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4. DISCUSSION

4.1 Exclusions and limitations The report presents reported information from management. The sign-off by management is a confirmation of o ensure accurate, reliable reporting. Where audits have been completed, audited performance results are specifically indicated. Where departments implement cut-off dates prior to the end of a quarter, for review and reporting purposes, each department is required to indicate such cut-off dates, to ensure the continuous review and audit of performance information in terms of regulation 14(c) of the Municipal Planning and Performance Management regulations.

4.2 Mid-year performance on the IDP targets (July to December 2017) The IDP scorecard for 2017/18 has 22 targets. The IDP targets are annual. The report presents progress towards the annual targets for the financial year to date. Annual targets on the SDBIP remain a risk in that the targets they influence on the IDP will not be achieved. Historic underperformance in previous financial years on the following indicators means they are currently at high risk of under-performance-

• Non-revenue energy;

• Indigent households on the indigent register;

• Achievement of all financial ratios; and

• Formal households with access to electricity

Current progress on the IDP is indicated on the table below Table 1: IDP progress

Key Performance Area

Key performance indicator 5 Year Target

Baseline as at May 2017

Baseline as at November 2017[1]

Target IDP (Current)

Actual IDP (mid-year)

Basic water provision Percentage of households in formal areas with access to water (metered connections)

86.70 %

81.97 %

82.02%

83.09 %

82.4%

Basic water provision Percentage of formalised areas provided with weekly waste removal services

100 %

100.0 %

101.53%

100 %

102%

Basic water provision Percentage of households with access to sanitation

81.44 % 79.14 % 79.13% 79.56 % 79.19%

Basic water provision Percentage of formal households with access to electricity

85.86 % 81.46 % 80.95% 82.31 % 81.76%

Mobility optimization Percentage of required municipal storm water drainage network provided

50.41 % 38.55 % 38.62% 41.53 % 38.88%

Mobility optimization Percentage of roads provided to the required standard (km)

30.11 % 24.08 % 24.17% 25.40 % 24.58%

Mobility optimization Percentage of completed TRT bus way lanes constructed

85.3 % 40.20 % 40.20% 44.82 % 40.2%[2]

Upgrading and development of informal settlement

Percentage of informal settlements with access to rudimentary water services

100 % 100.00 % 101.86% 100 % 104.6%


Percentage of informal settlements with access to rudimentary sanitation services

100%

100.00 %

118.06% 100% 89.25%

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Nr. of informal settlements formalised

32 5 0 7 0

Job intensive economic growth

Number of new income earning opportunities facilitated by the city

104 000 21 500 17 183 23 000 10 032


Rand value of investment attracted to Tshwane (annual)

R'b 10.8 R’b2.20 R’b2.298 R'b 2.4 R0


Support through mentorship/training of the Tshepo 10 000 cooperative

1 097 245 289 257 184

Health Percentage of City of Tshwane clinics providing mother and child health services

100% 100 % 100% 100% 100%

Poverty and inequality Number of indigent households supported by the city through its social packages

16 000 6 000 104 936 total hh 2 837 new hh

4 000 1 311

Public Safety Percentage of reduction in safety incidents (Fire, rescue and specialised humanitarian incidents) (annual)

5.0 % 13 551 23.9% (10 414 incidents)

13 414 56.44%

Public Safety Percentage of increase in interventions to root out crime and related incidents (annual)

5.0 % 43.56% (3 968 interventions)

2 792 -32.42%

Institutional Governance

Unqualified Audit Opinion achieved (Annual)

Unqualified Audit Opinion


Unqualified Audit Opinion for FY 2016/17


N/A

Financial Management Percentage of financial targets met (regulated targets=cost coverage, debt coverage and % service debtors to revenue)

100.0 % 100.0 % 66% 100 % 100%

Financial Management Percentage average of annual non-revenue energy (NRE)(Annual)

10.0 % 19.00 % 20.58% <16 % 20.58%

Financial Management Percentage reduction of non-revenue water (NRW)

23.00 % 26.00 % 23.6% 25.40 % 23.6%


Percentage of employee satisfaction rating

80.0 % 60.0 % 60%[3] 75.00 % N/A

[1] The baselines were updated to reflect the audit results of the AGSA for financial year 2016/17 [2] This indicator reflects previous financial years performance. [3] Employee satisfaction is measured every two years. The number reflected herein reflects the prior financial year results (2015/16) as this indicator was not measured in 2016/17.

4.3 Performance on the SDBIP The SDBIP consists of two scorecards as follows:

• one scorecard with 37 targets drives the achievement of the IDP targets

• a second scorecard with 42 targets that do not directly drive the IDP targets Performance on the SDBIP targets is represented below. Detailed performance on the SDBIP scorecards is reported in the annexure to the report.

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Table 2: SDBIP performance status

Department Targets applicable for Q2

Q2 targets achieved

Mid-year targets achieved

Q2 targets not achieved

Mid-year targets not achieved

Non-reported Q2

Annual targets

Scorecard 1 targets not achieved

Scorecard 2 targets not achieved

Community and Social Development

5 2

3 2

1

0 1 2 1

Community Safety (ES) 3 3 2 0 1 0 0 1 0 Community Safety(MP) 6 6 6 0 0 0 0 0 0 Economic Development and Spatial Planning

6 6 4 0 2 0 1 0 2

Group Finance

10 4 4 3 3 2 0 0 3

Customer Relations Management

2 1 1 1 1 0 0 0 1

Group Human Capital 4 3 3 1 1 0 1 0 1 Group Property

4 1 1 3 3 0 0 0 0

Health

6 4 4 2 1 1 0 0 2

Housing and Human Settlement 1 1 1 4 0 1 Office of the City Manager 0 0 0 0 0 0 1 0 0 Regional Operations & Coordination

14 5 4 8 10 1 0 1 8

Roads and Transport 6 2 2 4 4 0 1 0 4 Utility Services

6 1 3 3 3 3 2 3 0

Totals 73

38 37 28 31 7 11 7 23

4.3.1 Performance for the second quarter (October to December 2017) on the SDBIP

targets At the end of the second quarter of the financial year:

• 38 of 73 targets were achieved (52%)

• 28 planned targets were not achieved (38.36%)

• 7 planned targets were not reported on (9.59%)

4.3.2 Performance for the period July to December 2017 on the SDBIP targets (mid-year) Three indicators with annual targets have reported progress at mid-year. In addition to the indicator on the indigent indicated above, the following progress on annual targets is reported:

• 410 households had access to sanitation through new sewer connections, which is approximately 43% of progress towards the annual target.

• 12.394km of roads were provided to the required standard against an annual target of 13km.

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• 1311 indigent households were supported by the City through its indigent policy, which is approximately 32,8% of progress towards the annual target. The municipality may be at risk of not achieving the annual target.

At the mid-year:

• 37 of 73 targets were achieved (50.68%)


• The status of 7 targets could not be confirmed due to non-reporting in either or both quarters.

