tshwane · entity name: 2014/15 mid-year report page 2 . sandspruit works association - city of...
TRANSCRIPT
SANDSPRUIT WORKS ASSOCIATION (SOC)LIMITED/ NON PROFIT COMPANY
Registration No: 1999/19160/08
2014/15 MID-YEAR REPORT (JULY-DECEMBER 2014)
(In terms of Section 88 of the Municipal Finance Management Act, 2003)
121
Entity Name: 2014/15 Mid-Year Report Page 2
SANDSPRUIT WORKS ASSOCIATION - CITY OF TSHWANE
(SOC)LIMITED / NON PROFIT COMPANY
COMPANY INFORMATION: Registration number: 1999/19160/08 Registered Address: Molefe Makinta Highway Opposite Morula Sun Next to NTI Mabopane 0208 Postal Address: Private Bag X1124 Ga-Rankuwa 0221 Telephone number : (012) 7019700 Fax number : (012) 7017101
Website : www.odiwater.co.za Bankers : Standard Bank Auditors : Auditor-General
Vision
To become the preferred water service provider that innovatively meets the water services provision challenges and needs of all its customers in a sustainable manner
Mission
To render efficient, quality water and sanitation service delivery in a financially sustainable manner, in the Region of Tshwane through leadership and commitment to the City of
Tshwane’s policies and plans
122
Entity Name: 2014/15 Mid-Year Report Page 3
TABLE OF CONTENTS
CHAPTER ONE: LEADERSHIP & CORPORATE PROFILE Section 1: Corporate Profile and Overview of the entity Section 2: Strategic Objectives Section 3: Salient Features Section 4: High-level organisational structure Section 5: Foreword by Member of the Mayoral Committee (e.g. MMC Transport) Section 6: Chairperson’s Foreword Section 7: Chief Executive Officer’s Report Section 8: Chief Financial Officer’s Report CHAPTER TWO: GOVERNANCE Section 1: Corporate Governance Statement Section 2: Board of Directors Section 3: Board Committees Section 4: Director’s Remuneration Section 5: Company Secretarial Function Section 6: Risk Management and Internal controls Section 7: Internal Audit Function Section 8: Corporate Ethics and Organisational Integrity Section 9: Sustainability Report Section 10: Corporate Social Responsibility Report Section11: Anticorruption and fraud Section 12: ICT Governance CHAPTER THREE: SERVICE DELIVERY PERFORMANCE Section 1: Highlights and Achievements Section 2: Financial Performance Section 3: Capital Projects Section 4: Performance against IDP and City Scorecard Section 5: Assessment of Arrears on municipal taxes and service charges Section 6: Statement on amounts owed by Government Departments and public entities Section 7: Recommendations and Plans for the next financial year. CHAPTER FOUR: HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT Section 1: Human Resource Management Section 2: Employment Equity Section 3: Skills Development and Training Section 4: Performance Management Section 5: HIV/AIDS on the Workplace Section 6: Employee Benefits Section 7: Supply Chain Management and Black Economic Empowerment CHAPTER FIVE: FINANCIAL PERFORMANCE Section 1: Statement of Financial Position and Notes Section 2: Statement of Financial Performance and Notes Section 3: Spending against capital budget Section 4: Cash Flow Statement Section5: Statement of Changes in Net Assets Section 6: Report in irregular, fruitless and wasteful expenditure and legal process CHAPTER SIX: AUDITOR-GENERAL FINDINGS Section 1: Auditor-General’s Report for the Current year Section 2: Historical Audit Findings and Remedial Action Section 3: Commitment by the Board of Directors
123
Entity Name: 2014/15 Mid-Year Report Page 4
CHAPTER ONE: LEADERSHIP & CORPORATE PROFILE Section 1: Corporate Profile / Overview of the entity
Sandspruit Works Association is recognized as a state owned company and municipal entity under the
ownership of the City of Tshwane Metropolitan Municipality. The entity derives its mandate from the Service
Level Agreement with the City of Tshwane. From this mandate the priority goals are guided by the City’s
Integrated Development Plan (IDP), City’s priorities and the Growth and Development Strategy (GDS) 2055
outcomes.
Sandspruit Works Association (SWA) currently undertakes the provision of water and sanitation services
function in the northern region of the City of Tshwane Metropolitan Municipality (CTMM) and thus have the
function of a Water Services Provider (WSP) in terms of the Water Services Act (Act 108 of 1997). The supply
area of Sandspruit Works Association includes Ga-Rankuwa; Mabopane and Winterveldt. The principal activity
of the company is to develop, prepare, install and maintain water and sanitation services and related services
to these designated areas. It also fulfils the complete Operations, Financial, Marketing and Human resources
and Legal functions.
SWA operates as an area-based water service provider, undertaking multi-functional initiatives, involving role-
players e.g councillors and basing its effort on a number of constructive efforts, such as provision of potable
water and sanitation, Waste Treatment Plant, collection of revenue, and building relationships through social
responsibility with the community and other stakeholders.
The services and projects implemented by Sandspruit Works Association are therefore complementary and in
line with the Business plan, Service delivery Agreement and City of Tshwane Integrated Development Plan
(IDP). Sandspruit Works Association is managed by the Chief Executive Officer heading the following
functional sections:
Operations and Maintenance
Finance
Information Technology
Marketing and Communications
Human Resource
Legal Services
Risk management
Supply Chain Management
124
Entity Name: 2014/15 Mid-Year Report Page 5
Section 2: Strategic Objectives Key Performance Area (Strategic Objective)
Departmental Division
Indicator 2014/15 Target
Baseline Cumulative Quarterly Targets Budget FY 2014/15 R`000
Quarter 1 Quarter 2 Quarter3 Quarter4
1. Promote Sustainable Service Infrastructure and Human Settlement Management
Operations Reduce Unaccounted for Water by 0.5% annually
21%
22%
21%
21%
21%
21%
R31 828
2.Promote Shared Economic Growth and Job Creation
Operations 100% of general workers employed for Long Term operations projects must reside in Ga- Rankuwa, Mabopane or Winterveldt for the 2013/14 financial year
100%
100%
100%
100%
100%
100%
R0
2.Promote Shared Economic Growth and Job Creation
Operations Use a minimum of 40 SMME contractors in SWA per annum
45
40
11
11
11
12
R0
3.Ensure Sustainable, Safer City and Integrated Social Development
Finance Number of indigent households receiving basic (12kl) water and sanitation services annually
650 households
600 household
163 household
163 household
162 household
162 household
R518 400
4.Promote Governance and Active Citizenry
Finance Financial Compliance in terms s87 (11) of the MFMA annually
100%
100%
100%
100%
100%
100%
R0
4.Promote Governance and Active Citizenry
Supply Chain Management
SCM Compliance in terms of s12 of the SCM regulations annually
100%
100%
100%
100%
100%
100%
R0
4.Promote Governance and Active Citizenry
Legal Compliance with Contract Management in terms of s116 of MFMA annually
100%
100%
100%
100%
100%
100%
R0
4.Promote Governance and Active Citizenry
Marketing Number of ward committee meetings held annually to discuss community concerns
16
12
4
4
4
4
R0
5.Improve Financial Sustainability
Finance Increase revenue collection by 2% annually
70%
66%
70%
70%
70%
70%
R144 909
125
Entity Name: 2014/15 Mid-Year Report Page 6
Section 3: Salient Features
Financial( for the six (6) months period Revenue by Type
From the above diagram, water revenue exceed budgeted amount by R2.9 million whiles service charges other relating to waste water treatment plant is R3 million below budget. Interest of debtors is R1.7 million above budgeted amount. This is mainly due to declines in collection rates. Measures have been put in place to ensure improve on collection rates. The operation grant subsidy are significantly high which demonstrates that Sandspruit Works Association remains heavily dependent on the City of Tshwane to ensure that it still remains a viable business. Operational grant subsidy currently equates to 40% of the total revenue.
0.00 100.00 200.00
Service charges - water revenue
Service charges - sanitation revenue
Service charges - other
Interest earned - external investments
Interest earned - outstanding debtors
Operational Grant
Millions
Budget
Actual
126
Entity Name: 2014/15 Mid-Year Report Page 7
Expenditure by type:
From the above diagram, it is clear that the collection rates are a serious concern. The debtors’ impairment amount is R 21.5 million rand above the budgeted amount. Various Revenue enhancement measures are being implemented and monitored to improve on the collection rates to ensure financial sustainability for the entity. Further, bulk water purchases are R5.5 million above the budgeted amount, which only translated to R3.6 million above the budgeted amount for revenue relating to water and sanitation revenue. The decline in collection rates has resulted in reprioritisation of spending in order to manage the cash flow better. This has resulted in other expenditure falling below budgeted amount by R10 million.
- 40.00 80.00
Employee related costs
Remuneration of Directors
Debt impairment
Collection costs
Depreciation & asset impairment
Bulk purchases
Other expenditure
Millions
Budget
Actual
127
Entity Name: 2014/15 Mid-Year Report Page 8
Section 4: High-level organisational structure
BOARD OF DIRECTORS
CHIEF EXECUTIVE OFFICER
OPERATIONS AND MAINTANANCE
MANAGER CHIEF FINANCIAL
OFFICER MARKETING
COMMUNICATIONS MANAGER
EXECUTIVE STRATEGIC LEGAL
ADVISOR
HUMAN RESOURCES
MANAGER WWT MANAGER
EXECUTIVE SECRETORY
COMPANY SECRETARY
128
Entity Name: 2014/15 Mid-Year Report Page 9
Section 5: Foreword by Member of the Mayoral Committee Insert the MMC’s photo (This section should provide a summary statement of expectations by the MMC exercising oversight of the entity and how the entity has achieved those expectations in the year under review. Alignment to IDP and Stakeholder engagements – public participation)
129
Entity Name: 2014/15 Mid-Year Report Page 10
Section 6: Chairperson’s Foreword Insert Chairperson’s photo During the period under review, the entity has been able to strengthen its position with various stakeholders. Our ability to meet the expectations of a broad and multicultural customer base often required innovative and continuous inventive approaches when interacting and executing our activities. We cemented our performance by ensuring that all the objectives in our corporate scorecard were met and exceeded our expectations. The entity always factored its mandate and the aspirations of the Shareholder into the strategic plans. Operations were very effective in implementing the key deliverables defined in the strategic plan and our detailed Expanded Public Works Programme and its timeous implementation helped to fast track those issues that embrace the national agenda. The momentum set in the previous financial year increased during this period and resulted in us, once again, delivering on those programmes that served as the mayoral priorities. The favourable financial position we have achieved will strengthen our position going forward. In spite of the portfolio growth and disproportionate funding in relation to the portfolio of services, we have been able to cement our position through increased productivity and efficiencies. All departments comprising marketing, operations, human resources, internal audit, risk management and finance, continued to perform at a high standard collectively. With constant guidance and vigilance, the Board of Directors, through the City of Tshwane audit committee, dedicated itself to ensuring that all the issues that were raised by the auditor general in last year’s audit were rectified. Processes were put in place to ensure that the entity’s internal controls were above board and the entity currently performs inventory stock counts.
130
Entity Name: 2014/15 Mid-Year Report Page 11
Section 7: Chief Executive Officer’s Report
131
Entity Name: 2014/15 Mid-Year Report Page 12
Section 8: Chief Financial Officer’s Report
Sandspruit Works Association - Year To Date Budget Statement - Financial Performance (revenue and expenditure) - M06 December (YTD)
Description
2013/14 2014/2015 2014/2015
Audited Outcome
YearTD actual
Full Year Forecast
Revenue By Source
Service charges - water revenue 150 834
999.00 96 216
136.66 186 526
567.80
Service charges - sanitation revenue 43 323
681.26 25 998
498.54 50 590
037.34
Service charges - other 41 931
646.00 21 365
198.62 48 833
280.00
Interest earned - external investments 417 474.00
79 610.77 -
Interest earned - outstanding debtors 27 473
969.00 16 713
429.46 29 972
360.42
Other revenue 168 015
909.00 95 956
912.04 172 940
097.91 Total Revenue (excluding capital transfers and contributions)
431 997 678.26
256 329 786.09
488 862 343.48
Expenditure By Type
Employee related costs 83 335
786.00 43 854
414.34 94 193
201.74
Remuneration of Directors 444 192.00
129 304.00
678 216.00
Debt impairment 95 408
282.00 63 994
222.09 85 084
036.54
Collection costs - 1 935
806.75 5 842
587.57
Depreciation & asset impairment 1 701
541.00 669 979.12
2 459 382.00
Bulk purchases 132 104
670.00 78 527
423.89 145 909
056.00
Other expenditure 123 923
965.00 66 756
609.89 154 695
863.63
Total Expenditure 436 918
436.00 255 867
760.08 488 862
343.48
-
Surplus/(Deficit) for the year -4 920
757.74 462 026.01 -
From the above analysis, it is clear that the collection rates are a serious concern. The debtors’ impairment amount is R 21.5 million rand above the budgeted amount. Various Revenue enhancement measures are being implemented and monitored to improve on the collection rates to ensure financial sustainability for the entity.
The following measures have been developed to improve the collections: A Revenue Enhancement Strategy Document has been developed and implemented. A targeted approach
is developed per area and for each category of customers, i.e. disconnections on those commercial and government customers whose accounts are long outstanding.
Continuous monitoring of disconnected consumers
132
Entity Name: 2014/15 Mid-Year Report Page 13
For residential customers: Identifying areas that are able to pay and performing reconciliation and house visits to those customers. Contacting the customers to come and make arrangement for payments. Non contactable customers and those that fail to come and make arrangement will be visited and restriction is been performed. Issuing of court summons.
Assist Social Development Department in identifying indigent customers and having them registered as such
Reassessing the status of those customers registered as indigent to determine whether their indigent status has improved and then updating the register accordingly. This will be done in conjunction with the Social Development Department.
Stricter monitoring on indigent customers to ensure that they consume within the allocated 12kl of water. Programs to assist indigent customers with internal leaks. Flow Limiters Meters are also required to restrict those customers who consume excessive levels and are
not paying.
And also, bulk water purchases are R5.5 million above the budgeted amount, which translated to R3.6 million above the budgeted amount for revenue relating to water and sanitation revenue. This results in increased Non-Revenue Water which also impacts negatively on the financial sustainability of the organisation. In the 2014/2015 Year to Date Financial Year, the Non-Revenue water is estimated to be around 2 million kiloliters (2013/2014: 2.3 million kiloliters). The 2 million kiloliters equates to R 13.3 million. Various measures taken to reduce Non-Revenue water include the following: 1. Network analysis of existing systems 2. Monitoring and logging of pressures and flows 3. Engineering investigations in problematic areas 4. Pressure management: Installation and setting of PRV’s 5. Domestic and commercial meter audits and meter replacements 6. Active leak detection by locating water leaks using various methods and equipment 7. Continuous meter audits 8. Monitoring the reservoir 9. Monitoring housing developments & Capital projects 10. Data cleansing exercises are also undertaken to preserve the integrity of the data
Another issue that is critical to the financial sustainability of the company is expansion into more sustainable areas. From the analysis of the debtors’ book, 98% comprise of Household debt. Of the 52 600 debtors in the book, 51 600 are household. From the total of 51 600 household debtors, 17 494 are registered indigents. Therefore, Sandspruit Works Association requires more sustainable areas so that there is adequate cross subsidisation amongst consumers.
133
Entity Name: 2014/15 Mid-Year Report Page 14
CHAPTER TWO: GOVERNANCE Section 1: Corporate Governance Statement To ensure accountability and governance arrangements are in place, Section 121(2) (c) of the MFMA supports the requirements of Section 18(1) (d) of the MSA: information on matters of governance should be communicated to communities. This should, according to Sections 65(1) (a) of the MFMA and 46 of the MSA be undertaken through the compilation and publication of the Annual Report. The purpose of such an annual report is to promote accountability to communities for decisions taken by the Council and matters relating to administrative structures, throughout a financial year.
Ethical Leadership
The board provides effective leadership based on a principled foundation and the entity subscribes to high ethical standards. Responsible leadership, characterised by the values of responsibility, accountability, fairness and transparency, has been a defining characteristic of the entity since the company’s establishment in 2005. The fundamental objective has always been to do business ethically while building a sustainable company that recognises the short- and long-term impact of its activities on the economy, society and the environment. In its deliberations, decisions and actions, the board is sensitive to the legitimate interests and expectations of the company’s stakeholders.
Corporate Governance
The entity applies the governance principles contained in King III and continues to further entrench and strengthen recommended practices in our governance structures, systems, processes and procedures. The Board of Directors and Executives recognise and are committed to the principles of openness, integrity and accountability advocated by the King III Code on Corporate Governance. Through this process, shareholders and other stakeholders may derive assurance that the entity is being ethically managed according to prudently determined risk parameters in compliance with generally accepted corporate practices. Monitoring the entity’s compliance with King Code on Corporate Governance forms part of the mandate of the audit committee. The entity has complied with the Code in all respect during the year under review.
The Board of Directors has incorporated the City of Tshwane ’s Corporate Governance Protocol in its Board Charter, which inter alia regulates its relationship with the City of Tshwane as its sole member and parent municipality in the interest of good corporate governance and good ethics. The Protocol is premised on the principles enunciated in the King Report for Corporate Governance for South Africa 2009 (King III).The Company steadfastly consolidated its position in respect of adherence to the King III report on Corporate Governance. The entity practices are, in most material instances, in line with the principles set out in the King III Report. Ongoing steps are however taken to align practices with the Report’s recommendations and the Board continually reviews our progress to ensure that we improve our Corporate Governance. During the year under review the Company entrenched its risk management reviews and reporting and compliance assessments were conducted in terms of the Companies Act and the Municipal Finance Management Act (MFMA). The annual Board assessments and evaluations were conducted and an annual report for the previous year was effectively completed in accordance with the terms of section 121 of the Municipal Finance Management Act. Corporate Citizenship
The board and management recognise that the entity is formed under a political structure. As such, it has a social and moral standing in society with all the attendant responsibilities. The board is therefore responsible for ensuring that the entity protects, enhances and invests in the well-being of the economy, society and natural environment, and pursues its activities within the limits of social, political and environmental responsibilities outlined in international conventions on human rights.
Compliance with laws, rules, codes and standards
The board is responsible for ensuring that the entity complies with applicable laws and considers adhering to non-binding rules, codes and standards.
134
Entity Name: 2014/15 Mid-Year Report Page 15
Section 2: Board of Directors The entity has a unitary board, which consist of 1 executive and 5 non-executives directors. The Board is chaired by the non-executive director, Adv K-D Garlipp (Acting). The board meets regularly, at least quarterly and retain full control over the company. The Board remains accountable to City of Tshwane Metropolitan Municipality, the sole member and its stakeholders, the citizens of Tshwane. A Service Delivery Agreement (SDA) concluded in accordance with the provisions of the MSA governs the entity’ relationship with the City of Tshwane. The Board provides Monthly, Quarterly, Bi-Annually and Annual Reports on its performance and service delivery to the parent municipality as prescribed in the SDA, the MFMA and the MSA. Non-executive Directors contribute an independent view to matters under consideration and add to the depth of experience of the Board. The roles of Chairperson and Chief Executive Officer are separate, with responsibilities divided between them. The Chairperson has no executive functions. Members have unlimited access to the Company Secretary, who acts as an advisor to the Board and its committees on matters including compliance with Company Rules and Procedures, statutory regulations and best corporate practices. The Board or any of its members may, in appropriate circumstances and at the expense of the company, obtain the advice of independent professionals. An annual director and peer review is undertaken, as well as a Board evaluation. A performance evaluation of the Board is conducted at the end of the financial year. Any shortcomings are addressed and areas of strength consolidated. The performance of board committees are evaluated against the terms of reference. Attendance at meetings held during the six months period was as follows: Directors Board
(3 Meetings) Social & Ethics
Finance & Risk
Remuneration Strategic Planning
Operations &
Marketing
Human Resources
Adv K-D Garlip 3 0 0 0 0 0 0 CV Maboka 3 0 0 0 0 0 0 KA Eales* 2 0 0 0 0 0 0 LN Bokaba 3 0 0 0 0 0 0 T Moromane 3 0 0 0 0 0 0
The Board of Directors has adopted the Board Charter which encapsulates the City of Tshwane Governance Protocol and includes matters of ethics, procedure and the conduct of committee members. Registers are kept and updated on the disclosure and declaration of interests of directors and senior management. The Board and Senior Management ensure that there is full material compliance to all relevant legislation. The Company Secretary has certified in terms of section 268(d) of the Companies Act that all statutory returns have been submitted to the Registrar of Companies. Section 3: Board Committees
Note: The Board of Sandspruit Works Association requires additional Board members to be appointed by the City of Tshwane. Due to the size of our current Board, SWA does not have sufficient members to serve on these committees; hence matters that should be addressed in these committees are tabled at the regular Board meetings.
The following committees have been formed, each of which is chaired by a non-executive director.
Remuneration Committee Operations Committee Finance and Audit Committee
135
Entity Name: 2014/15 Mid-Year Report Page 16
3.1 Finance Committee
The Finance committee consist of the following non-executive directors:
Adv. K-D Garlipp (Mr) K A Eales (Ms) T Moromane (Ms)
The role of the finance committee is to assist the board by performing an objective and independent review of the functioning of the organisation’s finance and accounting control mechanisms. The finance committee exercises its functions through close liaison and communication with corporate management and the internal and external auditor.
The finance committee operates in accordance in with a written charter authorised by the board, and provides assistance to the board with regard to:
Ensuring compliance with applicable legislation and the requirements of regulatory authorities; Matters relating to financial accounting, accounting policies, reporting and disclosures; Internal and external audit policy; Activities, scope, adequacy and effectiveness of the internal audit function and audit plans; Review/ approval of external audit plans, findings, problems, reports and fees; Compliance with the Code of Corporate Practices and Conduct; and Compliance with code of ethics.
The Finance committee and Management has reviewed the financial statements with the audit committee and the audit committee has reviewed them without management or the external auditors being present. The quality of the accounting policies was discussed with the external auditors. The finance committee considers the annual financial statements of the entity to be a fair presentation of its financial position on [insert date] and of the results of its operations, changes in equity and cash flow for the period ended then in accordance with GRAP and the Companies Act.
3.2 Operations Committee
The operations committee consist of the following non-executive directors:
LN Bokaba (Mr) K A Eales (Ms) C V Maboka (Mr)
3.3 Remuneration Committee The remuneration committee consist of the following non-executive directors:
Adv. K-D Garlipp LN Bokaba (Mr) C V Maboka (Mr)
The remuneration committee advises the board on remuneration policies, remuneration packages and other terms of employment for all directors and senior executives. Its specific terms of reference also include recommendations to the board on matters relating inter alia, general stall policy remuneration, profit bonuses, executive remuneration, director’s remuneration and fees, service contracts, share purchase and option schemes, and retirement funds. The independent professional advisors advise the committee.
136
Entity Name: 2014/15 Mid-Year Report Page 17
Section 4: Director’s Remuneration 4.1 Entity’s remuneration policy
The remuneration of Non-Executive Directors’ is determined by the City of Tshwane Metropolitan Municipality (CTMM) through its Remuneration Policies. The Remuneration Policy is intended to guide Municipal Entities (ME) of the City of Tshwane in the recruitment, retention and motivation of a consistently high performing human resource, thereby contributing to the achievement of the short and long term objectives of the MEs.
NON- EXECUTIVE DIRECTORS REMUNERATION
Name Designation Meeting Fee
R Other
R Retainer
R Total
R
1 Adv K-D Garlip Acting Chairperson 53 107 0 53 000
106 107
2 CV Maboka Non-Executive Director 32 326 0 27 000 59 326
3 KA Eales Non-Executive Director 20 781 0 0 20 781
4 LN Bokaba Non-Executive Director 32 326 11 545
27 000 70 871
5 T Moromane Non-Executive Director 32 326 0
27 000 59 326
TOTAL
182 411 11 545 134 000 312 411
137
Entity Name: 2014/15 Mid-Year Report Page 18
SENIOR MANAGEMENT REMUNERATION
Name Designation Salary Pension Medical Aid
Cell Phone Travel
Accommodation
Subsistence Housing
Leave Pay Insurance Bonus Total
MJ Taetsane Chief Executive Officer 119 533 - - 1 800 17 000 None None - - 3 591 - 141 924
PJ Avenant Chief Financial Officer 43 476 5 339 2 937 1 116 17 000 None None 2 091 - 3 591 43 476 119 025
IS Mogototoane
Deputy Chief Financial Officer 43 476 5 339 3 326 1 165 17 000 None None 2 091 37 500 3 591 43 476 156 963
S Baronian Operations Manager 43 922 5 394 5 936 1 116 17 000 None None 3 770 - 3 591 43 922 124 651
S Gramoney Legal Manager 43 476 5 339 2 429 1 116 17 000 None None 2 669 - 3 591 43 476 119 094 AG Singo HR Manager 43 476 5 339 4 542 1 116 17 000 None None 4 496 - 3 591 43 476 123 036
GJ Modise
Marketing and Communication Manager
43 476 5 339 4 935 1 116 17 000 None None 2 628 - 3 591 43 476 121 560
ML Dichaba Risk Manager 43 476 5 339 3 934 1 116 17 000 None None 4 328 - 3 591 32 607 111 390 Total 424 309 37 426 28 039 9 661 136 000 - - 22 074 37 500 28 728 293 906 1 017 644
138
Entity Name: 2014/15 Mid-Year Report Page 19
Section 5: Company Secretarial Function Primary function of the company secretary is to act as the link between the board and management and to facilitate good relationships with the shareholders. The company secretary is responsible for the general administration, more specifically to ensure compliance to good corporate governance practices and to provide guidance to the directors on corporate governance principles and applicable legislation. The position is currently vacant and the entity is in the process of filling the post as a matter of urgency. Section 6: Risk Management and internal controls Effective risk management is integral to the entity’s objective of consistently adding value to the business. Management is continuously developing and enhancing its risk and control procedures to improve the mechanisms for identifying and monitoring risks. Operating risk is the potential for loss to occur through a breakdown in control information, business processes and compliance systems. Key policies and procedures in place to manage operating risk involve segregation of duties, transaction authorisation, supervision, monitoring and financial and managerial reporting. Financial risk management is dealt with in the financial In order to meet its responsibility with respect to providing reliable financial information, the entity maintains financial and operational systems of internal controls. These controls are designed to provide reasonable assurance that transaction are concluded in accordance with management authority, that the assets are adequately protected against material loss or unauthorised acquisition, use or disposal and that transactions are properly authorised and recorded. Internal auditors monitor the operation of the internal control systems and report findings and recommendations to management and the board of directors, Audit and Performance Committee and Executive Management. Corrective actions are taken to address control deficiencies and other opportunities for improving the system as they are defined. The board, operating through its audit committee, provides supervisions of the financial reporting process and internal control systems. There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Furthermore, the effectiveness of internal control systems can change with circumstances. The entity assessed its internal control systems as at April 2014 in relation to the criteria for effective internal control over financial. Section 7: Internal Audit Function The Internal Audit Function is performed by the Group Internal Audit Department of the City of Tshwane. It has a specific mandate from the Group Audit and Performance Committee and independently appraises the adequacy and effectiveness of the company’s systems, financial internal controls including Supply Chain Management and accounting records, reporting its findings to management of SWA, the City of Tshwane, the Group APC and the auditor-general. The internal audit coverage plan is based on risk assessment performed at each operating unit. The coverage plan is updated annually, based on the risk assessment and results of the audit work performed. This ensures that the audit coverage is focused on and identifies areas of high risk. Section 8: Corporate Ethics and Organisational Integrity The company has developed a Code of Conduct (‘the Code”) which has been fully endorsed by the Board and applies to all directors and employees. The Code is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism. In summary the Code requires that at all times, all company personnel act with utmost integrity and objectivity and in compliance with the letter and spirit of both the law and company policies. Failure by employees to act in terms of the Code results in disciplinary action. The Code is discussed with each new employee as part of his or her induction training and all employees are asked to sign an annual declaration confirming their compliance with the Code. A copy of the Code is available to interested parties upon request. A toll-free anonymous telephone facility exists for reporting of non-adherence to the Code or ethic related matters. Furthermore, any breach of the Code is considered a serious offence and is dealt with accordingly; as a result, this acts as a deterrent. The directors believe that ethical standards are being met and fully supported by the ethics programme.
139
Entity Name: 2014/15 Mid-Year Report Page 20
Section 9: Sustainability Report Short Term Sustainability • Implementing Revenue Enhancement Strategy to increase revenue • Conduct Meter audits to identify meter problems and replacing zero consumption meters. • Development of a water demand Management Strategy which will assist in reducing unaccounted for
water. • Reduction in bulk water purchases. • Establishing discreet water supply zones. • Repairing aging pipelines / infrastructure (fire hydrants, scour valves, valve chambers, control valves. • Removal of unauthorized connections.
Long Term Sustainability
• In order for Sandspruit Works Association to become self-sustainable, the City of Tshwane should
consider the following proposals:-
• The City of Tshwane to expand the mandate of SWA in respect of its area of supply to Region 1. • With this view, the City should explore the option of expanding the services of the entity to the other
Regions within Tshwane. In other words, adopting a one service delivery mechanism. As a result, expanding the entities mandate will assist in achieving the vision and needs of the City of Tshwane as follows:
• Long Term Sustainability – As an external mechanism utilised by the City of Tshwane, SWA is structured to take long term decisions in the best interest of water service delivery. As a result of consolidating the services and the expertise, SWA will ensure investment and funding in infrastructure, systems and management to drive not only effectiveness and efficiency but also long term sustainability.
• Standardisation of Service Levels – Currently certain communities receive different levels of services for historic reasons. Different regions have inherited systems and procedures in place prior to demarcation and there has been limited impact on standardisation. Consolidation and Specialisation will assist the City of Tshwane in standardisation and also improvement of service delivery.
Section 10: Corporate Social Responsibility Report The Company’s Corporate Social Investment Philosophy and function have, over the years been broadly underpinned by the concept of sustainable development. The policy of the entity is to act as a facilitator rather than as sole sponsor of social investment projects. In this way, the long-term sustainability of projects is encouraged, additional donors attracted and formerly disadvantaged communities are empowered. The Non-Governmental Organisations are a major national initiative through which business and government have joined hands to support the following strategic interventions:
Skills training and job creation; Small business development and Environmental.
Section 11: Anticorruption and Fraud SWA has established a Forensic and Fraud Prevention Unit (FFP) to implement the Anti-Fraud and Corruption Strategy and is currently adopting the Anti-Fraud and Corruption strategy used by City of Tshwane as the parent municipality. The FFP has engaged into a number of strategies in order to minimise the occurrence of fraud such as prevention measures by reviewing the policies and procedures and internal control gaps, employee vetting, declaration of interest and risk management. It has also being using the internal audit and management actions as a detection measures. SWA also conducts regular fraud control health checks to identify where the fraud control may need attention and improvement and in particular to assess the awareness of staff of fraud control.
140
Entity Name: 2014/15 Mid-Year Report Page 21
CHAPTER THREE: SERVICE DELIVERY PERFORMANCE
Section 1: Highlights and Achievements Sandspruit Works Association achieved an unqualified audit for the 2013/2014 financial year. In respect of the 180 days operational service delivery programme, service deliverables have been achieved within stipulated timeframe and still remains work in progress. (Refer to Annexure A for report) During the period under review, the operation department managed to achieve all its targets on the scorecard. The non-revenue water target was exceeded in the first three months with the remaining three months been estimated due to unavailability of data to calculate the results. As part of water demand management and revenue control, 460 indigent house hold were fitted with water management devices meters to ensure that only allocated monthly 12 kl of water was consumed. The project was targeted to indigent household consuming more than 25 kl per month. Meters inside the yards for 113 government institutions were moved outside the yard in order to eliminate in accurate billing due to inaccessibility of meters by meter readers. Section 2: Financial Performance 2.1.1 Revenue The Company posted revenue of R 256 million for the six months period, an increase of 20% over the previous year’s Mid-Year. The subsidy from the City of Tshwane remains significantly high making up to 38% of total revenue received, this being an increase of 6% over the previous year. The revenue earned from interest income increased by 23% to R 16.7 million. This increase is attributable mainly to declining revenue collection levels. On average the collection rate for the six months ended December 2014 are at 58%. 2.1.2 Results of Operations Operational costs increased by 19% on the previous year to R255 million during this period (2012: R 215 million). The key operational costs that contributed to the increase were mainly bulk water purchases and debtors’ impairment. The bulk water purchase was 20% higher over the previous period which was due to the increased water demand of R19 million in comparison to prior year. Further, debtors’ impairment was 31% higher in comparison to prior year due to declines in collection rates. The Company posted a surplus of R 462 926 for the period under review, against a deficit of R 795 000 for the previous year. This decrease is largely due to recoveries on the debt owed by Madibeng Local Municipality. 2.1.3 Cash Flow A Council grant to the value of R134 million was received during this period that contributed 52% of operational costs. The Company ended the year in a favourable cash position with cash on hand being R34 million (2013: R22 million). This was due to effective cash flow management. 2.1.4 Statement of Financial Position The ability of the Company to meet its financial obligations is still a concern given that the total assets exceed total liabilities by only R 330 777. This is a reflection of low profitability levels and that the company could be plunged into technical insolvency at any time. It is also worth noting that the City of Tshwane still remains the major creditor in the books of SWA. The City of Tshwane debt is constitutes 85% of creditors’ book. Current liabilities exceed current assets by R8 million which indicates that the company is highly illiquid. The current ratio is currently 0.90:1 versus standard norm of 2:1.
141
Entity Name: 2014/15 Mid-Year Report Page 22
2.1.2 Results of Operations The water purchases budget was exceeded by 6% for the first six months period to the total of R4 260 000 due to the following factors: 1. Increase in water demand in the area due to dry season or lack of rain up to mid-November 2. Unavailability of funds from the city to cover the shortfall as per the service delivery agreement to make
intervention to manage the water demand 3. Expansion of existing informal settlement and new informal settlement throughout the area of supply.
Even thou we have exceeded the budget on water purchases, overall there was an under spending in operations expenditure by R1 239 00 which is 2% over the first period of six months. Section 3: Capital Projects Sandspruit Works Association does not execute Capital Projects as it is not within its mandate.
142
Entity Name: 2014/15 Mid-Year Report Page 23
Section 4: Performance against IDP and City Scorecard (SDBIP)
Key Performance Area (Strategic Objective)
Indicator
2014/15 Target
Baseline
PERFORMANCE Quarter 1&2 Target
Quarter 1 Results
Quarter 2 results
1. Promote Sustainable Service Infrastructure and Human Settlement Management
Reduce Unaccounted for Water by 0.5% annually
21%
22%
21%
18.4%
Estimated 21%
2.Promote Shared Economic Growth and Job Creation
100% of general workers employed for Long Term operations projects must reside in Ga- Rankuwa, Mabopane or Winterveldt for the 2013/14 financial year
100%
100%
100%
100%
100%
3.Promote Shared Economic Growth and Job Creation
Use a minimum of 40 SMME contractors in SWA per annum
45
40
11
27
11 4.Ensure Sustainable, Safer City and Integrated Social Development
Number of indigent households receiving basic (12kl) water and sanitation services annually
650 households
600 household
163 household
693 household
163
5.Promote Governance and Active Citizenry
Financial Compliance in terms S87 (11) of the MFMA annually
100%
100%
100%
100%
100%
100% 6.Promote Governance and Active Citizenry
SCM Compliance in terms of s12 of the SCM regulations annually
100%
100%
100%
100%
100%
7.Promote Governance and Active Citizenry
Compliance with Contract Management in terms of s116 of MFMA annually
100%
100%
100%
100%
100% 8.Promote Governance and Active Citizenry
Number of ward committee meetings held annually to discuss community concerns
16 16
12 8
4 4
8 10
11 9.Improve Financial Sustainability
Increase revenue collection by 2% annually 70%
66%
70%
56%
58%
10.Continued Organisational Development, Transformation and Innovation
Number of Training and Leadership programmes scheduled annually in order to increase skills development of the employees
12 12
12 12
3 3
5
143
Entity Name: 2014/15 Mid-Year Report Page 24
Section 5: Assessment of Arrears on municipal taxes and service charges 5.1 Assessment of Municipal Taxes and Service Charges owed to the entity
Detail 0-30 days 31-60 days 61-90 days 91-180 days 181& over Total
Debtor’s Age Analysis by income source
15 887 203 13 780 188 13 452 398 36 491 281 426 489 633 506 100 703
The total debtor’s amount of R 506 million of which 98% relate to household debtors for services rendered for water and sanitation. The accumulated provision for bad debts amounts to R 486 million or 96% of the accumulated debtors. The following measures have been developed to improve the collections: A Revenue Enhancement Strategy Document has been developed and implemented. A targeted
approach is developed per area and for each category of customers, i.e. disconnections on those commercial and government customers whose accounts are long outstanding.
