/her nominees or members of their immediateissue is put to the meeting for discussion and/or noting. The family, may deal in any securities of the Group at any timemeeting is also invited to receive and adopt the financial when he/she is in possession of unpublished, price-sensitivestatements and directors report. information.For Extraordinary General Meetings the level of proxy votes The Group operates a closed period prior to the publication oflodged for and against each resolution are disclosed at each its interim and annual results, during which directors andmeeting, together with details of abstentions. employees of the Group may not deal in securities of theEmployment and equity practices Group. In terms of policy, directors and employees who wishThe Group has in place a communications system which to transact in the shares of the Group, even outside of theensures that employees are kept informed on matters Groups “closed or block period”, are required to obtain theaffecting them and also factors influencing the Groups clearance of the performance. This is done through regularbriefings, presentations, electronic mailings and the Internal controls Internal controls comprise methods and procedures adoptedcorporate website. by management to achieve the objectives of safeguardingThe share option scheme, which had been in operation for assets, preventing and detecting errors and fraud, ensuring thesome time, expired at the end of November 2008. The accuracy and completeness of accounting records, and thescheme was not renewed. preparation of accurate and reliable financial statements. The Board confirms that throughout the financial year, and up toThe Group is an equal opportunity employer. Applications the approval of the Annual Report, there have beenfrom disabled persons receive full and fair consideration, procedures in place for identifying, evaluating and managinghaving regard to the aptitudes and abilities of the applicant. the significant risks to the achievement of the Groups strategicIn the event of disability every effort is made to ensure that objectives. This is in line with the Boards responsibility for theemployment continues and appropriate training is given. Groups system of internal control and review of itsCareer development and promotion of disabled people is, as effectiveness. Detailed policies and procedures are in placefar as possible, identical to that of other employees. across the Group, covering the regulation and reporting of processes and transactions.The Group takes a positive approach to equality anddiversity. It takes on and promotes development As part of the internal controls the Group has an internal auditopportunities whenever these arise, with a view to division. The division constantly monitors and reports on thedeveloping skills and expertise. Skilled and professional Groups systems of internal control risk management. The Econet Wireless Holdings Limited Annual Report 2009 20
  23. 23. head of the division attends the meetings of the Audit andRemuneration Committee and submits a report at themeeting. The Audit and Remuneration Committee hasoverall responsibility of reviewing the internal controlsystems and reports its findings to the Board.Independence of AuditorsThe Groups Audit and Remuneration Committee confirmsthe independence of the Auditors, Deloitte & Touche, whoare engaged by the Group for audit-related services. TheGroup uses other accounting firms to assist with non-auditmanagement consultancy work as and when required.Going concernIn light of the current financial situations and existingborrowing facilities available to the Group, the Directorshave a reasonable expectation that the Group has adequateresources to continue in operational existence for theforeseeable future. Accordingly, they continue to adopt thegoing-concern basis in preparing the annual financialstatements.By order of the BoardT. NyambiraiCHAIRMANS.T. MasiyiwaDIRECTORC.A. BandaGROUP COMPANY SECRETARY28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 21
  24. 24. Certificate by Company Secretary In my capacity as Group Company Secretary, I confirm that, in terms of the Companies Act (Chapter 24:03), the Group has lodged with the Registrar of Companies, the returns required under the Act and the returns are true and correct. CHARLES A. BANDA GROUP COMPANY SECRETARY 28 July 2009CHARLES A. BANDAGroup Company Secretary Econet Wireless Holdings Limited Annual Report 2009 22