The table below summarises performance on the SDBIP scorecards. The table that follows provides detailed performance information. Table 3: Summary of performance at mid-year on the SDBIP

Key performance area Achievements Underperforming

areas Reasons for

underperformance Mitigation measures

Basic service provision

• 2338 formalised areas were provided with weekly waste removal services • 150 informal settlements had access to rudimentary water service

1790 houses were electrified against a target of 2500

Unavailable of material needed to complete projects. Limited capacity for installing meters in areas where the network is energized

The department is engaging Supply Chain Management to source material required for the execution and completion of projects.

893 new electricity connections were provided against a target of 1500

KPI’s its application driven

The dept strives to complete all applications received and paid for within 30 days

1978 households in formal areas were provided with metered water connections against a target of 3000

Connections are demand driven, all applications received were processed within 14 days. There were delays due to community unrest in Region 1 and 2.

The department strives to complete applications received within 14 days. The department requested to adjust the annual KPI target to 4500 based on trends for Q1 and Q2 as well as due local business interference on the project.

Just over 66 informal settlements were provided with rudimentary sanitation services against a target of 76

Inadequate budget to cater and service all informal settlements

Motivation of additional budget will be advanced during the budget adjustment process

1988 title deeds transferred to eligible beneficiaries against a target of 2500

No new title deeds were received from the Gauteng Department of Human Settlements. Illegal sales of the houses, unresolved estates are also reasons for non-issuing.

Constant issuing of calling letters to beneficiaries.

Political/ public events to issue title deeds in collaboration with the Gauteng Dept of Human Settlements.

Consumer education on the importance of a title deed.

Issuing of referral letters to the Master of the High Court for resolution of estates. Constant issuing of calling letters to beneficiaries.

Political/ public events to issue title deeds in collaboration with the Gauteng Dept of Human Settlements.

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Consumer education on the importance of a title deed.

Issuing of referral letters to the Master of the High Court for resolution of estates.

Mobility optimisation

• 2.376km of required stormwater drainage was provided against a target of 0.95km • 93.6% of gravel roads have been bladed as per the maintenance plan.

89% of the maintenance plan for re-gravelling of roads has been implemented against a target of 90%

Limited budget for yellow plant equipment

Long term mitigation would be for the city to obtain its own equipment for graveling roads.

2604 passenger trips per day on A Re Yeng have been reported against a target of 13000

The deviation is due to the fact that during the October Transport Month; A Re Yeng Line 1A provided free ride promote transport month initiative. The negotiations with the Taxi industry has not yet been finalised hence Line 1A is still running a free ride.

Implement the taxi transfer in the third quarter and end the free ride on line 1A.

280 362 passenger trips on Tshwane Bus Services took place as against a target of 300 000.

Insufficient passengers Plans are underway to ensure that 165 buses are operating per day. More buses = more passengers

No traffic signs were implemented or maintained.

Not provided by KPI owner


42.7m of road markings were repainted against a target of 130m.

The target is actually 0. Not provided by KPI owner

Job intensive economic growth • 126 Tshepo

10000 cooperatives were supported • 10 032 income earning opportunities were facilitated by the city

None N/A N/A

Health 100% of City of Tshwane primary health care (PHC) fixed clinics-

• Implemented the Prevention of Mother-to-Child Transmission (PMTCT) of HIV Programme; • provided immunisation coverage for children under 1 year of age; and • provided HIV testing facilities for pregnant women. • 2 drug awareness programmes were implemented

There was no reporting on the clinics with electronic health record systems

The percentage achievement, on e-health coverage would not be achieved based on the reasons that the allocated budget in relation to the KPI has been re adjusted at the beginning of the financial year to cover significant financial shortfall city wide. It is therefore recommended that the above KPI be removed during adjustment, due to non-availability of the budget

Motivation submitted to remove KPI

There was no reporting on the people testing for HIV and receiving results.

The KPI on HIV testing, could not be reported on as in its current format it present challenges based on the way the KPI is structured and the prospective evidence that would support the KPI. Therefore the department has reworked the above KPI, and it would be amended during adjustment budget period with the strong recommendation that it be moved from

KPI has been reworked the KPI and it is recommended that it be moved from Corporate SDBIP to Departmental SDBIP.

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Corporate SDBIP level to the Departmental SDBIP level

Poverty and inequality • 2618

households were exited from the indigent register

1311 new households are supported by the city’s indigent policy against an annual target of 4000.



Public safety • 56 inner city by-law policing operations took place • 81 inner city road policing operations took place • All search warrants issued on drug related matters were executed • 3060 rescue incidents were responded to • 207 special and humanitarian services were responded to • 308 by-law policing operations were executed • 915 crime prevention operations were executed • 645 road policing operations were executed

2695 fire incidents were responded to, indicating a higher rate of fires that anticipated.

Due to the unseasonal dry and hot weather experienced in the Gauteng province there was an increased amount of wildland fires when compared over previous seasons (Climate change).

1) Intensifying public awareness campaigns on fire prevention, fire breaks etc. 2) Fire Brigade Bylaw enforcement. 3) Early warning report distributions via media (SA Weather Services).

Financial management

• Revenue from residential rental yielded R542 749, above target. • 35.24% of CoT assets, turnover ratio is achieved • 17.43%

Non-revenue electricity remains unreported, despite financial year 2016/17 ending on losses of 20.58%, an increase from 19% in the 2015/16 financial year.



93.5% of building plans were approved with 45 days against a target of 100%.

The KPI is worded incorrectly – it should read “% of building plans evaluated” and not “approved” and “within the statutory timeframes: 30 - 60 days” (not “within 45 days”).

Amending the wording of the KPI during the 2017/18 adjusted SDBIP process and ensuring that it is only on Corporate or Departmental level and not both.

Creditor payment days is at 71 days, as compared to 35 days in December 2016.



Capital expenditure targets have not been achieved.



Revenue collection is under-performed.

Not reported Not reported

Awarding of contracts to local SMMEs and cooperatives from the marginalized groups is under-performed

New permanent bid committees were only appointed in November 2017, meaning that their effectiveness was severely limited in the part of the 2nd quarter.

The learning curve of the new bid committees has flattened and their performance is expected to significantly improve.

Revenue from the group property portfolio is under target for business rental, personnel parking and land rental.

Leases have expired, no new leases have been entered into, debt collection needs to be instituted, unlawful occupants need to be removed.

Disposal policy drafted, Highest and Best Use Analysis of portfolio and market valuation to be instituted for identification of properties to be released on a cyclical basis.

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Time taken to connect new businesses to electricity is not reported on.

The City is currently finalising the Reform Action Plan for cost of doing business which include measuring performance (time taken) for providing electricity connections. The KPI requires the on-line application system which GICT is currently working on.