Continuous monitoring of disconnected consumers For residential customers: Identifying areas that are able to pay and performing reconciliation and
house visits to those customers. Contacting the customers to come and make arrangement for payments. Non contactable customers and those that fail to come and make arrangement will be visited and restriction is been performed. Issuing of court summons.
Assist Social Development Department in identifying indigent customers and having them registered as such
Reassessing the status of those customers registered as indigent to determine whether their indigent status has improved and then updating the register accordingly. This will be done in conjunction with the Social Development Department.
Stricter monitoring on indigent customers to ensure that they consume within the allocated 12kl of water.
Programs to assist indigent customers with internal leaks. Flow Limiters Meters are also required to restrict those customers who consume excessive levels and
are not paying.
5.2 Amounts owed by entity for service charges
Name of Entity Amount Owed Status Comments
Sandspruit Works Association
R41 173 305 Amount provided for in the entity’s books
Amount will be paid to CoT once we receive the Operational Losses subsidy of R 39 968 438.
144
Entity Name: 2014/15 Mid-Year Report Page 25
5.3. Assessment of Directors’ and senior managers’ municipal accounts
Name of Director/Senior Managers
Designation Name of Municipality
Municipal Account Name/ Number
Account Status as at November 2014
Comments
MJ Taetsane Chief Executive Officer
Adv K-D Garlipp Non-Executive Director
City of Tshwane
CV Maboka Non-Executive Director
KA Eales Non-Executive Director
LN Bokaba Non-Executive Director
T Moromane Non-Executive Director
S Baronian Operations Manager
S Gramoney Legal Manager A Singo HR Manager L Dichaba Risk Manager
Section 6: Statement on amounts owed by Government Departments and Public Entities
Name of Department
Amounts owed Account Status Comments
City of Tshwane Departments
R 1 670 749 Overdue An amount of R 1 241 573 is overdue. Certain department have committed to make payment before 31 December 2014. This is in line with recovery strategies implemented.
Department of Health
R 115 867 Overdue An amount of R 76 176 is long overdue.
Department of Education
R 516 248 Overdue
Section 7: Recommendation and Plans for next six months
The shareholder needs to review the budget allocation to the company to ensure that:
The company is able to achieve a customer satisfaction index rating of 70% for service delivery;
Improving on the revenue collection rates
Aligning the Revenue Enhancement Strategy with the of the CoT (this is aimed at reducing the Debtors
Impairment)
Reprioritisation in spending in line with the budgetary constraints
Attending to burst pipes urgently to reduce the cost of Non-Revenue Water
145
Entity Name: 2014/15 Mid-Year Report Page 26
CHAPTER FOUR: HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT
1.Number of staff per function and current vacancies
Department Approved Posts Filled Posts Vacant Posts
1. Human Resources 11 08 03 2. Risk 07 05 02 3. Marketing 34 29 05 4. Supply Chain Management 05 04 01 5. Legal 05 03 02 6. Operations 94 92 02 7. Finance 63 60 03 8. Klipgat WWT 45 29 16 9. Temba WWT 23 21 02 10. Totals: 287 251 36
2. SWA Age Workforce 2.1 72% of SWA workforce are between the ages of 25-50 years and; 2.2 28% of the remaining workforce are between the ages of 51-62 years. 4. SWA Pension Fund Name of the Fund: Botshelo pension Fund and is administered by Sanlam (former Botshelo water employees belongs to this fund and they are no longer making contributions to this fund. They only access their benefit through attrition. 5. SWA Provident Fund Name of the Fund: Sandspruit Works Association provident Fund and is administered by Alexander Forbes. (All SWA permanent employee are members of this fund) 6. SWA Medical Aid Schemes 6.1 Sizwe Medical Aid Scheme: 212 SWA employees are members of this scheme. 6.2 Discovery Medical Aid Scheme: 28 SWA employees are members of this scheme
Section 1: Human Resource Management
The entity’s overall objective as set out in its employment policy is to ensure that the company’s employment practices and remuneration policies motivate and retain talented employees and create an attractive environment for all employees. The employment policy is periodically reviewed to ensure that it remains relevant and practical for the changing needs of current and potential employees. Our vision is to be the employer of choice in our field. Our vision is to at the top end of compliance by including such requirements into our working practices. Section 2: Employment Equity The entity has employment policies that it believes are appropriate to the business and the market in which it trades. Equal employment opportunities are offered to all employees. We firmly endorse the four key areas of employment equity identified by the Employment Equity Act: elimination of discrimination in decision-making; promotion of employee diversity; reduction of barriers to advancement of the disadvantaged; and introduction of measures and procedures for transformation.
The entity’s employment equity programme was extremely progressive and we exceeded the targets set. Our conviction to ensure material participation of previously disadvantaged companies and individuals is demonstrated by the degree of procurement spent on the designated companies and individuals.
146
Entity Name: 2014/15 Mid-Year Report Page 27
Section 3: Skills Development and Training
The entity is committed to the maintenance of standards by supporting and training staff through its world-class skills development programme. This programme aims to develop both technical and people skills required for the company to conduct its business on an effective basis. Our skills development programmes are in line with the requirements of the Skills Development Act and our workplace plan (WSP) is aligned to our business plan and focus is placed on occupational specific programmes, management development and legally required training.
In the 2014/15 financial year, our training will focus on the development of specific competencies relating to our future strategy for the company i.e. project management, risk management, quality assurance, supply chain management and financial management. Section 4: Performance Management Performance Management was implemented for all management levels on the organisational structure. The balanced scorecard is the tool being used for measurement. The performance indicators are linked to the Company objectives and the IDP scorecard. Additional objectives are included to reinforce the culture of governance and risk management among managers. The Company started the rollout process to ensure that all employees in supervisory positions are included in the performance management strategy. Training of underperforming officials is being introduced as part of our coaching and mentorship process to improve the performance levels. Performance Management is being adopted as a positive management strategy rather than a punitive process, and in this way employees feel comfortable to be part of the process. The entity will continue to set new standards of service delivery and our customer relationship programme will serve as a pillar for our on-going success. We remain firm in our commitment to sound stakeholder relationships and are committed to managing both short-term and long-term plans to standards that will ultimately benefit our communities. The challenges that we face are the increasing portfolio and a budget that is not scientifically proportionate to it. We will, however, continue to strive for operational effectiveness and, with our customers and stakeholders, we will collectively focus on improving the environmental well-being of our society. Section 5: HIV/AIDS on the Workplace The management of HIV/Aids is an important challenge facing every organisation in our country. The entity has determined that HIV/Aids will have an impact on the following risk areas: operations, target market risk, supplier risk, legal risk and health risk. Whilst all these risk are under further investigation, and has adopted the following core principles as a basis for its HIV/ Aids policy: Continuously assess the risks posed by HIV/Aids on the business; Limit the number of new infections among employees; Ensure employees living with HIV/ Aids are aware of their rights and that their rights are respected and
protected; Provide care and support to employees living with HIV/Aids.
1.1. HIV/Aids Structures
In order to achieve the policy objectives, entity has formed an HIV/Aids committee which consists of three experienced independent medical practitioners, four union representatives and five members of senior management. The company has trained five peer educators, who are fulltime employees, who have shown passion and willingness to assist their fellow HIV positive colleagues to ensure that HIV positive employees receive care and support in their work environment.
1.2. Prevalence rate To identify the current prevalence rate, the committee with the co-operation and support of the union conducted two studies: an actuarial study of the company’s risk profile and a survey to measure the employee’s knowledge, attitudes, practices and beliefs (KAPB) about HIV/Aids.
147
Entity Name: 2014/15 Mid-Year Report Page 28
1.3. Actuarial impact analysis
The company employed the services of an actuary to assess the current and future expected cost to the organisation, resulting directly and indirectly from HIV/Aids. The company recognises the cost involved to both the company and the community of not taking progressive steps in combating the disease has therefore allocated an additional [R 5 million] worth of resources from its annual budget to fighting the disease. The HIV/Aids committee has approved the budget.
1.4. Awareness of the disease The committee has focussed its attention on identifying and measuring the extent of the risk of HIV/Aids to the organisation. In order to identify employees’ level of awareness, the committee used the help of three psychologist and qualified counsellor to anonymously survey all staff numbers through the KAPB survey.
1.5. Education
To build on the awareness programme, an ongoing education programme has been instituted. The first place of this programme was to train peer educators who will then provide HIV/Aids education to all staff on an ongoing basis. Peer educators received training on lay counselling, grief management, company benefits, first aid and treatment of workplace injuries.
Section 6: Employee Benefits The Company is a participating employer in one or more of the various retirement benefit schemes through which the City of Tshwane Metropolitan Municipality and its associated Utilities, Agencies and Companies (UACs) provide post-employment benefits to all their permanent employees through 8 (eight) Defined Contribution Funds and 8 Defined Benefit Funds. The following funds provide pension benefits for the Group employees: Defined Contribution Funds:
Alexandra Forbes Retirement Fund Section 7: Supply Chain Management and Black Economic Empowerment The entity has adopted Supply Chain Management systems in compliance with the provisions of the MFMA and the National Treasury: Municipal Supply Chain Management Regulations, 2005. An SCM unit was established in September 2005 and which monitors the implementation of the entity’s SCM policies in line with the regulations which seeks to modernises financial governance and improve accountability and transparency in the entity’s processes. The entity’s SCM policies provide for the exclusion of awards persons in the service of the state subject to the exemptions and regulations issued by National Treasury from time to time. The entity has implemented the three –stage bidding processes with separate Bid specification, Bid evaluation and Bid Adjudication committees having been set out. The Board has ensured that the procurement policy embraced the objectives of broad-based Black Economic Empowerment and the CEO, as the Accounting Officer of the Company, was tasked as the custodian for effective implementation. The projects implemented during this period served as valuable foundations for ensuring community participation in our BEE programmes. This pace will be enhanced and the Company will continue to be sensitive to the financial constraints facing emerging black businesses. No unsolicited bids were made by the company.
148
Entity Name: 2014/15 Mid-Year Report Page 29
CHAPTER FIVE: FINANCIAL PERFORMANCE
STATEMENT OF FINANCIAL POSITION
Sandspruit Works Association - Table F4 Monthly Budget Statement - Year To Date Financial Position as at 31 December 2014
Audited 2013/14 YearTD actual
ASSETS Current assets Cash 13 891 132.00 34 042 931.50 Call investment deposits - - Consumer debtors 14 339 330.00 13 744 773.19 Other debtors 64 008 676.00 40 620 698.90 VAT Receivable 1 695 182.00 Inventory 3 382 914.00 3 449 519.77 Total current assets 97 317 234.00 91 857 923.36
Non-current assets Property, plant and equipment (Including Intangible) 8 106 241.00 7 682 182.28 Total non-current assets 8 106 241.00 7 682 182.28
TOTAL ASSETS 105 423 475.00 99 540 105.64
LIABILITIES Current liabilities Consumer deposits 3 725 662.00 3 715 591.37 Trade and other payables 98 910 880.00 77 482 623.50 Operating Lease Liability 286 147.00 286 147.00 Unspent Conditional grants 1 829 899.00 1 634 101.28 VAT Payable - 15 288 729.48 Total current liabilities 104 752 588.00 98 407 192.63
Non-current liabilities Operating Lease Liability 25 503.00 25 503.00 Provisions Total non-current liabilities 25 503.00 25 503.00
TOTAL LIABILITIES 104 778 091.00 98 432 695.63
NET ASSETS 645 384.00 1 107 410.01
COMMUNITY WEALTH/EQUITY Accumulated Surplus/(Deficit) 645 384.00 1 107 410.01 TOTAL COMMUNITY WEALTH/EQUITY 645 384.00 1 107 410.01
149
Entity Name: 2014/15 Mid-Year Report Page 30
STATEMENT OF FINANCIAL PERFORMANCE
Sandspruit Works Association - Year To Date Budget Statement - Financial Performance (revenue and expenditure) – for the period ended 31 December 2014 (YTD)
Description
2013/14 2014/15
Audited Outcome
YearTD actual
Revenue By Source
Service charges - water revenue 150 834 999.00 96 216 136.66
Service charges - sanitation revenue 43 323 681.26 25 998 498.54
Service charges - other 41 931 646.00 21 365 198.62
Interest earned - external investments 417 474.00 79 610.77
Interest earned - outstanding debtors 27 473 969.00 16 713 429.46
Other revenue 168 015 909.00 95 956 912.04
Total Revenue (excluding capital transfers and contributions) 431 997 678.26 256 329 786.09
Expenditure By Type
Employee related costs 83 335 786.00 43 854 414.34
Remuneration of Directors 444 192.00 129 304.00
Debt impairment 95 408 282.00 63 994 222.09
Collection costs - 1 935 806.75
Depreciation & asset impairment 1 701 541.00 669 979.12
Bulk purchases 132 104 670.00 78 527 423.89
Other expenditure 123 923 965.00 66 756 609.89
Total Expenditure 436 918 436.00 255 867 760.08
Surplus/(Deficit) for the year -4 920 757.74 462 026.01
STATEMENT OF NET ASSETS
Sandspruit Works Association - Statement of Changes in Net Assets as at 31 December 2014
Accumulated
Surplus Total net assets
Balance at 01 July 2013 5 566 143.00 5 566 143.00
Surplus/(deficit) for the year -4 920 759.00 -4 920 759.00
Balance at 30 June 2014 645 384.00 645 384.00
Surplus/(deficit) for the year 462 026.01 462 026.01
Balance at 31 December 2014 1 107 410.01 1 107 410.01
150
Entity Name: 2014/15 Mid-Year Report Page 31
CASH FLOW STATEMENT
Sandspruit Works Association - Cash Flows as at 31 December 2014
Description 2013/14
2014/15
Audited Outcome YearTD actual
CASH FLOW FROM OPERATING ACTIVITIES
Receipts
Ratepayers and other (including Grants) 291 521 729.00 203 819 631.08
Interest 10 720 890.00 2 078 026.54
Payments
Suppliers and employees -300 120 530.00 -185 425 291.06
NET CASH FROM/(USED) OPERATING ACTIVITIES 2 122 089.00 20 472 366.56
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of PPE -354 390.00 -320 567.06
NET CASH FROM/(USED) INVESTING ACTIVITIES -354 390.00 -320 567.06
NET INCREASE/ (DECREASE) IN CASH HELD 1 767 699.00 20 151 799.50
Cash/cash equivalents at the year begin: 12 123 433.00 13 891 132.00
Cash/cash equivalents at the year end 13 891 132.00 34 042 931.50
151
Entity Name: 2014/15 Mid-Year Report Page 32
CHAPTER SIX: AUDITOR-GENERAL FINDINGS Section 1: Auditor-General’s Report for the Current Year
Note: The Constitution S188 (1) (b) states that the functions of the Auditor-General includes the auditing and reporting on the accounts, financial statements and financial management of all municipalities. MSA section 45 states that the results of performance measurement… must be audited annually by the Auditor-General.
Refer to the Annual Financial Statements set out in Chapter 5 and the timescale for the audit of these accounts and the audit of performance and the production of reports on these matters by the Auditor General as set out in this Chapter. Include a comparison of the previous audit opinions and share a narrative that analyses the reasons for the outcome of the opinion. This should be at a high level to assist the reader in understanding the reasons for the audit outcomes. 2012/13 2013/14 2014/15
Audit Opinion Unqualified Unqualified Unqualified Section 2: Historical Audit Findings and Remedial Action This section should deal with the corrective actions and the progress made in relation to the issues raised in the previous financial year, namely 2013/14. This section highlights the repetitive nature of the audit findings and requires comment by the leadership on the actions that are or will be put in place to resolve them.
ANALYSIS OF 2012/13 AUDIT FINDINGS
ANALYSIS OF 2012/13 AUDIT FINDINGS
NEW IN 2014/15
REPEAT FINDING
ACTIONS TO RESOLVE
Matters affecting Audit opinion
9 The AFS will be submitted to internal audit for review before submission to the AG and also compliance checklist will be developed to ensure that procurement complies with the legislation.
Important Matters 32 Recommendations made by the AG will be implemented according to the timelines reflected in the report.
Administrative Matters 0 Section 3: Commitment by the Board of Directors This section should provide a statement/clause from the Board that it has satisfied itself that the remedial
actions taken or to be taken on matters raised by the Auditor-General are adequate.
152
Entity Name: 2014/15 Mid-Year Report Page 33
180 DAY PROGRAMME OPERATIONAL SERVICE DELIVERY PROGRAMME
Region 1
180 Days Operational Service Delivery Programme
Monthly Performance Report
Month Ended : 30 September 2014
Department / Section : Operations Department
Name and Details of the Project
Operational Plan: August Actual Expenditure
Outcomes Achieved / Deviations from Operational Plan
Picture Evidence
Water Distribution
Pro- and re-active Ward based maintenance plan Phase 1 (Investigation)
Physical inspection for Leaking water meters or network leaks and identify high water loss areas. All wards on the program will be investigated in the month of August 2014 Phase 2 (Preventative & Remedial)
Leak repairs, Address low water pressure issues and construction repairs. Phase 2 will be carried out in the months of September, October and November 2014
Phase 1 (Investigation)
Physical inspection for Leaking water meters or network leaks and identify high water loss areas. All wards on the program will be investigated in the month of August 2014
MAWIGA:
Ward 19 Indigents leaks
A local contractor was appointed in a quotation basic and still buzzy at Mabopane and he will be proceeding to Winterveldlt (Beirut and Lebanon) after completing Mabopane. Repairing of meter leaks and relocation of meters Beirut
67 stands received, 50 completed Lebanon
40 received, 100% complete
Meter leaks were logged and our client service teams have started repairing the leaks prioritizing critical wards, the process is ongoing. There is as and when three contractors which
After repairs Repaired meter leak in Beirut
Indigents repaired master flow
Repaired indigent tap
Repaired meter in Lebanon
153
Entity Name: 2014/15 Mid-Year Report Page 34
Name and Details of the Project
Operational Plan: August Actual Expenditure
Outcomes Achieved / Deviations from Operational Plan
Picture Evidence
were appointed for installation of domestic meters in three areas each one of them addressing an area (MAWIGA) they will also execute the meter relocations The relocations will start in the middle of October due to ordering of required fittings. Manhole lids and top slab
Scope of work is in place waiting for the delivery of manhole frames and lids from our sole supplier in Cape Town before it the scope of work can be submitted to supply chain for procurement processes for seven days quotations. Ward 24 Stand pipes
Onsite inspection was done for placing of six stand pipes in Mpho area. The scope of work is in place and it will be submitted to supply chain for seven days quotation. Anticipated date will be third week of October. Indigents leaks
Same as reported in ward 19 Repairing of meter leaks and relocation of meters
Same as reported in ward 19 Extension 3 in Winterveldlt
30 received, 100% completed See the attached photo below Manhole lids and top slab Same as reported in ward 19
154
Entity Name: 2014/15 Mid-Year Report Page 35
Region 1
180 Days Operational Service Delivery Programme
Performance Report
Month Ended : 28 October 2014
Department / Section : Operations Department
Name and Details of the Project
Operational Plan: August Actual Expenditure
Outcomes Achieved / Deviations from Operational Plan
Picture Evidence
Water Distribution
Pro- and re-active Ward based maintenance plan Phase 1 (Investigation)
Physical inspection for Leaking water meters or network leaks and identify high water loss areas. All wards on the program will be investigated in the month of August 2014 Phase 2 (Preventative & Remedial)
Leak repairs, Address low water pressure issues and construction repairs. Phase 2 will be carried out in the months of September, October and November 2014
Phase 1 (Investigation)
Physical inspection for Leaking water meters or network leaks and identify high water loss areas. All wards on the program will be investigated in the month of August 2014
MAWIGA:
Ward 22 Repairing of meter leaks Gatsebe
175 received 175 completed Boikhutsong
105 received 105 completed Meter relocations
Block M 20 received 10 completed and project is still on going. Indigents leaks
Repairing of leaks is completed in block b and c, installation of WMDS is ongoing. Block C( WMDS)
47 installed
After repairs
Repaired meter leak in Boikhutsong
Before relocation in block m Mabopane
Relocated meter and reinstating of paving breaks
155
Entity Name: 2014/15 Mid-Year Report Page 36
Name and Details of the Project
Operational Plan: August Actual Expenditure
Outcomes Achieved / Deviations from Operational Plan
Picture Evidence
Block B
127 installed Manhole, lids and top slab
Please take note, two manhole chambers were reported urgently to be given special attention, because they were so dangerous to the community of winter veldt especially small children. They were prioritized and given urgent response under emergency
a) The other one needed reconstruction from chamber walls and placing of top slab
b) The last one only placing of top slap Ward 32
A pipe burst occurred in zone1, Garankuwa next to traffic cycle, which left zone 16, 1, 4 and 21 without water for three days. The asbestos pipe has reached its life span and again there is pipeline that is currently being installed parallel to it, rock blasting is done and keeps on affecting it to burst but the good news is after the new line is completed the existing will be disconnected, the new line will take over. The necessary fittings were procured and the burst was fixed successfully Ward 12 Indigents leaks
No list was provided for indigents leaks. Repairing of meter leaks and relocation of meter Block E
Installed WMD meter in Block B
Before construction of chamber
Construction of chamber walls
156
Entity Name: 2014/15 Mid-Year Report Page 37
Name and Details of the Project
Operational Plan: August Actual Expenditure
Outcomes Achieved / Deviations from Operational Plan
Picture Evidence
30 received and completed Block EW
15 received and completed Meter relocation Lebanon
250 received 15 completed, the process is slow due to challenges on site, Lebanon is a developed area the occupants have paved their yards with interlock brick and cemented paving, the supplier has to remove and reinstated which take too much time and the progress becomes slow
Manhole lids and top slab
This item is in order in this ward
Completed chamber
Pipe burst in zone 1 Ga rankuwa
Construction of top slab
Repairing of pipe burst
157
Entity Name: 2014/15 Mid-Year Report Page 38
Name and Details of the Project
Operational Plan: August Actual Expenditure
Outcomes Achieved / Deviations from Operational Plan
Picture Evidence
.
Assembling and laying of pipes and fittings to repair pipe burst
Preparing to anchor the bend
158
Entity Name: 2014/15 Mid-Year Report Page 39
Name and Details of the Project
Operational Plan: August Actual Expenditure
Outcomes Achieved / Deviations from Operational Plan
Picture Evidence
After the pipe burst repaired in zone 1 Garankuwa
159
Entity Name: 2014/15 Mid-Year Report Page 40
160
TEDA 2014/15 Mid-year report Page 0 Municipal entity of the City of Tshwane 2006/019396/07
2014 / 15 MID – YEAR REPORT
(JULY – DECEMBER 2014)
(In terms of Section 88 of the
Municipal Finance Management Act, 2003)
161
TEDA 2014/15 Mid-year report Page 1 Municipal entity of the City of Tshwane 2006/019396/07
TSHWANE ECONOMIC DEVELOPMENT AGENCY
(SOC)LIMITED / NON PROFIT COMPANY
COMPANY INFORMATION:
Registration number: 2006/019396/07
Physical Address 349 Witch- Hazel Avenue
Eco-origin Building, Block F
Highveld Ext. 70, Centurion
0057
Postal Address P. O. Box 11751
Zwartkops 0051
Telephone number : (012) 358 0000
Fax number : (012) 358 0000
Website : www.teda.org.za
Bankers : Standard Bank
Auditors : Auditor-General
Vision
‘TEDA strives to be a leading African economic development agency’
Mission
‘To provide innovative investor solutions so as to attract and develop strategic industries and
businesses into the Capital City in order to strengthen and position South Africa in the
continent’
162
TEDA 2014/15 Mid-year report Page 2 Municipal entity of the City of Tshwane 2006/019396/07
TABLE OF CONTENTS
CHAPTER ONE: LEADERSHIP & CORPORATE PROFILE
Section 1: Corporate Profile and Overview of the entity 3
Section 2: Strategic Objectives 3
Section 3: Salient Features 4
Section 4: High-level organisational structure 6
Section 5: Foreword by Member of the Mayoral Committee 7
Section 6: Chairperson’s Foreword 8
Section 7: Chief Executive Officer’s Report 9
Section 8: Chief Financial Officer’s Report 10
CHAPTER TWO: GOVERNANCE
Section 1: Corporate Governance Statement 11
Section 2: Board of Directors 11
Section 3: Board Committees 11
Section 4: Director’s Remuneration 12
Section 5: Company Secretarial Function 16
Section 6: Risk Management and Internal controls 17
Section 7: Internal Audit Function 21
Section 8: Corporate Ethics and Organisational Integrity 21
Section 9: Anticorruption and fraud 21
Section 10: ICT Governance 21
CHAPTER THREE: SERVICE DELIVERY PERFORMANCE
Section 1: Highlights and Achievements 23
Section 2: Financial Performance 24
Section 3: Performance against IDP and City Scorecard 25
Section 5: Assessment of Arrears on municipal taxes and service charges 34
Section 6: Statement on amounts owed by Government Departments and public entities 34
Section 7: Recommendations and Plans for the next financial year 34
CHAPTER FOUR: HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT
Section 1: Human Resource Management 35
Section 2: Employment Equity 35
Section 3: Skills Development and Training 37
Section 4: Performance Management 38
Section 5: Employee Benefits 39
Section 6: Supply Chain Management and Black Economic Empowerment 40
CHAPTER FIVE: FINANCIAL PERFORMANCE
Section 1: Accounting officer’s responsibilities and approval 43
Section 2: Directors report 44
Section 3: Report of the Audit Committee 48
Section 4: Report of the Independent Auditor – Auditor General 49
Section 5: Statement of Financial Position 51
Section 6: Statement of Financial Performance 52
Section 7: Statement of changes in Net Assets 53
Section 8: Cash Flow Statement 54
Section 9: Statement of comparison of Budget and Actual Amounts 55
Section 10: Accounting policies 57
Section 11: Notes to the Interim Financial Statements 72
CHAPTER SIX: AUDITOR-GENERAL FINDINGS
Section 1: Auditor-General’s Report for the Current year 86
Section 2: Historical Audit Findings and Remedial Action 86
Section 3: Commitment by the Board of Directors 88
163
TEDA 2014/15 Mid-year report Page 3 Municipal entity of the City of Tshwane 2006/019396/07
CHAPTER ONE: LEADERSHIP & CORPORATE PROFILE
Section 1: Corporate Profile / Overview of the entity
Tshwane Economic Development Agency (TEDA) was established as a state owned company in
November 2006 and is wholly owned by the City of Tshwane. TEDA was established with the aim of
being a catalyst for the accelerated economic growth and job creation within the Tshwane
Metropolitan.
The entity derives its mandate from the Service Delivery Agreement with the City of Tshwane. From this
mandate the priority goals are guided by the City’s Integrated Development Plan (IDP), City’s priorities
and the Growth and Development Strategy (GDS) 2055 outcomes.
The entity’s budget is R47, 5 million in the medium term with a total staff compliment of 35. TEDA’s
medium term goal in terms of resources is to ensure that the core business units are properly
capacitated to enable an effective and impactful response to its mandate. TEDA plans to reduce its
total dependence on City’s funding and over time create its own funding streams. Tin order to get to
that stage, there is currently a financial model being designed to address this demand. The
organizational development exercise underway will provide clarity in terms of the resources, systems
and process needed to enhance TEDA in its quest to fulfil its mandate.
There is a strong focus on effective use of strategic partnerships through collaboration and
cooperation to advance the impact that TEDA must make in meeting its objectives and further
contribute to the economic growth within the City.
Section 2: Strategic Objectives
TEDA strategic objectives have been derived from the mandate as approved by Mayoral Committee
and these are aligned to the Tshwane vision 2055, CoT IDP 2011-16 and in particular with the Service
Delivery Budget Implementation Programme of the Department of Economic Development.
Tshwane Vision 2055 City of Tshwane SDBIP TEDA’s Strategic Objectives
Outcome 2:
A growing economy that is
inclusive, diversified and
competitive
SO 2
Promote shared economic growth
and job creation
To promote, facilitate and
coordinate investment in strategic
infrastructure to create value for the
CoT
To establish and maintain an
economic Infrastructure Investment
Vehicle
To identify, design, develop and
manage projects with strategic
economic and / or social benefits
for the greater Tshwane community
To develop and maintain strategic
immovable and property asset
portfolio for maximum return on
investment
To facilitate the implementation of
agreements signed between CoT
and key stakeholders
To promote Tshwane as a viable
investment destination through the
implementation of an integrated
Marketing and Communication
programme
Outcome 5
An African Capital City that
promotes excellence and
innovative governance
SO 4
Promote good governance and
active citizenry
To establish and build TEDA as a
strong and effective organization in
the context of good governance
best practices
164
TEDA 2014/15 Mid-year report Page 4 Municipal entity of the City of Tshwane 2006/019396/07
Section 3: Salient Features
Non – Financial:
In the reporting period, TEDA’s budget allocation was not aligned to the cost of the key performance
indicators set and therefore there was a challenge in carrying out some of the activities that were set
due to inadequate funds. However, the set targets that were funded were met within the specified
periods. In order to provide the necessary capacity that will enable the Tshwane Entrepreneurs to take
part in the export market, there was an Exporters Awareness programme carried out by TEDA in
collaboration with the Department of Trade and Industry and other industry players that are crucial in
the export market e.g customs and excise experts etc. the programme provided the entrepreneurs
with information and intricacies of international trade. TEDA engaged the Industrial Development
Corporation in order to build relations for possible funding support for future initiatives envisaged to be
undertaken by TEDA.
The recruitment process has been put on hold in the short term while TEDA goes through an
organisational development process. The achievements so far has been the filling of posts within the
core business units. The long term strategy will be to ensure that the core business are further
resourced and create a balance between these and the support function and be in line with the
industry norm on the ratio of support versus core business.
TEDA fully endorses and supports the Government’s Broad-Based Black Economic Empowerment
(BBBEE) programme. TEDA would prefer to do business with local business enterprises who share its
values and who are prepared to contribute to the meaningful BBBEE initiatives (including, but not
limited to subcontracting and Joint Ventures) as part of their request for proposal (RFP) responses.
TEDA’S policy is to allow a “preference” in accordance with the Preferential Procurement Policy
Framework Act No.5 of 2000, to companies who provide a BBBEE Accreditation Certificate. All
procurement and disposal transactions in excess of R30 000 must be evaluated accordingly. It is worth
noting that TEDA has procured about 75% of the total procurement of products and services from BEE
companies and therefore advancing the broader government policy as stated above
Financial (for the six (6) months period
The entity’s spending is at 44% against the allocated budget and it is in line with the entity’s demand
management plan. The employee costs are at 50%; remuneration of board members is at 45%;
general expenses are at 43%, marketing and trade investment is at 35%. The organisation has
continually managed to service its creditors on time as prescribed by the MFMA and also made
improvements on its internal control through implementing policies and procedures approved by the
board. The entity aims to improve the unqualified audit opinion and achieve a clean audit opinion in
the next financial year.
165
TEDA 2014/15 Mid-year report Page 5 Municipal entity of the City of Tshwane 2006/019396/07
Budget vs Expenditure as at 31 Dec 2014 Graph
Original
Budget Roll-over
Adjustments
and Virement Final budget
Actual
amounts on
comparable
basis
Difference
between final
budget and
actual
Percentage
Collection/S
pend
Revenue
Total Revenue 51,556,936 2,461,277 - 54,018,213 27,914,597 26,103,616 52%
Expenditure
Employee costs 28,710,927 541,667 29,252,594 14,498,349 14,754,245 50%
Remuneration of Board Members 2,190,522 -11,000 2,179,522 971,854 1,207,668 45%
General Expenses 17,392,687 958,968 -1,216,977 17,134,678 7,412,383 9,722,295 43%
Marketing, Trade and Investment 990,000 260,642 637,556 1,888,198 660,942 1,227,256 35%
Projects Expenditure 1,500,000 500,000 650,000 2,650,000 - 2,650,000 0%
Operating Expenditure 50,784,136 2,261,277 59,579 53,104,992 23,543,528 29,561,464 44%
Capital Expenditure 772,800 200,000 -59,579 913,221 420,555 492,666 46%
Total Expenditure 51,556,936 2,461,277 - 54,018,213 23,964,083 30,054,130 44%
(Deficit)/Surplus for the year - - - - 3,950,514 -3,950,514
Budget vs Expenditure as at 31 December 2014
166
TEDA 2014/15 Mid-year report Page 6 Municipal entity of the City of Tshwane 2006/019396/07
Section 4: High-level organisational structure
The organisational structure below has been designed in response to the TEDA mandate. The Board
provides the strategic direction of the organisation and the implementation of the strategic direction
is carried out under the leadership of the Chief Executive officer. Each unit is headed by an Executive
manager who is in charge of executing the functional strategies and daily operations within their
respective units.
Figure 1: TEDA high level organisational structure
The core business of TEDA is Trade and investment, Projects and Programme Management as well as
Property Management. These are supported by Marketing and Communications, Finance and SCM
and Corporate services. The core business is underpinned by an element of business development.
Figure 2: Organisational Value Chain
167
TEDA 2014/15 Mid-year report Page 7 Municipal entity of the City of Tshwane 2006/019396/07
Section 5: Foreword by Member of the Mayoral Committee
Cllr - Subesh Pillay
MMC for Economic Development and Planning
TEDA emerged from a challenging period in the latter part of 2013/14, characterised by instability and
changes in leadership which had a direct impact on its overall performance. I can confidently say
after the interventions made by the shareholder to bring stability to the entity, there has been marked
improvement both in terms of clarity in leadership as well as the general morale of staff evidenced by
the organisational performance in the first two quarters of 2014/15.
The efforts to ensure creation of new job opportunities and TEDA’s role in facilitating investment
coming into the City were a challenge in the mid-term. While it is understood that the planned
projects which would have contributed to the job creation initiatives are in a conceptualisation stage
however, efforts must be made to accelerate the execution of projects within the short to medium
term to meet the planned targets of job creation. The TITTIC flag ship event that was planned to take
place in this calendar year has been moved forward to be hosted in the fourth quarter of 2014/15. The
intention is to show case what the City of Tshwane has to offer to international investors and ultimately
get them to invest in the City.
168
TEDA 2014/15 Mid-year report Page 8 Municipal entity of the City of Tshwane 2006/019396/07
Section 6: Chairperson’s Foreword
I have pleasure in presenting the Chairperson’s foreword for the 2014/15 mid-year report for TEDA.