  25. 25. Deloitte & Touche Kenilworth Gardens 1 Kenilworth Road Newlands PO Box 267 HARARE Zimbabwe Tel: (263) (4) 746248/54 (263) (4) 746271/5 Fax:(263) (4) 746255 OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ECONET WIRELESS HOLDINGS LIMITEDReport of the independent auditors on the financial statementsWe have audited the accompanying consolidated financial statements of Econet Wireless Holdings Limited, which comprisethe consolidated balance sheet as at 28 February 2009, and the consolidated income statement, consolidated statement ofchanges in equity and consolidated cash flow statement for the year then ended, and a summary of significant accountingpolicies and other explanatory notes set out on pages 26 to 60.Directors responsibility for the financial statementsThe directors are responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with International Financial Reporting Standards and the provisions of the Zimbabwe Companies Act (Chapter24:03). This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation andfair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting andapplying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.Auditors responsibilityOur responsibility is to express an opinion on these consolidated financial statements, based on our audit. We conducted ouraudit in accordance with International Standards on Auditing. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statementsare free of material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidatedfinancial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entitys internal controls. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Basis for adverse opinion on compliance with International Financial Reporting StandardsThe Zimbabwe economy is recognised as being hyperinflationary for purposes of financial reporting. These financialstatements have not been prepared in conformity with International Financial Reporting Standards in that the requirements ofIAS 29, (Financial Reporting in Hyperinflationary Economies) have not been complied with. The standard requires that financialstatements that report in the currency of a hyperinflationary economy should be stated in terms of the measuring unit currencyat the balance sheet date.The non-compliance with IAS 29 arises from the inability to reliably measure inflation due to the interaction of multipleeconomic factors which are pervasive to the Zimbabwean economic environment as explained in Note 4.3. A member firm of Deloitte Touche TohmatsuAudit Tax Consulting Financial Advisory Econet Wireless Holdings Limited Annual Report 2009 23
  26. 26. REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF ECONET WIRELESS HOLDINGS LIMITED (Continued)Adverse opinion on non-compliance with International Financial Reporting StandardsIn our opinion, because of the significance of the matters described in the Basis for Adverse Opinion paragraph, the financialstatements do not give a true and fair view of the financial position of Econet Wireless Holdings Limited as at 28 February 2009,and of the results of its operations and its cash flows for the year then ended in accordance with International FinancialReporting Standards.Report on legal and regulatory requirementsThese financial statements have been properly prepared in accordance with the accounting policies set out in note 4, andcomply with the disclosure requirements of the Companies Act (Chapter 24:03), and the relevant statutory instruments (SI33/99 and SI 62/96).Without further qualifying our opinion, we draw your attention to the following:Fair value determination for transactions, assets and liabilitiesThe determination of fair values presented in the financial statements is affected by the prevailing economic environment andthe fair values may therefore be distorted. This may result in significant variations in fair values, depending on factors andassumptions used in the determination of the fair values.The significant assumptions and the estimation uncertainties pertaining to items that are carried at fair value have beendisclosed in Note 5 to these financial statements.Supplementary InformationThe United States dollars supplementary balance sheet and income statement set out on pages 62 and 63 that are included aspart of the financial statements are not covered by this report. Consequently, no assurance is expressed on the United Statesdollar balance sheet and income statement.Deloitte & ToucheChartered Accountants (Zimbabwe)Harare, Zimbabwe28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 24
  27. 27. Margins improved significantly followingthe dollarisation of the tariff. We continueto seek ways of enhancing shareholdervalue as the business expands its revenuestreams and product innovation. Econet Wireless Holdings Limited 2009 Financial Statements Consolidated Income Statement 26 Consolidated Balance Sheet 27 Company Balance Sheet 28 Consolidated Statement of Changes in Equity 29 Consolidated Cash Flow Statement 30 Notes to the Consolidated Financial Statements 31 Supplementary Information 62 Detachable proxy formEconet Wireless Holdings Limited Annual Report 2009 25