Employee satisfaction and institutional governance

• All unaccounted-for employees were eliminated • 88% of senior and middle managers have had their skills audited • 7286 employees were trained

There has not been adherence to the employment equity plan

Slow progress of appointments towards achieving Annual EE Targets

Fast tracking the progress of recruitment/appointments to achieve EE Annual Targets

4.4 Performance of the municipal entities

The city has two municipal entities which must perform according to service delivery agreements and performance objectives set by the Municipality, and they are: 1. Housing Company Tshwane (HCT)

2. Tshwane Economic Development Agency (TEDA)

This second quarter report has been prepared against both entities’ 2017/18 business plans and scorecards. At the end of quarter 2, 72.41% of targets were reported achieved by entities against their planned targets. These are yet unaudited results. The detailed extracts as reported by the entities are found in the annexure and appendices to the report. Table 4: summary of performance of municipal entities for quarter 2

Entity Nr of targets

Targets applicable for Q1

Targets achieved for Q1

Targets not achieved for Q1

Nr of targets Applicable for Q2



Status Mid-year & YTD

TEDA 19

15 6

3

13 10 3 Overall performance of the entities is showing improvement from the first quarter, but is still underperformed

Housing Company Tshwane

17 10 6 4 16 11 5

Total 36 25 (69.44%)

18 (69.23%)

7 (38.88%)

29 (80.55%)

21 (72.41%)

8 (27.58%)

4.5 Implementation of capital projects of the municipality

53 of 231 projects had achieved milestones by mid-year, with 146 projects behind schedule. The status is indicated in the figure below.

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The expenditure at mid-year is indicated in the table below. Detailed project performance is reported in the projects appendix to this report. Table 5: Expenditure per department

Cluster Department Total projects Budget Allocated (R) Expenditure YTD (R)

% Expenditur

e YTD City Manager Office of the City

Manager 3 376,000,000.00 497,621.74 0.13%

Group Audit and Risk

2

13,000,000.00 6,768,094.80 52.06%

Community Safety

Community Safety 5 23,250,000.00 5,615,172.62 24.15%

Group Financial Services


9 120,500,000.00 0 0.00%

ROC Regional Operations & Coordination

2

6,800,000.00 583,235.40 8.58%

Governance & Support Services

Economic Development and Spatial Planning

7

96,514,650.00 2,740,568.52 2.84%

Group Human Capital

2

6,200,000.00 14,000.00 0.23%

Group Property 2 5,200,000.00 - 0.00%

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Shared Services 8 93,600,000.00 42,249,909.62

Office of COO

Community and Social Development Services

7

91,707,000.00

26,055,832.08 28.41%


4 10,000,000.00 7,375,156.51 73.75%

Environment and Agricultural Management

7

32,500,000.00 11,815,150.49 36.35%

Utility Services 63

1,016,116,394.00 219,429,798.69 21.59%

Roads and Transport

71

1,078,973,564.00 366,851,011.76

34%

Housing and Human Settlement

31

874,422,432.00 201,316,487.33 23.02%

Health 5

15,500,000.00 6,216,369.28 40.11%

Entities

HCT 2

82,174,536.00 0 0.00%

TEDA 1

200,000.00 177,516.74 88.76%

Table 6: Projects on track

Department Project Name Q2 Milestone Q2 Actual work done Community and Social Development Services

9.712773.1.013 Capital Funded From Operating (Capital Moveable)

Procurement as per selection list. Based on availability of library books. Further procurement of library furniture and IT equipment.

Purchasing of library furniture - funds committed. Lib book tender cancelled, use Gauteng tender - Regulation 32. Purchasing of IT equipment through corporate tender.


9.712948.1.017 Social Development centre in Hammanskraal

Construction: snag list for Administration Building, Early Childhood Development Centre, Adult Community Centre and Guard Hut

General progress at 75%. Erection of roof structure in progress and interior finishes.


9.712954.1 017 Social Development centre in Winterveldt




9.712955.1.017 Social Development centre in Mabopane




9.713025.1.105 Call centre furniture and equipment

Procurement of Centurion chill area tables, chairs & other kitchen supplies

Kitchen supplies (microwaves delivered) Other supplies procured on OPEX


9.713026.1.015 Construction Centurion Call Centre Chill Room

2nd & final constructing phase (companion stage

Completed construction of shelter


9.712751.1.007 Capital Funded from Operating

Procurement of furniture and office machines as requested


9.713045.1.015 Provision of waste containers

Procure and distribute 240-liter house hold bins in Regions 1 and 6

Distributed 342 (240l bins) in Region 1, 2,3 , 4 and 6. Procured receptacle bins worth R2,2m

Group Audit and Risk 9.712449.1.001 Insurance replacements(CTMM Contribution)

Replacement of capital assets for which the claims were settled.

Capital Items replaced.

Group Human Capital 9.713064.1.007 Capital Movables

Procurement of required assets

New wbs were created in order to enable finalisation procurement

Health 9.712278.1.015 Upgrading Of Clinic Dispensaries

Continue with earth works. • Superstructure Brick work – 100% • Electrical 35%. • External works 65% • Overall progress – 78.9%

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Health 9.712756.1.007 Capital Funded from Operating


• Purchase requisitions were completed. • 75% purchase orders were issued but awaiting delivery.

Health 9.713048.1.015 Extension of Rosslyn Clinic

Continue with architectural drawings.

• Architectural drawings in progress.

Health 9.713049.1.015 New Clinic Lusaka


• Architectural drawings in progress.


9.710863.2.005 Booysens ext. Bulk water

Supply Chain processes Detailed designs for the reservoir submitted to Utility Services on 11 December 2017 for approval.


9.710863.2.005 Water - Rama City

Pipe laying & blanket Excavation and bedding.


9.710863.2.005 Water provision - Zithobeni Heights Phase 1

Steel fixing & concrete works

Installation of valve chamber and replacing stolen valves.


9.710863.2.005.L Refilwe Manor - 10 ML Reservoir

Casting of concrete Structural work: continue with reservoir formwork, reinforcing, concrete & post-tensioning. Continue with construction of control room formwork, reinforcing & concrete. Construction of feeder & delivery pipes between 2 reservoirs plus overflow pipe.


9.710864.2.005 Booysens ext. Bulk Sewer

Supply Chain processes Detailed designs for the reservoir submitted to Utility Services on 11 December 2017 for approval.


9.710864.2.005 Refilwe Manor Pump stations

Mechanical works Structural works: continue with the construction of wet well, dry well, emergency storage, sand trap, manholes, top structures.


9.710864.2.005 Sewer - Rama City

Pipe laying & blanket Excavation and bedding.


9.710864.2.005 Sewer provision - Kudube 9 Bulk sewer line

Pipe laying & blanket Pipe laying and backfilling.

Roads and Transport 9.710143.1.005 Major Storm water Systems: Klip/Kruisfontein

Obtain approval of tender and advertise tender.