This mid-year report is presented against the ongoing effort by TEDA to review the Business Plan in
pursuance of aligning it to the 2014/15 budget allocation. Of particular importance to note is that the
Business Plan under review comprised also performance areas that were intended with the initial
budget plan in mind. It is envisaged that the revised Business Plan that will be presented for approval
at the January Budget Adjustment hearings will not only improve TEDA’s performance ratings but will
also give a realistic account of what is possible within the available means – both human and
financial.
There is still a concerning issue of limited available funding and as such the entity is striving to develop
a sound financial management model that will enable the entity to fund its operations, generate
income, and be a profitable organization. This work is expected to be finalized before the end of the
financial year and will articulate how the goal of self-sustainability will be accomplished within TEDA’s
business units.
Our greatest challenge as the board has been to strategically position the entity to the external
environment to be on the cutting edge as one of the competitive economic development agencies.
The 5th Tshwane International Trade Infrastructure Investment Conference (TITIIC) planned for May
2015 is a great platform to ensure that Tshwane’s profile as an investment destination is raised.
TEDA is committed to developing our people to their fullest potential, equipping them with the
necessary skills and capabilities to handle both their current jobs and prepare them for the new
challenges ahead. The Board in its quest to play effective oversight role to the entity has embarked on
an organizational design, that will provide clarity in terms of the resource needs and the skills set. The
new Human Capital Model for TEDA will also be unveiled before the end of the current financial year,
ushering in the confidence of the entity that has the required human resource capacity to deliver on
its strategic priorities.
As TEDA Board of Directors we are conscious of our responsibilities to our Shareholder and our
obligations to our stakeholders. During the period under review, the Board and Management held
robust discussions at a planned lekgotla and defined strategic focus of TEDA in the medium to long
term. We have not only identified deficiencies but we have identified plans and strategies to address
them in remaining period. As TEDA we will be putting extra effort to ensure that the organization strives
to continue to deliver on our mandate whilst also developing and seeking better ways of achieving
our strategic objectives.
In this quarter, 3 members resigned from the TEDA Board. I wish to thank them for their oversight and
governance role displayed during their tenure.
169
TEDA 2014/15 Mid-year report Page 9 Municipal entity of the City of Tshwane 2006/019396/07
Section 7: Chief Executive Officer’s Report
TEDA started the year 2014/15 with a few challenges around leadership stability and the resultant low
staff morale, therefore, the focus was more on ensuring that TEDA is steered on course and staff
morale is built. My primary role was to provide direction for TEDA to perform according to the
expectations of the shareholder, create harmony within the organisation while providing support to
the Board and Executives. The set targets for TEDA for 2014/15 were not fully funded and therefore this
had an impact on the general performance of the entity in the mid-term. Additional funding has been
sought for those unfunded mandate areas through the adjustment budget process.
The organisational changes presently under way, which are expected to advance substantially during
the year ahead, include the establishment of a funding model to assist TEDA in creating its income
generating streams and reduce sole dependency on the City’s funding. In the long run TEDA must be
self-sustainable and take charge of its funding needs. During the first quarter, TEDA also deemed it
necessary to go through an organisational design process to establish the resources, systems and
processes needs in carrying out its mandate. This process is in progress and expected to be concluded
in quarter 3.
TEDA’s contribution to the Department of Economic Development’s SDBIP targets was below
expectation especially in the area of job creation. The fact is that planned projects, which would
contribute largely to creation of jobs, are at their early stages and project execution will take place in
the new financial year. Initiatives to ensure that TEDA meets these job creation targets are underway
and will involve tapping on the Tshepo 10,000, a massive job creation initiative aimed at empowering
the youth of Tshwane.
TEDA facilitated the following activities:
A possible joint venture partnership between Blue-Green Aquaculture and MK Group for the
establishment of an aquaculture project possibly located in Hammanskraal
Engaged Thebe Investment Corporation on a possible investment in the tourism industry in
Cullinan and a site visit was facilitated to the area
A possible investment into the Hamanskraal BPO Park by Intiyso Consulting
TEDA was instrumental in arranging discussions between the CoT and Rainbow Junction with a
view to addressing challenges faced and to advancing project progress
The Audit outcome for 2013/14 is that TEDA has an unqualified report on the financials and the
performance information audit is qualified. TEDA has taken its interaction with the Auditor General and
the advice rendered into account in correcting these in the 2014/15 financial year to avoid repeated
findings. This is a milestone on the performance information since the 2012/13 performance
information was not auditable and had to be withdrawn from the audit process.
TEDA’s target in the 2014/15 audit outcome is to ensure that on both financials and performance
information it does not get qualified. This is in line with the City’s overall aim under the “Operation
Clean Audit” initiative. A mitigation plan to address the audit findings has been implemented and will
be monitored on a quarterly basis and will be subjected to an audit by the Internal Audit unit.
170
TEDA 2014/15 Mid-year report Page 10 Municipal entity of the City of Tshwane 2006/019396/07
Section 8: Chief Financial Officer’s Report
The entity’s spending is at 44% and this is in line with the entity’s demand management plan. The
organisation has continually managed to service its creditors on time as prescribed by the MFMA but
there is a need to develop a financial sustainability model to ensure that multiple revenue streams are
created that will enable the entity to achieve self-sufficiency and reduce dependency on
shareholder funding.
Challenges Proposed Action Plan
Limited budget Budget and expenditure management
Demand management plan
Financial Sustainability model
Unqualified Audit opinion Internal control improved through policies and
procedures
Audit action plan developed
Key controls and dashboard implemented
Risk register action plan developed
MTREF Comparative figures
Previous Financial Year
2013/14
Current Financial Year
2014/15
Next Financial Year
2015/16
Revenue
Total Revenue 59 255 905 54 018 213 51 556 936
Expenditure
Employee costs 19 452 372 26 805 147 29 351 636
Remuneration of Board
Members 3 397 149 1 444 270 1 240 024
General Expenses 11 404 005 17 134 678 13 952 586
Marketing, Trade and
Investment 13 425 376 1 888 198 2 114 782
Projects Expenditure 2 646 887 2 650 000 2 968 000
Capital Expenditure
(Depreciation) 1 958 108 2 150 108 1 808 121
Total Expenditure 52 283 897 52 072 401 51 435 149
Taxation 1 963 079 287 310 121 787
(Deficit)/Surplus for the year 5 008 929 1 658 502 -
171
TEDA 2014/15 Mid-year report Page 11 Municipal entity of the City of Tshwane 2006/019396/07
CHAPTER TWO: GOVERNANCE
Section 1: Corporate Governance Statement
The Board of Directors and Executives are committed to the principles of openness, integrity and
accountability advocated by the King III Code on Corporate Governance, 2009. Therefore
shareholders and other stakeholders may derive assurance that the entity is being ethically managed
according to prudently determined risk parameters in compliance with generally accepted corporate
practices. The entity has complied with the Code in all respect during the period under review.
TEDA adopted a Corporate Governance Policy Framework in April 2014. This framework includes a
basket of key policies necessary to ensure the entity’s compliance with King III and relevant local
government legislation. The Board monitors compliance with King III and legislation through quarterly
compliance reports submitted by management. During the period under review, the entity has made
significant progress in improving its compliance record. Such improvements will continue to be
experienced as TEDA’s maturity level grows.
For example, as part of its Corporate Governance policies, the entity has adopted a Code of
Conduct for Employees and Directors, Anti-Fraud Policy, Conflict of Interests Policy, Performance
Management Policy, Internal Audit Plan, Risk Management Plan, amongst other significant policies.
The Board of Directors has incorporated the City of Tshwane’s Corporate Governance Protocol in its
Corporate Governance policies, which inter alia regulates its relationship with the City of Tshwane as
its sole member and parent municipality in the interest of good corporate governance and good
ethics
Ethical Leadership
The board provides effective leadership based on a principled foundation and the entity subscribes to
high ethical standards. Responsible leadership, characterised by the values of responsibility,
accountability, fairness and transparency, has been a defining characteristic of the entity since the
company’s establishment.
The fundamental objective has always been to do business ethically while building a sustainable
company that recognises the short- and long-term impact of its activities on the economy, society
and the environment. In its deliberations, decisions and actions, the board is sensitive to the legitimate
interests and expectations of the company’s stakeholders.
The Social and Ethics Committee of the entity meets twice per annum to monitor the entity’s
contribution to the three pillars of sustainability i.e. socio-economic and environmental management
as required by the Companies Act, 71 of 2008.
Section 2: Board of Directors
The entity has a unitary board, which consist of non-executives directors. The range of skills within the
Board includes accounting, planning, economics, law and human resources. The Board is chaired by
a non-executive director, Mr L Vutula. It meets regularly, at least quarterly and retains full control over
the company. The Board remains accountable to City of Tshwane as sole shareholder and its
stakeholders, the citizens of Tshwane. A Service Delivery Agreement (SDA) concluded in accordance
with the provisions of the MSA governs the entity’ relationship with the City of Tshwane. The Board
provides Monthly, Quarterly, Bi-Annually and Annual Reports on its financial and service delivery
performance to the parent municipality as prescribed in the SDA, the Municipal Financial
Management Act and the Municipal Systems Act.
The TEDA Corporate Governance Policy Framework includes the Code of Good Boardroom Practice
and this creates a conducive environment for non-executive directors to contribute independent
view on matters under discussion and add to the depth of experience of the Board. The roles of
Chairperson and Chief Executive Officer are separate, with responsibilities divided between them.
172
TEDA 2014/15 Mid-year report Page 12 Municipal entity of the City of Tshwane 2006/019396/07
The Chairperson has no executive functions. Members have unlimited access to the Company
Secretary, who acts as an advisor to the Board and its committees on matters including compliance
with Company Rules and Procedures, statutory regulations and best corporate practices. The Board or any of its members may, in appropriate circumstances and at the expense of the
company, obtain the advice of independent professionals. A performance evaluation of the
Chairperson, Board and committees is conducted at the end of the financial year to identify and
address any shortcomings and consolidate areas of strength.
The Board of Directors has adopted the Board Charter and committee ToRs which encapsulates the
City of Tshwane Governance Protocol and includes the conduct of members, meeting procedures,
roles and responsibilities.
Attendance at meetings held during the six months period was as follows:
Directors Board Social &
Ethics
FinRisk &
Governance
Remco Projects Trade &
Investment
No. of meetings held:
6 1 2 2 2 2
Mr L Vutula 4 1
Ms RS Bahula-Ermias 4 1 2
Mr H Gouvelis 4 1 1 1
Mr J Matsho 5 1 1 1
Mr CR Mpyane 5 2 2
Mr FK Sibanda 3 2
Ms N Singh 3 1 2
Mr L Thubakgale 6 1 2
Mr M Yates 6 2 2
Section 3: Board Committees
The Board established the following committees to strengthen its oversight role:
3.1 Projects Committee
The mandate of the committee is to advise the Board on the implementation of the projects portfolio
of TEDA. The committee uses the Projects Management Framework adopted by the Board in order to
perform its functions.
3.2 Trade and Investment Committee
The mandate of the committee is to advise the Board on CoT economic development initiatives
which include, but are not restricted to:
Trade and Investment Promotion, Facilitation and Aftercare
Implementing the CoT’s investment pipeline
Promotion of Export-Ready Companies
Development Facilitation which includes packaging and promoting investment projects and
nodal development e.g. the Implementation of the Inner City Revitalisation Programmes.
3.3 Remunerations Committee
The mandate of the committee is to advise the Board on the development and implementation of the
remuneration and recruitment policies of TEDA as well as other human capital policies.
173
TEDA 2014/15 Mid-year report Page 13 Municipal entity of the City of Tshwane 2006/019396/07
3.4 Finance, Risk and Governance Committee
The terms of reference of this committee include:
Ensuring the development of corporate governance, financial and organisational
performance policies of TEDA.
Monitoring TEDA’s compliance with laws and regulations and reporting to the Board any
incidents of non-compliance.
Ensure that TEDA’s fraud prevention policies are in place and implemented.
Ensure the development and management of a Risk Management Policy and plans.
3.5 Social and Ethics Committee
This statutory committee was established in terms of the Companies Regulations, 2011. Its terms of
reference include, amongst other things, monitoring the activities of the company on socio-economic
development matters and the company's standing with regard to:
The principles set out in the United Nations Global Compact Principles.
The OECD recommendations regarding corruption.
The Employment Equity Act, 1998.
The Broad-Based Black Economic Empowerment.
TEDA’s corporate social responsibility.
3.6 Audit and Performance Committee of the CoT and its Municipal Entities
The risk based audit function of TEDA is dependent on the shared resource provided by the CoT
through the Group Audit Committee and the Group Internal Audit Unit.
Section 4: Director’s Remuneration
4.1 Entity’s remuneration policy
Non-executive directors are remunerated in terms of the CoT approved Remuneration Policy for
directors and senior manager of municipal entities.
NON- EXECUTIVE DIRECTORS REMUNERATION
Name Designation
July
R
Aug
R
Sept
R
Oct
R
Nov
R
Dec
R
Total
1 Mr L Vutula Chairperson 18 854.00 13 712.00 13 712.00 27 424.00 18 854.00 23 996.00 116 552.00
2 Ms S Bahula-Ermais NED 6 896.00 3 428.00 13 712.00 22 282.00 18 854.00 41 136.00 106 308.00
3 Mrs N Sigh NED 6 856.00 3 428.00 3 428.00 15 426.00 1 714.00 27 424.00 58 276.00
4 Mr FK Sibanda NED 6 856.00 8 570.00 - - - 35 994.00 51 420.00
5 Mr H Gouvelis NED 6 856.00 8 570.00 11 998.00 27 424.00 8 570.00 20 568.00 83 986.00
6 Mr J Matso NED 5 142.00 8 570.00 - 8 570.00 6 856.00 35 994.00 65 132.00
7 Adv Thubakgale NED 13 712.00 8 570.00 - 8 570.00 6 856.00 41 136.00 78 844.00
8 Mr M Yates NED 20 550.00 8 570.00 - 8 570.00 17 140.00 41 136.00 95 966.00
9 Mr CR Mpyane NED 18 854.00 8 570.00 11 998.00 11 998.00 8 570.00 41 136.00 101 126.00
TOTAL 104 576 71 988.00 54 848.00 130 264.00 87 414.00 308 520.00 757 610.00
174
175
TEDA 2014/15 Mid-year report Page 15 Municipal entity of the City of Tshwane 2006/019396/07
EXECUTIVE REMUNERATION
Name Designation
Salary
R
Pension
R
Medical Aid
R
Cell Phone
R
Travel
R
Total
R
Boledi Seopela Corporate Services R 704,814.00 R 4,111.42 R 16,950.00 R 12,000.00 R 716,814.00
Khanya Mahlare Marketing &
Communications R 704,814.00 R 39,642.00 R 12,000.00 R 120 000.00 R 716,814.00
Lebogang Mahaye Company Secretary R 597,345.00 R 28,212.00 R 12,000.00 R 609,345.00
Mmatlou Sebogodi Chief Financial Officer R 704,814.00 R 4,111.42 R 12,000.00 R 716,814.00
Tshifhiwa Mafela Trade & Investment R 704,814.00 R 27,174.00 R 12,000.00 108 000.00 R 716,814.00
Total - - - - - -
176
TEDA 2014/15 Mid-year report Page 16 Municipal entity of the City of Tshwane 2006/019396/07
Section 5: Company Secretarial Function
The Company Secretary acts as a link between the board and management. The Company
Secretary is responsible for Board administration, more specifically to ensure compliance with good
corporate governance practices and to provide guidance to the directors on corporate governance
principles and applicable legislation.
Registers are kept and updated on the disclosure and declaration of interests of directors and senior
management. The Company Secretary has certified in terms of section 268(d) of the Companies Act
that all statutory returns have been submitted to the Registrar of Companies.
The TEDA Corporate Governance Policy provides a framework within which the Company Secretary
performs her functions. The Board approved the Annual Work Plan at the beginning of the financial
year, which is linked to the entity’s legislative obligations. In addition, the Company Secretary provides
a secretariat function to the Board, ensures that director’s interests and other statutory requirements
are filed in accordance with regulatory frameworks.
177
TEDA 2014/15 Mid-year report Page 17 Municipal entity of the City of Tshwane 2006/019396/07
Section 6: Risk Management and internal controls
The table below reflects the strategic risks of the company with the mitigation plans put in place to monitor and minimise the identified risks. The
strategic risks are based on the strategic objectives of the entity. The table depicts the status of the monitoring process at the mid- term reporting. The
City of Tshwane Enterprise risk management unit provides expert support and guide to TEDA on risk management issues. These issues are then reported
to the City’s Risk Management Committee overall assessment on the effectiveness of the mitigation plan. The risk personnel from the City also sit in the
Board meetings and the Finance, Risk and Governance committee of the Board and report on risk issues on a regular basis. Risk management is a
standing agenda item on the executive committee of the entity and the management of the mitigation plans are then discussed and reported on a
regular basis to EXCO.
Table 1: Detailed risk control matrix
Strategic Risk Root Cause IR RR
Management Action
Plan Action Owner
Time
Frame Q2 Progress Evidence
Strategic Objective – 7
To establish and build TEDA as a strong and effective organisation in the context of good governance best practices
1. Lack of
financial
sustainability
model
1. Failure to raise enough capital for
business sustainability
2. Lack of revenue generating model
3. Inadequate budget allocations from
CoT
4. Limited working capital
5. Inadequate engagement with other
spheres of government
Hig
h
Hig
h
1. Develop and
implement financial
sustainability plan with
clear definition of
revenue streams
CFO
31
-De
c-1
4
The process of
developing the model
is underway and it is
anticipated that it will
be concluded and
implemented in
quarter 4.
The project
charter
2. Lack of critical
skills
1. Lack of understanding of TEDA
mandate.
2. Inadequate business processes.
Hig
h
Hig
h
1. To conduct skills audit
2. To develop
organisational
development
processes
Exe
cu
tiv
e C
op
ora
te
Se
rvic
es
31
-De
c-1
4
Organisational
Development process
is currently underway,
It is envisaged that
the process will be
concluded by quarter
3.
Project plan for
the OD
process.
178
TEDA 2014/15 Mid-year report Page 18 Municipal entity of the City of Tshwane 2006/019396/07
Strategic Risk Root Cause IR RR
Management Action
Plan Action Owner
Time
Frame Q2 Progress Evidence
Strategic Objective – 1
To promote, facilitate and coordinate trade and investment in strategic infrastructure to create value for CoT
3. Failure to
attract
investors
1. Lack of resources
2. Change in government policies
3. Lack of operating model to
respond to mandate
4. Unfavourable Global Economic
climate
Hig
h
Hig
h
1. Investment
assessment
framework to be
developed
2. Develop investment
promotion strategy
3. To package
investment incentives
4. Employ additional
capacity
Exe
cu
tiv
e T
rad
e a
nd
Inv
est
me
nt
He
ad
of
Co
rpo
rate
Se
rvic
es
31
-De
c-1
4
Corporate services:
Recruitment process
to employ additional
capacity has been
put on hold due to
OD process.
Trade and investment
strategic framework
currently has been
developed.
Investment incentives
will be packaged
based on the City’s
incentive policy. The
City has drafted theirs
but they are still under
discussion
Investment
assessment
framework is being
developed and will
be concluded by end
of January 2015.
The Trade and
Investment
Strategic
Framework
179
TEDA 2014/15 Mid-year report Page 19 Municipal entity of the City of Tshwane 2006/019396/07
Strategic Risk Root Cause IR RR
Management Action
Plan Action Owner
Time
Frame Q2 Progress Evidence
4. Failure to retain
investors and
provide
aftercareinvest
ors
1. Inadequate resources (Budget,
Human capacity)
2. Duplications of functions with
CoT
3. Not taking advantage of available
marketing platforms
4. Lack of knowledge of government
programmes and
incentive schemes
Hig
h
Hig
h
1. Conduct market
research on investor
environment through
2. Continuous
development
investor after-care
programme
Exe
cu
tiv
e T
rad
e a
nd
Inv
est
me
n
30
Ju
ne
l 5
Company visitation
programme to
determine the needs
of investors has
commenced. It
addresses both
market research on
investor environment
(as key information is
gathered in the
process) and investor
after-care
programme.
Company
visitation
programme to
determine the
needs of
investors has
commenced.
It addresses
both market
research on
investor
environment
(as key
information is
gathered in
the process)
and investor
after-care
programme.
Strategic Objective – 5
To facilitate implementation of agreements signed between CoT and stakeholders
5. Inadequate
stakeholder
engagement
1. Lack of communication amongst
key stakeholders
2. Unclear communication channels
with the main shareholder
Me
diu
m
Me
diu
m 1. Develop and
implement a
stakeholder
engagement
strategy Exe
cu
tiv
e
Ma
na
ge
r:
Ma
rke
tin
g
Exe
cu
tiv
e
Tra
de
an
d
Inv
est
em
e
nt
31
-De
c-1
4
The stakeholder
engagement strategy
has been developed
The strategy
document
Strategic Objective – 3
To identify, design, develop and manage projects with strategic economic and social benefits for the greater Tshwane community
6. Incorrect
assessment of
projects
1. Lack of knowledge to operate
Model
2. Inflexibility/inappropriateness of
model
3. Insufficient resources to apply the
model
Hig
h
Hig
h
1. Develop procedure
manual
2. Conduct training on
appropriate model
3. Review the
assessment model to
introduce flexibility
and appropriateness
Exe
cu
tiv
e P
PM
30
Ju
ne
15
The strategic risk
regarding incorrect
assessment of projects
is addressed through
various models
articulated in the PPM
unit strategy read in
conjunction with the
project life cycle
guide.
The Functional
strategy
document
(includes the
procedure
manual)
180
TEDA 2014/15 Mid-year report Page 20 Municipal entity of the City of Tshwane 2006/019396/07
Strategic Risk Root Cause IR RR
Management Action
Plan Action Owner
Time
Frame Q2 Progress Evidence
Strategic Objective – 7
To establish and build TEDA as a strong and effective organisation in the context of good governance best practices
7. Poor
implementatio
n of
governance
processes
1. Lack of own-defined standard
operating procedures
2. Lack of knowledge of governance
frameworks and processes
3. Lack of accountability Me
diu
m
Low
1. Revise and finalise
organisational
design process
2. Ensure policies and
procedures are in
place for key
business processes
EM
: C
orp
ora
te S
erv
ice
s
an
d A
ll E
xe
cu
tiv
es
31
-De
c-1
4
The OD process is
underway.
Policies and
procedure manuals
are in place. The
Standard operating
procedures will be in
place by end of
quarter 4.
181
TEDA 2014/15 Mid-year report Page 21 Municipal entity of the City of Tshwane 2006/019396/07
Section 7: Internal Audit Function
TEDA makes use of shared services for Internal Audit with the City of Tshwane and therefore the
internal audit processes are those of the City. The reporting lines are such that the City’s internal audit
reports TEDA audit outcomes to the City’s Audit and Performance Committee on a quarterly basis. The
audit plan of the City is communicated to TEDA at the beginning of the year and this enables TEDA to
incorporate this into the annual plan. The City’s audit personnel that provide the audit function to
TEDA sits in the Finance, Risk and Governance Committee of TEDA Board and the Board meetings to
report on audit matters.
Section 8: Corporate Ethics and Organisational Integrity
It is crucial to make employees aware of the TEDA’s commitment to a policy of fair dealing and
integrity in the conducts of its business. This commitment which is actively endorsed by TEDA Board is
based on a fundamental belief that the business should be conducted honestly, fairly and legally.
TEDA expects all employees to share its commitment to high moral, ethical and legal standards in all
areas of activity.
TEDA employees were trained and participating actively during sessions to become au fait with their
responsibility towards the Code of Conduct. Thus far 37 employees were trained on Code of Conduct.
1 employee was on maternity leave during the training season.
Section 9: Anticorruption and Fraud
TEDA has implemented policies and procedures as part of a system of internal control that minimises
the risk of fraud and corruption within the entity. TEDA currently makes use of the City’s Anti- corruption
hotline to allow reporting of corrupt activities. The segregation of duties within the human resources,
finance and supply chain management units are some of the internal controls in place to ensure
prevention of fraud and corruption. The supply chain management policy clearly defines the roles
and responsibilities of different role players in the procurement process to further strengthen the
internal controls with that area. TEDA has implemented delegations of authority document to clarify
the levels of authority in the approval processes. These delegations as the policies are subject to
review as and when the need arises.
Section 10: ICT Governance
TEDA’s ICT environment is fully dependent on the City of Tshwane’s ICT Infrastructure. The main uplink
to the Internet is connected via the City of Tshwane’s ICT Metropolitan Area Network (MAN). The
connection is through a high speed optical fiber cable which is connected to the nearest City of
Tshwane offices (Centurion Testing Centre). This uplink provides TEDA with high speed connectivity to
all CoT’s ICT Infrastructure. This enables TEDA to be able to use CoT’s Voice Over Internet Protocol
(VoIP), Messaging Exchange System (emails), File Server (My documents) and all other ICT
Infrastructure related services.
The uplink is connected through a concentrator (Alcatel Lucent) switch which in turn connects other
multiple sites around the Centurion region. The core network environment and the VoIP system is
managed by a service provider called Informer System and they are using Alcatel Lucent for their
networking equipment and handsets.
The key challenge to this ICT environment is that all ICT services are not owned by TEDA’s ICT as the
Infrastructure is owned by CoT. If there are new users joining TEDA all profile creations have to be done
by CoT ICT, all emails need to be created by CoT, all telephone extensions and any other services can
only be done by CoT. Should there be power failure in the CoT Data Centre which the concentrator is
located, it affects TEDA as there is no other redundant link for connectivity. The area where the optical
fiber has been installed is next to a construction site so when excavations are taking place they
sometimes cut the cable which also creates down time and problems for TEDA.
182
TEDA 2014/15 Mid-year report Page 22 Municipal entity of the City of Tshwane 2006/019396/07
All ICT investments at TEDA are done with considerations of the MFMA at all times as required by the
Supply Chain Management division and all rules and guidelines are adhered to at all times. All
personal information is protected and security policies have been implemented on the ICT servers to
ensure that all information is protected and the Personal Information Protection Act is adhered to.
TEDA’s approved ICT Governance Framework is using the COBIT and the ITIL objectives to achieve all
TEDA ICT’s goals and objectives.
183
TEDA 2014/15 Mid-year report Page 23 Municipal entity of the City of Tshwane 2006/019396/07
CHAPTER THREE: SERVICE DELIVERY PERFORMANCE
Section 1: Highlights and Achievements TEDA forms part of the Department of Economic Development (DED) and the organisation strives to
contribute towards Outcome 2: A growing economy that is inclusive, diversified and competitive.
Linked to this outcome is the output: Facilitation of economic growth that is labour absorptive.
Set out below is an analysis of TEDA performance against its DED SDBIP targets for the first half of
2013/14.
Table 2: Contribution towards SDBIP
Output KPI Baseline Annual Target Year-to-date
Target
Year-to-date
Actual
Achievement
Facilitate
economic
growth that is
labour intensive
Number of new
income
opportunities
facilitated by
TEDA
1000 250 120 0
Rand value of
investment
facilitated by
TEDA
R1 billion R500 million - -
Nr of SMME’s
and
entrepreneurs
supported by
TEDA
500 300 150 270
During the period under review, TEDA performed well above the set SDBIP target as far as SMMEs and
entrepreneurs support is concerned. TEDA’s actual performance was 270 where the year-to-date
target was 150. This was as a result of several activities aimed at ensuring that Tshwane SMMEs are
given the necessary support to fully participate actively within the broader economy and to stimulate
growth and job creation within the City.
TEDAs projects are still at the concept stage, therefore there is no progress against the job
opportunities target i.e KPI: Number of new income opportunities facilitated by TEDA, and this impacts
greatly on the City’s target on employment creation. This indicator measures the creation of new
jobs attributable to TEDA’s activities, mostly EPWP. A recovery plan has been devised and is under
implementation.
TEDA is also targeting existing and potential investors to identify investments being undertaken, jobs
created as well as ascertain TEDA investment support.
Total Nr of targets for
the financial year
Nr of targets
achieved
Nr of targets not
achieved
Nr of targets not
achieved year to
date
Nr of targets
achieved year to
date
2 1 1 1 1
184
TEDA 2014/15 Mid-year report Page 24 Municipal entity of the City of Tshwane 2006/019396/07
Section 2: Financial Performance
The table below depicts the financial performance of the entity
Original
Budget Roll-over
Adjustments
and Virement Final budget
Actual
amounts on
comparable
basis
Difference
between final
budget and
actual
Percentage
Collection/S
pend
Revenue
Total Revenue 51,556,936 2,461,277 - 54,018,213 27,914,597 26,103,616 52%
Expenditure
Employee costs 28,710,927 541,667 29,252,594 14,498,349 14,754,245 50%
Remuneration of Board Members 2,190,522 -11,000 2,179,522 971,854 1,207,668 45%
General Expenses 17,392,687 958,968 -1,216,977 17,134,678 7,412,383 9,722,295 43%
Marketing, Trade and Investment 990,000 260,642 637,556 1,888,198 660,942 1,227,256 35%
Projects Expenditure 1,500,000 500,000 650,000 2,650,000 - 2,650,000 0%
Operating Expenditure 50,784,136 2,261,277 59,579 53,104,992 23,543,528 29,561,464 44%
Capital Expenditure 772,800 200,000 -59,579 913,221 420,555 492,666 46%
Total Expenditure 51,556,936 2,461,277 - 54,018,213 23,964,083 30,054,130 44%
(Deficit)/Surplus for the year - - - - 3,950,514 -3,950,514
Budget vs Expenditure as at 31 December 2014
185
TEDA 2014/15 Mid-year report Page 25 Municipal entity of the City of Tshwane 2006/019396/07
Section 3: Performance against entity Business Plan
Set out below on Table 3 –9, is the entity’s performance against its KPI s for the six months period.
Table 3: Summary of Strategic Objective 1 achievements for mid-year 2013/14
No Output Performance Indicator
Annual
Target
YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective
measure
1.1
The acquisition of trade
and investment
intelligence
Number of trade and investment
reports/studies 2 2 2 100%
Number of export market briefs
produced 4 briefs 2 2 100%
Number of trade and investment
subscriptions 2 2 2 100%
1.2 Attraction of new
investment
Rand value of committed investment
projects
R500
million - - - Due in quarter 4
Number of new jobs facilitated 250 - - - Due in quarter 4
Number of timeous responses to
potential investment enquiries 50 25 24 96.0%
New platform to reach
investors are been
investigated
Number of potential investors targeted
for specific investment opportunities 5 3 4 133.3%
Number of site visits from investors that
have been targeted 2 1 1 100.0%
1.3
Participate in
TEDA/DTI/GGDA led
trade and investment
initiatives
Number of outward trade and
investment business missions undertaken 7 3 0 0.0%
No funding. Funding request
has been made during
budget adjustment process
Number of inward trade and investment
missions hosted and/or participated in 3 1 3 150.0%
Number of National Pavilions
participated in 3 1 0 0.0% No funding.
1.4
Participate in Industry
Events, Networking,
Information
Dissemination and
Collaboration with
Strategic Alliances
Number of relevant local and
international conferences, seminars,
workshops and symposiums attended
5 3 4 133.3%
Number of theme specific information
dissemination workshops and networking
events hosted for investor and exporter
community
4 2 2 100%
186
TEDA 2014/15 Mid-year report Page 26 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator
Annual
Target
YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective
measure
1.5
To showcase Tshwane
export potential and
investment
attractiveness
Produce one promotion booklet of top
Tshwane exportable products and
services produced
1 - - 0.0% Due in quarter 4
Produce one investment promotion
booklet 1 - - 0.0% Due in quarter 4
Number of exporters profiled in relevant
trade publications 4 2 0 0.0% No funding
Host Annual Exporters Awards 1 - - 0.0% Due in quarter 4
1.6
Provision of export
development and
promotion services
Number of capacity building workshops
4 2
4 150.0%
1.7
To develop and
implement an after-
care programme
Number of companies visited and
profiled 20 10 15 150.0%
Rand value of investment for
expansion/retention
R250
million - - 0.0% Due in quarter 4
Number of jobs created/retained
through expansion/retention 250 - - 0.0% Due in quarter 4
Table 4: Summary of Strategic Objective 2 achievements for mid-year 2013/14
No Output Performance Indicator
Annual
Target
YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective
measure
2.1 Funding model Concept document developed
Funding
model Implementation 0 0.0%
The process is to be fast
tracked by developing
project plans
187
TEDA 2014/15 Mid-year report Page 27 Municipal entity of the City of Tshwane 2006/019396/07
In this current year, detailed design work for projects begun and implementation will be carried out commencing in 2015/16.
Table 5: Summary of Strategic Objective 3 achievements for mid-year 2013/14
No Output Performance Indicator Annual Target
YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective measure
3.1 Development of
Cullinan Area
Needs and demand assessment
(desk top study) 1 1 1 100%
Project Charter 1 1 1 100%
Terms of reference for feasibility
study 1 1 1 100%
3.2
Industrial Park for
Advance Bio
Manufacturing
Project Charter 1 1 1 100%
Funding Application 1 1 1 100%
Feasibility Study 1 - -
3.3 Southern Africa Agro-
Project Charter 1 1 1 100%
Funding Application
1 1 0 0 Internal funds were utilized to
commission a pre-feasibility
study and as such no funding
solicitation was required
Feasibility Study 1 - - Due in quarter 4
3.4 Youth Build
Programme
Partnership Agreement 1 1 1 100%
Implementation
1 1 0 0 Follow-up with City’s Waste
Management department
regarding service level
agreements
3.5 Hammanskraal Leisure
Resort
Project Charter 1 1 1 100%
Partnership agreement
1 1 0 0 Follow-up on the process of
transfer of land and to identify
alternative land to locate
project
Partnership based designs 1 - - Due in quarter 3
3.6 TITIIC Planning and execute the TITIIC
event
Launch of TITTIC
Conference
TITTIC planned for quarter 4.
188
TEDA 2014/15 Mid-year report Page 28 Municipal entity of the City of Tshwane 2006/019396/07
Table 6: Summary of Strategic Objective 4 achievements for mid-year 2013/14
No Output Performance Indicator Annual Target
YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason
for deviation /
Corrective measure
4.1
Manage, develop and
facilitate strategic land
and building portfolio
No. of land parcels identified for
development 1 0 0 0.0%
Land parcels to be
identified in
conjunction with CoT.
Financial analysis will
be done once the
assignment of land
portfolio has taken
place.
Service level agreements entered
into with Developers 1 0 0 0.0%
No. of strategic land and buildings
developed 1 0 0 0.0%
Prepare cash-flow projections on
portfolio of assets
Annual Cash-
flow projections
prepared on the
asset portfolio
Prepare cash
flow projections 0 0.0%
Negotiate third party contracts
No. of third party
contracts
negotiated
0 0 0.0%
Model full life financial analysis for
portfolios
Review and
Update
financial analysis
for portfolios
0 0 0.0%
189
TEDA 2014/15 Mid-year report Page 29 Municipal entity of the City of Tshwane 2006/019396/07
Table 7: Summary of Strategic Objective 5 achievements for mid-year 2013/14
No Output Performance Indicator Annual Target YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective
measure
5.1
Effective
Stakeholder
engagement and
liaison
Amount of capital funding
raised for special purpose
vehice
No. of capital pledges
obtained for projects 4 0 0.0%
Lack of alignment to
available funding
MoU’s signed with stakeholders No. of MoU signed with
stakeholders 8 2 25%
Finalise the outstanding
MOU’s
Service Delivery Agreement
with CoT entered into
New SDA aligned with the
annual business plan and
100% implemented
50.0% 30% 60% Process to amend SDA
underway
Translate Client Value
Management Road map to
campaign briefs
No. of campaign briefs 6 4 66% Lack of alignment to
available funding
Monitor, evaluate and report
on stakeholder management
No. of evaluations and
reports generated 4 0 0.0%
Lack of alignment to
available funding.
