Corporate Governance

The Group and its directors are fully committed to good corporate governance and to the principles of openness, integrity and accountability in dealing with shareholders and all other stakeholders. All directors endorse the Code of Corporate Practices and Conduct recommended in the King Report on Corporate Governance in South Africa 2002 (“King II Report”). The directors are of the opinion that the principles articulated in the King II report have been adhered to throughout the
accounting period.

BOARD OF DIRECTORS

The Board currently consists of seven directors, five of whom are non-executive and independent. The non-executive directors, drawing on their experience, skills and business acumen, ensure impartial and objective viewpoints in decision making processes and standards of conduct. The directors consider the mix of technical, entrepreneurial, financial and business skills of the directors to be balanced, thus enhancing the effectiveness of the Board.

The roles of the Chairman and the Chief Executive Officer do not vest in the same person. Leslie Boyd is the independent non-executive Chairman of the Group and Jens Montanana is the Chief Executive Officer. This ensures a balance of authority and precludes any one director from exercising unfettered powers of decision-making.

The Board retains full and effective control over the Group and monitors the executive management and decisions in the subsidiary companies. The Board is responsible for the adoption of strategic plans, monitoring of operational performance and management, determination of policy and processes to ensure the integrity of the Group’s risk management and internal controls, communications policy, and director selection, orientation and evaluation. These responsibilities are set out in the approved Board Charter. Please refer to pages 46 and 47 for a copy of the Board Charter. The directors are of the opinion that they have adhered to the terms of reference as articulated in the Board Charter for the financial year ended 28 February 2006.

To adequately fulfil their responsibilities, directors have unrestricted access to timely financial information, all Group information, records and documents. Directors are provided with guidelines regarding their duties and responsibilities as directors and a formal orientation programme has been established to familiarise incoming directors with information about the Group’s business, competitive posture and strategic plans and objectives.

The Board meets at least four times a calendar year and additional meetings are held when non-scheduled matters arise. At all Board meetings directors declare their interests in contracts where applicable. Full details of the directorate are set out on pages 10 and 11.

Formal appraisal processes are in place to monitor Board performance. A Board self-assessment review is performed annually. At the same time assessments are performed on the committees of the Board, as well as the performance of the Chairman and individual directors.

Directors' attendance at Board meetings – 2006 financial year and subsequent meetings to date of this report.

P=Present

The Board has the following committees to assist it with its duties:

• Audit, Compliance and Risk Committee
• Remuneration and Nomination Committee

AUDIT, COMPLIANCE AND RISK COMMITTEE

The Audit, Compliance and Risk Committee consists of the following independent non-executive directors:

• Colin Brayshaw (Chairman)
• Cedric Savage
• Chris Seabrooke

The Committee operates within defined terms of reference as set out in its charter, and authority granted to it by the Board and meets at least three times a year, when the external auditors, the internal auditors, the Chief Executive Officer and the Group Finance Director are invited to attend. The external and internal auditors have unrestricted access to the Audit, Compliance and Risk Committee and meet with the Committee members, without management present, at least once a year.

The Committee is satisfied that it has met its responsibilities for the year with respect to its terms of reference.

The principal functions of the Committee are to review the Annual Financial Statements, the half yearly results announcement, monitor the effectiveness of internal controls, assess the risks facing the business, discuss the findings and recommendations of the internal and external auditors, review the internal and external audit plans and review the effectiveness of the internal and external auditors. The Chairman of the Committee reports on the Committee’s activities at each Board meeting.

Datatec’s operating subsidiary companies have separate audit committees. Members of the Datatec Audit, Compliance and Risk Committee are represented on the major subsidiaries committees. Full reports from these sub committees are submitted to and form part of the documentation made available to the Datatec Audit, Compliance and Risk Committee.

The Audit, Compliance and Risk Committee ensures that there is appropriate independence relating to non-audit services provided by the external auditors. Pre-approved permissible non-audit services performed by the external auditors include taxation and due diligence services.

The Committee assists the Board in reviewing the risk management process and significant risks facing the Group. The Committee sets the Group's risk strategy in liaison with the executive directors and senior management, making use of generally recognised risk management and internal control models and frameworks in order to maintain a sound system of risk management and internal control. The Committee identifies and monitors, at least annually, key performance indicators and key risks, including operational, physical, human resources, technology, continuity, credit, market and compliance risks.

Management is accountable to the Board for designing, implementing, monitoring and integrating the process of risk management into the day-to-day activities. The Board, however, retains overall accountability for risk management. The Board views risk management in a positive light as it may also identify business opportunities.

A formal strategic risk assessment for Datatec and its major operating subsidiaries has previously been completed. Risk mitigation strategies have been identified for all key risks both at a Group and an operating entity level. The output of the risk assessment process has formed the basis for the internal audit coverage plan. Identified risks are reviewed on an annual basis.