Awaiting for appointment letter

Roads and Transport 9.710229.2.015 Traffic Calming And Pedestrian Safety For Tshwane

Tender process Compilation of tender document

Roads and Transport 9.710657.2.015 Mabopane Station Modal Interchange

Construction of 44 stalls, 1 Administration Building, demolition of existing concrete columns, construction of gabions in pond 2 and construction of Paving

Construction of 44 stalls completed, Ground floor of Administration Building constructed, demolition of existing concrete columns completed, construction of Paving – Bus & taxi rank is 35% complete

Roads and Transport 9.711265.1.015 Hartebeest Spruit: Canal Upgrading

Tender advertise and tender process for contractor

Tender Process

Roads and Transport 9.711273.2.005 Major Storm water Drainage System: Majaneng

Review of Detail Designs Appointed Consultant busy reviewing designs

Roads and Transport 9.712220.1.005 Soshanguve Block L

Tender evaluation and appoint consultant.

Review of detail designs underway

Roads and Transport 9.712220.1.005.O Soshanguve Block LL South

Construction of 0,75 KM of side - walks.

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Roads and Transport 9.712502.1.015 Traffic Flow Improvement at Intersections

Appointment of Service Provider and design reviews

site establishment and preparations for commencement of works

Roads and Transport 9.712513.1.015 Flooding Backlogs: Soshanguve South (& Akasia Area): Soshanguve Block WW

Tender evaluation and appoint consultant

Awaiting for appointment letter of consultant

Roads and Transport 9.712513.1.015 Flooding Backlogs: Soshanguve South (& Akasia Area): Soshanguve South Extension 1



Roads and Transport 9.712518.1.015 Flooding backlog: Drainage canals along Hans Strydom Dr, Mamelodi x 4 and 5

Tender documentation, obtain approval and advertise.


Roads and Transport 9.712893.1.005 Upgrading of Road from gravel to tar in Zithobeni Ward 102

Procurement Busy with proceurement of consultant

Utility Services : Water & Sanitation

9.712534.1.015.E Installation of telemetry, bulk meters and control equipment at reservoirs

Telemetry Server room Backup Generator Installation and commissioning

The second batch of level sensors is installed together with the back-up generators at the depot

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Utility Services : Energy & Electricity

9.710005.1.016 Upgrading/Strengthening of Existing Network Scheme - West

Process 100% of applications received

Processed 100% of all applications received


9.710005.1.016 Upgrading /Strengthening of Existing Network Schemes - North




9.710005.1.016 Upgrading/Strengthening of Existing Network Scheme - East




9.710006.1.016 Payments to Townships for Reticulated Towns



9.710177.1.001 Low Voltage Network Within Towns (Renewal)

Full implementation of all projects on site. Complete 3 LV areas.

3 areas completed, (UG - M/S Natalensis/Besembiesie; Zithobeni X 8 load splitting & Mamelodi X 20 load split (Cnr Abia Khoza and Maluleke ))


9.710178.2.005.F Electricity for All- Region 6

Construction of the infrastructure backbone with connections

100% completion and commissioing of feeder cable work for Mamelodi Ext.11 electroification project.


9.710556.1.005 USDG Funds: Region 4 (Public Lighting)

Construction of the Network Backbone infrastructure, 50 Streetlights and 0 High mast

59 Streetlights and 2 Highmast lights


9.710480.1.015 Strengthening 11KV Cable Network

The period is used mainly to identify the critical projects which will be executed in the financial year. This is based on the Winter Load Readings that give an indication for projects that will be addressed.

Analysis of Winterload completed and 530m of underground medium voltage cables installed and completed.


9.710481.1.005 Strengthening 11kV Overhead Network

This period sees a lot of execution work and expenditure is realized more rapidly as compared to Q1. Project that have a shorter project time will be realized in this quarter.

We have realized 3.1km achievement on the upgrading of 11kV lines. (IW 33-IW36 PHASE 3&4 and Z line Phase 3)


9.711862.1.015 Pre-paid Electricity Meters

Tender process Utility Services : Energy & Electricity

9.712279.015.J Soshanguve JJ 132/11KV Substation

Install 3 x 40MVA power transformer.

Started with the excavation of the substation building foundation and completed 70% of the outdorr yard equipment foundations. Received delivery of materail and 132kV circuit breakers


9.712279.015.M Mamelodi-3 132/11KV substation (2 x 40MVA Power Transformers)

Delivery of 2x40MVA transformers

Completed the testing and commissioning of the substation. Project completed and handed over to the City


9.712279.1.015.E Eldoraigne 132/11kv Substation

Receive delivery of power transformers



9.712279.1.015.G Hartherley 132/11KV Substation

Appoint contractor and procure all material

Completed the installation of the towers on the Hatherley -Mamelodi line


9.712483.1.016 New Connections

Process 585 Connections Realised 557 residential connections realised


9.712908.1.015 Electricity vending infrastructure

Tender Process Unable to spend, Contract reached maximum cap and deviation rejected

4.6 Audit outcomes for financial year 2016/17 and the 2017/18 SDBIP adjustment

The municipality and its entities achieved an unqualified audit opinion for financial year 2016/17. There were however material findings for three indicators on the audit of the annual predetermined objectives, findings related to the compliance with legislation on the annual financial statements, and internal control deficiencies identified. The municipal manager, together with the chief financial officer and other senior management will put in place measures to address the recommendations of the auditor-general.

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The audit results of 2016/.18 will be used to recalculate the baseline for the 207/.18 SDBIP adjustment. At the monment the process for assessing possible adjustments to the SDBIP is currently underway and will be guided by any proposals for adjustment to the 2017/18 budget, without compromising service delivery. The matters raised by the Auditor-General South Africa (AGSA) in the 2016/17 FY audit will also be considered during this process. The possible impact which delays in projects and transfers of project funding might have on the achievement of targets will be taken into consideration. The 2016/17 Annual report reflect the performance of the City on its IDP and this AGSA audited performance has been used to update the baselines for all key performance indicators contained in the IDP scorecard. The baselines for KPI’s in the approved IDP scorecard was based on a projected baseline as implementation was still underway in the 2016/17 FY when the 2017/21 IDP was approved. These audited results have subsequently contributed to the update of the targets set for the 2017/18 FY to be in line with the confirmed baseline. There is no adjustment to the IDP scorecard, only an update of the baselines and subsequent 2017/18 targets to be in line with the confirmed baseline. It is however recommended that the indicators reflecting percentages, indicate the target in percentages, as well as in numbers relating to the SDBIP outputs. The updated baselines and 2017/18 targets is contained in the attached in the annexure to the report.

4.7 Financial performance This section of the report highlights certain elements of financial performance. The report of the chief financial officer contains more comprehensive financial reporting for the mid-year. The actual revenue realised for the period (excluding capital transfers) amounts to R14,9 billion against a YTD budget of R15,9 billion. This represents a variance of R939 million for the period. The under recovery is mainly on service charges water revenue and transfer and subsidies, due to the delay in the transfer of the equitable share. Expenditure amounts to R14,7 billion against a YTD budget of R16,8 billion. A variance of R2 billion is reflected. The variance is mainly on Contracted Services, Employee Related Costs and Other expenditure. The following main line items are contributing to the under recovery on the revenue line item.