5.2
International
investment
outbound and
inbound missions
aligned to market
analysis by City
No. of countries with bilateral
agreements 5 2 0 0.0%
Lack of alignment to
available funding
No. of sister city agreements
entered into 2 1 1 100%
No. of overseas promotional
agents / distributors engaged 4 2 0 0.0%
Follow-ups with
Portuguese embassy in
SA are underway
Establish a one stop investment
and export centre Build and set up
Approval
phase Established 0.0%
Discussions underway
with GGDA to consider
implementing satellite
on-stop shop in Tshwane
5.3 Customer surveys No. of surveys conducted 3 1 2 150.0%
5.4
Aligned vision,
mission and
communication
strategy with that
of the City
Develop alignment strategy
and implementation plan
Annual Review: Strategy &
Business Plan Implement Implementing 100%
190
TEDA 2014/15 Mid-year report Page 30 Municipal entity of the City of Tshwane 2006/019396/07
Table 8: Summary of Strategic Objective 6 achievements for mid-year 2013/14
No Output Performance Indicator Annual Target
YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective
measure
6.1 Increase City’s
competitiveness
Event attracting instrument
designed and delivered
Implementation of
the instrument.
Partner in 2 events
50% 2.0% 4.0% To be implemented
through a partnership
Marketing and Communication
Strategy developed
100% Implementation
plan for 2014 50.0% 5.0% 100%
No. of product packaging 3 2 9 150.0%
No. of Major events & conferences
TEDA bid for on behalf / in
conjunction with the City
1 1 0 0.0%
Design and layout for
Tshwane Story to be
finalized in January
2015
6.2
Launch campaigns
that build a strong
corporate and
destination brand
No. of campaigns launched 2 2 1 50.0%
TITTIC Marketing &
Communication
campaign is underway
and TEDA is to be
launched during TITTIC
in Q4
Corporate identity manual
development
Review manual. Print
additional signage,
name tags and
access cards. One
stop centre branding
and promotion
45% 55.0% 122.2%
6.3
Utilize marketing
platforms to position
and profile TEDA as
a brand
Number of platforms and
marketing activities performed 6 3 11 150.0%
Brand architecture research,
development and alignment
workshop on the
TEDA brand 10% 0% 10% 150.0%
6.4
Communicate
TEDA’s projects and
programmes
Number of placed articles in
different publications 8 4 10 150.0%
Media interactions carried out 4 2 6 150.0%
Communications policy Review policy 0 - 0.0 Due in quarter 3
Electronic newsletter developed
and print copies for circulation
Increase circulation of
newsletter. 4 issues 2 3 150.0%
Press events facilitated 3 1 0 0.0% TITTIC press event
planned for quarter 3
191
TEDA 2014/15 Mid-year report Page 31 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator Annual Target
YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective
measure
Developed partner mailing lists.
10% Increase in
partners formed (per
annum)
4% 4% 100%
2013/14 Annual report produced 1 10% 0 0.0% Work on the look and
feel has begun
6.5
Managing and
regularly updating
website
Updated website and increased
hits
Achieving 1.2 million
hits per annum 500 000 25 806 5.2%
More information will
be loaded in real time
Table 9: Summary of Strategic Objective 7 achievements for mid-year 2013/14
No Output Performance Indicator Annual Target YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective
measure
7.1
Sound Financial
Management policies
and practices
Unqualified audit opinion with no
matters of emphasis
Unqualified audit
opinion 100% 100% 100%
No. payments made within the
prescribed period
90% payments made
within 30 days of the
prescribed period
90% 97.3% 108.1%
No. of SMME’s / BBBEE/ PDI’s owned
companies benefiting from the
TEDA procurement process
70% procurement from
SMME’s / HDI’s owned
companies
70% 80.2% 114.5%
7.2
A well-resourced and
performance
managed workforce
supported by ICT
strategy
Formulate and implement
integrated talent management
strategy
Implement 50% 20% 20% 100%
% of funded positions filled timeously 70% 5% 97% 97% Recruitment is on hold
due to OD process
Job content revised for all positions
on the structure. Competencies
developed, profiled and graded
100% 10% 0 0.0%
On hold until the
finalization of the OD
process
% of staff capacity active in training
or capacity development initiatives
per annum
100% training
conducted as per
annual training plan
60%.0% 20% 33.3%
On hold due to the
implementation of OD
process
Integrated performance
management framework
(comprehensive balanced
scorecard)
100% of staff signed
performance scorecard 20% 118% 150
192
TEDA 2014/15 Mid-year report Page 32 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator Annual Target YTD
Target
YTD
Actual
%
Achievement
for YTD
Comments / Reason for
deviation / Corrective
measure
Design a market related
remuneration structure 90% retention 100% 99% 99%
Outcome of job
profiling & grading will
inform remuneration
structure
Formulate policies that are fair,
equitable, consistent and aligned to
transparent workplace practises
100% HR policies
approved 50% 125.0% 150.0%
Develop & implement ICT Strategy
& Implementation Plan
Implement 30% of ICT
strategy 0 0 0
ICT Strategy developed
and awaiting approval
7.3
Framework for
Planning, monitoring
performance and
reporting on TEDA
objectives
TEDA Strategic Plan developed Review and update the
5 year Strategic Plan
Implement the
strategic plan 100% 100%
Develop and implement a TEDA
monitoring and evaluation tool
Review and maintain
the monitoring tool 100% 100% 100%
Monthly, quarterly and annual
Reporting on TEDA performance
objectives
Monthly, quarterly and
annual reports
generated & submitted
to CoT
Mid-term
report
submitted
100% 100%
Annual TEDA Business Plan
developed
Business Plan Review &
Implement
Implementatio
n of business
plan
100% 100%
7.4 Effective Legal
support services
Quarterly written opinions in
response to requests
Legal advice rendered
(annually)
Legal advice
rendered 100% 100%
7.5 Risk Management
strategy implemented
Develop & Implement Risk
Management (RM) Strategy
No. of strategic risk
monitoring reports
compiled and
submitted to the Board
Strategic risk
monitored 100% 100%
7.6
Internal Audit Plan
developed &
implemented
Develop & Implement IAP
No. of reports issued in
accordance with the
approved IAP
Audit reports
issued 100% 100%
7.7
Ensure Board
effectiveness and
compliance with King
III, MFMA, Municipal
Systems Act,
Companies Act and
Mo
Ensure compliance with Companies
Act, MFMA, MSA, MoI 100% 100% 100% 100%
Manage Board and Committees 70% 70% 70% 100%
Develop and update corporate
governance polices 100% 100% 50% 50%
193
TEDA 2014/15 Mid-year report Page - 33 - Municipal entity of the City of Tshwane 2006/019396/07
Section 4: Assessment of Arrears on municipal taxes and service charges
4.1 Assessment of Municipal Taxes and Service Charges owed to the entity
Not applicable to TEDA.
4.2 Amounts owed by entity for service charges
Not applicable to TEDA.
4.3 Assessment of Directors’ and senior managers’ municipal accounts
Name of
Director/
Executive
Manager
Designation Name of
Municipality
Municipal Account
Name/ Number
Account
Status
Comments
L Vutula Chairperson
S Bahula-Ermais NED
N Sigh NED
FK Sibanda NED
H Gouvelis NED
J Matso NED
Adv
Thubakgale
NED
M Yates NED
CR Mpyane NED
S Mogaladi Chief Executive
Officer
City of
Tshwane
5003 049 547 In order Account
paid up
B Seopela Corporate
Services
K Mahlare Marketing &
Communications
L Mahaye Company
Secretary
M Sebogodi Chief Financial
Officer
T Mafela Trade &
Investment
City of Joburg 552953877 In order Account
paid up
Section 5: Recommendation and Plans for next six months
TEDA’s business plan was reviewed to be in line with the allocated budget for 2014/15 and also
to redefine the set target to make them SMART. The mid-year review looked at status quo,
achievbements, challenges and plans for the next six months. This is mainly under the SDBIP
targets on job creation and investment attraction.
TEDA is going to explore means to capitalise on the Tshepo 10,000 participants and afford
them the opportunity to earn income.
TEDA needs to appreciate its maturity level and focus on its operations. The core business units
within the entity should be capacitated and resourced. The systems and processes will be
given more attention to ensure stronger governance set up.
194
TEDA 2014/15 Mid-year report Page - 34 - Municipal entity of the City of Tshwane 2006/019396/07
CHAPTER FOUR: HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT
Section 1: Human Resource Management
The aim of Human Capital is to create capacity to enable TEDA to effectively execute its
strategic goals, inclusive to this goal is to ensure that the organisation’s people management
practices are aligned to the legislative framework and benchmarked standards. By so doing
TEDA will be enabled to respond to its primary objective which is to “cultivate an environment
within which the City of Tshwane can grow its human capital and the economy”. The entity
has employment policies that provide guidelines to ensure that the organisation’s employment
practises are fair and create an attractive environment for all employees.
The following is the current approved high level organisational structure of TEDA:
As at 31 December 2014, the entity employed 35 staff members in the following areas listed
below:
Table 10: Number of employees per Business Unit
Business Units Total positions filled Vacancies
Office of the CEO 3 5
Company Secretary 3 0
Corporate Services 9 4
Finance Management & Reporting 8 3
Marketing & Communications 6 1
Projects Portfolio Management - 6
Property Asset Management 3 2
Trade & Investment 3 2
Total 35 23
Chief Executive Officer
Corporate
Services
Marketing
&
Communications
Trade &
Investment Promotion
Projects
Portfolio
Management
Finance Management &
Reporting
Property Asset Management
(Vacant)
Executive
Supporting the CEO
(Vacant)
195
TEDA 2014/15 Mid-year report Page - 35 - Municipal entity of the City of Tshwane 2006/019396/07
Age distribution
The age distribution breakdown within TEDA is as follows:
Table 11: Age distribution
Age Range Male Female Total
20-29 1 2 3
30-39 8 14 22
40-49 5 4 9
51-60 0 1 1
61-63 0 0 0
Total 14 21 35
Arrears money owed to the entity by staff
There are no outstanding monies owed by and non-executive Directors of TEDA and staff.
Section 2: Employment Equity
TEDA values Employment Equity as a platform of promoting equal opportunities and fair
treatment in employment through the elimination of unfair discrimination; and implementing
affirmative action as outlined by Employment Equity Act.
TEDA is not required by the Department of Labour to submit a target plan as its current head-
count is less than 50. However, Human Capital intends to set targets to fill vacancies that will
be confirmed on the new organization structure currently being constructed as part of the
Organizational Development Project. The target will enable TEDA to appoint equitably on
leadership levels. The table below demonstrates the progress made in relation to the EE
targets:
Table 12: EE representation per level
A significant number of males is prevalent at Senior Management in comparison to small
representation of the female population.
Level Head count Gender status Equity status
M F A I C W
Executives 5 1 4 5 0 0 0
Senior Managers 8 6 2 7 1 0 0
Managers 7 2 5 7 0 0 0
Specialist 6 1 5 6 0 0 0
Administration 7 4 3 7 0 0 0
Support 2 0 2 2 0 0 0
196
TEDA 2014/15 Mid-year report Page - 36 - Municipal entity of the City of Tshwane 2006/019396/07
The significant representation of females at Executive level is an indication of high regard for
Women Leadership in TEDA.
Table 13: Overall gender & equity status 2014/15
Gender status Equity status
M F A I C W
14 21 34 1 0 0
A total of 99.9% of TEDA employees are African and only 0.01% is Indian. There is no
representation for Coloured or White population. This is an indication to recruit from the Indian,
Coloured and White populations for future.
We remain firm in our commitment to address EE status upon finalization of the new
organization structure.
Section 3: Skills Development and Training
TEDA acknowledges the importance of skills development which plays a pivotal role of
building a sustainable and competitive organization. The benefits of Human Capital
integration is realised at the implementation of training. An interim training plan has been
compiled as advised by development interventions identified through Personal Development
Planning process. Our training focus is aligned to our business plan with a robust focus on
occupational specific intervention and formal educational programmes.
The entity has successfully registered with Services SETA as the relevant SETA which
accommodates entities with a Project Management and Business Development focus. In the
2014/15 financial year, our training should focus on the development of specific competencies
relating to our future strategy for the company.
3.1 Internal training interventions
Training interventions took place internally to synthesize employees about internal policies.
Training focus was on the following:
3.1.1 Code of conduct Policy
It is crucial to make employees aware of the TEDA’s commitment to a policy of fair dealing
and integrity in the conducts of its business. Employees were trained and participating actively
during sessions to become au fait with their responsibility towards the Code of Conduct.
3.1.2 Induction sessions
The aim is to ensure a smooth socialization of employees within TEDA. Executives of various
divisions delivered presentations that highlighted divisional responsibilities to TEDA mandate.
Corporate Services presentation emphasizes the Talent Management Strategy and internal
policies employees should be mindful of at all times.
197
TEDA 2014/15 Mid-year report Page - 37 - Municipal entity of the City of Tshwane 2006/019396/07
3.1.3 Financial competency Development of Supply Chain and Finance officials
Table 13a: Progress report on financial competency development
Financial Competency Development: Progress report Description A.
Total number of
officials employed
by Municipality
(Regulation
14(4)(a) and (c)
Consolidated:
Competency
assessments
completed for A
(Regulation
14(4)(b) and (d)
Consolidated:
Total number of
officials whose
performance
agreements
comply with
Regulation 16
(Regulation
14(4)(f)
Consolidated:
Total number of
officials that meet
prescribed
competency
levels (Regulation
14(4)(e)
Financial officials 4 0 4 0
Accounting officer 0 0 0 0
Chief financial
officer
1 0 1 0
Senior manager 1 0 1 0
Any other financial
officers
2 0 2 0
Supply Chain
Management
officials
3 0 3 0
Head of Supply
Chain
Management unit
0 0 0 0
Supply Chain
Management
senior manager
1 0 1 0
Any other Supply
Chain
Management
officials
2 0 2 0
TOTAL 7 0 7 0
Section 4: Performance Management
Performance Management was adopted as a positive management strategy rather than a
punitive process, and in this way employees felt comfortable to be part of the process.
Performance Management was implemented for all employee levels (including contractors/
temporary staff) in the organisational structure. This has occurred in full cycle for each quarter:
3.1 Contracting of Scorecards and Performance Agreements
The Balanced Scorecard is the tool used for target setting and measurement. The
performance indicators are linked to the Company objectives and the SDBIP scorecard.
Additional objectives such as Core Managerial Competencies are included as part of
Executives and Management Performance Contracts. This is to ensure that Executives and
Management are committed to driving performance in other areas other than operative tasks
such as:
Stakeholder Orientation and focus;
Financial Management;
People Management & empowerment; and
Problem Solving.
198
TEDA 2014/15 Mid-year report Page - 38 - Municipal entity of the City of Tshwane 2006/019396/07
Figure 3: illustration of progress regarding Performance Scorecard compliance
Head count: 38
38 employee contracted
3.2 Contracting of Personal Development Plans
TEDA believes that people empowerment is one of the core elements of building a culture of
high performance. This belief is translated to the implementation of Personal Development
Plans for employees.
Figure 4: Performance Development Plan compliance
Head count: 38
26 employees have PDPs
12 employees (Executives & Senior managers will undergo assessments as part of the
OD project. Assessment report will deduce and recommend competencies for
development and related training.
3.3 Performance Reviews
Interim reviews for first quarter were successfully implemented for all employees. Interim reviews
are significantly encouraged to reinforce the culture of employee engagement and
coaching. This process provides the opportunity to communicate performance feedback and
further advice employees on improvement plans where necessary.
Score Card Compliance Report
Completed: 100%
Contracting of Personal Development Plan
Completed: 79 %
Due for OD assessment: 21 %
199
TEDA 2014/15 Mid-year report Page - 39 - Municipal entity of the City of Tshwane 2006/019396/07
Figure 5: Performance Review for first quarter Compliance
Head count: 38
Performance of 37 employees has been reviewed
Performance of 1 employee has not been reviewed due to maternity leave
Section 5: Employee Benefits
TEDA packages follow the Cost to Company (CTC) structure which includes benefits such as:
Medical fund membership:
TEDA offers two (2) medical aid schemes to the employees and those include Discovery and
Bonitas Medical Schemes.
Retirement fund:
TEDA employee pension is managed by Momentum.
Risk benefits:
The package includes income continuation benefit, severe illness benefit, family funeral
benefit and group life cover.
Section 6: Supply Chain Management and Black Economic Empowerment
In the period under review, TEDA applied the supply chain management policy in all its
dealings with suppliers and contractors. TEDA’s supply chain activities were implemented in
accordance with the Municipal Finance Management Act (MFMA), the Preferential
Procurement Policy Framework Act (PPPFA), and Broad-based Black Economic Empowerment
(BBBEE).
During the period under review, the following achievements were realised:
The DTI’s National compliance target in terms of BEE is 70%.
Overall total procurement commitments (i.e. awards) were R5 590 117, 94 with a BBBEE
achievement of R3 348 234, 71 which equates to 79% against a target of 70%.
All procurement above the value of R200 000 were awarded through the tendering
process and bid committee system. Contracts below a threshold of R200 000 were
awarded through (RFQ) request for quotation and also participating in existing
contracts.
The total procurement commitment for Non-compliant contributor is R232 300, 20
meanwhile level 8 contributor amounts to R2 009 583, 03.
The entity experienced no legal challenges from the public in respect of any of the
contracts awarded during this period.
Performance Review Compliance Report
Completed: 99.9%
Maternity leave: 0.01 %
200
TEDA 2014/15 Mid-year report Page - 40 - Municipal entity of the City of Tshwane 2006/019396/07
CHAPTER FIVE: FINANCIAL PERFORMANCE
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd
(Registration number: 2006/019396/07)
INTERIM FINANCIAL STATEMENTS
201
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014
Table of Contents
TEDA 2014/15 Mid-year report Page - 41 - Municipal entity of the City of Tshwane 2006/019396/07
Contents Page
General Information 43 Accounting Officer’s Responsibilities and Approval 44 Directors Report
45-48
Report of the Audit Committee 49 Report of the Independent Auditors – Auditor General 50 Statement of Financial Position 51 Statement of Financial Performance 52 Statement of Changes in Net Assets 53 Cash Flow Statement 54 Statement of Comparison of Budget and Actual Amounts
55 – 56
Accounting Policies 57 – 71 Notes to the Interim Financial Statements 72 - 85
202
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 General Information
TEDA 2014/15 Mid-year report Page - 42 - Municipal entity of the City of Tshwane 2006/019396/07
Country of incorporation and domicile South Africa Legal form of entity Private Company Company registration number 2006/019396/07 Nature of business and principal activities Facilitate economic development in the Tshwane areas Controlling entity City of Tshwane Metropolitan Municipality Board of Directors Mr L Vutula (Chairperson) Ms RS Bahula- Ermias Mr H Gouvelis Ms LD Haskins (retired in September 2014) Ms CBB Mahlati (retired 10th March 2014) Mr J Matsho Mr CR Mpyane Ms NM Ntsinde (retired in September 2014) Mr FK Sibanda Ms N Singh Mr JL Thubakgale Mr MW Yates Accounting Officer Mr S Mogaladi (Acting CEO)
Chief Financial Officer Ms MC Sebogodi
Physical Address 349 Witch- Hazel Avenue
Eco-origin Building, Block F Highveld Ext. 70, Centurion
0057 Postal Address P. O. Box 11751 Zwartkops 0051 Auditors Auditor-General of South Africa Bankers Standard Bank
203
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014
Accounting Officer’s Responsibilities and Approval
TEDA 2014/15 Mid-year report Page - 43 - Municipal entity of the City of Tshwane 2006/019396/07
The accounting officer is required by the Municipal Finance Management Act (Act 56 of 2003) (MFMA) the Companies Act of South Africa (Act No. 61 of 1973), to maintain adequate accounting records and is responsible for the content and integrity of the Interim financial statements and related financial information included in this report. It is the responsibility of the accounting officer to ensure that the Interim financial statements fairly present the state of affairs of the municipal entity as at the end of the financial year and the results of its operations and cash flows for the year then ended. The external auditors are engaged to express an independent opinion on the Interim financial statements and was given unrestricted access to all financial records and related data. The Interim financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practices (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The Interim financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The accounting officer acknowledges that he is ultimately responsible for the system of internal financial control established by the municipal entity and places considerable importance on maintaining a strong control environment. To enable the accounting officer to meet these responsibilities, the accounting officer sets standards for internal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the municipal entity and all employees are required to maintain the highest ethical standards in ensuring the municipal entity’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the municipal entity is on identifying, assessing, managing and monitoring all known forms of risk across the municipal entity. While operating risk cannot be fully eliminated, the municipal entity endeavors to minimize it by ensuring that appropriate infrastructure, controls, systems and ethical behavior are applied and managed within predetermined procedures and constraints. The accounting officer is of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the Interim financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or deficit. The accounting officer has reviewed the municipal entity’s cash flow forecast for the year to 31 December 2015 and, in the light of this review and the current financial position, acknowledges that the municipal entity will have to secure access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the municipal entity's Interim financial statements. The Interim financial statements have not been audited by the municipal entity's external auditors in accordance with the Companies Act, 2008 (Act No 71 of 2008) and their report is presented on pages ___ to ___. The Interim financial statements set out on pages _____ to _____ which have been prepared on the going concern basis, were approved by the board directors, and accounting officer on ___________________ and signed by: __________________________ Accounting Officer
204
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014
Director’s Report
TEDA 2014/15 Mid-year report Page - 44 - Municipal entity of the City of Tshwane 2006/019396/07
1. Incorporation
The company was incorporated in South Africa on 23 June 2006 and obtained its certificate to commence business on the same day.
2. Review of activities
3. Main business and operations
TEDA was established in June 2006 by the City of Tshwane (CoT) with the main purpose of investment attraction into the City and therefore addressing inequality, unemployment and poverty. TEDA developed six strategic objectives in the 2013/14 financial year flowing from its mandate. The core business of TEDA is made up of Trade and Investment and Project Management Portfolio, with Marketing and Communications unit as a hybrid between support and core business. There is a strong element of business development within the core operations which will be incorporated in the future under one of the units to create a complete value chain. TEDA recognises the City of Tshwane in its capacity as shareholder, as the main stakeholder among the other government and private sector institutions which it has to partner with in executing its mandate. TEDA has formed some strategic partnerships in the year under review with some critical stakeholders for instance, the National Department of Trade and Industry (DTI), the Gauteng Growth and Development Agency (GGDA), SA Chamber of Commerce, SA Embassies abroad and Embassies of Foreign countries in South Africa, SA Economic Attaches’ in Foreign countries, other local and International Trade and Investment Agencies.
4. Important policy decisions and strategic issues facing the entity
TEDA being in its second year of operation is still faced with the challenge of making itself a visible and known brand. The Agency is still striving towards making an impact within the City of Tshwane in the economic development milieu. There is a need for a concerted effort by TEDA to focus on implementation of projects and initiatives that will contribute towards the achievement of the Tshwane Vision 2055. While the CoT funding to TEDA is gradually being tapered down in the medium term period, there are plans to access alternative sources of funding and develop income generating initiatives for future TEDA sustainability. One of the strategic issues facing TEDA is making strategic choices underpinned by guiding philosophical standpoints. For example choices between the agency being the direct provider of services or playing a facilitation role, working in collaboration with partners and other providers or being in competition with them and choosing between many or few offerings with low and high impact respectively against the backdrop of available resources.
5. Comment on significant events that have taken place during the year
In the year under review TEDA has added more human capacity across its support and core units, however the core units still need more capacity in order to achieve TEDA’s business scorecard for the ensuing years. TEDA hosted a funding fair in the latter part of the financial year targeted at small, medium and medium enterprises (SMME’s) and the event attracted approximately 300 participants from a arrange of SMME’s. This was done in conjunction with other government funding agencies for information dissemination on the support and access to funding opportunities that are available for SMME’s. TEDA took part in the China Expo as delegates under the National Department of Trade and Industry. This presented the Agency with an opportunity to market itself among international stakeholders operating within the similar arena of economic development. TEDA also co-sponsored and facilitated the Africa Public Private Partnership event with the aim of exposing TEDA to the African and international markets.
6. Comment on major projects undertaken or completed during the year
TEDA implemented co-funded projects with the City of Tshwane as per the Service Level Agreement entered into between the two parties. TEDA met its funding obligations for these projects and reported on them accordingly. These were:
National Tooling Institute Programme (NTIP) – the tooling academy has absorbed 79 learners in the 2013/14 financial year. These learners are in a programme which will ensure that they are employed within the manufacturing industry;
Hammanskraal Stalls- Some of these stall are complete whilst others are still under construction with completion anticipated in early 2014/15 financial year.
Automotive Industry Development Centre (AIDC). TEDA’s contribution was towards funding of the setting up of the Project Management Office (PMO).
Refurbishment of the Mamelodi rondavels within the proposed cultural precinct.
205
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014
Director’s Report
TEDA 2014/15 Mid-year report Page - 45 - Municipal entity of the City of Tshwane 2006/019396/07
One of the important projects managed by TEDA is the Tshwane International Trade and Investment Conference (TITIIC) aimed at promoting the City as an investment destination. This project is scheduled for launch in May 2015.
7. Information on predetermined objectives
Six strategic objectives were developed in line with the TEDA mandate. Interim and quarterly targets were set as milestones to achieve the objectives. These were duly reported on, on a monthly, quarterly and mid- term basis to the Board as well as the City of Tshwane. TEDA had challenges in meeting its set targets in the 2013/14 financial year due to the limited resources, both human and financial. However, a performance improvement plan was developed towards ensuring that some targets were adequately met through the limited means available. Notably targets on the SMME support improved in the last quarter of 2013/14 due to the inaugural Funding Fair hosted by TEDA. A portfolio of evidence was also created for each quarter performance reports to substantiate the achieved milestones. The detailed report on how well TEDA did on the key performance indicators and targets is contained in the chapter 3 of the Interim performance report.
8. Policies Approved by the Board
A total of 14 institutional policies were approved in the year under review. Additional policies are being developed to ensure that TEDA subscribes fully to imperatives such as “triple bottom line” reporting in terms of Corporate Governance frameworks.
9. Staffing
In the year under review TEDA made strides in appointing Executives in all business and support units. For the ensuing years the agency will have full human resource capacity comprising suitable qualified staff to enable TEDA to deliver on its mandate. This is in light of the Organisational Design exercise which has started and which will not only advise on the appropriate structure for TEDA in line with its strategy but also define the Human Capital model for TEDA in line with the envisaged new status of a larger entity.
10. Going concern
Tshwane Economic Development Agency has an accumulated loss for the period of R4 million. The Interim financial statements have been prepared on a going concern basis as the directors have no reason to believe that the entity will not be a going concern in the foreseeable future. The entity is wholly owned by the City of Tshwane and the municipality has no intention to liquidate the entity.
11. Subsequent events
The directors are not privy to any matter or circumstance arising since the end of the financial year that can significantly affect the financial results.
12. Value Added Tax
The entity is registered for VAT effective from 1st July 2014.
13. Share capital and equity
There were no changes in the authorised or issued share capital of the entity during the year under review.
14. Directors’ personal financial interest
The Directors have declared that they do not have any personal interests in the contracts entered into by the entity.
15. Directors
The Directors of the entity during the year under review and to the date of this report are as follows: Name Nationality Changes
South African Mr L Vutula (Chairperson) South African Ms RS Bahula- Ermias South African
206
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014
Director’s Report
TEDA 2014/15 Mid-year report Page - 46 - Municipal entity of the City of Tshwane 2006/019396/07
Mr H Gouvelis South African Ms LD Haskins South African Retired in September 2014 Ms CBB Mahlati South African Retired on the 10th March 2014 Ms J Matsho South African Mr CR Mpyane South African Ms NM Ntsinde South African Retired in September 2014 Mr FK Sibanda South African Ms N Singh South African
Mr JL Thubakgale South African
Mr MW Yates South African
16. Corporate Governance
The Directors are committed to promoting a high ethical and performance excellence culture within the company and to ensuring the highest standards of corporate governance compliance, corporate social responsibility, risk management and prudent financial management. The Board is responsible to the company’s shareholder, the City of Tshwane, for the implementation of the shareholder compact and long term business strategy through oversight on the management of the company’s operations in line with the company’s vision, i.e. TEDA strives to be a leading African economic development agency.
The Board of Directors confirms that the company has, during the year under review, complied with the King Code on Corporate Governance (King III).
Board appraisals were not performed due to lack of sufficient funds for this purpose.
The salient features of the entity’s adoption of King III are outlined below:
17. Board of directors
The Board:
Retains oversight control over the entity, its plans and strategy; Acknowledges its responsibilities as to strategy, compliance with internal policies, laws and regulations,
effective risk management and performance measurement, transparency and effective communication both internally and externally by the entity.
Is of a unitary structure comprising 11 non-executive directors all of whom are independent non-executive directors as defined in the code.
18. Director Development
The entity has during the year under review provided corporate governance training to its Directors.
19. Board Committees
The Board has delegated certain functions to the following well-structured committees. All board members with the exception of the chairperson serve in more than one committee. (Detail relating to the frequency of meetings and attendance of committees is contained in the performance report)
20. Finance and Risk Committee
The committee comprises eight non-executive directors. The committee exercise oversight role on finance and risk related matters.
21. Projects Committee
The committee comprises six non-executive directors. The committee exercise oversight role on the planning and execution the projects that are in line with the entity’s business plan. It also monitors the performance and spending progress of the projects.
207
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014
Director’s Report
TEDA 2014/15 Mid-year report Page - 47 - Municipal entity of the City of Tshwane 2006/019396/07
22. Remuneration Committee
This committee comprises eight non-executive directors. The committee exercise oversight role on human resources and remuneration matters affecting the entity.
23. Social and Ethics Committee
The committee was established in terms of section 43 of the Companies Regulations, 2011 and has four members. This committee exercises its responsibilities in terms of subsection (5) of the Regulations.
24. Chairperson and Chief Executive
The chairperson is a non-executive and independent director (as defined by the King Code). The roles of Chairperson and Chief Executive Officer (CEO) are separate. The collective responsibilities of management vest in the CEO and as such the CEO bears the ultimate responsibility for all day to day management functions. The TEDA Board delegates responsibilities to management through the CEO, who in turn sub-delegates to Executives reporting to him.
25. Company Secretary
The Company Secretary was appointed with effect from 01 August 2013 and performs the functions as required in terms of section 88 of the Companies Act, 2008.
26. Audit Committee
The Audit Committee function is performed by the group audit and performance committee established by the City of Tshwane for all its municipal entities.
27. Risk Management
The entity has performed risk assessment and compiled a risk register for 2014/15.