The Chairman of the Audit, Compliance and Risk Committee will be available at the Annual General Meeting to answer queries about the work of the Committee.

Directors' attendance at Audit, Compliance and Risk Committee meetings – 2006 financial year and subsequent meetings to date of this report.

P=Present

REMUNERATION AND NOMINATION COMMITTEE

The Remuneration and Nomination Committee currently consists of the following independent non-executive directors:

• Chris Seabrooke (Chairman from 16 August 2006)
• Leslie Boyd (Chairman until 16 August 2006)
• Nick Temple

The Committee operates within defined terms of reference as set out in its charter, and authority granted to it by the Board and meets at least three times a year. The Chief Executive Officer and Group Finance Director may be invited to attend these meetings, but neither may take any part in decisions regarding their own remuneration.

The Committee is satisfied that it has met its responsibilities for the year with respect to its terms of reference.

The Committee is responsible for making recommendations to the Board on the Group’s framework of executive remuneration and to determine specific remuneration packages for each of the executive directors and certain senior managers of the Group. The Committee is also responsible for the Group's remuneration policies and the allocation of share options in terms of Datatec’s share-based incentive schemes. The Committee makes recommendations to the Board regarding the  appointment of new executive and non-executive directors and makes recommendations on the composition of the Board generally. Director appointments are formal and transparent. The Chairman of the Committee reports on the Committee’s activities at each Board meeting.

Fees payable to non-executive directors are recommended by the Board and ratified by shareholders at the Annual General Meeting. Full disclosure of individual directors’ remuneration appears on page 57.

The Chairman of the Committee will be available at the Annual General Meeting to answer questions about the Committee's work.

Directors' attendance at Remuneration and Nomination Committee meetings – 2006 financial year and subsequent meetings
to date of this report.

P=Present

COMPANY SECRETARY

All directors have access to the advice and services of the Company Secretary and are entitled and authorised to seek independent and professional advice about affairs of the Group at the Group’s expense. The Company Secretary is responsible for the duties set out in Section 268G of the Companies Act. The certificate required to be signed in terms of subsection (d) of the Act appears on page 62.

FINANCIAL AND INTERNAL CONTROL

The Group’s internal control and accounting systems are designed to provide reasonable, but not absolute, assurance as to the integrity and reliability of the financial information and to safeguard, verify and maintain accountability of its revenues and assets. These controls are implemented by skilled company personnel.

The Group has implemented a system of control self-assessment across all Group companies. Local management is required to complete and submit control self-assessment programmes bi-annually. Local management is monitored against internal control norms in other Group companies and action is taken where ratings are considered to be inadequate. Ratings are also reviewed by the Audit, Compliance and Risk Committee.

Nothing came to the attention of the directors or arose out of the internal control self-assessment process, internal audits or year-end external audits to indicate that any material breakdown in the functioning of the Group’s internal controls, procedures and systems had occurred during the course of the year, other than weaknesses identified in Westcon’s Compass system, currently being rectified by management.

In addition, there are documented and tested procedures in some of the subsidiaries which will allow these subsidiaries to continue their critical business processes in the event of a disastrous incident impacting their activities. Where such documented procedures currently do not exist, the relevant subsidiaries are in the process of implementing them.

INTERNAL AUDIT

Internal Audit, which is outsourced to Ernst & Young, is an independent appraisal function, which examines and evaluates the activities and the appropriateness of the systems of internal control, risk management and governance processes. Internal Audit operates within defined terms of reference as set out in its charter, and authority granted to it by the Audit, Compliance and Risk Committee and the Board. The Audit, Compliance and Risk Committee is satisfied that Internal Audit has met its responsibilities for the year with respect to its terms of reference.

Internal Audit report to the Group Finance Director on day-to-day matters, and to the Chairman of the Audit, Compliance and Risk Committee. Audit plans are presented in advance to the Audit, Compliance and Risk Committee and are based on an assessment of risk areas. Internal Audit attend and present their findings to the Audit, Compliance and Risk Committee.

The objective of Internal Audit is to assist the Board in the effective discharge of their responsibilities.

MANAGEMENT REPORTING

The Group has established management reporting disciplines which include the preparation of annual budgets by operating entities. Monthly results and the financial status of operating entities are reported against approved budgets. Profit projections and cash flow forecasts are reviewed regularly, while working capital and borrowing levels are monitored on an ongoing basis.

EMPOWERMENT AND EMPLOYMENT EQUITY

Datatec places particularly high value on the abilities and contributions made by employees in the development and achievements of its businesses.

Around the globe, the Group is an equal opportunities employer. The Group strives to afford all staff members opportunities to realise their full potential and advance their careers. The Group is committed to a working environment that is free from any discrimination and seeks to develop skills and talent inherent in its work force.