• Service charges: Electricity Revenue (R34,7 million unfavourable) – mainly on smart prepaid electricity. Technical audits on all meters are being conducted and all notification and placement of meters attended to.

• Service charges: Water (R369 million unfavourable) and Sanitation (R15 million unfavourable) – due to a decline in usage. The budget for water and sewerage is based on statistical trends.

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• Service Charges refuse (R30 million unfavourable) – mainly on Bulk Containers and Landfill Sites. The income on billing of landfill sites for December is not reflecting yet. Impact of weighbridges at 4 landfill sites and billing of waste contractors are still being evaluated, and information on billing documents are being corrected and processed.

• Rental of facilities and equipment (R23,5 million unfavourable) – mainly due to under recovery on the rental of housing accommodation, facilities and commercial properties. Expired lease agreements are in the process of being advertised and renewed.

• Fines and penalties (R77 million unfavourable) – mainly due to outstanding income from AARTO traffic fines. There is a delay in capturing transactions, as data is only available after the closing of each month.

• Licences and permits (R5 million unfavourable) – mainly due to a decline in applications on drivers licences.

• Transfers and subsidies (R589 million unfavourable) – mainly due to the outstanding transfer of the equitable share.

• Other Revenue (R56 million unfavourable) – due to under-recovery on market fees, transport, township development electricity and rezoning.

• Listed below are the main line items that are currently underspent when compared to the YTD projections:

• Employee-related costs (R390 million under budget) – mainly relates to service bonus, salaries, provision for leave, post-employment pension and long-service benefits. The actual spending on the provisions are posted at year end. Overtime salaries is overspent by R46 million, mainly due to the payment of employees attending unplanned power outages and cable thefts.

• Debt impairment (R97,9 million under budget) – Journal for December was processed late, to reflect in the following month.

• Depreciation (R256 million under budget). The calculation aligns with the asset verification and purification process.

• Bulk purchases Electricity (R151 million under budget) – due to outstanding invoices from Eskom. Bulk Purchases Water is under budget due to the outstanding invoices and sign off by the City of the Service Level Agreement between the CoT and the Cullinan Diamond Mine for the provision of potable water and the treatment of sewage by the Cullinan Diamond Mine.

• Other Materials (R140m) – mainly due to underspending on substations, chemicals and stationery.

• Contracted Services (R763m) – underspending on the repairs maintenance budget on roads, buildings, connections, grounds, electricity and water reticulation. Expenditure is expected to increase in the third quarter.

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• Transfers and grants (R18 million) – due to underspending on the payment of Municipal Entities and for the Early Childhood Development NGO Support.

• Other Expenditure (R391m) – mainly on telecommunications, rental of plant and equipment, LED initiatives, EPWP Job creation and implementation of OITPS. Listed below are the main line items that are currently over budget when compared to the YTD projections:

• Finance Charges (R249m) – due to the interest paid on external loans.

• Employee Related Costs: Overtime-salaries (R46m) -

• Leased Building (R58m) - The lease exit plan was not realised as planned.

• Insurance Premiums and Excesses (R29m) – Group Audit and Risk Department – due to the payment of annual insurance premiums.

• PTNOG Grant (R48m) – Due to payment of second quarter invoices.

• Rental Vehicles Vatable (R20m), Rental Vehicles Non-VAT (R5m) and Leased Vehicles Non-VAT (R6m) – due to the payment of previous year invoices. The Department is still busy with the de-fleeting process, expenditure is expected to be reduced once the process is finalised.

• Legal Costs (R9,8m) –

• Rudimentary Services (R4,5m) –due to payment of previous year invoices.

• System Ware Software (R5m) – dependent on the maintenance work done at each point, which triggers expenditure.

• Power Stations (R4m) – due to maintenance done on power station to generate electricity.

• Coal (R4m) –The Pretoria West Power Station is generating, as per commitment made, and coal has been procured.

• Petrol and Diesel (R6m) – dependant on consumption, actual was higher than projected.

• Project Linked Housing (R18,2m) – due to payment made on Housing Top Structures at Ezithobeni and Mamelodi Erf.

4.8 Management commitments to improve performance in Q3 onwards

The City Manager engaged with management on the reasons for under-performance, and on departmental mitigation measures. Strict measures and consequences will be implemented for non-performance. The City's Management committed on the follwing strategic areas for Q3 to improve performance viz.:

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1. monitoring supply chain processes and enhancing their functioning; 2. developing a short term solution on watchmen services while a long term apporach

is being devised; 3. fastracking the implementation of the resolution that will come out of MayCo on

the warehousing model; and 4. ensuring the implementation of all capital projects through the newly established

ePMU. Further, departments committed to report on annual targets quarterly to track reporting quarterly and to ensure that in 2018/19, supply chain and procuremnt plannig will be critical elements of anning and budgeting to avoid supply chain delays. In the current financial year, departments committed to complete supply chain processes by the 15th of February 2018, with purchase orders in the system, to ensure that implementation is ramped up. There is agreement that contracts management and project management capacity needs to be improved in the City. However, in the short term, the existence of the enterprise project management office, had enabled the provision of project capacity, and departments are fast-tracking the development of task orders to seek specific assistance on the projects. The enterprise project management unit is to design a system to ensure that designs are in place when the city goes into the new financial year, and to assist with developing the pipeline of projects going forward. The departments in the COO's cluster committed to ensure project site meetings take place every two weeks. Project reporting on physical and financial progress of projects is to take place every two weeks to the administration. The cluster is to collaborate with stores to ensure availability of materials as required. The community and social development services department is to ensure that all departments understand the new EPWP model, and how it is to be rolled out, to ensure that the job opportunities targets are realised.3 Housing projects to the value of R200m are at appointment stage, and the department committed to submit those documents to the city manager by Friday 19 January 2018 for sign off. Revenue collection efforts are to be intensified and all departments commit to ensure more realistic planning is implemented during the adjustments budget. Submissions have been made to transfer funds from certain projects to projects on track needing additional funding. The Governance Cluster committed to the following remedial actions:

• To begin a process of reviewing the governance structures in the administration to support the deivery on commitmnets.

• In so doing to facilitate that governance sub-structures are put in place, function effectively and report regularly.

• Business processes are to be streamlined and documented

• It was emphasised that management has to accept responsibility for the overall management of each department, in terms of labour relations, staff discipline, performance and service delivery

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• It was agreed that Tshwane specific induction is required for new members of management.

The cluster committed to finalising the following in quarter 3:

• Upgrading of network sites

• One Integrated Transaction Processing System

• Implementation of Storage Area Network

• E-Initiatives supporting the Smart City o Completion of blueprint and plan being fast tracked

o Credit Control Solutions

o Procurement done, delivery awaited

• Integrating Credit Control Solution to GIS o The tender served at the Bid Specification and referred back for refinement.