28. Internal Audit
The entity utilised the shared service provided by the City of Tshwane’s group internal audit unit to perform internal audit functions. 10. Holding entity
The entity is wholly owned by the City of Tshwane Metropolitan Municipality. 11. Auditors
The Auditor-General of South Africa will continue in office in accordance with section 90 of the Companies Act of South Africa and section 92 of the Municipal Finance Management Act. 12. Dividends
No dividends were declared for the year under review. _________________ L. Vutula Chairperson: Board of Directors
______________ Date
208
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the year ended 31 December 2014
Report of Audit Committee
TEDA 2014/15 Mid-year report Page - 48 - Municipal entity of the City of Tshwane 2006/019396/07
209
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014
Report of the Independent Auditor – Auditor General
TEDA 2014/15 Mid-year report Page - 49 - Municipal entity of the City of Tshwane 2006/019396/07
210
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Statement of Financial Position
TEDA 2014/15 Mid-year report Page - 50 - Municipal entity of the City of Tshwane 2006/019396/07
Notes
2015 (R)
2014 (R)
ASSETS
Current assets 12,581,670 7,637,871
Cash and Cash Equivalents 4 8,682,748 5,152,789 Other Receivables 5 202,069 255,350 Prepayments 6 2,899,593 2,229,732 Input VAT 7 797,260 -
Non-Current Assets 8,912,156 9,934,891
Property, Plant and Equipment 8 8,457,407 9,756,622 Intangible Assets 9 221,689 178,269 Deferred Taxation 10 233,060 -
Total assets 21,493,826 17,572,762
LIABILITIES Current Liabilities 17,090,999 9,342,888
Trade and other Payable 11 4,815,718 3,809,736 Unspent Grant 12 9,203,406 2,461,277 Taxation 23 3,071,875 3,071,875 Non-Current Liabilities 660,329 465,451
Operating lease 13 660,329 455,751 Deferred Taxation 10 - 9,700
Total liabilities 17,751,328 9,808,339
Net Assets 3,742,498 7,764,423
Shareholders’ equity 14 1,000 1,000 Accumulated surplus 3,741,498 7,763,423 Net Assets 3,742,498 7,764,423
211
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Statement of Financial Performance
TEDA 2014/15 Mid-year report Page - 51 - Municipal entity of the City of Tshwane 2006/019396/07
Notes 2015 2014
(R) (R) Revenue
Exchange transactions 15.1
Interest earned 62,033 176,095 Other operating income 33,650 4,250 Non-exchange revenue 15.2 Grant revenue recognised 21,057,871 59,075,560 Total Revenue 21,153,554 59,255,905
Expenses
Employees costs 16 (16,711,751) (19,452,372) Remuneration of Board Members 17 (923,107) (3,397,149) Depreciation and amortisation expense 18 (1,615,884) (1,895,453) General Expenses 19 (5,499,098) (11,404,005) Projects 20 (392,996) (13,425,376) Marketing, Trade and Investment 21 (261,942) (2,646,887) Loss on assets written off 22 (13,459) (62,655) Total Expenditure (25,418,237) (52,283,897) Surplus (Loss) before taxation (4,264,683) 6,972,008
Taxation 23 242,758 (1,963,079)
Surplus (Loss) for the period (4,021,925) 5,008,929
Attributable to:
Net Asset holders of the Entity (4,021,925) 5,008,929
212
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Statement of Changes in Net Assets
TEDA 2014/15 Mid-year report Page - 52 - Municipal entity of the City of Tshwane 2006/019396/07
Note Share capital
and equity Accumulated
Surplus/(Deficit) Total net
assets
(R) (R)
Balance at 01 July 2013 as restated
1,000 2,754,494 2,755,494
Changes in net assets
Surplus for the year
- 5,008,929
5,008,929
Total changes
-
5,008,929
5,008,929
Balance at 01 July 2014
1,000 7,763,423
7,764,423
Changes in net assets
Surplus (Loss) for the period
- (4,021,925) (4,021,925)
Total changes
- (4,021,925) (4,021,925)
Balance as at 31 December 2014
1,000 3,741,498 3,742,498
213
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Cash Flow Statement
TEDA 2014/15 Mid-year report Page - 53 - Municipal entity of the City of Tshwane 2006/019396/07
Note 2015 2014
(R) (R)
Cash flows from operating activities
Receipts 27,914,597 47,661,431
Transfers and Subsidies 27,800,000 47,500,000 Interest income received 80,947 157,181 Receipts from sale of tender documents 33,650 4,250 Payments (23,964,083) (47,720,048)
Compensation of Employees and Board Fees (15,470,203) (22,411,471) Goods and Services (8,493,880) (25,308,577) Net cash Generated from operating activities 24 3,950,514 (58,617)
Net cash outflows from operating activities
3,950,514 (58,617)
Cash flows from investing activities
(420,555) (10,037,481)
Purchase of Motor Vehicles - - Purchase of Office Equipment (30,717) (576,800) Purchase of Computer Equipment (87,648) (1,304,086) Purchase of Office Furniture and Fixtures (222,190) (7,968,717) Purchase of Intangible Assets (80,000) (187,878)
Cash flows from financing activities - (588,482)
Loan received from shareholders - - Loan repayment to the shareholders - (588,482) Net Increase (Decrease) in cash and cash equivalents
3,529,959 (10,684,581)
Cash and cash equivalents at the beginning of the period
5,152,789 15,837,370
Cash and cash equivalents at the end of the period 25 8,682,748 5,152,789
214
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Statement of Comparison of Budget and Actual Amounts Budget prepared on cash basis of accounting
TEDA 2014/15 Mid-year report Page - 54 - Municipal entity of the City of Tshwane 2006/019396/07
Original Budget
Roll-over Adjustment
s and Virement
Final budget
Actual amounts on comparable
basis
Difference between
final budget and actual
Percentage Spend
Refer Note
Revenue
Revenue from Non-exchange transactions 15.1
City of Tshwane- Transfers and rollover funds 47,500,000 2,461,277 - 49,961,277 23,750,000
26,211,277 48%
Revenue from exchange transactions
- 15.2
Rental income from CoT 4,056,936 4,056,936 4,050,000
6,936 99.9%
Interest Income - - 80,947 -
80,947 Other receipts and Operating Income (Tender Documents Sales) - - 33,650
-33,650
Total Revenue 51,556,936 2,461,277 - 54,018,213 27,914,597 26,103,616 52%
Expenditure
Employee costs (28,710,927) (541,667) (29,252,594) (14,498,349) (14,754,245) 50%
Remuneration of Board Members (2,190,522) - 11,000 (2,179,522) (971,854) (1,207,668) 45% 17
General Expenses (17,392,687) (958,968) 1,216,977 (17,134,678) (7,412,383) (9,722,295) 43% 19 and 21
Marketing, Trade and Investment (990,000) (260,642) (637,556) (1,888,198) (660,942) (1,227,256) 35%
Projects Expenditure (1,500,000) (500,000) (650,000) (2,650,000) - (2,650,000) 0% 20
Operating Expenditure (50,841,136) (2,261,277) (59,579) (53,104,992) (23,543,528) (29,561,464) 44%
Capital Budget (772,800) (200,000) 59,579 (913,221) (420,555) (492,666) 46% 27
Total Expenditure (51,556,936) (2,461,277) - (54,018,213) (23,964,083) (30,054,130) 44%
(Deficit)/Surplus for the year - - - - 3,950,514 (3,950,514) Actual Amount on Comparable Basis as presented in the Budget and Actual Comparative Statement
- - - -
Reconciliation (Basis Difference)
Loss on assets written off (13,459)
215
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Statement of Comparison of Budget and Actual Amounts Budget prepared on cash basis of accounting
TEDA 2014/15 Mid-year report Page - 55 - Municipal entity of the City of Tshwane 2006/019396/07
Operating Lease Liability (204,578)
Statement of Comparison of Budget and Actual Amounts (Continues)
Depreciation and Amortisation of Intangible Assets (1,615,884)
(Increase) in prepaid expense 669,861
Decrease (Increase) in receivables (53,281)
(Increase) in VAT Input 797,260
Increase in trade and other payables (1,052,987)
Increase (Decrease) in deferred income (6,742,129)
Taxation 242,758 Actual Amount in the Statement of Financial Performance
(4,021,925)
216
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 56 - Municipal entity of the City of Tshwane 2006/019396/07
The principal accounting policies applied in the preparation of these Interim Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
1. Basis of Preparation
1.1 Statement of Compliance
The Interim financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board and Municipal Financial Management Act No 56 of 2003. Those relevant to TEDA are listed below; Standard number Standard Description
GRAP1 (as revised 2012) Presentation of Financial Statements
GRAP2 (as revised 2012) Cash Flow Statements
GRAP3 (as revised 2012) Accounting policies, changes in accounting estimates and errors
GRAP9 (as revised 2012) Revenue from exchange transactions
GRAP13 (as revised 2012) Leases GRAP14 (as revised 2012) Events after the reporting date GRAP17 (as revised 2012) Property, plant and equipment GRAP19 (as revised 2012) Provisions, contingent liabilities and contingent assets GRAP20 (as revised 2012) Related parties GRAP21 (as revised 2012) Impairment of non-cash generating assets GRAP23 (as revised 2012) Revenue from non-exchange transactions
GRAP24 (as revised 2012) Presentation of budget information in the Financial Statements
GRAP25 (as revised 2012) Employee benefits GRAP31 (as revised 2012) Intangible assets GRAP104 (as revised 2012) Financial Instruments IAS12 (as revised in 1998) Income Taxes
1.2 Basis of Measurement, Functionality and presentation currency
These Interim financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention unless specified otherwise. They are presented in South African Rand, which is the entity’s functional currency.
1.3 Significant judgements and sources of estimation uncertainty In preparing the Interim financial statements, management is required to make estimates and assumptions that affect the amounts represented in the Interim financial statements and related disclosures. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Interim financial statements are disclosed below.
1.3.1 Trade receivables and/or loans and receivables
The entity assesses its trade receivables and loans and receivables for impairment at each statement of financial position date. In determining whether an impairment loss should be recorded in the statement of financial performance, the entity makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The entity assesses its trade receivables and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in surplus or deficit, the entity makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. Each receivable is reviewed individually at year end.
217
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 57 - Municipal entity of the City of Tshwane 2006/019396/07
1.3.2 Property, plant and equipment The entity’s management determines the estimated useful lives and residual values of property, plant and equipment. These assessments are made on an Interim basis and use historical evidence and current economic factors to estimate the values. Administrative computer equipment, office furniture and equipment, exhibits and motor vehicles are not componentised. These assets do not have significant parts that are considered to have an estimated useful life different to the estimated useful life of the asset as a whole.
1.3.3 Fair value estimation
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the entity for similar financial instruments. The carrying amount of cash and cash equivalents, trade and other receivables and trade and other payables approximated their fair values due to the short-term maturities of these assets and liabilities.
1.3.4 Impairment testing
The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. If the recoverable amount is less than the carrying amount, an impairment loss should be recognised in the statement of financial performance.
1.3.5 Provisions
Provisions were raised and management determined an estimate based on the information available. Additional disclosures of these estimates of provisions are included in note 10.1.
1.3.6 Taxation
Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The entity recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The entity recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the entity to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the entity to realise the net deferred tax assets recorded at the statement of financial position date could be impacted. Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. The entity establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company’s domicile. As the Company assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognised. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable surplus will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable surplus together with future tax planning strategies.
1.3.7 Effective interest rate
The entity used the prime interest rate to discount future cash flows.
1.3.8 Allowance for doubtful debts
On debtors an impairment loss is recognised in surplus and deficit when there is objective evidence that it is impaired. The impairment is measured as the difference between the debtors carrying amount and the present value of estimated future cash flows discounted at the effective interest rate, computed at initial recognition.
218
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 58 - Municipal entity of the City of Tshwane 2006/019396/07
1.4 Property, plant and equipment
Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period.
The cost of an item of property, plant and equipment is recognised as an asset when: it is probable that future economic benefits or service potential associated with the item will flow to the
entity; and the cost of the item can be measured reliably.
Property, plant and equipment were initially measured at cost.
The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost.
Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at date of acquisition.
The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories.
Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management.
Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses.
Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Average useful life
Computer equipment 3 years Furniture and Fixtures 3 – 16 years Motor Vehicle 5 years Office equipment 5 – 8 years
The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset.
Items of entity are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset.
The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. The gain or loss arising from the de-recognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. Gains shall not be classified as revenue.
Assets which the agency holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are not accounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the entity.
219
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 59 - Municipal entity of the City of Tshwane 2006/019396/07
1.5 Intangible assets
An asset is identified as an intangible asset when it: is capable of being separated or divided from an entity and sold, transferred, licensed, rented or
exchanged, either individually or together with a related contract, assets or liability; or arises from contractual rights or other legal rights, regardless whether those rights are transferable or
separate from TEDA or from other rights and obligations.
An intangible asset is recognised when: it is probable that the expected future economic benefits or service potential that are attributable to the
asset will flow to the TEDA; and the cost or fair value of the asset can be measured reliably.
Intangible assets are initially recognised at cost.
An intangible asset acquired through a non-exchange transaction, the cost shall be its fair value as at the date of acquisition.
Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.
An intangible asset arising from development (or from the development phase of an internal project) is recognised when: it is technically feasible to complete the asset so that it will be available for use or sale. there is an intention to complete and use or sell it. there is an ability to use or sell it. it will generate probable future economic benefits or service potential. there are available technical, financial and other resources to complete the development and to use or
sell the asset. the expenditure attributable to the asset during its development can be measured reliably.
Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment Interimly and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.
The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.
Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.
Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.
Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:
Item Useful life
Computer software 3 years
Intangible assets are derecognised: when no future economic benefits or service potential are expected from its use or disposal. The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It is recognised in surplus or deficit when the asset is derecognised.
1.6 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity.
220
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 60 - Municipal entity of the City of Tshwane 2006/019396/07
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibles.
A financial asset is: cash; a residual interest of another entity; or a contractual right to:
receive cash or another financial asset from another entity; or exchange financial assets or financial liabilities with another entity under conditions that are
potentially favourable to the entity.
A financial liability is any liability that is a contractual obligation to: deliver cash or another financial asset to another entity; or exchange financial assets or financial liabilities under conditions that are potentially unfavourable to
the entity.
Financial instruments at fair value comprise financial assets or financial liabilities that are instruments held for trading. A financial instrument is held for trading if: it is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or on initial recognition it is part of a portfolio of identified financial instruments that are managed together
and for which there is evidence of a recent actual pattern of short term profit-taking; non-derivative financial assets or financial liabilities with fixed or determinable payments that are
designated at fair value at initial recognition; and financial instruments that do not meet the definition of financial instruments at amortised cost or financial
instruments at cost.
Classification
The entity has the following types of financial assets (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:
Class Category
Cash and cash equivalent Financial asset measured at amortised cost Receivable from exchange transactions Financial asset measured at amortised cost
The entity has the following types of financial liabilities (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:
Class Category
Payables from Exchange transaction Financial liability measured at amortised cost
Initial recognition
The entity recognises a financial asset or a financial liability in its statement of financial position when the entity becomes a party to the contractual provisions of the instrument.
Transaction costs are recognised as part of the cost of the instrument. Subsequent to initial recognition these instruments are measured as set out above.
1.6.1 Financial Risk Management
Overview
The entity has exposure to the following risks from its use of financial instruments: • Credit risk; • Liquidity risk; and • Interest rate risk.
221
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 61 - Municipal entity of the City of Tshwane 2006/019396/07
This note presents information about the entity’s exposure to each of the above risks, the entity’s objectives, policies and processes for measuring and managing risk, and the entity’s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the entity’s risk management framework. The entity’s risk management policies are established to identify and analyse the risks faced by the entity, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the entity’s activities. The entity aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Credit risk
Credit risk is the risk of financial loss to the TEDA if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the TEDA’s receivables from customers. Potential concentrations of credit risk consist mainly of cash and cash equivalents. Deposits
TEDA limits its counterparty exposures from its money market investment operations by only dealing with well-established financial institutions of high quality credit standing as approved by the National Treasury. The credit qualities of counterparties are also reviewed on a continuous basis by the National Treasury. Liquidity risk
Liquidity risk is the risk that TEDA will not be able to meet its financial obligations as they fall due. The entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the entity’s reputation. The entity receives government grants every year based on budget requirements. Interest rate risk
TEDA has adopted a policy of ensuring that the entity’s income and operating cash flows are substantially independent of changes in market interest rates, due to the underlying nature of the business. TEDA has no interest bearing assets or liabilities. Accordingly the entity’s income and expenses are substantially independent of changes in markets rates of interest. As a result, changes in the market rate of interest have a negligible impact on the financial performance of the entity. Capital management TEDA has developed systems and internal controls that are sufficient and effective in maintaining efficient levels of both components of working capital, current assets and current liabilities. The working capital management ensures that TEDA has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.
1.7 Employee benefits Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the entity has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Post-employment benefits: Defined contribution plans
Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.
Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined contribution plans where the entities obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan.
222
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 62 - Municipal entity of the City of Tshwane 2006/019396/07
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit in surplus or deficit when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund Post-employment benefits: Defined benefit plans
These post-employment benefit plans other than defined contribution plans. Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and sometimes its employees, into an entity, or fund, that is legally separate from the reporting entity and from which the employee benefits are paid. The payment of funded benefits when they fall due depends not only on the financial position and the investment performance of the fund but also on an entity‘s ability (and wi llingness) to make good any shortfall in the fund‘s assets. Therefore, the entity is, in substance, underwriting the actuarial and investment risks associated with the plan. TEDA does not participate in any defined benefit plan as at 31 December 2014.
Medical benefits
The entity provides medical benefits for its employees through defined contribution plans. The entity has no further payment once contributions have been paid. The contributions are recognised as employee benefit expenses in profit or loss in the periods during which the services are rendered by the employees. Bonus plans
The entity recognises a provision for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation as a result of services received from the employee and the obligation can be measured reliably. Leave entitlement
Employee entitlements to Interim leave are recognised when they accrue. An accrual is raised for the estimated liability for Interim leave as a result of services rendered by employees up to the reporting date. The related expense is recognised as employee benefit expenses in profit or loss.
1.8 Income tax
Current tax assets and liabilities
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the Statement of Financial Position date. Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting surplus nor taxable profit (tax loss). A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable surplus will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting surplus nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable surplus will be available against which the unused tax can be utilised. Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except:
223
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 63 - Municipal entity of the City of Tshwane 2006/019396/07
When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting surplus nor taxable surplus or deficit
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable surplus will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax deficit can be utilised, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting surplus nor taxable surplus or loss. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable surplus will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable surplus will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
1.9 Provisions and Contingencies
Provisions are recognised when the entity has a present obligation as a result of a past event, for which it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the obligation. All the provisions of the entity are short-term in nature and measured at present value of the expenditures expected to be required to settle the obligation.
Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement does not exceed the amount of the provision.
Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the obligation.
Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognised as an interest expense.
A provision is used only for expenditures for which the provision was originally recognised. Provisions are not recognised for future operating deficits.
If an entity has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and measured as a provision.
A constructive obligation to restructure arises only when an entity: has a detailed formal plan for the restructuring, identifying at least:
the activity/operating unit or part of a activity/operating unit concerned; the principal locations affected; the location, function, and approximate number of employees who will be compensated for services
being terminated;
224
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 64 - Municipal entity of the City of Tshwane 2006/019396/07
the expenditures that will be undertaken; and when the plan will be implemented; and has raised a valid expectation in those affected that it will carry out the restructuring by starting to
implement that plan or announcing its main features to those affected by it.
A restructuring provision includes only the direct expenditures arising from the restructuring, which are those that are both: necessarily entailed by the restructuring; and not associated with the on-going activities of the entity
No obligation arises as a consequence of the sale or transfer of an operation until the entity is committed to the sale or transfer, that is, there is a binding agreement.
Contingent assets and contingent liabilities are not recognised but disclosed in the financial statements.
1.10.2 Revenue from non-exchange transactions
Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.
1.10 Revenue
1.10.1 Revenue from exchange transactions
Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners.
An exchange transaction is one in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
1.10.1 Revenue from exchange transactions (Continues)
Measurement
Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.
Rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied:
• the amount of revenue can be measured reliably; • it is probable that the economic benefits or service potential associated with the transaction will flow to
the entity; • the stage of completion of the transaction at the reporting date can be measured reliably; and • the costs incurred for the transaction and the costs to complete the transaction can be measured
reliably.
When services are performed by an indeterminate number of acts over a specified time frame, revenue is recognised on a straight line basis over the specified time frame unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of completion is determined by total services to be performed.
225
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 65 - Municipal entity of the City of Tshwane 2006/019396/07
Recognition
An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow. As the entity satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction.
Measurement
Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the entity.
When, as a result of a non-exchange transaction, the entity recognises an asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue.
The transfer from City of Tshwane Metropolitan Municipality is recognised when it is probable that future economic benefits will flow to TEDA and when the amount can be measured reliably. A transfer is recognised as revenue to the extent that there is no further obligation arising from the receipt of transfer payment.
Conditions on transferred assets are stipulations that specify that the future economic benefits or service potential embodied in the asset is required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor.
1.11 Finance Income
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in the Statement of Financial Performance, using the effective interest method.
1.12 Unauthorised, Irregular, Fruitless and wasteful expenditure
Unauthorised expenditure is treated as a current asset in the statement of financial position until such expenditure is recovered from a third party or funded from future revenue.
Irregular expenditure means expenditure, other than unauthorised expenditure, incurred in contravention of or not in accordance with a requirement of any applicable legislation, including the Municipal Finance Management Act, the State Tender Board Act, or any regulations made in terms of this act, or any provincial legislation providing for procurement procedures in that provincial government.
Irregular expenditure is treated as expenditure in the Statement of financial performance after approval per the departmental delegations.
Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned
Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. Fruitless and wasteful expenditure must be recovered from the responsible official (a debtor account should be raised), or the vote if the responsible official cannot be determined. It is treated as current assets in the statement of financial position until such expenditure is recovered from the responsible official or funded from future revenue.
1.13 Related parties
The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the national sphere of government are considered to be related parties.
Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions.
226
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 66 - Municipal entity of the City of Tshwane 2006/019396/07
Close members of the family of a person are considered to be those family members who may be expected to influence, or be influenced by, management in their dealings with the entity.
Only transactions with related parties not at arm’s length or not in the ordinary course of business are disclosed.
1.14 Key management personnel
The key management of TEDA refers to the Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Executive Directors.
1.15 Prior year errors Prior year errors are omissions from, and misstatements in, an entity’s financial statements for one or more prior periods arising from failure to use or the misuse of reliable information that was available when the financial statements for that period were issued, and could have been reasonably expected to be taken into account in those financial statements. All prior year errors are corrected retrospectively to the earliest period practicable. Comparative amounts for prior years in which the error occurred are restated.
1.16 Commitments
Commitments are legal obligations to undertake in a given way, at a given time in the future. Usually commitments refer to the requirement for parties to a futures contract to make or receive delivery of the underlying commodities on the expiration date of the contract or through a valid purchase order.
1.17 Budget information
Budget information in accordance with GRAP 1 and 24, has been provided in a separate disclosure note to these Interim financial statements. General purpose financial reporting by TEDA shall provide information on whether resources were obtained and used in accordance with the legally adopted budget. The Interim financial statements and the budget are on a different basis of accounting therefore a comparison with the budgeted amounts for the reporting period have been included in the Statement of comparison of budget and actual amounts.
1.18 Comparative figures
Prior year comparatives
When the presentation or classification of items in the Interim financial statements is amended, prior period comparative amounts are also reclassified and restated, unless such comparative reclassification and / or restatement is not required by a Standard of GRAP.
The nature and reason for such reclassifications and restatements are also disclosed.
Where material accounting errors, which relate to prior periods, have been identified in the current year, the correction is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly.
Where there has been a change in accounting policy in the current year, the adjustment is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly.
The presentation and classification of items in the current year is consistent with prior periods.
1.19 Offset
Where a legally enforceable right of offset exists for recognised financial assets and financial liabilities, and there is, an intention to settle the liability and realise the asset simultaneously, or to settle on a net basis, all related financial effects are offset.
1.20 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
227
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 67 - Municipal entity of the City of Tshwane 2006/019396/07
Operating leases - lessee
All leases that TEDA enters into as a lessee, and where the lessor retains substantially all the risks and rewards of ownership of the underlying asset, are classified as operating leases. Payments made under operating leases are charged against revenue on a straight-line basis over the term of the lease.
2. New standards and interpretations
2.1 Approved Standards and interpretations issued, but not yet effective
Standard number Standard name Effective date (if applicable)
GRAP 18 Segment Reporting No effective date GRAP 20 Related Party Disclosures final – Original No effective date GRAP 32 Service Concession arrangements No effective date
GRAP 105 Transfer of Functions Between Entities Under Common Control – Original No effective date
GRAP 106 Transfer of Functions Between Entities Not Under Common Control – Original No effective date
GRAP 107 Mergers – Original No effective date GRAP 108 Statutory receivables No effective date GRAP 18 Segment Reporting: The standard requires the identification and aggregation of the operating segments of the entity into reportable segments. For each of the reportable segments identified details of the financial performance and financial position will be disclosed. The precise impact of this on the financial statements of the entity is still being assessed but it is expected that this will only result in additional disclosures without affecting the underlying accounting. This standard does not yet have an effective date. GRAP 20 Related Party Disclosures final – Original:
This Standard requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in the consolidated and separate financial statements of the reporting entity in accordance with the Standard of GRAP on Consolidated and Separate Financial Statements. This Standard also applies to individual financial statements.
Related party transactions and outstanding balances within an economic entity are to be disclosed in an entity’s financial statements. Intra-group related party transactions and outstanding balances are eliminated in the preparation of the consolidated financial statements of the economic entity. The entity has early adopted the standard and its disclosure requirements, which prompt the entity to make separate disclosures about the major classes of transactions with management that they have undertaken, refer to Note 16 and 17 of the Interim financial statements. GRAP 32 Service Concession arrangements – Original:
A service concession arrangement is a contractual arrangement between a grantor and an operator in which: (a) the operator uses the service concession asset to provide a mandated function on behalf of the grantor for a specified period of time; and (b) the operator is compensated for its services over the period of the service concession arrangement. A service concession asset is an asset used to provide a mandated function in a service concession arrangement that: (a) is provided by the operator which: (i) the operator constructs, develops, or acquires from a third party; or (ii) is an existing asset of the operator; or (b) is provided by the grantor which: (i) is an existing asset of the grantor; or (ii) is an upgrade to an existing asset of the grantor. Recognition and measurement of a service concession asset
The grantor shall recognise an asset provided by the operator and an upgrade to an existing asset of the grantor as a service concession asset if:
228
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 68 - Municipal entity of the City of Tshwane 2006/019396/07
(a) the grantor controls or regulates what services the operator must provide with the asset, to whom it must provide them, and at what price; and (b) the grantor controls—through ownership, beneficial entitlement or otherwise—any significant residual interest in the asset at the end of the term of the arrangement. The grantor shall initially measure the service concession asset at fair value. Where the grantor recognises a service concession asset in accordance with paragraph .07 (or paragraph .08 for a whole-of-life asset), the grantor shall also recognise a liability. The grantor shall not recognise a liability when an existing asset of the grantor is reclassified as a service concession asset in accordance with paragraph .10, except in circumstances where additional consideration is provided by the operator, as noted in paragraph.13. The entity has not yet adopted the standard and there should be no impact on the Interim financial statements as no concession arrangements have taken place. GRAP 105 Transfer of Functions Between Entities Under Common Control - Original:
The standard refers to a transaction or event in which an acquirer can be identified, and that occurs between entities under common control. A transfer of functions between entities under common control is a reorganisation and/or reallocation of functions between entities that are ultimately controlled by the same entity before and after a transfer of functions, and that control is not transitory. For a transaction or event to occur between entities under common control, the transaction or event needs to be undertaken between entities within the same sphere of government or between entities that are part of the same economic entity. Entities that are ultimately controlled by the same entity before and after the transfer of functions are within the same economic entity. The extent of non-controlling interests in each of the entities that are involved in a transfer of functions before and after the transfer of functions is not relevant in determining whether the transaction or event involves entities under common control.
Recognition and measurement Accounting by the acquirer Para.35 As of the transfer date, the acquirer shall recognise the purchase consideration paid (if any) to the
transferor and all the assets acquired and liabilities assumed in a transfer of functions. The assets acquired and liabilities assumed shall be measured at their carrying amounts.
Accounting by the transferor Para.51 As of the transfer date, the transferor shall derecognise from its financial statements, all the assets
transferred and liabilities relinquished in a transfer of functions at their carrying amounts.
The entity has not yet adopted the standard and there should be no impact on the Interim financial statements as no transfer of functions has taken place. GRAP 106 Transfer of Functions Between Entities Not Under Common Control - Original:
A transfer of functions undertaken between entities not under common control could involve an acquisition or transfer of another entity or the acquisition or transfer of part of another entity. Para.20 This Standard defines a transfer of functions as the reorganisation and/or there-allocation of functions between entities by transferring functions between entities or into another entity. The transfer of functions must be undertaken between entities not under common control. An acquirer might obtain control of an acquire in a variety of ways, for example:
(a) by transferring cash, cash equivalents or other assets (including net assets that constitute a function); (b) by incurring liabilities; (c) by exchanging residual interests; (d) by providing more than one type of consideration; or (e) without transferring consideration, including through a binding arrangement.
Para.21 A transfer of functions between entities not under common control may be structured in a variety of ways, which include but are not limited to:
(a) one or more functions become controlled entities of an acquirer or the net assets of one or more functions are legally acquired or transferred by the acquirer; or (b) one entity transfers its net assets, or its owners transfer their residual interests, to another entity or its owners.
The impact of this on the Interim financial statements of the entity is not significant since the entity has not been a party to transfer of functions between entities not under common control.
229
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 69 - Municipal entity of the City of Tshwane 2006/019396/07
GRAP 107 Mergers – Original
The standard refers to a transaction or event for where no acquirer can be identified. A merger is the establishment of a new combined entity in which none of the former entities obtains control over any other and no acquirer can be identified. Determining whether an acquirer can be identified includes a consideration of, amongst other things, which of the combining entities initiated the transaction or event, the relative size of the combining entities, as well as whether the assets or revenue of one of the entities involved in the transaction or event significantly exceed those of the other entities. A merger can either involve the combination of two or more entities in which one of the combining entities continues to become the new reporting entity, or a new reporting entity is established from the combining entities. The concept of control and a function is not relevant in a transaction or event that meets the definition of a merger. The impact of this on the Interim financial statements of the entity is not significant since the entity has not been a party to any merger. GRAP 108 Statutory Receivables – Original
Statutory receivables are receivables that: (a) arise from legislation, supporting regulations, or similar means; and (b) require settlement by another entity in cash or another financial asset. The transaction amount (for purposes of this Standard) for a statutory receivable means the amount specified in, or calculated, levied or charged in accordance with, legislation, supporting regulations, or similar means. Measurement
An entity shall initially measure statutory receivables at their transaction amount. The statutory receivables shall be measured initially in accordance with the relevant Standard of GRAP. The amount determined on initial measurement in accordance with another Standard of GRAP is the same as the transaction amount described in this Standard. Recognition
An entity shall recognise statutory receivables as follows: (a) if the transaction is an exchange transaction, using the Standard of GRAP on Revenue from Exchange Transactions; (b) if the transaction is a non-exchange transaction, using the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers); or (c) if the transaction is not within the scope of the Standards of GRAP listed in (a) or (b) or another Standard of GRAP, the receivable is recognised when the definition of an asset is met and, when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity and the transaction amount can be measured reliably. The impact of this on the Interim financial statements of the entity will not be significant once the standard is effective. 3 Financial Risk Management
Information about TEDA’s exposure to risks, its objectives, policies and processes for measuring and managing
such risks are disclosed in the Accounting policies. The quantitative disclosure is provided in this note.
3.1 Credit Risk Exposure to credit risk
Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The entity only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party.
230
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Accounting policies to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 70 - Municipal entity of the City of Tshwane 2006/019396/07
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
2015 2014
(R) (R)
Trade and Other Receivables 999,329 255,350 Cash and cash Equivalents 8,682,748 5,152,789 9,682,077 5,408,139
At 31 December 2014, TEDA did not consider there to be any significant concentration of credit risk that had not been adequately provided for. No security is held against Cash and Cash Equivalents.
3.3 Liquidity Risk
The entity’s risk to liquidity is a result of the funds available to cover future commitments. The entity manages liquidity risk through an on-going review of future commitments.
2015
Trade and Other
Payables
Less than 1 year 4,815,718 Between 1 and 2 years -
4,815,718
2014
Trade and Other Payables
Less than 1 year 3,809,736 Between 1 and 2 years -
3,809,736
231
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 71 - Municipal entity of the City of Tshwane 2006/019396/07
2015 2014
4 Cash and Cash Equivalents (R) (R)
Cash and cash equivalents consist of the following: Cash on hand 5,000 436 Cash at bank* 8,677,748 5,152,353
8,682,748 5,152,789
*The entity has a current and salaries bank accounts with Standard Bank which is used to meet the entities obligations. Bank Statement balances Cashbook balances
2015 2014 2015 2014
Primary Account - 410791830 7,851,049 3,426,693 7,856,049 3,427,129 Salaries Account - 011057491 826,699 1,725,660 826,699 1,725,660
8,677,748 5,152,353 8,682,748 5,152,789
5 Account Receivable
SARS (PAYE credit)* 202,069 202,069 Board Members - 34,094 Employees - 273 Interest Income accrued - 18,914
202,069 255,350
*The SARS credit emanates from over payment of PAYE and the receivable from board members relates to overpayments to board members.
6 Prepayment
Opening balance as at 01 July 2014 2,229,732 2,229,732 Rental of offices 669,861 -
Closing balance as at 31 December 2014 2,899,593 2,229,732
Opening balance of prepaid expenses relates to funds paid in advance to CSIR to secure a venue for hosting Tshwane International Trade and Infrastructure Investment Conference (TITIIC) to be held in May 2015 and was previously reported that the conference will take place in May 2014 which was postponed to May 2015. With the other balance of prepaid expenses being for January 2015 office space rental for TEDA offices.
7 VAT Input
-
VAT Input receivable 797,260 - 797,260 -
VAT Input receivable is from taxable supplies TEDA incurred as at 31 December 2014 which are VAT claimable.
232
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 72 - Municipal entity of the City of Tshwane 2006/019396/07
8 Property, Plant and Equipment
8.1 Reconciliation of Carrying Value
2015 2014
Cost Accumulated Depreciation & Impairment
Carrying Value
Cost Accumulated
Depreciation & Impairment
Carrying Value
Motor Vehicles 1,067,708 (325,025) 742,683
1,067,708 (217,377) 850,331 Office Equipment 964,579 (135,552) 829,024
933,862 (75,993) 857,869
Computer Equipment 1,667,602 (579,493) 1,088,109
1,650,260 (311,594) 1,338,666 Furniture & Fixtures 1,798,945 (146,096) 1,652,849 1,798,919 (55,524) 1,743,395 Leasehold Improvements 6,394,759 (2,250,017) 4,144,742 6,172,569 (1,206,208) 4,966,361 Total 11,893,593 (3,436,186) 8,457,407
11,623,318 (1,866,696) 9,756,622
8.2 Reconciliation of Property, Plant and Equipment – 2015
Opening Value
Additions Disposal Transfers Depreciation Impairment Revaluation Errors Closing CV
Motor Vehicles 850,331 (107,648) 742,683 Office Equipment 857,869 30,717 (59,562) 829,024 Computer Equipment 1,338,666 40,642 (13,459) (277,740) 1,088,109 Furniture & Fixtures 1,743,395 (90,546) 1,652,849 Leasehold Improvements 4,966,361 222,190 (1,043,809) 4,144,742 Total 9,756,622 293,549 (13,459) (1,579,446) 8,457,407
8.3 Reconciliation of Property, Plant and Equipment – 2014
Opening Value
Additions Disposal Transfers Depreciation Impairment Revaluation Errors Carrying Value
Closing Balance
Motor Vehicles 1,063,873 - (213,542) 850,331 Office Equipment 354,365 576,800 (73,296) 857,869 Computer Equipment 413,467 1,304,090 (62,655) (316,236) 1,338,666
Furniture & Fixtures 2,770 1,796,149 (55,524) 1,743,395 Leasehold Improvements - 6,172,569 (1,206,208) 4,966,361
Total 1,834,475 9,849,608 (62,655) (1,864,806) 9,756,622
233
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 73 - Municipal entity of the City of Tshwane 2006/019396/07
Change in accounting estimates
During the year ended 30 June 2014, TEDA reviewed the useful lives of its assets. The following classes of assets were reviewed; Useful lives before change Useful lives after change
Furniture and Fixtures 5 years 3 -16 years Office Equipment 5 years 5 - 8 years The overall net effect of the change is a reduction in the depreciation charge of R99 550.
9 Intangible Assets
9.1 Reconciliation of Carrying Value 2015 2014
Cost Accumulated
Amortisation & Impairment
Carrying Value
Cost Accumulated
Amortisation & Impairment
Carrying Value
Computer Software 289,013 (67,324) 221,689 209,013 (30,744) 178,269 Total 289,013 (67,324) 221,689
209,013 (30,744) 178,269
9.2 Reconciliation of Intangible Assets – 2015
Carrying Value
Opening Balance
Additions Disposals Transfers Amortisation Impairment Revaluation Internally
Developed
Carrying Value Closing Balance
Computer Software 178,269 80,000 (36,579) 221,689
Total 178,269 80,000 (36,579) 221,689
234
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page - 74 - Municipal entity of the City of Tshwane 2006/019396/07
9.3 Reconciliation of Intangible Assets – 2014
Carrying Value
Opening Balance
Additions Disposals Transfers Amortisation Impairment Revaluation Internally
Developed
Carrying Value Closing Balance
Computer Software 21,039 187,877 - - (30,647) - - - 178,269 Total 21,039 187,877 - - (30,647) - - 178,269
*Impairment test is performed annually on the 1
st of June and when there is indicators for impairment on all assets including intangible assets using the following
impairment indicators; a. Inspection of any physical damage, b. Disposal plans, c. Performance of the assets and d. Changes in technological environment.
As a result of the impairment test TEDA management could not find any asset/s that warrants being impaired since most of the assets are fairly new and no damage was discovered during the asset verification process and also no significant technological changes were identified which have an adverse effect on computer equipment and other assets sensitive to technological changes.
235
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 75 Municipal entity of the City of Tshwane 2006/019396/07
10 Deferred taxation 2015 2013
(R) (R)
Deferred taxation balances are presented in the statement of financial position as follows:
- Deferred tax asset 233,060 - - Deferred tax liability - 9,700
233,060 9,700
Temporary differences Property, equipment and intangible assets (229,067) (402,925) Provision - leave and bonus pay 1,074,217 265,615 Prepayments (811,886) - Unspent grant 2,576,953 689,157 Section 24C allowance (2,562,050) (689,157) Straight lining of lease 184,893 127,610 233,060 (9,700)
Movement in deferred taxation Balance at the beginning of the year (9,700) 17,696 Property, equipment and intangible assets 173,857 (387,954) Provision - leave and bonus pay 808,602 232,948 Prepayments (811,886) - Unspent grant 1,887,796 (3,241,157) Section 24C allowance (1,872,892) 3,241,157 Straight lining of lease 57,283 127,610 233,060 (9,700)
11 Trade and Other Payables from Exchange Transactions Trade creditors
929,117 1,848,111
Board fees Accrual - 227,534 Employee Contributions Accrual 738 161,463 Payable: SARS 49,374 624,002 Leave and bonus Pay Accrual^ 10.1 3,836,489 948,626 Total creditors
4,815,718 3,809,736
10.1 Employee benefit liability Provision for leave entitlement 1,336,665 948,626
Provision for bonus pay 2,499,824 - Total Provisions 3,836,489 948,626
Reconciliation of Movement in Employee benefit liability
Opening Balance 948,626 116,667 Provisions for Leave entitlement raised 928,828 1,612,386 Leave entitlement used (540,789) (780,427) Provisions for bonus raised 2,499,824
Bonus provision used -
Closing Balance 3,836,489 948,626
236
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 76 Municipal entity of the City of Tshwane 2006/019396/07
2015 2014
(R) (R)
12 Unspent Grant
Transfers from City of Tshwane 27,800,000 47,500,000
Movements during the year
Balance at the beginning of the year 2,461,277 14,036,837 Income recognised during the year (21,057,871) (59,075,560)
9,203,406 (2,461,277)
The Unspent Grant is a transfer from the CoT to enable the entity to achieve its strategic objective as per the Service Delivery Agreement.