  28. 28. Consolidated Income StatementFor the year ended 28 February 2009All figures in ZW$ NOTES 2009Revenue 7 825 302 187Cost of sales and external services sold (118 793 899)Gross profit 706 508 288Other income 27 747 442Employee costs (49 975 857)Operating costs- Administration (90 519 652)- Marketing and sales (12 047 695)- Network (16 911 377)- Other (438 729 260)Operating profit before depreciation 126 071 889Depreciation (741 051)Profit from operations 8 125 330 838Investment income 9 351 388Net finance costs 10 (1 122 388)Share of profit of associate 19 6 027 572 755Impairment of investment in associate 19 (5 889 130 504)Fair value gain on financial assets 14 692 561Profit before foreign currency exchange losses and taxation 277 694 650Foreign currency exchange losses 10.1 (2 004 905 402)Loss before taxation (1 727 210 752)Taxation 11 650 191 949Loss for the year (1 077 018 803)Attributable to:Equity holders of the parent (1 080 524 533)Minority interest 3 505 730 (1 077 018 803)Basic loss per share (dollars) 12 (6 434)Headline loss per share (dollars) 12 (31 544)Diluted basic loss per share (dollars) 12 (6 416)Diluted headline loss per share (dollars) 12 (31 458) Econet Wireless Holdings Limited Annual Report 2009 26
  29. 29. Consolidated Balance SheetAs at 28 February 2009All figures in ZW$ NOTES 2009ASSETSNon-current assetsProperty, plant and equipment 13 8 315 276 059Investment property 14 31 656Deferred tax assets 16 856 152 803Held-to-maturity investments 18 213 828 784Investment in associate 19 138 442 251Available-for-sale investments 20 870 750 600Held-for-trading investments 22 1 784 721Total non-current assets 10 396 266 874Current assetsInventories 23 226 039 172Trade and other receivables 24 1 857 037 371Bank balances and cash 286 891 020Total current assets 2 369 967 563Total assets 12 766 234 437EQUITY AND LIABILITIESEQUITYCapital and reservesShare capital 25 -Share premium 25 -Reserves 6 353 201 312Accumulated losses (1 080 680 647)Total capital and reserves 5 272 520 665Minority interest 219 242 549Total shareholders equity 5 491 763 214LIABILITIESNon-current liabilitiesDeferred tax liabilities 16 2 627 086 578Interest-bearing debt 29 864 120 178Total non-current liabilities 3 491 206 756Current liabilitiesTrade and other payables 26 1 875 893 960Provisions and accruals 27 139 358 537Taxation 138 363 720Deferred revenue 28 316 756 836Interest-bearing debt 29 1 312 891 414Total current liabilities 3 783 264 467Total equity and liabilities 12 766 234 437T. NYAMBIRAI K.V. CHIRAIRO C.A. BANDACHAIRMAN DIRECTOR GROUP COMPANY SECRETARY28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 27
  30. 30. Company Balance SheetAs at 28 February 2009All figures in ZW$ NOTES 2009ASSETSNon-current assetsProperty, plant and equipment 25 446 200Investment in subsidiaries - loan 17.2 23 321 250Total non-current assets 48 767 450Current assetsInter-company balances 17.2 394 183 998Total assets 442 951 448EQUITY AND LIABILITIESEQUITYCapital and reservesShare capital 25 -Share premium 25 -Reserves 386 099 630Accumulated profit 49 217 958Total capital and reserves 435 317 588LIABILITIESNon-current liabilitiesDeferred tax liabilities 7 633 860Total equity and liabilities 442 951 448The principal information has been stated in the consolidated financial statements; therefore no cash flow, statement of changes in equityor income statement is provided for the Company.T. NYAMBIRAI K.V. CHIRAIRO C.A. BANDACHAIRMAN DIRECTOR GROUP COMPANY SECRETARY28 July 2009 Econet Wireless Holdings Limited Annual Report 2009 28
  31. 31. Consolidated Statement of Changes in EquityFor the year ended 28 February 2009 RESERVES ACCUMULATED ATTRIBUTABLE TO MINORITY TOTAL LOSSES EQUITY HOLDERS INTERESTAll figures in ZW$ OF THE PARENTBalance at 29 February 2008 - - - - -Revaluation of property, plantand equipment 7 957 839 282 - 7 957 839 282 323 982 378 8 281 821 660Deferred tax arising on revaluation (2 301 238 450) - (2 301 238 450) (102 016 301) (2 403 254 751)Fair value gain on available-for-salefinancial instruments 870 750 600 - 870 750 600 - 870 750 600Deferred tax arising on fair value gain (174 150 120) - (174 150 120) - (174 150 120)Loss for the year - (1 080 524 533) (1 080 524 533) 3 505 730 (1 077 018 803)Exchange differences arisingon translation - 229 950 229 950 (6 229 258) (5 999 308)Share buy-back - (386 064) (386 064) - (386 064)Balance at 28 February 2009 6 353 201 312 (1 080 680 647) 5 272 520 665 219 242 549 5 491 763 214Capital redemption reserve fund - when shares are redeemed or purchased wholly or partly out of the Company profits, an amount equal to thenominal value of the shares is transferred to the capital redemption reserve fund.Non-distributable reserves- the reserve arises from the revaluation of property, plant and equipment, available-for-sale financial assets and reserveswhich are not classified under other categories. Where a revalued financial asset is sold, the portion of the reserve that relates to that financial asset,and is effectively realised, is recognised in profit and loss. Where a revalued financial asset is impaired, the portion of the reserve that relates to thatfinancial asset is recognised in profit or loss.Share capital, share premium and capital redemption reserve fund reflected a nil position as a result of the redenomination of the currency. Econet Wireless Holdings Limited Annual Report 2009 29