The amendments were made.

o Planned integration of Emergency Services and GIS systems explored

o Dependencies on service providers and no proper management of service providers and contracts

o Implementation of mSCOA

o Review of the micro-structure of Group Property to address its key functions.

o The placement of officials into the micro structure must be fast-tracked to ensure stability.

o Legal services is to assess the expenditure on legal matters and advise the city manager whether expenditure has been on the big cases.Departments must be billed for the cases not paid for by the legal services limited budget.

o The GSO must ensure that fleet availability and procurement is re-prioritised based on critical and burning needs, until there is sufficient funding to address all the fleet needs of the city.

Finance and the Utility Services department are to resolve the interdependencies pertaining reporting on non-revenue water and non-revenue electricity. FUrther, departments are to collaborate with the Tshwane Metro Police department to prioritise facilities that require watchmen services. Employment equity must be implemented with the appointment of the divisional head positions. With regard to supply chain management matters, the finance department (supply chain management) has to ensure more proactive engagement with management to ensure correct and qualitative specifications are developed.

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In addition, management must ensure that meetings are attended, and supply chain management must implement a schedule of meetings based on the need to address the current backlog (it cannot be business as usual). A committee is to be established to review the entire value chain for supply chain management.

5. COMMENTS OF THE STAKEHOLDER DEPARTMENTS 5.1 COMMENTS OF THE CHIEF FINANCIAL OFFICER

Cognisance is taken of the contents of the report. The purpose of the report is to report on the implementation of the Service Delivery and Budget Implementation Plan (SDBIP) and the Integrated Development Plan (IDP) per sections 52 and 72 of the Municipal Finance Management Act (MFMA). The Group Financial Services Department will render further financial comments on future reports in this regard.

5.2 COMMENTS OF THE GROUP HEAD: GROUP LEGAL AND SECRETARIAT

SERVICES The purpose of the report is to: 1. Table the report to council on the implementation of the budget and the

financial state of affairs of the municipality within 30 days of the end of a quarter; and

2. Present the report of the Accounting Officer of the municipality of the mid-year

budget and performance assessment, which report should be submitted to the mayor, the National Treasury and the relevant provincial treasury.

Section 52(d) of the Local Government: Municipal Finance Management Act, 2003 (Act No. 53 of 2003) (hereafter referred to as the “MFMA”) requires the Executive Mayor to report to the municipal council on the implementation of the budget and the financial state of affairs of the municipality within 30 days of the end of a quarter. Section 72 of the MFMA requires the Accounting Officer to conduct a mid-year budget and performance assessment, which report should be submitted to the Executive Mayor, the National Treasury and the relevant provincial treasury. Section 54(1)(f) requires the mayor to submit the section 72 report to Council by 31 January of each year. Having regard to the aforesaid and with specific reference to the context of the report, Group Legal and Secretariat Services Department advices that the report is in compliance with legislative requirements and therefore the content as well as the recommendations are supported.

6. IMPLICATIONS 6.1 HUMAN RESOURCES

There are no direct human resource implications of this report.

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6.2 FINANCES The detailed financial report is a separate report, and will indicate the possibility of an adjustments budget. It is concerning that at mid-year capital project expenditure is poor, with at leat 75 projects being behind schedule, whereas other projects requiring further funding to progress. An assessment of projects performance is in the projects appendix to the report.

6.3 CONSTITUTIONAL AND LEGAL FACTORS

This report complies with sections 52 and 72 of the MFMA. It is however, predominantly focused on non-financial performance, and the report of the CFO focuses on the financial performance of the city.

6.4 COMMUNICATION

The public muat be notified of the tabling of the mid-year report to council, and the report must be submitted to National Treasury, Gauteng provincial treasury and the national and provincial departments of local government.

6.5 PREVIOUS COUNCIL OR MAYORAL COMMITTEE RESOLUTIONS

None.

7. CONCLUSION

The report presents reported performance on the SDBIP and IDP targets, on the capital projects, and of municipal entities against their business plans for the periods; October-December 2017 (second quarter), and July-December 2017 (mid-year). At mid-year:

• 53 capital projects had achieved their milestones

• 146 capital projects were behind schedule;

• 50.68%% of the SDBIP targets were reported achieved; and

• municipal entities had reported 72.4% of their second quarter targets achieved. The adjustments process is currently under-way, and it is likely that certain projects milestones may be adjusted due to adjustments to the project finances.

The Special Mayoral Committee on 22 January 2018 resolved to recommend to Council as set out below:

City of Tshwane Mid-year and second quarter report for the financial year 2017-18

CSOP department 1/5/18 [Course title]

ANNEXURE A47

1

Contents

1 PURPOSE..........................................................................................................................................................2

2 LIMITATIONS.....................................................................................................................................................2

3 PERFORMANCE ON SERVICE DELIVERY TARGETS ...................................................................................2

3.1 MID-YEAR PERFORMANCE ON THE IDP ...............................................................................................3

3.2 PERFORMANCE ON SDBIP TARGETS ...................................................................................................5

3.2.1 PERFORMANCE FOR THE PERIOD OCTOBER TO DECEMBER 2017 (Quarter 2) ......................6

3.2.2 PERFORMANCE FOR THE PERIOD JULY TO DECEMBER 2017 (MID-YEAR) ............................7

4 PERFORMANCE OF MUNICIPAL ENTITIES ................................................................................................ 45

4.1 PERFORMANCE BY TEDA .................................................................................................................... 45

4.2 PERFORMANCE BY HCT....................................................................................................................... 49

5 IMPLEMENTATION OF CAPITAL PROJECTS .............................................................................................. 53

5.1 Performance of projects at mid-year ....................................................................................................... 54

Status of supply chain progress as at 31 December 2017 ................................................................................. 55

6 AUDIT OUTCOMES FOR THE 2016/17 FINANCIAL YEAR .......................................................................... 56

7 THE ADJUSTED SDBIP ................................................................................................................................. 56

8 FINANCIAL PERFORMANCE ........................................................................................................................ 57

9 MANAGEMENT COMMITMENTS TO IMPROVE PERFORMANCE ............................................................. 62

APPENDIX A: UPDATES OF BASELINES TO THE IDP SCORECARD DUE TO THE AGSA FINAL AUDIT RESULS 2016/17 .................................................................................................................................................................... 64