13 Operating lease liability
Operating lease smoothing effect 660,329 455,751 660,329 455,751
Movements during the year
Balance at the beginning of the year 455,751 - Raised during the year 204,578 455,751 660,329 455,751
Operating lease liability is from the rental of offices used by TEDA situated at: 349 Witch-Hazel Avenue; Eco-origin Building; Block F; Highveld Extension 70; Centurion for the period of three years starting from 1st of November 2013. It is caused by the escalation on rental payable at every anniversary date. 14 Share Capital and equity
Authorised 1,000 ordinary shares of R1 each 1,000 1,000 Issued - - Ordinary 1,000 ordinary shares of R1 each 1,000 1,000
15 Revenue 15.1 Revenue from exchange transactions Interest Earned Bank: Current Account
62,033 176,095
Other Operating Income Sale of Tender Documents 33,650 4,250 Total
95,683 180,345
15.2 Revenue from non-exchange transactions
Grant revenue recognised 21,057,871 59,075,560 Total 21,057,871 59,075,560
16 Employee Related Costs
2014
(R)
Basic Salary/Wages costs
12,810,073
17,672,289 Contributions pension fund, group risk and medical aid
1,013,815 948,124
Movement in leave and bonus provision 2,887,863 831,959 Employee Related Costs
16,711,751 19,452,372
237
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 77 Municipal entity of the City of Tshwane 2006/019396/07
2015 2014
(R) (R)
Employees Employees
Average number of employees 38 39 Included in the employee costs are the following key management personnel:
16.1 Remuneration of the Chief Executive Officer
Basic Salary
-
1,720,367 Contributions to UIF,SDL, Group Risk, Medical and Pension Fund
- 169,160
Total
- 1,889,527
The Chief Executive Officer post is vacant the current incumbent is appointed on an acting capacity and is a full time employee of the City of Tshwane and is remunerated by CoT. 16.2 Remuneration of the Chief Financial Officer
Basic Salary
618,281 1,185,552 Contributions to UIF,SDL, Group Risk, Medical and Pension Fund
273,472 36,018
Total
900,169 1,221,570
16.3 Remuneration of other senior managers
Basic Salary
2,058,095 4,379,072 Contributions to UIF,SDL, Group Risk, Medical and Pension Fund
1,103,717 234,311
Total
3,161,812 4,613,383
17 Remuneration of Board Members
L Vutula (Chairperson) 117,090 288,504 RS Bahula- Ermias 125,662 278,569
H Gouvelis 91,383 290,024
LD Haskins (Retired September 2014) 37,264 183,954 CBB Mahlati (Retired March 2014) - 215,581 J Matsho 79,385 385,853
CR Mpyane 123,949 323,447 NM Ntsinde (Retired September 2014) 11,998 287,298
FK Sibanda 65,673 252,790 N Singh 72,529 240,406 JL Thubakgale 91,383 340,204
MW Yates 106,791 310,519 Total Board Members' Remuneration 923,107 3,397,149
18 Depreciation and Amortisation Expense
Motor Vehicles
107,648 213,542 Office Equipment
59,562 73,296
Computer Equipment
277,740 316,236 Furniture & Fittings
90,546 55,524
Leasehold Improvements 1,043,809 1,206,208 Intangible Assets
36,579 30,647
Total Depreciation and Amortisation
1,615,884 1,895,453
238
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 78 Municipal entity of the City of Tshwane 2006/019396/07
19 General Expenses
2015 2014
(R) (R)
Included in general expenses are the following:-
Admin Fees (Pension Fund and Group Risk) 65,915 41,869 Advertising 260,028 765,318 Audit Fees 360,006 175,813 Bank charges 17,306 31,232 Catering 18,008 132,415 Communication Expenses 16,073 131,304 Conferences and delegations 64,400 186,935 Consulting fees (including legal expenses) 330,240 2,894,852 Insurance 49,723 78,700 IT Expenses 58,412 678,982 Licence fees – vehicles 1,869 - Printing and stationery 184,520 384,379 Planning & Staff Recruitment 202,282 45,960 Rental of Offices and storage 3,565,262 5,086,739 Repairs & Maintenance 13,649 - Travel and subsistence 55,159 272,368 Utilities 210,843 217,909 Other* 25,404 279,230
5,499,099 11,404,005
*Expenditure of R45,960 incurred under Other in 2014 has been reclassified to Planning & Staff Recruitment, and Admin Fees (Pension Fund and Group Risk) of R41,869 previously under expense item Other in 2014 has been reclassified.
19.1 Fruitless and wasteful expenditure
Included above under other expenses is interest incurred amounting to R38,990 from SARS for late submission of PAYE,SDL and UIF, which was due to the delay in registering for PAYE,SDL and UIF.
Interest charges - 38,990 - 38,990
20 Projects
National Tooling project - 1,326,672 TITIIC - 680,776 Stalls - 4,700,000 Special projects - 4,117,928 AIDC project - 2,600,000 Agro-processing 392,996 -
392,996 13,425,376
21 Marketing, Trade and Investment
Branding 30,910 - Events 43,586 - Export Development and Promotion 15,000 - Local & International Exhibitions - 127,638 Marketing Production 5,250 640,919 Public Relations 61,224 45,363 Research & Development - Marketing - 955,762 Trade Conferences & Missions 105,972 877,205 261,942 2,646,887
239
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 79 Municipal entity of the City of Tshwane 2006/019396/07
2015 2014
22 Loss on assets written off (R) (R)
Proceeds - - Less : Carrying amount of assets written off 13,459 62,655 13,459 62,655
Computer equipment to the carrying value of R13,459 in 2014/15 and R62,655 2013/14 has been stolen. 23 Taxation
Normal tax (1,194,111) 1,935,684 - Current year (1,194,111) 1,935,684 Deferred tax 242,758 27,395 - Current year 242,758 27,395 (951,353) 1,963,079
23.1 Taxation liability movement Opening balance 3,071,875 1,136,191 Current year - 1,935,684 Closing balance 3,071,875 3,071,875
Reconciliation of the tax expense Tax in Note @ 28% (951,353) 1,963,079 Profit (loss) before tax (4,264,683) 6,972,008 Tax as a % of income before tax (22.31%) 28.16% Reconciliation between applicable tax rate and average
effective tax rate
Tax effect on permanent differences (28%) 28% Tax effect on non-deductible expenses 5.69% 0.16% (22.31%) 28.16% No provisional taxation has been paid since there is an operational loss for the period.
24 Net cash flow generated by operating activities
Net surplus (Deficit) as per Statement of Comprehensive income (4,264,683) 5,008,929 Adjusted for items separately disclosed
Taxation 1,963,079 Adjusted for non-cash items: Loss on assets written off 22 13,459 62,655 Depreciation and Amortisation of Intangible Assets 18 1,615,884 1,895,453 Movement in Operating Lease Liability 13 204,578 455,751 Net cash flow generated by operations before movements in
working capital (2,430,762) 9,385,867
Movements in working capital 2015 2014
240
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 80 Municipal entity of the City of Tshwane 2006/019396/07
(R) (R)
(Increase) in prepaid expense (669,861) - Decrease (Increase) in receivables 53,281 (255,350) (Increase) in VAT Input (797,260) - Increase in trade and other payables 1,052,987 2,386,426 Increase (Decrease) in deferred income 6,742,129 (11,575,560) Cash flow generated by operations 3,950,514 (58,617)
25 Cash and cash equivalents
Cash and cash equivalents included in the cash flow statement comprise the following;
Cash on hand 5,000 436 Cash as per bank balances 8,677,748 15,834,405
8,682,748 5,152,789
26 Reclassification of Items
The following Items are reclassified in to order achieve fair presentation of balances. The reclassified items are listed below as follows;
2014 2014
Statement of Financial Performance (R) (R)
Amount Amount
Account Before After
General expense 367,059 279,230 Admin Fees (Pension Fund and Group Risk) - 41,869 Planning & Staff Recruitment - 45,960
The reclassification is for Admin Fees (Pension Fund and Group Risk) and Planning & Staff Recruitment expenditure incurred that were classified under general expense item Other.
27 Purchase of Property, plant and equipment
During the period, the municipal entity acquired property, plant and equipment with an aggregate cost of R373,549 which was acquired by means of funds from City of Tshwane. A total of R 420,555 was for cash purchases of fixed and intangible assets.
28 Budget
The entity has been allocated a budget of R 47.5 million and there is an approval to retain the surplus amounting to R 2.4 million which was effected during the adjustment period. The approved budget covers the period from 01 July 2014 to 30 June 2015. The budget and accounting bases differ. The financial statements are prepared on the accrual basis using a classification on the nature of expenses in the statement of financial performance. The financial statements differ from the budget, which is approved on the cash basis. A reconciliation between the actual amounts on the comparable basis as presented in the statement of comparison of budget and actual amounts and the actual amounts in the cash flow statement for the period ended 31 December 2014 is presented below. The financial statements and budget documents are prepared for the same period. There is a basis difference: the budget is prepared on a cash basis and the financial statements on the accrual basis. 28.1 Reconciliation of cash flow to Budget and actual comparison statement
2015 Operating Financing Investing Total
Actual as per Budget and Actual comparative (4,021,925) - - (4,021,925)
241
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 81 Municipal entity of the City of Tshwane 2006/019396/07
statement.
Basis Difference 7,972,439 (420,555) - 7,551,884
Actual amount in the Statement of Cash Flows 3,950,514 (420,555) - 3,529,959
2014 Operating Financing Investing Total
Actual as per Budget and Actual comparative statement. 5,008,929 - (10,037,481) (5,028,552)
Basis Difference (5,067,546) (588,483) - (5,656,029)
Actual amount in the Statement of Cash Flows (58,617) (588,483) (10,037,481) (10,684,581)
TEDA considers 9% a material variance in monitoring spending trends, where a detail explanation of the variance is important in order to aid planning and decision making. The budget is as per the economic classification and explanation on spending is as follows;
28.2 Compensation of Employees
Projected expenditure for Employee cost is informed by the current staff complement with the CEO earmarked to start in January 2015. The below expenditure is as a result of not filling all budgeted vacant post as previously planned and the resignation of Project Portfolio Management Executive.
28.3 Remuneration to Board of Directors
Expenditure is as per the initial work plan and with resignation of some board members and revision of the annual work plan expenditure is expected to be below expected.
28.4 Goods and Services
Expenditure is below the norm of 42% however it is accordance to the procurement plan with most operational projects i.e Funding Model and Organisational design (OD) being in the implementation phase.
28.5 Capital Expenditure
The expenditure for capital goods is mainly on computer equipment and software with procurement of Integrated Financial Management System and upgrade of the TEDA website. The remaining budget is anticipated to be spent on commitments and accruals. 29 Related parties
Controlling municipality: City of Tshwane Metropolitan Municipality Municipal entity under the same control: Housing Company Tshwane Municipal entity under the same control: Sandspruit Water Works Association Compensation to board members and key management Refer to note 17 & 18
2015 2014
Related party balances:
(R) (R)
Loan accounts - Owing to related parties
City of Tshwane Metropolitan Municipality
- -
Related party transactions:
Transfer made by the related party
City of Tshwane Metropolitan Municipality 27,800,000 47,500,000 Payment to the related party
City of Tshwane Metropolitan Municipality - 588,482
242
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 82 Municipal entity of the City of Tshwane 2006/019396/07
30 Commitments Approved and contracted 16,567,801 19,854,962 Total Commitments 16,567,801 19,854,962
30.1 Commitments under operating lease Not later than one year 7,219,598 7,817,094 Later than one year and not later than five years 6,460,888 11,441,226 Later than five years - Total Commitments 13,680,486 19,258,320
Operating lease commitment is the rental of offices used by TEDA situated at: 349 Witch-Hazel Avenue; Eco-origin Building; Block F; Highveld Extension 70; Centurion for the period of three years starting from 1st of November 2013.
30.2 Commitment Accounting Purchase orders issued 2,887,315 596,642 Total Commitments 2,887,315 596,642
31 Additional Disclosures in Terms of Municipal Finance Management Act
2015 2014
31.1 PAYE, SDL and UIF (R) (R)
Opening balance
585,013 1,035,739 Current period payroll deductions
3,780,294 6,183,852
Amount paid
(4,414,681) (6,634,578) Balance unpaid (Included in payables)
49,374 585,013
31.2 Employee Benefits
Pension Fund* 423,637 236,161 Group risk^ 173,069 94,204 Medical Aid” 417,109 559,539 1,013,815 889,904
*The entity has a pension fund defined contribution plan with Momentum where employees pay a fixed amount and the employer pays for the administration fees. ^*The entity has a group risk plan with Discovery Life where employees pay a fixed amount and the employer pays for the administration fees. “Medical Aid contributions are with Discovery Medical Aid Scheme and Bonitas Medical Aid Scheme. 31.3 Audit Fees External Audit 360,006 175,813 360,006 175,813
32 Fruitless and Wasteful Expenditure Reconciliation of fruitless and wasteful expenditure (included under general expenses) Opening balance 38,990 -
243
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 83 Municipal entity of the City of Tshwane 2006/019396/07
Fruitless and Wasteful expenditure current year 38,990 Condoned or written off (38,990) - Transfer to receivables for recovery – not condoned - Fruitless and Wasteful awaiting condonement - 38,990
Reconciliation of Fruitless and Wasteful (included under general expenses) Included above under other expenses is interest incurred amounting to R38,990 from SARS for late submission of PAYE,SDL and UIF, which was due to the delay in registering for PAYE,SDL and UIF. 33 Irregular Expenditure
Reconciliation of irregular expenditure (included under general expenses)
Opening balance - 1,188,088 Irregular expenditure current year - - Condoned or written off - (1,188,088) Transfer to receivables for recovery – not condoned - - Irregular expenditure - -
Incident
Disciplinary steps/criminal proceedings
Non-compliance with the SCM regulations. Procurement made by CoT in relation to the acquisition of recruitment services to recruit TEDA CEO, CFO, Company Secretary and Office Manager.
None
34 Deviation from Supply Chain Management regulations
Paragraph 12(1)(a)-(d)of Government gazette No. 27636 issued on 30 May 2005 states that a supply chain management policy must provide for the procurement of goods and services by way of a:
Written or verbal quotation for values up to R2,000 up to R10,000 (VAT included),
Formal written quotations for values over R10,000 up to R200,000 (VAT included), and
Competitive bidding process for values above R200,000 (VAT Included).
Paragraph 36 of the same gazette states that the accounting officer may dispense with the official procurement process in certain circumstances, provided that he records the reasons for any deviations and then reports them to the next meeting of the accounting officer and includes a note to the Interim financial statements. In terms of section 36(1)(a) of the Supply Chain Management Regulations, the accounting officer may dispense with the official procurement processes in the following instances:
in an emergency
if such goods or services are produced or available from a single provider only
for the acquisition of special works of art or historical objects where specifications are difficult to complete
in any other exceptional case where it is impractical or impossible to follow the official procurement processes.
Deviation from tender and quotation process: Sole suppliers-None
Emergency - None
Impracticality - None
TEDA deviated from the official procurement processes during the financial year due to services available from a single supplier -
Services available from a single provider only - None
Sole supplier -None
TEDA deviated from the official procurement processes during the financial year due to impracticality in inviting a competitive bidding process-
244
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Interim Financial Statements for the period ended 31 December 2014 Notes to Interim Financial Statements
TEDA 2014/15 Mid-year report Page 84 Municipal entity of the City of Tshwane 2006/019396/07
None
35 Regulation 45
The Interim financial statements of a municipality must disclose particulars of any award of more than R2 000 to a person who is a spouse, child or parent of a person in the service of the state or has been in the service of the state in the previous 12 months indicating:
29. The name of that person 30. The capacity in which that person is in the service of the state/municipality; and 31. The amount of the award
36 Contingent Liability
The entity has a contingent liability as at 31 December 2014, the details are as follow: There has been a disciplinary case against the former CEO of the entity and based on the outcome of the hearing, he was dismissed on the 30th April 2014 and his salary was stopped with immediate effect. The former CEO has lodged the appeal against his dismissal and the case was not finalised at the time of submitting this Interim Financial Statements. The remaining contract value from the time of dismissal is estimated at R 9.1 million including litigation cost of R400,000
245
TEDA 2014/15 Mid-year report Page 85 Municipal entity of the City of Tshwane 2006/019396/07
CHAPTER SIX: AUDITOR-GENERAL FINDINGS
Section 1: Auditor-General’s Report for the Current Year
TEDA audit outcome for the previous cycle, 2012/13 was mainly addressing the basic operational
policies and systems issues that were either not yet implemented or were in the draft stages. Systems
and policies were approved and implemented during the 2013/14 financial year in response to the
audit.
The current audit outcome for the 2013/14 financial year is more on the compliance issues relating to
performance management and disclosure of information. This is a positive progression from the
previous audit results as there were repeat findings between the two years. This indicates the
effectiveness of the audit mitigation plan that was employed to address the audit matters. 2012/13 2013/14
Audit Opinion Unqualified Unqualified
Section 2: Historical Audit Findings and Remedial Action
Table 14: 2013/14 Auditor Generals’ findings and mitigation plan
NO AUDIT FINDINGS ACTION PLAN
1.
Entity developed but did not implement
a multi-year business plan
The entity will refine business planning in line with National
Treasury Guidelines, taking into consideration
recommendations from AG.
2. Disclosure of commitments overstated
Quality assurance will be done to enhance the disclosure
commitment.
Integrated financial management will be introduced to
minimise manual data management
3.
Presentation and disclosure of budget
information
Quality assurance will be done to enhance the
presentation of the Statement of Comparison of Budget
and Actual
amount will be amended to present the budget in an easy
manner to follow that is comparable and consistent with
the approved budget
4.
Interest income recorded in incorrect
period
Quality assurance will be done to enhance the
presentation of the Annual Financial Statements
5.
Non-compliance with Section 99(2)(b) of
the MFMA relating to payment of
suppliers
Management introduced the Age analysis of payment to
service to monitor 30 days turnaround period. All invoices
are inspected against the quotation and the purchase
order to ensure that correct amounts are paid to the
service providers within 30 days as per MFMA.
6. Contingent liability note incomplete
Management to ensure that confirmation on contingent
liabilities is sought from the legal advisor/attorney before
AFS preparation.
7.
Failure to completely disclose all
deviations in the financial statements
Management to ensure that deviation is sought for
contracts exceeding 12 months where it is not feasible to
invite bid
8.
Weakness in system of internal control:
Operating expenditure
Management to ensure that processes and systems
description are regularly reviewed, updated and adhered
to.
9. Payments not made within 30 days
All purchase orders where good and services are
delivered to be inspected on monthly basis to ensure that
outstanding invoices are tracked and thus pay the service
provides within 30 days as per MFMA. Furthermore, the
entity will procure an Integrated Financial System that will
assist in automating the procure-to-pay processes.
10. Incorrect points awarded to prospective Scores reviewed accordingly.
246
TEDA 2014/15 Mid-year report Page 86 Municipal entity of the City of Tshwane 2006/019396/07
bidder
11.
Reference check on employees not
performed MIE has been contracted to conduct background checks
on all new employees.
12.
Disclosure of the minimum competency
level in the annual report
Quality assurance will be done to enhance the
presentation of the Annual report. The annual report will
be amended accordingly.
13.
SCM policy omitted some of the aspects
of the SCM regulation
Management has reviewed the entire SCM policy to
ensure that it complies with all applicable legislation.
14.
Declaration of interest was not obtained
from supplier
Paragraph 2.8 has since been completed accordingly
and there is no conflict of interest (#6). Management will
review the completeness of bid documentations.
15.
Non-disclosure of persons employed by
the state as required by SCM regulation
Management will ensure that there is proper
communication between SCM and Finance especially
regarding information that goes into the financial
statements.
16.
Mid-Term Report for 2013/14 not
submitted to parent municipality within
the required time
The Board work-plan has been synchronized with the
reporting dates of the City.
17.
Indicators and targets not well-defined /
specific
SMART principles have been applied in crafting the
indicators in the ensuing years.
18.
Non-disclosure in performance report of
measures to improve performance
Corrective measures will be implemented in the mid-term
report of 2014/15.
19.
Deficiencies noted on the performance
report and approved business plan
The entity will refine business planning in line with National
Treasury Guidelines, taking into consideration
recommendations from AG and the information will be
reported accordingly in the annual report.
20.
Authorized bank signatories not updated
timely Bank signatories have been updated and timeous
amendments will be made in future to avoid recurrence.
21.
Tenant installation costs not capitalised
and amortised
Key role player in the AFS preparations will be sent to
GRAP training. Furthermore, the AFS preparation timetable
for the subsequent financial years will amended so as to
provide ample time for the reviewers. 22.
Income tax and deferred tax
misstatements noted.
23.
Competency assessments for prescribed
officers not performed Management to compile a checklist of items prior to
appointment and that assessment are completed.
24. AOPO- indicators not well defined
Technical indicator descriptions to be drawn and included
in the adjusted business plan to align with objectives set.
25. AOPO-Key performance not specific
Technical indicator descriptions to be drawn and included
in the adjusted business plan to align with objectives set.
26 AOPO-Key performance not Measurable
Technical indicator descriptions to be drawn and included
in the adjusted business plan to align with objectives set
27. Invoices paid for not addressed to TEDA
The finance unit will design an invoice minimum
requirement checklist to be completed by the end user
departments to be attached to the invoice when
submitted to finance
247
TEDA 2014/15 Mid-year report Page 87 Municipal entity of the City of Tshwane 2006/019396/07
Section 3: Commitment by the Board of Directors
TEDA Board has satisfied itself that mitigation plans taken or to be taken on matters raised by the
Auditor General are adequate.
_____________________________________
Luthando Vutula
Chairperson of the Board
248
249
TEDA 2014/15 Mid-year report Page 89 Municipal entity of the City of Tshwane 2006/019396/07
BALANCE SCORECARD WITH KEY PERFORMANCE AREAS AND INDICATORS
Strategic Objective 1: To promote, facilitate and coordinate investment in strategic infrastructure to create value for the CoT Tshwane
No Output Performance Indicator
Annual
Performance
Target Baseline
Cumulative Quarterly Targets
2014/15 Q 1 Q2 Q3 Q4
1.1
The acquisition of
trade and
investment
intelligence
Number of trade and investment
reports/studies 2 N/A 1 1 - -
Number of export market briefs
produced 4 briefs N/A 1 1 1 1
Number of trade and investment
subscriptions 2 N/A 2 - - -
1.2 Attraction of new
investment
Rand value of committed
investment projects R500 million N/A - - - R500 million
Number of new jobs facilitated 250 N/A - - - 250
Number of timeous responses to
potential investment enquiries 50 N/A 15 10 10 15
Number of potential investors
targeted for specific investment
opportunities
5 N/A 1 2 1 1
Number of site visits from investors
that have been targeted 2 N/A - 1 - 1
1.3
Participate in
TEDA/DTI/GGDA
led trade and
investment
initiatives
Number of outward trade and
investment business missions
undertaken
7 N/A - 2 2 2
Number of inward trade and
investment missions hosted and/or
participated in
3 N/A - 1 1 1
Number of National Pavilions
participated in 3 N/A - 1 1 1
1.4
Participate in
Industry Events,
Networking,
Number of relevant local and
international conferences, seminars,
workshops and symposiums
5 N/A 2 1 1 1
250
TEDA 2014/15 Mid-year report Page 90 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator
Annual
Performance
Target Baseline
Cumulative Quarterly Targets
2014/15 Q 1 Q2 Q3 Q4
Information
Dissemination and
Collaboration with
Strategic Alliances
attended
Number of theme specific
information dissemination workshops
and networking events hosted for
investor and exporter community
4 N/A 1 1 1 1
1.5
To showcase
Tshwane export
potential and
investment
attractiveness
Produce one promotion booklet of
top Tshwane exportable products
and services produced
One promotion
booklet N/A - - - 1
Produce one investment promotion
booklet
One promotion
booklet N/A - - - 1
Number of exporters profiled in
relevant trade publications 4 N/A 1 1 1 1
Host Annual Exporters Awards 1 N/A - - - 1
1.6
Provision of export
development and
promotion services
Number of capacity building
workshops (on Standards, Exhibition,
Financial Assistance, Productivity
and Incentives) and export
awareness sessions on traditional
and emerging markets
4 sessions per
annum and 20
companies
participating
per session
N/A 1 1 1
1
1.7
To develop and
implement an
after-care
programme
Number of companies visited and
profiled 20 N/A 5 5 5 5
Rand value of investment for
expansion/retention R250 million N/A - - - R250 million
Number of jobs created/retained
through expansion/retention 250 N/A - - - 250
251
TEDA 2014/15 Mid-year report Page 91 Municipal entity of the City of Tshwane 2006/019396/07
Strategic Objective 2 To establish and maintain an economic Infrastructure Investment Vehicle.
No
. Output
Performance
Indicator
Annual performance
target Baseline
Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
2.1 Funding
model
Concept
document
developed
Funding model N/A
Appoint an expert to
develop a concept
document
Implementation Implementatio
n
implementatio
n
Strategic Objective 3: To identify, design, develop and manage projects with strategic economic and / or social benefits for the greater Tshwane community
No Output Performance Indicator
Annual
performance
target Baseline Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
3.1
Development of
Cullinan Area
Needs and demand
assessment (desk top
study) conducted
1 None 1 - - -
Project Charter produced 1 None - 1 - -
Feasibility study 1 none 1
3.2 Advance Bio
manufacturing
Project Charter produced 1 None 1 - - -
Facilitate funding
application 1 None - 1 - -
Facilitate the Feasibility
Study development 1 None - - - 1
3.3 Tshwane Agro-
processing Hub
Project Charter produced 1 None 1 - - -
Funding Application 1 None - 1 - -
Feasibility Study
conducted 1 None - - - 1
3.4 Region 1 youth
greening project
Partnership Agreements
entered into 1 None 1 - - -
252
TEDA 2014/15 Mid-year report Page 92 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator
Annual
performance
target Baseline Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
No. of participants trained
according to the
agreement
None - - 50
3.5
Hammanskraal Leisure
resort
Completion of Project
Charter
1 None - 1 - -
Partnership agreement
concluded 1 None - - 1 -
Partnership-based project
designs 1 None - - - 1
3.6 TITIIC
Planning and execution of
TITIIC
Launch of
TITIIC
Conference
4th TITIIC
project plan
and
monitoring
instruments
developed
and ratified
Project Plan
implementat
ion and
reporting
Project Plan
implementation
and reporting
Launch in
May 2015
253
TEDA 2014/15 Mid-year report Page 93 Municipal entity of the City of Tshwane 2006/019396/07
Strategic Objective 4: To develop and maintain a strategic immovable and property asset portfolio for maximum return on investment
No Output Performance Indicator
Annual
performance
target Baseline
Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
4.1 Manage, develop and facilitate
strategic land and building portfolio
No. of land parcels identified
for development 1 0 0 0 100%
Service level agreements
entered into with Developers 1 0 0 0 100%
No. of strategic land and
buildings developed 1 0 0 0 100%
Prepare cash-flow
projections on portfolio of
assets
Annual
Cash-flow
projections
prepared on
the asset
portfolio
determine the
value of
land parcels
prepare
cash flow
projections
prepare
cash flow
projections
annual
cash flow
developed
Negotiate third party
contracts
No. of third
party
contracts
negotiated
0 0 0 0
Model full life financial
analysis for portfolios
Review and
Update
financial
analysis for
portfolios
Review
financial analysis 0
Update
financial analysis 0
254
TEDA 2014/15 Mid-year report Page 94 Municipal entity of the City of Tshwane 2006/019396/07
Strategic Objective 5: To facilitate the implementation of agreements signed between CoT and key stakeholders.
No Output Performance Indicator
Annual
performance
target Baseline
Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
5.1 Effective Stakeholder
Engagements and Liaison
Amount of capital funding raised
for special purpose vehicle
No. of capital
pledges obtained
for projects
2 2 2 2
MOU’s signed with stakeholders
No. of MOU
signed with
stakeholders
4 4 4 4
Service Delivery Agreement with
CoT entered into
New SDA
aligned with the
annual business
plan and 100%
implemented
30% 50% 70% 100%
Translate Client Value
Management Road map to
Campaign briefs
No. of Campaign
briefs (to be
determined)
3 3 3 3
Monitor, evaluate and Report on
Stakeholder Management
No. of evaluations
and reports
generated (to be
determined)
2 2 2 2
5.2
International investment
outbound and inbound
missions aligned to market
analysis by City.
No. of countries with bilateral
agreements 5 1 1 2 1
No. of sister city agreements
entered into 2 1 1
No. of overseas promotional
agents / distributors engaged 4 1 1 1 1
Establish a one stop investment
and export centre Build & set up planning
approval
phase building setting up
5.3 Customer Surveys No. of surveys conducted 3 1 1 1
255
TEDA 2014/15 Mid-year report Page 95 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator
Annual
performance
target Baseline
Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
5.4
Aligned Vision, Mission and
Communication Strategy
with that of the City
Develop Alignment Strategy &
Implementation Plan
Annual Review:
Strategy &
Business Plan
review
strategy implement implement implement
256
TEDA 2014/15 Mid-year report Page 96 Municipal entity of the City of Tshwane 2006/019396/07
Strategic Objective 6: To promote Tshwane as a viable investment destination through the implementation of an integrated Marketing and Communication programme
No Output Performance Indicator
Annual
performance
target Baseline Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
6.1 Increase City’s competitiveness
Event attracting instrument
designed and delivered
Implementation
of the
instrument.
Partner in 2
medium events.
Developed
instrument 50% 50%
Marketing and Communication
Strategy developed
100%
Implementation
plan for 2014
20% 15% 35% 35% 15%
No. of Product packaging 3 3 1 1 1 0
No. of Major events &
conferences TEDA bid for on
behalf / in conjunction with the
City
1 0 1
6.2 Launch campaigns that build a strong
corporate and destination brand
No. of campaigns launched 2 3 1 1
Corporate identity manual
development
Review manual.
Print additional
signage, name
tags and access
cards. One stop
centre branding
and promotion
100%
development
of manual
15% 30% 40% 15%
6.3 Utilize marketing platforms to position and
profile TEDA as a brand
Number of platforms and
marketing activities performed 6 3 1 2 2 1
Brand architecture research,
development and alignment
workshop on
the TEDA brand
10%
90% 0% 0% 10% 0%
257
TEDA 2014/15 Mid-year report Page 97 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator
Annual
performance
target Baseline Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
6.4 Communicate TEDA’s projects and
programmes
Number of placed articles in
different publications 8 3 2 2 2 2
Media interactions carried out four two one one one one
Communications policy Review policy 100% policy
document review
Electronic newsletter developed
and print copies for circulation
Increase
circulation of
newsletter. 4
issues
2 1 1 1 1
Press events facilitated 3 3 1 1 1
Developed partner mailing lists.
10% Increase in
partners formed
(per annum)
2 mailing lists 2% 2% 2% 2%
Annual report produced 1 10% 80% 10%
6.5 Managing and regularly updating website
Updated website and increased
hits
Achieving 1.2
million hits per
annum
0 250,000 250,000 250,000 250,000
258
TEDA 2014/15 Mid-year report Page 98 Municipal entity of the City of Tshwane 2006/019396/07
Strategic Objective 7: To establish and build TEDA as a strong and effective organization in the context of good governance best practice
No Output Performance Indicator
Annual
performance
target Baseline Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
7.1
Sound Financial
Management policies and
practices
Unqualified audit opinion with
no matters of emphasis
Unqualified
audit opinion
100%
compliance to
legislation
100%
compliance to
legislation
100%
compliance
to
legislation
100%
compliance
to legislation
No. payments made within
the prescribed period
90% payments
made within 30
days of the
prescribed
period
90% 90% 90% 90%
No. of SMME’s / BBBEE/ PDI’s
owned companies benefiting
from the TEDA procurement
process
70%
procurement
from SMME’s /
HDI’s owned
companies
70% 70% 70% 70%
Contract percentage
awarded to SMME, Exempted
Micro Enterprises (BEE status
contributor level 1-4) EME's
have an annual turn-over of
R5 million or less
70% of contracts
awarded to
SMME / EME
70% 70% 70% 70%
7.2
A well-resourced and
performance managed
workforce supported by ICT
strategy
Formulate and implement
integrated talent
management strategy
Implement 50% 10% 10% 50% 50%
% of funded positions filled
timeously 70% 5% filled 5% filled 20% 20% filled
Job content revised for all
positions on the structure.