  32. 32. Consolidated Cash Flow StatementFor the year ended 28 February 2009All figures in ZW$ NOTES 2009Cash flows to operating activitiesOperating loss before working capital changes 30.1 (323 806 847)Net movement in working capital 30.2 248 932 790Cash utilised in operations (74 874 057)Cash flows to investing activitiesNet finance cost (1 122 388)Net expenditure on property, plant and equipment (34 195 449)Net cash used in investing activities (35 317 837)Cash flows from financing activitiesShare buy-back (386 064)Increase in interest-bearing debt 397 468 978Net cash from financing activities 397 082 914Net increase in cash and cash equivalents 286 891 020Cash and cash equivalents at the beginning of the year -Cash and cash equivalents at the end of the year 30.3 286 891 020 Econet Wireless Holdings Limited Annual Report 2009 30
  33. 33. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20091 GENERAL INFORMATION The Company was incorporated in Zimbabwe on 4 August 1998 and its main operating subsidiary on 23 August 1994. The address of its registered office and principal place of business is Econet Park, 2 Old Mutare Road, Msasa, Harare. The main business of the Group is mobile telecommunications and related value added services. These financial statements are presented in Zimbabwe dollars, being the currency of the primary economic environment in which the Group operates. Supplementary financial information has been presented in United States dollars as some of the transactions during the year were in United States dollars. Subsequent events - Demonetisation of Zimbabwe dollar In the fiscal policy statement presented by the Minister of Finance on 16 July 2009, the Zimbabwean dollar was demonetised. The fiscal statement introduced the use of multiple currencies.2 ADOPTION OF NEW AND REVISED STANDARDS2.1 Standards and Interpretations effective in the current period In the current year, the Group has adopted all of the revised Standards and Interpretations applicable to the Group issued by the International Accounting Standards Board (IASB) and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations and effective for the accounting periods beginning on or after 1 January 2008. The adoption of these new and revised Standards and Interpretations did not have a material impact on the financial statements of the Group. IFRIC 12 "Service Concession Arrangements (effective 1 January 2008)" IFRIC 13 "Customer Loyalty Programmes" IFRIC 14 IAS 19: "The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction" (effective 1 January 2008).3 STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE At the date of the authorisation of these financial statements, the following Standards and Interpretations, which are applicable to the Group, were either issued or revised but not yet effective: IFRS 2: Share-based Payments (Revised) Effective from 1 January 2009. IFRS 3: Business Combinations (Revised). Effective from 1 July 2009. IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (Revised). Effective from 1 July 2009. IFRS 7: Financial Instruments: Disclosures. IAS 1: Presentation of Financial Statements (Revised). Effective from 1 January 2009. IAS 16: Property, Plant and Equipment (Revised). Effective from 1 January 2009. IAS 19: Employee Benefits. IAS 20: Accounting for Government Grants and Disclosures of Government Assistance. IAS 23: Borrowing costs (Revised). Effective from 1 January 2009. IAS 27: Consolidated and Separate Financial Statements (Revised). Effective from 1 July 2009. IAS 28: Investment in Associates (Revised). Effective from 1 July 2009. IAS 29:Financial Reporting in Hyperinflationary Economies. IAS 32: Financial Instruments: Presentation (Revised). Effective from 1 January 2009. IAS 36: Impairment of Assets (Revised). Effective from 1 January 2009. IAS 38: Intangible Assets (Revised). Effective from 1 January 2009. IAS 39: Financial Instruments: Recognition and Measurement (Revised). Effective from 1 July 2009. IAS 40: Investment Property (Revised). Effective from 1 January 2009. The Directors anticipate that all of the above Interpretations will be adopted in the Groups financial statements for the period commencing 1 March 2009 and that the adoption of those Interpretations will not have a material impact on the financial statements of the Group in the period of initial application.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES4.1 Basis of accounting The financial statements have not been prepared in accordance with International Financial Reporting Standards (IFRS) in that the absence of inflation indices has made it impossible to produce inflation-adjusted financial statements in compliance with the requirements of IAS 29: "Financial Reporting in Hyperinflationary Economies." The principal accounting policies of the Group, which are set out below, are consistent in all material respects with those applied in the previous year and conform with standards issued by the International Accounting Standards Board (IASB) with the exception of non compliance with IAS 29. Econet Wireless Holdings Limited Annual Report 2009 31