The Group is open to new partnerships that will increase shareholder value as well as plough back skills and resources into the South African community.

All the South African operations have committed themselves to a transformation process designed to minimise barriers to employment equity. Significant progress has been made to achieving the employment equity plan goals. Since most of our business interests exist outside SA, employment equity plans are established on an individual entity basis.

The Group's social responsibility activities are detailed on page 48.

ORGANISATIONAL INTEGRITY

The Group operates on a basis of decentralised management across numerous countries. All employees are required to maintain the highest level of ethical standards in ensuring that the Group’s business practices are conducted in a manner that, in all circumstances, is above reproach. The code of ethics has been approved by the directors and has been rolled out through the Group. The directors believe that the required ethical standards have been met during the year under review.

Datatec is actively enhancing its performance-driven culture of full disclosure and transparency in which individual employees assume responsibility for the actions of the business. The integrity of new appointees in the selection and promotion process is continuously assessed. The basis of ethical conduct is entrenched in the company culture.

WHISTLEBLOWING HOTLINE

Datatec has implemented a whistleblowing hotline in SA. This hotline is being extended into Europe and will be rolled out to other subsidiaries in the Group. The hotline provides a facility whereby employees are able to an onymously provide tip-offs of potential frauds or unethical conduct.

SAFETY, HEALTH AND ENVIRONMENT

A formal safety, health and environmental policy has been implemented and approved by the Board.

Datatec recognises its obligation to reduce the risk of injury in the working environment and to supply a clean and safe workplace. The Group undertakes to comply with health and safety regulations as set in the jurisdictions in which the Group operates around the world. To this extent, where applicable, operating subsidiaries have individual health and safety policies.

Although the Group operates in a predominantly office and warehouse based environment the Group recognises its responsibility to safeguard the environment in the course of conducting business operations. Where applicable each operating subsidiary has its own environmental policy.

Datatec has set the following environmental objectives to be applied across the Group using best practice in environmental management. The Group will:

• Comply with legal environmental requirements
• Seek to maximise our understanding of environmental issues
• Purchase environmentally sensitive products wherever possible
• Seek to minimise waste
• Seek to minimise energy use
• Seek to minimise transportation impacts
• Support community and other environmental initiatives by active involvement

SHARE DEALINGS

No Group director or employee may deal, directly or indirectly, in Datatec shares or warrants on the basis of previously unpublished, price-sensitive information.

Restrictions are imposed upon directors and senior management in the trading of Datatec shares and warrants and upon all employees regarding the exercising of Datatec share-based incentives during certain “closed periods”. In light of the JSE Listing Requirements, the insider trading laws and good corporate governance, the Datatec Remuneration and Nomination Committee has advised that employees are not permitted to exercise their share-based incentives during closed periods or when in possession of unpublished price-sensitive or inside information relating to Datatec. The closed periods include the periods between Datatec’s interim and financial year-end reporting times and the dates on which the relevant results are published, and any time when Datatec is trading under a cautionary announcement.

Employees may nonetheless on application, and at the sole discretion of the directors, be allowed to exercise their share options while Datatec is trading under a cautionary announcement provided that the JSE Listing Requirements and the relevant insider trading laws permit the exercise of options at the relevant point in time. Employees exercising their options in these circumstances will be required to sign a declaration confirming that they are not in possession of unpublished pricesensitive or inside information relating to Datatec.

In respect of the closed periods preceding the publication of results, employees whose option exercise date falls within such a closed period will be permitted to exercise their options during a period of one month prior to the starting date of such a closed period. This concession has been made in accordance with clause 5.8.1 of the Datatec Share Option Scheme whereby “the directors shall be entitled if in their opinion special circumstances exist and in consequence of which they consider it reasonable to permit the exercise of the option (in whole or in part) prior to the date on which it could be otherwise exercised, to permit such exercise”. No employee shall, however, be permitted to exercise an option when in possession of unpublished price-sensitive or inside information relating to Datatec.

SHAREHOLDER RELATIONS

Datatec’s investor relations programme includes communications with shareholders through interim and annual reports, meetings and presentations.

Datatec’s daily investor relations activities are carried out by an investor relations team comprising designated spokespeople mandated by the Board. Datatec is committed to providing transparent, generous and regular disclosure to its shareholders.

Datatec reports financial results to shareholders, institutional investors and the media twice a year; interim results in October and annual results in May. The Company’s websit (www.datatec.co.za) provides the latest and historical financial and other information on the Group including formal announcements, presentations and webcasts. Individuals, shareholders and interested parties can subscribe to Datatec’s investor relations programme on the website. Press releases and information already in the public domain are sent via email communication.

GOING CONCERN

The directors’ assessment on the Group as a going concern is set out on page 62 and on page 65.