Competencies developed,
profiled and graded
100% - 10% 10% 10%
% of staff capacity active in
training or capacity
development initiatives per
annum
100% training
conducted as
per annual
training plan
20% 40% 40% 20%
259
TEDA 2014/15 Mid-year report Page 99 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator
Annual
performance
target Baseline Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
Integrated performance
management framework
(comprehensive balanced
scorecard)
100% of staff
signed
performance
scorecard
20% singed
contract 30% 30%
Design a market related
remuneration structure 90% retention 100% retained 100% retained 100% 90% retained
Formulate policies that are
fair, equitable, consistent and
aligned to transparent
workplace practices
100% HR policies
approved
5% approved
policies
25% approved
policies
25%
approved
policies
25%
approved
policies
Develop & implement ICT
Strategy & Implementation
Plan
Implement 30%
of ICT strategy - -
10%
developed
90%
developed
and
implemented
7.3
Framework for Planning,
monitoring performance
and reporting on TEDA
objectives
TEDA Strategic Plan
developed
Review and
update the 5
year Strategic
Plan
Implement the
Strategic Plan
Implement the
Strategic Plan
Implement
the
Strategic
Plan
Review the
Strategic
Plan
Develop and implement a
TEDA monitoring and
evaluation tool
Review and
maintain the
monitoring tool
100% 100% 100% 100%
Monthly, quarterly and annual
Reporting on TEDA
performance objectives
Monthly,
quarterly and
annual reports
generated &
submitted to
CoT
Quarterly report
submitted
Mid-term report
submitted
Quarterly
report
submitted
Annual
report
submitted
Annual TEDA Business Plan
developed
Business Plan
Review &
Implement
Implementation
of Business Plan
Implementation
of Business Plan
Develop
Business
Plan
Business Plan
submitted
7.4 Effective Legal support
services
Quarterly written opinions in
response to requests
Legal advice
rendered
(annually)
Legal advice
rendered
Legal advice
rendered
Legal
advice
rendered
Legal advice
rendered
260
TEDA 2014/15 Mid-year report Page 100 Municipal entity of the City of Tshwane 2006/019396/07
No Output Performance Indicator
Annual
performance
target Baseline Cumulative Quarterly Targets
2014/15 Q 1 Q 2 Q 3 Q 4
7.5 Risk Management strategy
implemented
Develop & Implement Risk
Management (RM) Strategy
No. of strategic
risk monitoring
reports
compiled and
submitted to the
Board
Strategic risk
monitored
Strategic risk
monitored
Strategic
risk
monitored
Strategic risk
register
reviewed
and
updated
7.6 Internal Audit Plan
developed & implemented Develop & Implement IAP
No. of reports
issued in
accordance
with the
approved IAP
audit reports
issued
audit reports
issued
audit
reports
issued
annual audit
plan drawn
7.7
Ensure Board effectiveness
and compliance with King
III, MFMA, Municipal
Systems Act, Companies
Act and Mo
Ensure compliance with
Companies Act, MFMA, MSA,
MoI
100%
100% 100% 100% 100%
Manage Board and
Committees 70%
70% 70% 70% 70%
Develop and update
corporate governance
policies
100%
100% 100% 100% 100%
261
2014/15 MID-YEAR REPORT (JULY-DECEMBER 2014)
HOUSING COMPANY TSHWANE
NON PROFIT COMPANY
Registration No: 2001/029821/08 (In terms of Section 88 of the
Municipal Finance Management Act, 2003)
262
HOUSING COMPANY TSHWANE
NON PROFIT COMPANY
COMPANY INFORMATION: Registration number: 2001/029821/08 Registered Address: Shop 7 & 8 Ground Floor Bothongo Plaza West 271 Francis Baard street Pretoria 0001 Postal Address: P O Box 11586 The Tramshed 0126 Telephone number : (012) 358 4469 Fax number : (086) 214 8895
Website : www.thehct.co.za
Bankers : Absa Bank Auditors : Auditor-General
Vision
An excellent social housing provider of choice in the City of Tshwane
Mission
To sustainably deliver and manage affordable social housing in the City of Tshwane
263
TABLE OF CONTENTS
CHAPTER ONE: LEADERSHIP & CORPORATE PROFILE Section 1: Corporate Profile and Overview of the entity Section 2: Strategic Objectives Section 3: Salient Features Section 4: High-level organisational structure Section 5: Foreword by Member of the Mayoral Committee (e.g. MMC Housing and Human Settlments) Section 6: Chairperson’s Foreword Section 7: Chief Executive Officer’s Report Section 8: Chief Financial Officer’s Report CHAPTER TWO: GOVERNANCE Section 1: Corporate Governance Statement Section 2: Board of Directors Section 3: Board Committees Section 4: Director’s Remuneration Section 5: Company Secretarial Function Section 6: Risk Management and Internal controls Section 7: Internal Audit Function Section 8: Corporate Ethics and Organisational Integrity Section 9: Sustainability Report Section 10: Corporate Social Responsibility Report Section11: Anticorruption and fraud Section 12: ICT Governance CHAPTER THREE: SERVICE DELIVERY PERFORMANCE Section 1: Highlights and Achievements Section 2: Financial Performance Section 3: Capital Projects Section 4: Performance against IDP and City Scorecard Section 5: Assessment of Arrears on municipal taxes and service charges Section 6: Statement on amounts owed by Government Departments and public entities Section 7: Recommendations and Plans for the next financial year. CHAPTER FOUR: HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT Section 1: Human Resource Management Section 2: Employment Equity Section 3: Skills Development and Training Section 4: Performance Management Section 5: HIV/AIDS on the Workplace Section 6: Employee Benefits Section 7: Supply Chain Management and Black Economic Empowerment CHAPTER FIVE: FINANCIAL PERFORMANCE Section 1: Statement of Financial Position and Notes Section 2: Statement of Financial Performance and Notes Section 3: Spending against capital budget Section 4: Cash Flow Statement Section5: Statement of Changes in Net Assets Section 6: Report in irregular, fruitless and wasteful expenditure and legal process CHAPTER SIX: AUDITOR-GENERAL FINDINGS Section 1: Auditor-General’s Report for the Current year Section 2: Historical Audit Findings and Remedial Action Section 3: Commitment by the Board of Directors
264
CHAPTER ONE: LEADERSHIP & CORPORATE PROFILE Section 1: Corporate Profile / Overview of the entity Housing Company Tshwane (HCT) was established in year 2001 as an independent municipal entity, wholly owned by the City of Tshwane, to develop, maintain and manage social housing and other forms of institutional housing developments in the greater Tshwane area. The entity is responsible for providing social housing within the identified Restructuring Zones, as well as maintenance and management to Council owned rental stock and it’s transferred to the entity. The entity derives its mandate from the Service Delivery Agreement with the City of Tshwane. From this mandate the priority goals are guided by the City’s Integrated Development Plan (IDP), City’s priorities and the Tshwane Vision 2055 outcomes. Chapter 2 of the current City of Tshwane IDP (situational analysis) recognizes the need for a continuous and
sustainable provision of basic services to the Tshwane residents. With respect to housing in general, the IDP dictates,
inter alia, that meeting housing demand remains one of the City’s biggest challenges… focus needs to be placed on
the provision of social housing units and mixed housing developments towards meeting the diverse housing needs of
the people in the city.
Section 2: Strategic Objectives HCT has developed the Key Strategic Objectives below to give effect to its mandate execution. The HCT’s strategic
goal is to provide social housing to meet the needs of the City of Tshwane residents and as such is supported by the
following objectives:
Key Strategic Objective 1: Provision of new Social Housing units on a sustainable basis
Key Strategic Objective 2: Effective and efficient management of HCT and Social Housing portfolio
Key Strategic Objective 3: Strive for Financial sustainability by 2017
Key Strategic Objective 4: Promote and practice sound governance
265
The HCT strategic objectives contribute to the attainment of the CoT’s strategic objectives and associated service
delivery performance areas:
City of Tshwane
Strategic Objective
HCT Strategic Objective Key Performance area(s)
Sustainable Services
Infrastructure and
Human Settlements
1. Provide new Social Housing
units on a sustainable basis
Increase in number of new social housing units
built (refer to the scorecard for quantifiable
targets)
2. Promote effective and efficient
management of HCT and Social
Housing portfolio (manage social
housing stock in accordance with
industry norms, and standards as
defined by the social housing
regulator from time to time)
Full compliance with legislative and risk
management frameworks and policies
Effective housing stock management
Improved Financial
Sustainability
3. Strive for financial sustainability
by 2017 (conduct business in a
manner which maximises revenue
collection from a growing social
housing stock)
Prudent credit control and revenue
management (rentals)
Effective financial management
Promote good
governance and
active citizenry
4. Promote sound governance
Full compliance with legislative and risk
management frameworks
Good corporate governance
*Tenant involvement and participation in social
housing planning, implementation, management
and monitoring (sound client management
services)
266
Section 3: Salient Features
Income and Expenditure
Capital Expenditure
The entity is setting-up all statutory supply chain committees for procurement of the required service-providers for its intended Townlands and Timberlands projects
-2 000 0000
2 000 0004 000 0006 000 0008 000 000
10 000 00012 000 00014 000 00016 000 00018 000 00020 000 000
Inco
me
Expe
nditu
re
Surp
lus
Budget
Actual
Variance
-
1 000 000.00
2 000 000.00
3 000 000.00
4 000 000.00
5 000 000.00
6 000 000.00
7 000 000.00
8 000 000.00
9 000 000.00
10 000 000.00
Capital Expenditure
Budget
Actual
Variance
267
Net Debt to Revenue and Return on Operating Assets Ratio
0
10
20
30
40
50
60
70
80
2014 2015
Net Debt to Revenue
Return on OperatingAssets
268
HCT Organisational structure In prior years, the HCT’s limited social housing portfolio hindered its expansion in terms of human resources or skills/capacity to effectively carry out its mandate. In the light of new developments around additional Council-owned rental housing units to be managed by HCT on behalf of the City of Tshwane, as well as the Conditional accreditation of the company by the Social Housing Regulatory Authority (SHRA), which positions the company to be able to access the social housing investments for developments, the HCT Board of Directors approved the implementation of a human resources development plan which has thus far enabled the company’s capacity to be brought up to an acceptable level to enable it to carry out social housing property management mandate. Moving forward, the company is solid position to facilitate development on new (greenfield projects), once projects are approved by the Social Housing Regulatory Authority (SHRA). Housing Company Tshwane is currently implementing the blocked-phase approach in terms of its development aligned to the below organogram, which will see new key positions filled during the 2014/2015 financial year and thus enhancing its operations of developing and managing properties and as well as financial management and other compliance areas. The current HCT organogram is reflected below:
269
Section 4: High-level organisational structure
Human Settlements
(COT)
HCT Board
Chief Executive Officer
Chief Financial Officer
(2014/15)
Finance Manager
Bookkeeper
Accounts Clerk
Supply Chain Officer
Chief Operating Officer (2014/15)
Compliance Officer
Human Resource
Officer
Office Assistant/Recepti
onist
Marketing Officer
Property Manager
Leasing Officer
Maintenance Officer
Caretaker Caretaker General Worker
Building Manager (2014/15)
Property Development
Manager
Project Co-ordinator (2014/15)
270
Section 5: Foreword by Member of the Mayoral Committee The City of Tshwane Metropolitan municipality needs to meet the targets of human settlements and housing development and Housing Company Tshwane is mandated to develop and manage social and institutional housing and is expected to advance such developments in order for the city to meet such targets. The mandate of Housing Company Tshwane, which the entity is expected to meet, is to:
a. Develop, own and manage affordable rental housing opportunities close to employment nodes, transport nodes, social amenities and related public services for households earning between R 3 500 and R7 500 ( as revised by the National Department of Human Settlements from time to time);
b. Provide rental housing accommodation for people who do not qualify for subsidy and are unable to participate in the formal, non-subsidised housing market;
c. Provide property management and turnaround services for low to medium density social or rental
accommodation; and
d. Manage all rental stock owned by the Council of the City of Tshwane. While alignment of the annual business plan with the Service Delivery Agreement and the conditional accreditation by the Social Housing Regulatory Authority was achieved, the entity needs to start implementing programmes and projects relating to the development of social housing units in the City of Tshwane rapidly. Furthermore, the entity needs to enhance its stakeholder relations management in order to enhance its public perception and especially, since it has been tasked with management of selected Council-owned rental stock. This will not only increase stock under the entity’s management, but will enhance operational capacity within HCT and will equally require capability by the entity moving forward.
271
Section 6: Chairperson’s Foreword During the period under review, the entity has been able to strengthen its position with various stakeholders. Our ability to meet the expectations of a broad and multicultural customer base often required innovative and continuous inventive approaches when interacting and executing our activities. We cemented our performance by ensuring that all the objectives in our corporate scorecard were met and exceeded our expectations. The entity always factored its mandate and the aspirations of the Shareholder into the strategic plans. Operations were very effective in implementing the key deliverables defined in the strategic plan and our detailed Expanded Public Works Programme and its timeous implementation helped to fast track those issues that embrace the national agenda. The momentum set in the previous financial year increased during this period and resulted in us, once again, delivering on those programmes that served as the mayoral priorities.
Housing Company Tshwane did all it could to discharge of its mandate as per the existing Service Delivery Agreement (SDA) with the shareholder, the City of Tshwane. Certain aspects of the SDA have been implemented (e.g. transferring of newly-refurbished City of Tshwane rental units/ buildings to HCT), and this will moving forward assist in enhancing company’s performance in terms of the set targets for the rest of 2014/15. It is anticipated that this will be implemented smoothly throughout the 2014/15 financial year so that HCT can effectively grow its rental stock under management. Overall, the company’s operations during the first half of 2014/15 improved significantly as a result of a reliable cash-flow position, the capacitation of the company (i.e. rental stock transferred for management) as well as the continued improvement of the governance environment and including the Conditional Accreditation by the Social Housing Regulatory Authority (SHRA). This places the company at a level where it can, from now going forward play a much more significant role in social and institutional housing development and management in and around the City of Tshwane metropolitan area. With constant guidance and vigilance of the Board of Directors, through the City of Tshwane audit and performance committee, management has dedicated itself to ensuring that all the issues that were raised by the auditor general in 2012/13 year’s audit were rectified. Processes were put in place to ensure that the entity’s internal controls were above board.The Auditor General has risen an Unqualified opinion in 2013/2014 financial year, with audit findings decreasing by half from the previous year. To this far management has committed to implement an internal tracking programme, so that matters raised in the audit are constantly monitored on a month to month basis and reported to the Board timeously. There has not been any change to the Board of Director’s composition, except the departure of the former Chief Executive Officer on the third quarter of 2013/2014 financial year. This was mitigated through the support of the Shareholder and the Board to the appointed acting CEO and management during this time.
272
Section 7: Chief Executive Officer’s Report GENERAL PERFORMANCE The company performance rating during the first half of the 2014/15 has improved compared to the previous period in 2013/2014 in terms of meeting some pre-determined objectives of the company. Even though some of the performance objective could not be achieved by the company; the company for the first time since its inception, achieved a Conditional Accreditation level by the Social Housing Regulatory Authority (SHRA). Going forward, the board and management have committed to raising performance levels during 2014/15 financial year as set out in the newly approved company Business Plan (2013-2017) and as well as the revised five (5) year Strategic Vision of the company. UNITS UNDER MANAGEMENT A Service Level Agreement was concluded between the City of Tshwane and Housing Company Tshwane in 2013/14 financial year for the transfer Council owned rental stock for management and maintenance. This process presented the company with a firm commitment to ensure that HCT develops an expanded social housing rental stock portfolio that is sufficient to support the sustainability of the institution. To enable this, our shareholder has implemented a structured process of a further rental stock transfer that will see the HCT rental portfolio significantly increase in terms of numbers. This is a significant programme since Social Housing Institutions require at least a minimum 2000 units under management to break-even in terms of sustainability (assuming cost-recovery rentals at least). The rental stock under HCT management at the end of the 2013/14 financial year was restricted to the 95 units at the Eloff Building, but will from the first quarter of financial year 2014/15 increase by 154 units. NEW PROJECTS Planning for new greenfield projects to be implemented by the company during the first half of 2014/15, however project Townlands and Timberlands commenced in the second quarter of 2014/15 financial year. The entity faces a challenge with the establishment of various statutory committees for competitive bidding i.e Bid Specification Committee and Bid Evaluation Committees, in order to comply with all supply chain and procurement processes for service providers for the pre-construction studies and investigation. Major challenge within the entity is the delay in finalizing the appointment of a new Chief Executive Officer, which hampers segregation of duties within the entity since the property development manager is acting, thus delaying the implementation of earmarked greenfield development projects. CONCLUSION In light of the Auditor General’s unqualified opinion on the company, the management of the entity has committed itself to a programme to track (monthly) and resolve matters raised and report to the City of Tshwane and the Board of Directors on quarterly basis. This will assist mitigating the risk of having any repeated or unresolved findings and also assist in achieving a clean audit in the near future. Recommendation and guidance as provided by the auditor will be implemented where the entity had gaps in order to enhance and tighten its controls, including the implementation of policies and projects to achieve on the pre-determined objectives. The company’s general performance (relative to the company mandate scorecard and targets set in the Service Delivery Agreement) is expected to be satisfactory, with a number of objectives achieved in the upcoming quarters of the year. In 2014/15, management’s priority is to meet all the company’s pre-determined objectives and targets as detailed in the newly revised Service Delivery Agreement (SDA) and multi-year company business Plan (2013-2017) and the five (5) Strategic Vision of the company, thus ensuring that there is overall compliance and that set performance targets/pre-determined objectives are met. Mr N.A Magubane Acting Chief Executive Officer
273
Section 8: Chief Financial Officer’s Report Insert CFO’s photo
1 Review of Operating results
The overall financial performance for the six months period resulted into an accumulated surplus of R 2, 1 million. This is attributed to the fact that the company has fully utilised the 2013/2014 unspent conditional grant (liability) as agreed with the City of Tshwane. Below is the graphical presentation of operating results:
The overall operating results for the period of six months are as follows: 1.1 Operating Revenue
Recorded variances are from revenue categories such as rental revenue, operational grant, interest income and other revenue. The variances can be explained as follows:
1.1.1 Rental revenue
For the six months of financial year (July 2014 – 31 December 2015), the company realized a revenue of R1,8 million as compared to the budgeted amount of R3,1 million . This is due to delays in transferring buildings , namely Blesbok, Bosbok, Old Stalshoogte, Nuwe Stalshoogte, tenant lease-agreements and human personnel from the City of Tshwane to Housing Company Tshwane. Another contributing factor has been a higher vacancy rate at Clarina building due to, the vetting and confirmation process to identify ex-Schubart Park from time to time. Table 2 below reflects the vacancy rate over the period under review.
Table 2: Eloff Gebou : Vacancy rate
Eloff
14-Jul 14-Aug 14-Sep 14-Oct 14-Nov 14-Dec
No. of units vacant
1 2 3 1 1 4
-2 000 0000
2 000 0004 000 0006 000 0008 000 000
10 000 00012 000 00014 000 00016 000 00018 000 00020 000 000
Inco
me
Expe
nditu
re
Surp
lus
Origional Budget
Actual
Variance
274
Carina Building
14-Jul 14-Aug 14-Sep 14-Oct 14-Nov 14-Dec
No. of units vacant
32 29 30 30 30 30
1.1.2 Operational Grant
The company realised an operational grant of R8, 3 million as compared to the budgeted amount of R13, 1 million. The variance was attributed to the change in accounting treatment of grant receipts. The original budget was prepared with the assumption that when grant is received from the City it will be recorded as revenue instead of unspent conditional grant (liability). The variance is R4, 8 million. 1.1.3 Interest Income For the six month period (July 2014 – Dec 2014), the company has earned interest income of R49 thousands as compared to the budgeted figure of R17 thousands. The variance of R31 thousands is attributed to interest charged to Clarina tenants for late payment of their rental. 1.1.4 Other revenue The company realised revenue of R31 thousands as compared to the budget figure of R70 thousands. The variance of R38 thousands was as a result of decrease in rental revenue relating to advertising space at Eloff building. The company has signed a contract with City Media and earn commission of 20% of the revenue for every advertisement placed at Eloff. 1.2 Operating Expenses
1.2.1 Expenditure
Major expenditure variances were recorded from broad expenditure categories such as employee related costs, remuneration of directors, finance charges, contracted services and other expenditures. 1.2.2 Employee related costs
The company has spent R1, 7 million as compared to the budgeted figure of R2, 8 million. The variance is due to the delay in filling key positions. The HCT board has since approved a revised organisational structure/organogram in keeping with the revised Strategic Plan for the company and the requirements of the Social Housing Regulatory Authority (SHRA). The total salary bill excludes benefits such as a provident fund or pension fund, medical aid contributions and cell phone allowances as all HCT employees are employed on a contract basis. The variance = R1 million. 1.2.3 Remuneration of directors
The company has spent R502 thousands on directors remuneration as compared to the budgeted amount of R425 thousands. There were more board meetings during the six months of the financial year. The variance = R76 thousands.
275
1.2.4 Finance Charges
For the six months of the financial year (July 2014 – Dec 2014, Housing Company Tshwane paid R 194 thousands as compared to the budget amount of R197 thousands in finance charges. The interest is related to the loan with National Housing Finance Corporation (NHFC). The variance = R3 thousands.
1.2.5 Contracted Services and other expenses
The company has spent R5, 5 million on contracted services and other expenditures as compared to the budgeted amount of R14, 6 million. The variance of R9, 1 million was due to the delay in the appointment of Service Providers for both Townlands and Timberlands projects. Processes are underway for the procurement of various service providers for the design and installation of engineering services in Townlands and Timberlands.
276
CHAPTER TWO: GOVERNANCE
Section 1: Corporate Governance Statement
To ensure accountability and governance arrangements are in place, Section 121(2) (c) of the MFMA supports the requirements of Section 18(1) (d) of the MSA: information on matters of governance should be communicated to communities. This should, according to Sections 65(1) (a) of the MFMA and 46 of the MSA be undertaken through the compilation and publication of the Annual Report. The purpose of such an annual report is to promote accountability to communities for decisions taken by the Council and matters relating to administrative structures, throughout a financial year. Ethical Leadership
The board provides effective leadership based on a principled foundation and the entity subscribes to high ethical standards. Responsible leadership, characterised by the values of responsibility, accountability, fairness and transparency, has been a defining characteristic of the entity since the company’s establishment in 2003. The fundamental objective has always been to do business ethically while building a sustainable company that recognises the short- and long-term impact of its activities on the economy, society and the environment. In its deliberations, decisions and actions, the board is sensitive to the legitimate interests and expectations of the company’s stakeholders.
Corporate Governance
Housing Company Tshwane applies the governance principles contained in King III and continues to further entrench and strengthen recommended practices in our governance structures, systems, processes and procedures. The Board of Directors and Executives recognise and are committed to the principles of openness, integrity and accountability advocated by the King III Code on Corporate Governance. Through this process, shareholders and other stakeholders may derive assurance that the entity is being ethically managed according to prudently determined risk parameters in compliance with generally accepted corporate practices. Monitoring the entity’s compliance with King Code on Corporate Governance forms part of the mandate of the audit committee. The entity has complied with the Code in all respect during the year under review.
The Board of Directors has incorporated the City of Tshwane’s Corporate Governance Protocol in its Board Charter, which inter alia regulates its relationship with the City of Tshwane as its sole member and parent municipality in the interest of good corporate governance and good ethics. The Protocol is premised on the principles enunciated in the King Report for Corporate Governance for South Africa 2009 (King III).The Company steadfastly consolidated its position in respect of adherence to the King III report on Corporate Governance. The entity practices are, in most material instances, in line with the principles set out in the King III Report. Ongoing steps are however taken to align practices with the Report’s recommendations and the Board continually reviews our progress to ensure that we improve our Corporate Governance. During the year under review the Company entrenched its risk management reviews and reporting and compliance assessments were conducted in terms of the Companies Act and the Municipal Finance Management Act (MFMA). The annual Board assessments and evaluations were conducted and an annual report for the previous year was effectively completed in accordance with the terms of section 121 of the Municipal Finance Management Act. Corporate Citizenship
The board and management recognise that the entity is formed under a political structure. As such, it has a social and moral standing in society with all the attendant responsibilities. The board is therefore responsible for ensuring that the entity protects, enhances and invests in the well-being of the economy, society and natural environment, and pursues its activities within the limits of social, political and environmental responsibilities outlined in international conventions on human rights.
Compliance with laws, rules, codes and standards
The board is responsible for ensuring that the entity complies with applicable laws and considers adhering to non-binding rules, codes and standards.
277
Section 2: Board of Directors Housing Company Tshwane has a unitary board, which consist of two (3) executives and eight (8) non-executives directors, chaired by the non-executive director, Mr Tshepo Phetla. The board meets regularly, at least once quarterly and retains full control over the company. The Board remains accountable to City of Tshwane Metropolitan Municipality, the sole Shareholder. A Service Delivery Agreement (SDA) concluded in accordance with the provisions of the MSA governs the entity’ relationship with the City of Tshwane. The Board provides Monthly, Quarterly, Bi-Annually and Annual Reports on its performance and service delivery to the parent municipality as prescribed in the SDA, the MFMA and the MSA. Non-executive Directors contribute an independent view to matters under consideration and add to the depth of experience of the Board. The roles of Chairperson and Chief Executive Officer are separate, with responsibilities divided between them. The Chairperson has no executive functions. Members of the Board have unlimited access to the Company Secretary, who acts as an advisor to the Board and its committees on matters including compliance with Company Rules and Procedures, statutory regulations and best corporate practices. The Board or any of its members may, in appropriate circumstances and at the expense of the company, obtain the advice of independent professionals. An annual director and peer review is undertaken, as well as a Board evaluation. A performance evaluation of the Board is conducted at the end of the financial year. Any shortcomings are addressed and areas of strength consolidated. The performance of board committees are evaluated against the terms of reference. Attendance at meetings held during the six months period was as follows: Directors Board Finance,
Risk Social & Ethics
Projects & Developmen
t
Human Resources and Remuneration
Remuneration
No. of meetings held 3
2
2
3
Mr T.S Phetla 3 R50,638 Mr T.J Mokgoro 1 1 R10,490 Dr R.W Rowland 3 3 R71,509 Dr A.J Singh 2 2 2 R52,409 Adv T.S Kholong 2 3 2 R47,124 Adv E. M Mphahlele
3
3
R144,518
Ms D Masilela 3 3 R68,000 Ms M Lehlokoa 3 2 R57,545 R502,233
The Board of Directors has adopted the Board Charter which encapsulates the City of Tshwane Governance Protocol and includes matters of ethics, procedure and the conduct of committee members. Registers are kept and updated on the disclosure and declaration of interests of directors and senior management. The Board and Senior Management ensure that there is full material compliance to all relevant legislation. The Company Secretary has certified in terms of section 268(d) of the Companies Act that all statutory returns have been submitted to the Registrar of Companies. Section 3: Board Committees The following Board committees have been formed, each of which is chaired by a non-executive director.
Finance, Ethics and Risk Committee; Human Resources and Remuneration Committee; Projects and Development Committee.
278
3.1 Audit Committee
The City of Tshwane Metropolitan Municipality as a parent-municipality through its policy, established an independent Audit and Performance Committee consisting of independent members, whereby the company is represented by the Chief Executive Officer and the Board Chairperson (as and when invited).
3.2 Finance, Ethics and Risk Committee
The Board’s Finance Social and Ethics committee consists of the following non-executive directors:
Dr T.J Mokgoro Adv S.T Kholong Adv E Mphahlele
The committee met [2] times during the period under review.
Section 43 (5) of the Companies Regulations, 2011 states that the Social and Ethics Committee has the following functions:
(a) To monitor the company’s activities, having regard to any relevant legislation, other legal requirements or prevailing codes of best practice, with regard to matters relating to:
(i) Social and economic development, including the company’s standing in terms of the goals and purposes of: (a) the 10 principles set out in the United Nations Global Compact Principles; and (b) the OECD recommendations regarding corruption; (c) the Employment Equity Act; and (d) the Broad-Based Black Economic Empowerment Act;
(ii) Good corporate citizenship, including the company’s: (a) promotion of equality, prevention of unfair discrimination, and reduction of corruption; (b) contribution to development of the communities in which its activities are predominantly conducted or within which its products or services are predominantly marketed; and (c) record of sponsorship, donations and charitable giving;
(iii) the environment, health and public safety, including the impact of the company’s activities and of its products or services;
3.3 Human Resources and Remuneration Committee
The Board’s Human Resources and Remuneration committee consist of the following non-executive directors: Dr W Rowland Ms D Masilela
The remuneration committee advises the board on remuneration policies, remuneration packages and other terms of employment for all directors and senior executives. Its specific terms of reference also include recommendations to the board on matters relating inter alia, general stall policy remuneration, profit bonuses, executive remuneration, director’s remuneration and fees, service contracts, share purchase (not applicable to HCT) and option schemes, and retirement funds. The independent professional advisors advise the committee. The committee met three [3] times during the period under review.
3.4 PROJECTS AND DEVELOPMENTS COMMITTEE The Board’s Projects and Development committee consists of the following non-executive directors, i.e.
Dr. A.J Singh; Ms. M Lehlokoa; Adv. S.T Kholong.
The functions of the committee is to fulfill the functions of Bid Adjudication committee, responsible for the evaluation/adjudication of procurement of bids/tenders/proposals for the procurement of goods and services in excess of R250 000.00 in accordance with the frameworks for Supply Chain Management framework and Treasury Regulations issued in terms of Municipal Finance Management Act 56 of 2003.
279
3.5 Risk Management Committee
The entity does not have its own risk management committee, but is a member as represented by the Chief Executive Officer in City of Tshwane Risk Committee. Section 4: Director’s Remuneration 4.1 Entity’s remuneration policy Housing Company Tshwane adopted and implements the approved City of Tshwane’s Policy on Remuneration of Chief Executive and Non-Executive Directors of Municipal Entities, which is also in line with the South African Institute for Chartered Accountants and in accordance with the size of the entity. Below is the reflection of non-executive director’s remuneration for the period under review:
NON- EXECUTIVE DIRECTORS REMUNERATION
Name Designation
Meeting Fee
R
Other
R
Retainer
R
Total
R
1 Mr T.S Phetla Chairperson R50,638 0 0 R50,638
2 Dr W Rowland Non- executive R71,509 0 0 R71,509
3 Dr A.J Singh Non-executive R52,409 0 0 R52,409
4 Ms M Lehlokoa Non-executive R57,545 0 0 R57,545
5 Ms D Masilela Non-executive R68,000 0 0 R68,000
6 Adv E.M Mphahlele Non-executive R144,518 0 0 R144,518
7 Adv T.S Kholong Non-executive R47,124 0 0 R47,124
8 Dr T.J Mokgoro Non-executive R10,490 0 0 R10,490
TOTAL R502,233
-
-
R502,233
280
SENIOR MANAGEMENT REMUNERATION
Name Designation Salary Pension
Medical Aid
Cell Phone
Travel
Accommodation
Subsistence
Housing
Leave Pay Insurance Bonus Total
Ms L. Makibinyane
Finance Manager R373,356 R0.00
R0.00
R0.00
R0.00
R0.00 R0.00 R0.00 R0.00 R0.00 R0.00 R373,356
Mr N.A Magubane
Property Development Manager (Acting CEO) R326,406 R0.00
R0.00
R0.00
R0.00
R0.00 R0.00 R0.00 R0.00 R0.00 R0.00 R326,406
Mr K.W Ramotshela
Property Manager R169,878 R0.00
R0.00
R0.00
R0.00
R0.00 R0.00 R0.00 R0.00 R0.00 R0.00 R169,878
Total
R869,640 -
-
-
-
-
-
-
-
- R869,640
281
282
Section 5: Company Secretarial Function Primary function of the company secretary is to act as the link between the board and management and to facilitate good relationships with the shareholder and other stakeholders of the company. The company secretary is responsible for the general administration, more specifically to ensure compliance to good corporate governance practices and to provide guidance to the directors on corporate governance principles and applicable legislation. Section 6: Risk Management and internal controls Effective risk management is integral to the company’s objective of consistently adding value to the business. Management is continuously developing and enhancing its risk and control procedures to improve the mechanisms for identifying and monitoring risks. Operating risk is the potential for loss to occur through a breakdown in control information, business processes and compliance systems. Key policies and procedures are in place to manage operating risk involve segregation of duties, transaction authorisation, supervision, monitoring and financial and managerial reporting. In order to meet its responsibility with respect to providing reliable financial information, the entity maintains financial and operational systems of internal controls. These controls are designed to provide reasonable assurance that transaction are concluded in accordance with management authority, that the assets are adequately protected against material loss or unauthorized acquisition, use or disposal and that transactions are properly authorised and recorded. The system includes a documented organisation structure and visions of responsibility, established policies and procedures, including a Code of Ethics to foster a strong ethical climate, which ate communicated to the parent municipality. It also includes the careful selection, training and development of people. Internal auditors monitor the operation of the internal control systems and report findings and recommendations to management and the board of directors. Corrective actions are taken to address control deficiencies and other opportunities for improving the system as they are defined. The board, operating through the audit and performance committee of the City of Tshwane, provides supervisions of the financial reporting process and internal control systems. There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls.
Section 7: Internal Audit Function The entity relies on the City of Tshwane internal audit department, which has a current staff complement of senior and adequately qualified persons. It has a specific mandate from the audit and performance committee and independently appraises the adequacy and effectiveness of the company’s systems, financial internal controls and accounting records, reporting its findings to local and divisional management and the auditor-general as well as the audit and performance committee. The internal audit coverage plan is based on risk assessment performed at each operating unit. The coverage plan is updated annually, based on the risk assessment and results of the audit work performed. This ensures that the audit coverage is focused on and identifies areas of high risk.
Section 8: Corporate Ethics and Organisational Integrity The company has developed a Code of Conduct (‘the Code”) which has been fully endorsed by the Board and applies to all directors and employees. The Code is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism. In summary the Code requires that at all times, all company personnel act with utmost integrity and objectivity and in compliance with the letter and spirit of both the law and company policies. Failure by employees to act in terms of the Code results in disciplinary action. The Code is discussed with each new employee as part of his or her induction training and all employees are asked to sign an annual declaration confirming their compliance with the Code. A copy of the Code is available to interested parties upon request. Furthermore, any breach of the Code is considered a serious offence and is dealt with accordingly; as a result, this acts as a deterrent. The directors believe that ethical standards are being met and fully supported by the ethics programme.
283
Section 9: Sustainability Report
Housing Company Tshwane has constructed a strategic pathway that will systematically build the organisation into a capable and sustainable institution within the social housing sector. The pathway creates a good relationship between the property management and property development components of the company. It plots a trajectory that seeks to establish and entrench HCT as a key player in the social housing market place within the Tshwane region. The sustainability pathway for the next five years will be built around the following principles:
HCT operates as a fully Social Housing Regulatory Authority (SHRA) accredited social housing institution SHI.
The capacity of HCT is systematically strengthened and built in the short and medium term through a mixture of insourcing, outsourcing, appointments of staff and structured partnerships.
Committed programme of transfer of rental stock from COT to HCT. Current and future social housing development initiatives will be lead and managed by HCT on
behalf of CoT. HCT will increasingly target new opportunities for partnership that push it beyond the focus on
simply managing. The storyline underpinning the HCT sustainability-approach is as follows and could be thought of as unfolding in phases that happens in sequence and in parallel. These phases take cognisance of where HCT is currently and where it would like to be in the future. The phases recognise that in order to perform against its mandate, HCT must start by focusing first on property management while building on its property development capability. Thus, Phase 1 has been characterised as property management. This is primarily because the `quick wins’ for the company reside in property management and also that viability is more easily achieved if there is a focus on achieving the break even number of rental units in the property management portfolio of an SHI. According to research, this is calculated to be 2000 units. However, given the opportunities that the shareholder has identified, Phase 2 will almost unfold in parallel to the phase 1 with HCT tackling a property development projects. Phase 3 will focus on extending the property management and development portfolios of HCT. During this phase, there will be stronger emphasis on integrating proactively and systematically within the restructuring zones of the City and transport orientated spatial restructuring that the CoT in embarking on. This proactive approach will be based on more systematic planning informed by demand and supply based information and closer analysis of the planned activity in the restructuring zones. HCT will focus on developing a social housing master plan. Phase 3 will also look at some opportunities for partnerships in terms of both development and property management. Phase 4 – will focus on a more structured and intense focus on sustaining and extending the growth of HCT where newly-developed is continuously managed within. The diagram below outlines the phased approach to how the HCT strategy will be rolled out over the next five years.
284
Section 10: Corporate Social Responsibility Report The Company does not have any Corporate Social Investment function at this stage. Section 11: Anti-corruption and Fraud Describe in broad terms what strategies are in place to prevent corruption, fraud and theft. Also indicate key risk areas and processes put in place as a deterrent – e.g. division of duties, internal audit review of processes and adherence thereto, Audit Committees that exclude politicians and officials as voting members, condemnation by board of corrupt practices and involvement of the police as soon as grounds for suspicion become evident. Note that this information is sensitive; therefore entities should not provide names of people involved in investigations. This Anti-Corruption Strategy and Fraud Prevention Plan have been developed as a result of the expressed commitment of Government to fight corruption. It is also an important contribution to the National Anti-Corruption Strategy of the country and supplements both the Public Service Anti-Corruption Strategy and the Local Government Anti-Corruption Strategy. The approach in preventing fraud and corruption is focused into 3 areas of structural, operational and maintenance strategies; Section 12: ICT Governance The entity is entirely part of the City of Tshwane ICT Governance and infrastructure and its policies on ICT are monitored by management to be compliant with those of the parent-municipality in terms of all relevant legislations i.e the MFMA, Personal Information Protection Act.