  34. 34. Notes to the Consolidated Financial StatementsFor the year ended 28 February 20094 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)4.2 Currency reforms The Zimbabwean currency was restated on 1 August 2008 by the removal of ten zeros and on 1 February 2009 by the removal of a further twelve zeros. In total, twenty two digits were removed by the Reserve Bank of Zimbabwe as part of currency reforms. As a result, prior year comparatives which are reflected in these financial statements in the currency unit prevailing at 28 February 2009, have become inconsequential to these financial statements. Accordingly, no comparative figures are shown. The Zimbabwe dollars shown in these financial statements have been restated in accordance with these changes.4.3 Limitations of financial reporting in the Zimbabwean economic environment The uncertainties in the adverse Zimbabwean economic environment during the financial year ended February 2009 have resulted in limitations in financial reporting. These uncertainties include:4.3.1 Non-availability of official inflation indices Inflation indices were not published from July 2008. Subsequent estimates by economists were wide ranging, between percentages of trillions and quadrillions. The use of foreign currency and multiple pricing which were prevalent in the economy distorted the process of measuring inflation. Given the chronic hyperinflation, the time lapse between the balance sheet and reporting dates rendered the financial information presented in inflation adjusted financial statements less useful and relevant for making economic decisions. Official inflation indices, when available, were only available at month end periods. Therefore the use of assumptions to determine inflation in the intervening periods rendered the information presented susceptible to estimation errors. In these circumstances, inflation-adjusted financial statements have not been prepared as required by the International Financial Reporting Standards (IAS 29): "Financial Reporting in Hyperinflationary Economies."4.3.2 Measurement of transactions The measurement of transactions in local currency was dependent on the mode of settlement. As a result there may be significant variations in the valuation of assets and liabilities. Accordingly, such valuations may be inherently unreliable. These uncertainties have been aggravated by; Multiple Pricing There were multiple prices for the same commodity/service, largely dependent on the modes of settling transactions from cheque/transfer, cash, fuel coupons, foreign currency etc. Multiple pricing resulted in distortions in financial reporting. Multiple exchange rates There were various exchange rates applicable which varied significantly namely; cash rates, cheque rates, transfer rates and Old Mutual Implied Rates. If a transaction occurs at more than one rate and is recorded at its nominal value this may result in distortions in financial reporting. Dollarisation The introduction of licensed operations in foreign currency and the basing of most other transactions in foreign currency for most of the non-licensed operators, created challenges for the Company in determining its functional currency in the latter part of 2008. As a result of these uncertainties and inherent limitations, caution is advised in the use of these financial statements for decision- making purposes.4.4 Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to the end of February of each year. Control is achieved where the Company has the power to govern the financial and operating activities of an entity so as to obtain benefits from its activities. The results of the subsidiaries acquired or disposed of during the year are included in the consolidated financial statements, from the effective date of acquisition or up to the effective date of disposal. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances and income and expenses are eliminated in full on consolidation. Minority interests in the net assets of consolidated subsidiaries (excluding goodwill) are identified separately from the Groups equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minoritys share of changes in equity since the date of the combination. Losses applicable to the minority, in excess of the minoritys interest in the subsidiarys equity, are allocated against the interests of the Group, except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. Econet Wireless Holdings Limited Annual Report 2009 32