List of tables

Table 1: Mid-year performance against the IDP targets for the 2017/18 financial year .............................................4 Table 2: Summary of performance by department .....................................................................................................6 Table 3: Summary of performance at mid-year on the SDBIP ...................................................................................8 Table 4: Detailed progress on the SDBIP scorecard driving the IDP targets .......................................................... 14 Table 5: Performance on the second scorecard of the SDBIP ............................................................................... 25 Table 6: summary of performance of municipal entities for quarter 2 ..................................................................... 45 Table 7: achieved targets for Q2 ............................................................................................................................. 45 Table 8: targets not achieved for Q2 ....................................................................................................................... 47 Table 9: TEDA detailed scorecard ........................................................................................................................... 48 Table 10: Achieved targets for Q2 by HCT ............................................................................................................. 50 Table 11: Targets not achieved for Q2 .................................................................................................................... 50 Table 14: Supply chain progress of capital projects ................................................................................................ 55 Table 15: Audit opinions of the municipal entities ................................................................................................... 56 Table 16: Performance on financial ratios ............................................................................................................... 57 Table 17: Consolidated summary of financial performance .................................................................................... 59 Table 18: Revenue .................................................................................................................................................. 60 Table 19: Expenditure by type ................................................................................................................................. 61

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1 PURPOSE

To provide an organisational progress report on the second quarter and mid-year targets, as contained in the

approved 2017/21 IDP and 2017/18 SDBIP, to the Council per sections 52(d), 54 and 72 of the MFMA

2 LIMITATIONS The report is based on reported performance information by management. Per the MayCo approved performance

reporting procedures, management is responsible to ensure reliable, accurate and timeous reporting, and therefore

heads of departments are required to review and approve performance reports before submission. The due date

for reporting is the 2nd of a month following a quarter. The non-compliance to this reporting date and the re-

submission of information by certain departments presents risks to the accuracy of information reported by a

department.

Manual reporting procedures were implemented for the quarter due to challenges with the electronic reporting

system. The manual reporting procedures will continue to be implemented until the Shared Services department

implements an MSCOA1 compliant integrated performance reporting system.

Audited information is presented to Council as and when it is complete, and year-end review processes, ensure

that the final annual performance report submitted to council contains internally audited results.

3 PERFORMANCE ON SERVICE DELIVERY TARGETS

This section of the report provides progress for the second quarter of the financial year, and mid-year performance

status. The assessment is at two levels –

• Mid-year performance on annual IDP targets; and

• Second quarter and mid-year assessment of the SDBIP targets.

Legend:

• N/A indicated in the mid-year progress column is a reflection that the IDP indicator is dependent on an

SDBIP annual indicator that will be reported in the last quarter

• Items highlighted in red indicate that the SDBIP target or capital project is currently underperforming

creating a risk that the IDP target may not be achieved at the end of the year. In the case of metro police,

although the SDBIP targets may be achieving, the rate of increase in interventions may not be sufficient to

achieve the IDP target

• Items highlighted in green indicate that the SDBIP target at mid-year is reported achieved indicating a

likelihood that the IDP target will be achieved at the end of the year.

• Items highlighted in yellow indicate that there is progress reported on the SDBIP against an annual target,

however, progress is not sufficient to determine whether the IDP target will be realised.

• Items highlighted in blue indicate where quarterly targets should be adjusted to reflect the baselines due to

the AGSA audit results as at financial year end. In some cases where there is no reporting against the

annual target, the 16/17 audited results are used.

1 Municipal Standards Chart of Accounts

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3.1 MID-YEAR PERFORMANCE ON THE IDP

The IDP contains 22 annual targets at an outcome level. Most of these targets are driven by the first scorecard of

the SDBIP2. Due to the nature of these IDP containing annual targets, progress is reflected towards the annual

target. There are 9 annual targets on the SDBIP, whereby no in-year progress may be recorded.

The table below shows progress against some of the indicators. Some of the indicators have reported steady

progress while others will be reported at financial year end.

Annual targets on the SDBIP remain a risk in that the targets they influence on the IDP will not be achieved.

Historic underperformance in previous financial years on the following indicators means they are currently at high

risk of under-performance-

• Non-revenue energy;

• Indigent households on the indigent register;

• Achievement of all financial ratios; and

• Formal households with access to electricity

Current under-performing targets on the IDP are indicated on the table below. However, of note is that targets that

appear on track such as roads and stormwater provision and the financial targets may still be at risk, as in the case

of roads and stormwater, lower targets were set for the first half of the year compared to the annual target, and the

financial ratios have not been achieved for numerous financial years in the past.

Department IDP Key performance indicator at risk

Utility Services Percentage of households in formal areas with access to water (metered connections)

Utility Services Percentage of households with access to sanitation

Utility Services Percentage of formal households with access to electricity

Roads and Transport Percentage of completed TRT bus way lanes constructed

Regional Operation and Coordination Percentage of informal settlements with access to rudimentary sanitation services

Housing and Human Settlement Nr. of informal settlements formalised

Economic and Spatial Planning Rand value of investment attracted to Tshwane (annual)

Economic and Spatial Planning Support through mentorship/training of the Tshepo 10 000 cooperative

Community and Social Development Number of indigent households supported by the city through its social packages

Community Safety Percentage of increase in interventions to root out crime and related incidents (annual)

Office of the City Manager Unqualified Audit Opinion achieved (Annual)

2 There are two scorecards in the SDBIP- one that contains targets that drive the IDP outcomes and one that does not

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Department IDP Key performance indicator at risk

Utility Services Percentage average of annual non-revenue energy (NRE)(Annual)

Group Human Capital Percentage of employee satisfaction rating

The table below reflects two baseline columns, to reflect the original baseline in May 2017 when the IDP was

approved, and the results after the audit of the AGSA per November 2017.

Table 1: Mid-year performance against the IDP targets for the 2017/18 financial year




Baseline as at November 20173


Actual IDP (Current)

Basic water provision

Percentage of households in formal areas with access to water (metered connections)

86.70 % 81.97 % 82.02% 83.09 % 82.4%


Percentage of formalised areas provided with weekly waste removal services

100 % 100.0 % 101.53% 100 % 102%


Percentage of households with access to sanitation

81.44 % 79.14 % 79.13% 79.56 % 79.19%


Percentage of formal households with access to electricity

85.86 % 81.46 % 80.95% 82.31 % 81.76%

Mobility optimization

Percentage of required municipal storm water drainage network provided

50.41 % 38.55 % 38.62% 41.53 % 38.88%


Percentage of roads provided to the required standard (km)

30.11 % 24.08 % 24.17% 25.40 % 24.58%


Percentage of completed TRT bus way lanes constructed

85.3 % 40.20 % 40.20% 44.82 % 40.2%4


Percentage of informal settlements with access to rudimentary water services

100 % 100.00 % 101.86% 100 % 104.6%


Percentage of informal settlements with access to rudimentary sanitation services

100% 100.00 % 118.06% 100% 89.25%


Nr. of informal settlements formalised

32 5 0 7 0



104 000 21 500 17 183 23 000 10 032

3 The baselines were updated to reflect the audit results of the AGSA for financial year 2016/17 4 This indicator reflects previous financial years performance.