285
CHAPTER THREE: SERVICE DELIVERY PERFORMANCE
Section 1: Highlights and Achievements
Highlights Narrative
1. Conditional Accreditation by the Social Housing Regulatory Authority (SHRA).
The company has achieved a progressive level of Conditional Accreditation by the Social Housing Regulatory Authority (SHRA) at the end of June 2014. This now enables the company to access and get assistance with project preparation, packaging for funding and other processes leading to project grant funding.
2 Sustained revenue collection based on a targeted 95% collection rate (target exceeded: current accounts and arrear amounts; see table below)
Eloff building continues to perform well in terms of revenue collection. This is attributed to the installation of Biometric access control installed and general tenant and property management processes by the company.
3 Reviewed Business Plan and alignment of targets with SDBIP (specifically the Housing & Human Settlement departmental scorecard)
The company’s Business Plan and Service Delivery Agreement with the City of Tshwane were reviewed and approved. This has led to a new business focus in keeping with the company’s mandate and shareholder performance expectations.
4 Five (5) year Strategic Plan HCT Board of Directors and management have on the last half of 2013/14 financial year embarked on a strategic planning process which will give guide and direction of the company over the next five (5) years in relation to the implementation of if mandate and projects thereof. The basis for the new strategic vision of the company focused more on how the company achieves the accreditation status by SHRA, how the company can enhance it operations within the property management and maintenance, while it develops for accreditation and regain the Shareholder confidence.
Section 2: Financial Performance
2.1.1 Revenue The Company posted revenue of R 10, 1 million for the six months period, an increase of 471% as compared to the previous year Mid-Year. The operational grant from the Shareholder contributed 81% of the total revenue received, this being an increase of 3,314% over the previous year. Rental revenue increased by 17, 8% to R 1, 8 million (2014: R1, 4 million). Other income declined by 0, 31%. 2.1.2 Results of Operations
Operational costs increased by 75.4% as compared to the previous year to R8, 5 million during this period (2014: R4, 9 million). The key operational costs that contributed to the increase were mainly contracted services as well as maintenance costs at both Eloff and Clarina buildings. The SHRA accreditation policies also contributed the increase in contracted services and maintenance costs was 38% as compared to the previous year. The Company posted a surplus of R 1, 5 million for the period under review, against a deficit of R 3, 1 million for the previous year. The surplus is attributed to the fact that the company has fully utilised the 2013/2014 unspent conditional grant as agreed with the parent-municipality, the City of Tshwane.
286
2.1.3 Cash Flow The company has formally requested the release of the operational grant to the value of R8 million from the City of Tshwane and it has not yet received the grant during the period under review. However the company has fully utilised the unspent conditional grant received in the prior financial year. The unspent operational grant contributed 96% of operational costs. The rental income increased by 16% as compared to prior year (2014: R1, 5 million. The remainder was from interest income. The Company ended the year in a favourable cash position with cash on hand being R24 million (2014: 24 million). This was due to effective cash flow management.
2.1.4 Statement of Financial Position The value of the Investment property has increased by R300 thousands from R13, 2 million due to increase in valuation of the property. Fixed assets increased by R 600,000 thousands due to the fact that the company has increased staff complement and had to purchase furniture and computers. The ability of the Company to meet its financial obligations increased as compared to the previous year, with the current ratio test increasing to 7, 76: 1 (2014= 5, 5: 1). The net current asset base has however improved from R 33 million to R 35 million. The increase in the Trade and Other Receivables was as a direct result of slow debtor’s payments from Clarina tenants, the estate that was declared as rental-free accommodation for ex-Schubart and Kruger Park residents as per the 2012 Constitutional Court ruling against the COT. The company bills Clarina tenants only R492 for levies and not residential rentals. There has been a decrease of 32% in Trade and Payables and this reflect improvements in settling the creditors within 30 days and complying with the MFMA.
Section 3: Capital Projects During the period under review the company has not been able to deliver any complete capital projects, as all its intended projects are at planning stage. Currently, the entity is setting-up all statutory supply chain committees for procurement of the required service-providers for its intended projects. The table below reflected the projections on the capital projects to be implemented by the entity:
Project Start Date Completion Date
Capex Budget R’000
Actual Spent
% spent
900 units Townlands July 2014 July 2015 R4,9 0 320 units Timberlands July 2014 June 2015 R3,6 0 R8,5 0
287
Section 4: Performance against IDP and City Scorecard (SDBIP)
Set out below, is an analysis of the entities performance against its KPIs for the financial year 2014/2015 as set out in the City’s IDP scorecard. As will be seen, significant progress against the set targets has been made. This indicates important success by the entity, and our partner-departments in enhancing the performance and capability of the entity. The following also demonstrates the developing entity’s business model in delivering on the mandate by the CoT to develop sustainable social housing and institutional housing within the city.
This section of the report analyses the performance of the entity in terms of the annual business plan scorecard, measuring performance in terms of both the entity’s impact and its financial and resource management. 1. Key performance area: Provision of new Social Housing units on a sustainable basis
Number of New units built and developed (Greenfields development) The entity has gone through the process of updating the studies and plans that were previously done for the Greenfield projects in order to verify milestone achieved and those requiring implementation. Procurement processes are underway for the procurement of various service providers for the installation of pre-construction services on the intended projects. Number of City of Tshwane rental units transferred to HCT for management (Brownfield developments) Target achieved, a Service Level Agreement between the City of Tshwane and Housing Company Tshwane to transfer Council-owned rental stock to the entity for management and maintenance was concluded and is being implemented to fully transfer 565 units to the entity. As part of the requirement in the social housing sector, the entity is expected to have a tenant satisfaction level of not below 60%. The entity has in the beginning of the financial year performed an independent tenant satisfaction survey in one of its buildings under management, which resulted in 75% satisfaction levels.
2. Key performance area: Housing Stock Management
Property Management and Maintenance Plans approved and implemented for each housing project developed and received from CoT (aligned to number of buildings transferred in each quarter). Implementation of approved property management plans on buildings transferred. Management plans have been drafted and are approved for the properties under management, varying in specific needs of each property.
3. Key performance area: Management and Internal Controls
Number of tenant occupancy and contracts (95 % occupancy) This indicator relates to the occupation units by tenants and lease agreements signed with the entity. The entity has so far achieved 57% of this target through the two building under management, as tenants have signed agreements. Processes are currently underway to transfer the lease-agreements of the tenants in the other transferred buildings.
Management and Internal control guideline/policy approved. Target achieved. The policy has been approved and is being implemented.
Percentage of complaints resolved (80%). Target has continuously been achieved and exceeded as it forms part of the Tenant satisfaction strategy on properties under management.
Review and approval of delegations of authority framework This target has not been achieved by the entity; however a draft document has been submitted to the Board’s committee for Finance, Risk and Ethics for review and approval during the third quarter of 2014/2015.
4. Key performance area: Effective Financial Management
288
% Compliance with GRAP 17 in terms of Asset Register management. The target has been achieved, through the implementation of asset management policy on a monthly basis and the entity will continue to sustain the achievement. % of total expenditure to be spent on BEE and SME procurement A target of 50% has been set for the entity and over the first two quarters, the entity has achieved nearly 25%, making it possible that the target will be achieved at the end of the financial year. Manage budget processes of the Department in accordance with regulatory frameworks Target achieved on quarterly basis.
5. Key performance area: Rental Collections and Revenue Management Number of Units billed as per tenant listings (10% increase in rental collection) Note: excludes Clarina estate targeted for rent-free alternative accommodation Target not achieved, however the entity is continuously working with Human Settlements department in order to have the billing rights and lease-agreement transferred to HCT during the third quarter of 2014/2015 financial year.
6. Key performance area: Human Resources Management Approval of Reviewed Performance Management policy This target has been achieved, with the policy reviewed and approved by the Board of Directors in the second quarter of 2014/2015 financial year. % of Vacant Positions filled. A total of 13 vacancies in the approved organogram structure have been filled, making 55% of the vacancies filled. The entity still faces a challenge of delays in relation to filling key vacant positions i.e CEO, CFO and CFO, however processes are underway with the selection, and short-listing for the CEO position. Skills Development Plan reviewed. Target achieved and the entity will sustain the achievement. Frequency for conducting and submitting performance appraisals for all staff Target achieved on monthly and quarterly basis. Achievement to be sustained.
7. Key performance area: Review and Implement Marketing and Communication Strategies Review a Marketing and Communication Strategy and Plan Plan reviewed and approved by the Board of Directors in the first quarter of 2014/15 Frequency of updates on the website with Social Housing Information Target achieved on monthly and quarterly basis. Achievement to be sustained.
8. Key performance area: Develop and Implement Internal Governance Structures and Processes Review of Legal Document Templates Target not achieved legal templates under review, to be finalized and approved by the Board in the third quarter of 2014/2015. Review of the Strategic Plan A multi-year strategic vision of the company was approved for implementation by the Board of Directors in the first quarter of 2014/15.
9. Key performance area: Risk Management 1 Risk Management Plan approved1 Risk Review conducted Target achieved and the entity will sustain achievement. Frequency of back-ups made in a secure offsite storage (CoT network dependent) Target has continuously been achieved by the entity on monthly and quarterly basis.
289
Section 5: Assessment of Arrears on municipal taxes and service charges
5.1 Assessment of Debtor book of the entity
Detail 0-30 days 31-60 days 61-90 days 91-180 days 181& over Total
Debtor’s Age Analysis by income source
101,491 64,436 57,952 54,479 363,197 641,554
The total debtor’s amount to R 641,554.48 managed by entity. The accumulated provision for bad debts amounts to R 315 921.00. 5.2 Amounts owed by entity for service charges
Name of Entity Amount Owed Status Comments
Housing Company Tshwane
R0.00 No amount owed. No amount owed.
5.3. Assessment of Directors’ and senior managers’ municipal accounts
Name of Director/Senior Managers
Designation Name of Municipality
Municipal Account Name/ Number
Account Status as at Dec 2014
Comments
T. Phetla Director (Chairperson)
Polokwane Municipality
Up to date Up to date
M. N. Lehlokoa Director City of Tshwane Up to date Up to date
E. Mphahlele Director Ekurhuleni Municipality
Up to date Up to date
S. S. Kholong Director City of JHB Up to date Up to date
W. Rowland Director City of Tshwane Up to date Up to date
A. J. Singh Director City of JHB Up to date Up to date
D. M. Masilela Director City of JHB Up to date Up to date
T. J. Mokgoro Director City of JHB Up to date Up to date
N. A Magubane Acting CEO City of Tshwane Up to date Up to date
L. M Makibinyane Finance Manager City of Tshwane Up to date Up to date
K. W Ramotshela Property Manager City of Tshwane Up to date Up to date Section 6: Statement on amounts owed by Government Departments and Public Entities
Name of Department
Amounts owed Account Status Comments
N/A N/A N/A N/A N/A N/A N/A N/A
Section 7: Recommendation and Plans for next six months
The shareholder needs to review the budget allocation to the company to ensure that:
The company is able to acquire resources in order to implement projects and programmes relating to its
mandate effectively;
The company is able to continue to achieve and manage a customer satisfaction index rating of 70% for
service delivery on properties currently management;
290
Council rental stock transferred to HCT for management, which will increase its revenue collection and
enhance its property management functionary.
The installation of pre-construction services for Townlands and Timberlands;
291
CHAPTER FOUR: HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT
In prior years, the HCT’s limited social housing portfolio hindered its expansion in terms of human resources or skills/capacity to effectively carry out its mandate. In the light of new developments around additional social housing units to be managed by HCT, as well as the accreditation of the company by the Social Housing Regulatory Authority (SHRA), the HCT Board of Directors approved the implementation of a human resources development plan which has thus far enabled the company’s capacity to be brought up to an acceptable level to enable it to carry out social housing development and management mandate.
During the transition to implementing an optimal and best-fit organisational structure, the HCT will utilise a combination of in-sourcing (targeted expertise) and leveraging of institutional resources from the broader City. It will also implement a targeted recruitment strategy in parallel to these other resourcing initiatives.
Human Resources Head Count per UNIT
2013/14
Units Units No. of posts
No. of filled posts
No. of vacancies
Vacancies %
Challenges Intervention/Action to be taken
Chief Executive Officer
2 0 2 100% Delays in appointment of the Chief Executive Officer creating a delay on other functions of the entity.
Screening and selection process for suitable candidates underway. The interview processes expected to commence on the week of 28 August 2014.
Finance Department
5 4 1 20% The entity has in the past been managing minimal rental stock and current staff members have been coping with the workload.
Processes underway to fill the vacant post in the finance department by the first quarter of 2014/15 financial year.
Property Management
14 7 7 50% The entity has a had a delay in the
Interviewing process for the Property Manager
292
implementation of filling in these positions due to minimal rental stock under management, however this is being addressed as the entity recently received rental stock transferred to it by the City.
position expected to commence on the week beginning 21 July 2014. Outstanding vacancies to be filled will be implemented on the first quarter of 2014/15 financial year.
Property Development
2 1 1 50 No challenges so far. Filling of vacant position in this division linked to development projects to be implemented.
TOTAL 21 11 9 43%
Skills or levels of education attained by staff and the success of training and development initiatives.
Training and development
Management Type of training
2012/13 2013/14
Gender Employees in post as 30 June 2012/13
Learnerships Skills Programmes & Other Short Courses
Other Forms Of Training
Total Gender Employees in Post As 30 June 2013/14
Learnerships Skills Programmes & Other Short Courses
Other Forms of Training
Total Remarks
Case-ware Female Yes 0 0 0 R3,169 Yes 0 0 0
Municipal Financial Management Programme
0 0 0 0 2 Females
Yes 0 0 0
GRAAP Standards
0 0 0 0 2 Females
Yes 0 0 0
Contract Management
0 0 0 0 Male Yes 0 0 0 R8,749
Social Housing Legislation & Regulations training
0 0 0 0 2 Males Yes 0 0 0 R6,500
Property Leasing
0 0 0 0 3 Males & 1 female
Female resigned
0 0 0 R33,098
The conditions or opportunities for previously disadvantaged individuals (esp. women) to progress through the municipal entity.
Human Resources Gender and Race
Indicator Baseline 2012/13 Target
2012/13 Actual
2013/14 Target
2013/14 Actual
Challenges Comments
African staff % of total staff
90% 52.4%
Female staff as % of total staff
38% 19%
African Female managers % of senior management
10% 5%
Staff turnover as % of total staff
0% 27%
293
Mechanisms to reinforce the value of diversity in the workplace and the municipal entity’s related progress and performance.
The age of employees.
Trends on total personnel expenditure over the last 3 to 5 years/ 4 quarters, compared to total budget, this will include the financial investment in employee training and development initiatives;
The number and name of pension and medical aid funds including an assessment of future risks or liabilities; The entity is not a member of any pension and medical aid scheme
Arrear (outstanding monies) owed to the entity or the City by staff and non-executive directors.
Name of Director/Senior Managers
Designation Name of Municipality
Municipal Account Name/ Number
Account Status as at June 2005
Comments
None N/A City of Tshwane N/A N/A N/A None N/A City of Tshwane N/A N/A N/A
Section 1: Human Resource Management
The entity’s overall objective as set out in its employment policy is to ensure that the company’s employment practices and remuneration policies motivate and retain talented employees and create an attractive environment for all employees. The employment policy is periodically reviewed to ensure that it remains relevant and practical for the changing needs of current and potential employees. Our vision is to be the employer of choice in our field. Our vision is to at the top end of compliance by including such requirements into our working practices. Section 2: Employment Equity The entity has employment policies that it believes are appropriate to the business and the market in which it trades. Equal employment opportunities are offered to all employees. We firmly endorse the four key areas of employment equity identified by the Employment Equity Act: elimination of discrimination in decision-making; promotion of employee diversity; reduction of barriers to advancement of the disadvantaged; and introduction of measures and procedures for transformation.
Employment Equity figures
African Coloured Indian White Total
Male 7
7
Female 3
1
4
Total 10
1
11
Actual % 55.5% 0% 100% 0% 52.4%
Target % 100% 100% 100% 100% 100%
Gap 8 1 0 1 10
Target Total 18 1 1 1 21
Change Totals
FY
2009/2010 FY
2010/2011 FY
2011/2012 FY
2012/2013 FY
2013/2014 FY
2014/2015
Total Salary Cost (inclusive of directors remuneration) 1,965,713 2,382,227 3,246,257 4,098,771 4,914,447
294
Staff Levels:
Senior Management 2
3
Administration 9
10
The entity’s employment equity programme was extremely progressive and we exceeded the targets set. Our conviction to ensure material participation of previously disadvantaged companies and individuals is demonstrated by the degree of procurement spent on the designated companies and individuals.
Section 3: Skills Development and Training
The entity is committed to the maintenance of standards by supporting and training staff through its world-class skills development programme. This programme aims to develop both technical and people skills required for the company to conduct its business on an effective basis. Our skills development programmes are in line with the requirements of the Skills Development Act and our workplace plan (WSP) is aligned to our business plan and focus is placed on occupational specific programmes, management development and legally required training.
In the 2014/15 financial year, our training will focus on the development of specific competencies relating to our future strategy for the company i.e. property management, property development, risk management, quality assurance, supply chain management, social housing sector based trainngs and financial management. Section 4: Performance Management Performance Management was implemented for all management levels on the organisational structure. The balanced scorecard is the tool being used for measurement. The performance indicators are linked to the Company’s objectives in order to have an immediate tracking of objective achievements. Additional objectives are included to reinforce the culture of governance and risk management among managers. The Company started the rollout process to ensure that all employees in supervisory positions are included in the performance management strategy. Training of underperforming officials is being introduced as part of our coaching and mentorship process to improve the performance levels. Performance Management is being adopted as a positive management strategy rather than a punitive process, and in this way employees feel comfortable to be part of the process. The entity will continue to set new standards of service delivery and our customer relationship programme will serve as a pillar for our on-going success. We remain firm in our commitment to sound stakeholder relationships and are committed to managing both short-term and long-term plans to standards that will ultimately benefit our communities. We will, however, continue to strive for operational effectiveness and, with our customers and stakeholders, we will collectively focus on improving the environmental well-being of our society. Section 5: HIV/AIDS on the Workplace The management of HIV/Aids is an important challenge facing every organisation in our country. The entity has determined that HIV/Aids will have an impact on the following risk areas: operations, target market risk, supplier risk, legal risk and health risk. Whilst all these risk are under further investigation, and has adopted the following core principles as a basis for its HIV/ Aids policy: Continuously assess the risks posed by HIV/Aids on the business; Limit the number of new infections among employees; Ensure employees living with HIV/ Aids are aware of their rights and that their rights are respected and
protected; Provide care and support to employees living with HIV/Aids.
1.1. HIV/Aids Structures
In order to achieve the policy objectives, entity has formed an HIV/Aids committee which consists of three experienced independent medical practitioners, four union representatives and five members of senior management. The company has trained five peer educators, who are fulltime employees, who have shown
295
passion and willingness to assist their fellow HIV positive colleagues to ensure that HIV positive employees receive care and support in their work environment.
1.2. Prevalence rate To identify the current prevalence rate, the committee with the co-operation and support of the union conducted two studies: an actuarial study of the company’s risk profile and a survey to measure the employee’s knowledge, attitudes, practices and beliefs (KAPB) about HIV/Aids. 1.3. Actuarial impact analysis The company employed the services of an actuary to assess the current and future expected cost to the organisation, resulting directly and indirectly from HIV/Aids. The company recognises the cost involved to both the company and the community of not taking progressive steps in combating the disease has therefore allocated an additional worth of resources from its annual budget to fighting the disease. The HIV/Aids committee has approved the budget.
1.4. Awareness of the disease The committee has focussed its attention on identifying and measuring the extent of the risk of HIV/Aids to the organisation. In order to identify employees’ level of awareness, the committee used the help of three psychologist and qualified counsellor to anonymously survey all staff numbers through the KAPB survey. 1.5. Education To build on the awareness programme, an on-going education programme has been instituted. The first place of this programme was to train peer educators who will then provide HIV/Aids education to all staff on an on-going basis. Peer educators received training on lay counselling, grief management, company benefits, first aid and treatment of workplace injuries.
Section 6: Employee Benefits The Company does not participate in any retirement benefit scheme at this stage. Section 7: Supply Chain Management and Black Economic Empowerment The entity has adopted Supply Chain Management systems in compliance with the provisions of the MFMA and the National Treasury: Municipal Supply Chain Management Regulations, 2005. An SCM unit was established in September 2005 and which monitors the implementation of the entity’s SCM policies in line with the regulations which seeks to modernises financial governance and improve accountability and transparency in the entity’s processes. The entity’s SCM policies provide for the exclusion of awards persons in the service of the state subject to the exemptions and regulations issued by National Treasury from time to time. The entity is in quarter three going to be implementing bidding processes with separate Bid specification, Bid evaluation and Bid Adjudication committees having been set out …etc. The Board has ensured that the procurement policy embraced the objectives of broad-based Black Economic Empowerment and the CEO, as the Accounting Officer of the Company, was tasked as the custodian for effective implementation. The Capital projects implemented during this period served as valuable foundations for ensuring community participation in our BEE programmes. This pace will be enhanced and the Company will continue to be sensitive to the financial constraints facing emerging black businesses. The entity has made a number of quotation-based awards for property maintenance and management projects that the entity undertakes from time to time, with an estimated total value of R……. to SMMEs and BEE companies …etc. No unsolicited bids were made by the company…etc.
Awards to state employees
Legal requirements The challenges experienced by the entity Mechanism in place or to be put in place to deal with the challenges.
296
CHAPTER FIVE: FINANCIAL PERFORMANCE
Housing Company Tshwane - Table F2 Monthly Budget Statement - Financial Performance (revenue and expenditure) - M06 December
Description
2013/14 Current
Year 2014/15
Unaudited Outcome
Original Budget
Monthly actual
YearTD actual
YearTD budget
YTD variance
YTD variance
R thousands %
Revenue By Source
Property rates – – – – – –
Property rates - penalties & collection charges – – – – – –
Service charges - electricity revenue – – – – – –
Service charges - water revenue – – – – – –
Service charges - sanitation revenue – – – – – –
Service charges - refuse revenue – – – – – –
Service charges - other – – – – – –
Rental of facilities and equipment 3,182 7,607 298 1,810 3,175 (1,365)
-43.0%
Interest earned - external investments – – – – – –
Interest earned - outstanding debtors 35 30 9 50 18 32 177.9%
Dividends received – – – – – –
Fines – – – – – –
Licences and permits – – – – – –
Agency services – – – – – –
Transfers recognised - operational 9,041 22,079 2,549 8,254 13,141 (4,887)
-37.2%
Other revenue 194 118 4 31 70 (39) -55.3%
Gains on disposal of PPE – – – – – –
Total Revenue (excluding capital transfers and contributions) 12,451 29,835 2,861 10,144 16,404
(6,259) -38.2%
Expenditure By Type
Employee related costs 3,962 5,609 316 1,724 2,804 (1,080)
-38.5%
Remuneration of Directors 1,544 988 119 502 425 77 18.1%
Debt impairment – – – – – –
Collection costs – – – – – –
Depreciation & asset impairment 40 95 62 62 48 15 31.1%
Finance charges 419 382 32 195 198 (3) -1.6%
Bulk purchases – – – – – –
Other materials – – – – – –
Contracted services 2,092 2,344 203 1,216 1,161 55 4.8%
Transfers and grants – – – – – –
Other expenditure 3,179 20,418 1,788 4,317 13,516 (9,199)
-68.1%
Loss on disposal of PPE – – – – – –
Total Expenditure 11,235 29,835 2,519 8,016 18,151 (10,135)
-55.8%
Surplus/(Deficit) 1,216 (0) 342 2,128 (1,747) 3,875
-221.8%
Transfers recognised - capital –
Contributions recognised - capital –
Contributions of PPE –
Surplus/(Deficit) before taxation 1,216 (0) 342 2,128 (1,747) 3,875
-221.8%
Taxation –
Surplus/(Deficit) for the year 1,216 (0) 342 2,128 (1,747) 3,875
297
Housing Company Tshwane - Table F4 Monthly Budget Statement - Financial Position - M06 December
Vote Description
2013/14 Current
Year 2014/15
Unaudited Outcome
Original Budget
YearTD actual
Full Year Forecast
R thousands
ASSETS
Current assets
Cash 31,524 10,115 24,310 10,115
Call investment deposits
Consumer debtors 750 2,959 326 2,959
Other debtors 66 81 611 81
Current portion of long-term receivables
Inventory
Total current assets 32,340 13,155 25,247 13,155
Non current assets
Long-term receivables
Investments
Investment property 13,585 24,697 13,500 24,697
Property, plant and equipment 636 1,312 915 1,312
Agricultural assets
Biological assets
Intangible assets 56 49
Total non current assets 14,277 26,009 14,464 26,009
TOTAL ASSETS 46,617 39,164 39,711 39,164
LIABILITIES
Current liabilities
Bank overdraft
Borrowing – 315 158 315
Consumer deposits 480 469 473 469
Trade and other payables 9,893 1,145 540 1,145
Provisions 185 90 185
Total current liabilities 10,372 2,115 1,261 2,115
Non current liabilities
Borrowing 2,804 2,173 2,488 2,173
Provisions
Total non current liabilities 2,804 2,173 2,488 2,173
TOTAL LIABILITIES 13,176 4,288 3,749 4,288
NET ASSETS 33,441 34,876 35,962 34,876
COMMUNITY WEALTH/EQUITY
Accumulated Surplus/(Deficit) 28,827 30,262 31,348 30,262
Reserves
Share capital 4,614 4,614 4,614 4,614
TOTAL COMMUNITY WEALTH/EQUITY 33,441 34,876 35,962 34,876
298
Housing Company Tshwane - Table F3 Monthly Budget Statement - Capital Expenditure - M06 December
Vote Description
2013/14 Current
Year 2014/15
Unaudited Outcome
Original Budget
Monthly actual
YearTD actual
YearTD budget
YTD variance
YTD variance
R thousands %
Multi-Year expenditure
Capital multi-year expenditure sub-total – – – – – –
Single Year expenditure
Buiding & iincrease in valuation 430 8,826 – – 8,537 (8,537) -100.0%
IT Equipment 212 78 78 102 75 26 35.0%
Furniture & fitting 254 72 – – 70 (70) -100.0%
Office Equipment 52 15 7 72 15 57 394.7%
Intangile assets – – – 63 – 63 #DIV/0!
–
–
–
–
–
–
Capital single-year expenditure sub-total 949 8,991 85 236 8,696
(8,460) -97.3%
Total Capital expenditure 949 8,991 85 236 8,696
(8,460) -97.3%
Funded by:
National Government –
Provincial Government –
Parent Municipality 271 8,826 – 151 8,537
(8,385) -98.2%
District Municipality –
Transfers recognised - capital 271 8,826 – 151 8,537
(8,385) -98.2%
Public contributions & Donations –
Borrowing –
Internally generated funds 421 165 85 85 160 (75) -46.7%
299
Housing Company Tshwane - Table F5 Monthly Budget Statement - Cash Flows - M06 December
Description
2013/14 Current
Year 2014/15
Unaudited Outcome
Original Budget
Monthly actual
YearTD actual
YearTD budget
YTD variance
YTD variance
R thousands %
CASH FLOW FROM OPERATING ACTIVITIES
Receipts
Ratepayers and other 3,239 4,613 314 1,742 2,039 (298) -14.6%
Government - operating 13,666 14,169 – – 13,155
(13,155) -100.0%
Government - capital – – – – – –
Interest 1 30 2 11 15 (4) -26.7%
Dividends – – – – – –
Payments
Suppliers and employees
(10,949)
(18,751)
(2,400)
(8,498)
(10,601) 2,103 -19.8%
Finance charges (419) (382) (31) (163) (198) 35 -17.7%
Dividends paid – – – – – –
Transfers and Grants – – – – – –
NET CASH FROM/(USED) OPERATING ACTIVITIES 5,537 (320) (2,115)
(6,909) 4,411
(15,595)
-353.6%
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts
Proceeds on disposal of PPE (28) – – – – –
Decrease (Increase) in non-current debtors – – – – – –
Decrease (increase) other non-current receivables – – – – – –
Decrease (increase) in non-current investments – – – – – –
Payments
Capital assets (558) (8,991) (85) (173)
(8,696) 8,523
-98.0%
NET CASH FROM/(USED) INVESTING ACTIVITIES (586) (8,991) (85) (173)
(8,696)
(8,523)
98.0%
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts
Short term loans – – – – – –
Borrowing long term/refinancing – – – – – –
Increase (decrease) in consumer deposits – – – – – –
Payments
Repayment of borrowing (315) (315) (26) (131) (158) 26 -16.7%
NET CASH FROM/(USED) FINANCING ACTIVITIES (315) (315) (26) (131) (158) (26) 16.7%
NET INCREASE/ (DECREASE) IN CASH HELD 4,636 (9,627)
(2,226)
(7,214)
(4,443)
(2,771)
62.4%
Cash/cash equivalents at the year begin: 20,834 19,742 26,536 25,470 19,742
Cash/cash equivalents at the year end: 25,470 10,115 24,310 18,256 15,299 2,957 19.3%
300
CHAPTER SIX: AUDITOR-GENERAL FINDINGS Section 1: Auditor-General’s Report for the Current Year Note: The Constitution S188 (1) (b) states that the functions of the Auditor-General includes the auditing and reporting on the accounts, financial statements and financial management of all municipalities. MSA section 45 states that the results of performance measurement… must be audited annually by the Auditor-General.
Refer to the Annual Financial Statements set out in Chapter 5 and the timescale for the audit of these accounts and the audit of performance and the production of reports on these matters by the Auditor General as set out in this Chapter. Include a comparison of the previous audit opinions and share a narrative that analyses the reasons for the outcome of the opinion. This should be at a high-level to assist the reader in understanding the reasons for the audit outcomes. 2012/13 2013/14 2014/15
Audit Opinion Unqualified Unqualified Section 2: Historical Audit Findings and Remedial Action
ANALYSIS OF 2012/13 AUDIT FINDINGS
NEW IN 2014/15
REPEAT FINDING
ACTIONS TO RESOLVE
Matters affecting Audit opinion
23 0 Matter have been categorised for tracking and reporting to the Board of Directors and to the City of Tshwane for monitoring.
Important Matters Administrative Matters Section 3: Commitment by the Board of Directors This section should provide a statement/clause from the Board that it has satisfied itself that the remedial
actions taken or to be taken on matters raised by the Auditor-General are adequate.
301
302
PERFORMANCE INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2014 BALANCE SCORECARD WITH KEY PERFORMANCE AREAS AND INDICATORS
No KPI Corporate level KPI Description
Q1& Q2 Target Actual Achieved/Not Achieved Management Corrective Action Plan
1. SO1 Number of new units built and developed (Greenfield developments) New Project: Timberlands New Project : Townlands
Procurement and appointment of service providers for Timberland Detailed planning and designs Timberland Detailed planning and designs completed
0 0 0
Target not achieved Target not achieved Target not achieved
The entity has had a delay in co-coordinating meetings to establish Bid Specification and Evaluation Committees. Up to this far (October 2014), management has engaged the Supply Chain Management department of the city in order to get assistance with setting-up of the required BSC, BEC and BAC committees as stipulated in the MFMA and the Supply Chain Management policy. Procurement processes underway to appoint service-provider for the pre-construction planning and design works for the engineering services in Townlands. Appointment of service provider to be concluded in Quarter Three of 2014/15 financial year.
2. SO1 Number of City of Tshwane rental units transferred to HCT for management(Brownfield developments)
SLA’s conclusion between CoT and HCT (Ou Stalshoogte - 114 and Nuwe stalshoogte -106) Total =220
220
Partially achieved
Target achieved, management currently engaging various stakeholder i.e Finance Department, Residents committees in order to implement the lease-agreement transfers.
303
No KPI Corporate level KPI Description
Q1& Q2 Target Actual Achieved/Not Achieved Management Corrective Action Plan
3. SO2 Property Management and Maintenance Plans approved and implemented for each housing project developed and received from CoT (aligned to number of buildings transferred in each quarter). Implementation of approved property management plans on buildings transferred.
6
6
Achieved
Performance will be sustained
4. SO2 Management and internal control guidelines /policy approved
1 0 Achieved The policy was approved in June 2014 as part of the entity’s approach to ensure that policies and plans for new financial year are approved by the Board of Directors at the end of the preceding year. Going forward the entity will move the target to Q4 of each financial year.
5. Percentage of complaints resolved (80%)
2 2 Achieved Compliance will be sustained.
6. SO2 Number of tenant occupancy and contracts (95% occupancy)
388 221 Target not achieved The entity is engaging and has established a process plan with Human Settlements department of the City and other stakeholders within the City of Tshwane in order to transfer the billing of tenants within the properties recently transferred to it.
7. SO3 Number of units billed as per tenant listings (10% increase in rental collections ) NB: Excludes Clarina estate
388 221 Target not achieved The entity is engaging and has established a process plan with Human Settlements department of the City and other stakeholders within the City of Tshwane in order to transfer the billing of tenants within the properties recently transferred to it.
8. % Compliance with GRAP 17 in terms of Asset Register management.
100% 100% Target Achieved Compliance will be sustained
304
No KPI Corporate level KPI Description
Q1& Q2 Target Actual Achieved/Not Achieved Management Corrective Action Plan
9. 25 % of total Spent on BEE and SME procurement.
25% 85% Target Achieved Compliance will be sustained
10. SO3 Manage budget processes of the Department in accordance with regulatory frameworks.
2 2 Target Achieved Compliance will be sustained
11. SO3 % of vacant positions filled 80% 76% Not Achieved In line with additional rental property stock transferred to the entity for management and in view of the future developments, the entity is on a progressive drive to fill in the vacant key positions.
12. Frequency for conducting and submitting performance appraisals for all staff
2 2 Target Achieved Compliance will be sustained
13. SO3 Approval of Reviewed Performance Management Policy
1 0 Target not achieved A reviewed policy to be submitted to the HR committee within the second quarter of 2014/15 financial year.
14. SO3 Skills development plans reviewed
1 0 Target not achieved Policies and plans relating to skills development to be reviewed and submitted to the Board of Directors in quarter three of 2014/15.
15. SO3 Review of Legal Document template
1 0 Target not achieved The entity reviews its legal documents i.e. lease-agreements, corporate documentation and company registration documents on annual basis. This KPI seeks to address these activities.
16. SO3 Review of Strategic Plan 1 0 Achieved Approved by the Board of Directors on 27 June 2014
17. SO4 Risk Management Plan approved and risk review conducted
1 0 Target not achieved A proposed Risk Management Plan to be submitted to the Finance, Risk and Ethics committee of the Board for approval within the third quarter of 2014/15.
18. Frequency of back-ups made in a secure offsite storage (CoT network dependent)
6 6 Achieved Compliance will be sustained
305
No KPI Corporate level KPI Description
Q1& Q2 Target Actual Achieved/Not Achieved Management Corrective Action Plan
19. Frequency of updates on the website with Social Housing Information
2 2 Achieved Compliance will be sustained
306
307
308
In order to achieve compliance with the Auditor-General directive, the performance assessment (as per section 121(4)(c)) compare the actual performance against the measurable performance objectives set in the SDAs and other agreements between the entities and the COT. The practice has been to compare performance against the City’s IDP and scorecard. The final result may be the same, but it is prudent to mention the fact that the performance is compared to the SDA’s objectives (as contained in the IDP and scorecard.) Further a short discussion of internal controls and system descriptions should be included in the assessment. This should be followed by a short discussion on the objectives, with regards to the measurability (specific, measurable and time bound) and consistency thereof. The performance must be stated and compared to the objectives. The practice of doing this under the heading of KPA’s and thereafter by considering the performance against individual KPI’s would most likely be compliant.
309