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Baseline as at November 20173


Actual IDP (Current)


Rand value of investment attracted to Tshwane (annual)

R'b 10.8 R’b2.20 R’b2.298 R'b 2.4 R0


Support through mentorship/training of the Tshepo 10 000 cooperative

1 097 245 289 257 184


100% 100 % 100% 100% 100%

Poverty and inequality

Number of indigent households supported by the city through its social packages

16 000 6 000 104 936 total hh 2 837 new hh

4 000 1 311

Public Safety Percentage of reduction in safety incidents (Fire, rescue and specialised humanitarian incidents) (annual)

5.0 % 13 551 23.9% (10 414 incidents)

13 414 56.44%

Public Safety Percentage of increase in interventions to root out crime and related incidents (annual)

5.0 % 43.56% (3 968 interventions)

2 792 -32.42%


Unqualified Audit Opinion achieved (Annual)



Unqualified Audit Opinion for FY 2016/17


N/A

Financial Management

Percentage of financial targets met (regulated targets=cost coverage, debt coverage and % service debtors to revenue)

100.0 % 100.0 % 66% 100 % 100%


Percentage average of annual non-revenue energy (NRE)(Annual)

10.0 % 19.00 % 20.58% <16 % 20.58%


Percentage reduction of non-revenue water (NRW)

23.00 % 26.00 % 23.6% 25.40 % 23.6%


Percentage of employee satisfaction rating

80.0 % 60.0 % 60%5 75.00 % N/A

3.2 PERFORMANCE ON SDBIP TARGETS

The approved SDBIP has 84 level targets for FY 2017/18, 9 of these targets are annual targets and are reported in

the last quarter of the financial year. The SDBIP performance assessment is based on reported information from

departments, and is not yet audited.

The corporate SDBIP scorecard is composed of two scorecards as follows:

• Indicators driving the 2017/18 IDP scorecard targets; and

• Indicators not driving the 2017/18 IDP scorecard targets

5 Employee satisfaction is measured every two years. The number reflected herein reflects the prior financial year results (2015/16) as this indicator was not measured in 2016/17.

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The table below summarises departmental performance on the two SDBIP scorecards.

Table 2: Summary of performance by department

Department Targets applicable

for Q2

Q2 targets

achieved

Mid-year targets

achieved

Q2 targets

not achieved

Mid-year targets

not achieved

Non-reported

Q2

Annual targets

Scorecard 1 targets

not achieved

Scorecard 2 targets

not achieved


5 2 3 2 1 0 1 2 1

Community Safety (ES)

3 3 2 0 1 0 0 1 0

Community Safety(MP)

6 6 6 0 0 0 0 0 0


6 6 4 0 2 0 1 0 2

Group Finance

10 4 4 3 3 2 0 0 3


2 1 1 1 1 0 0 0 1

Group Human Capital

4 3 3 1 1 0 1 0 1

Group Property

4 1 1 3 3 0 0 0 0

Health 6 4 4 2 1 1 0 0 2


1 1 1 4 0 1

Office of the City Manager

0 0 0 0 0 0 1 0 0

Regional Operations & Coordination

14 5 4 8 10 1 0 1 8

Roads and Transport

6 2 2 4 4 0 1 0 4

Utility Services

6 1 3 3 3 3 2 3 0

Totals 73 38 37 28 31 7 11 7 23

3.2.1 PERFORMANCE FOR THE PERIOD OCTOBER TO DECEMBER 2017 (Quarter 2) At the end of the second quarter of the financial year:

• 38 of 73 targets were achieved (52%)


• 7 planned targets were not reported on (9.59%)

In addition, one annual indicator, reflected the following progress for quarter 2-

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• 1311 indigent households were supported by the City through its indigent policy, which is approximately

32,8% of progress towards the annual target. The municipality may be at risk of not achieving the annual

target.

3.2.2 PERFORMANCE FOR THE PERIOD JULY TO DECEMBER 2017 (MID-YEAR)

Three indicators with annual targets have reported progress at mid-year. In addition to the indicator on the indigent

indicated above, the following progress on annual targets is reported:

• 410 households had access to sanitation through new sewer connections, which is approximately 43% of

progress towards the annual target.

• 12.394km of roads were provided to the required standard against an annual target of 13km.

At the mid-year:

• 37 of 73 targets were achieved (50.68%)6,


• The status of 7 targets could not be confirmed due to non-reporting in either or both quarters.

The table below summarises performance on the SDBIP scorecards. The table that follows provides detailed

performance information.

6 The NRW target that was reported by CSOP as the FY 2016/17 audited result was not included, as the mid-year target does

not correlate to the audited results, and this figure has not been confirmed by finance yet.

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Table 3: Summary of performance at mid-year on the SDBIP

Key performance area

Achievements Underperforming areas

Reasons for underperformance

Mitigation measures CSOP Assessment of reasons for underperformance

CSOP Assessment of mitigation measures


• 2338 formalised areas were provided with weekly waste removal services

• 150 informal settlements had access to rudimentary water service

1790 houses were electrified against a target of 2500

Unavailable of material needed to complete projects. Limited capacity for installing meters in areas where the network is energized


The reason provided is not satisfactory because it reflects poor planning on the side of the department. The department should source adequate supply of all the required material in advance.

The reason provided is not satisfactory because the department did not provide time frames for the implementation of the mitigation measure.

893 new electricity connections were provided against a target of 1500

KPI’s its application driven


The reason provided is satisfactory

The mitigation measure provided is satisfactory

1978 households in formal areas were provided with metered water connections against a target of 3000

Connections are demand driven, all applications received were processed within 14 days. There were delays due to community unrest in Region 1 and 2.




Just over 66 informal settlements were provided with rudimentary sanitation services against a target of 76

Inadequate budget to cater and service all informal settlements


The reason provided is dependent on budget allocations that are done at the beginning of the financial year.

The reason provided is dependent on the forthcoming budget adjustments. The target will remain at risk if Group Finance department does not increase the allocated budget during the adjustment process.

1988 title deeds transferred to eligible beneficiaries against a target of 2500

No new title deeds were received from the Gauteng Department of Human Settlements. Illegal sales of the houses, unresolved estates are also reasons for non-issuing.

Constant issuing of calling letters to beneficiaries. Political/ public events to issue title deeds in collaboration with the Gauteng Dept of Human Settlements. Consumer education on the importance of a title deed. Issuing of referral letters to the Master of the High Court for resolution of estates. Constant issuing of calling letters to beneficiaries.



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Political/ public events to issue title deeds in collaboration with the Gauteng Dept of Human Settlements. Consumer education on the importance of a title deed. Issuing of referral letters to the Master of the High Court for resolution of estates.

Mobility optimisation

• 2.376km of required stormwater drainage was provided against a target of 0.95km

• 93.6% of gravel roads have been bladed as per the maintenance plan.

89% of the maintenance plan for re-gravelling of roads has been implemented against a target of 90%

Limited budget for yellow plant equipment



Mitigation measure provided does not tally with the reason for underperformance because the department should source funds before they make commitments of purchasing new equipment. In addition, the department is not addressing the short term requirements for achieving the set target.

2604 passenger trips per day on A Re Yeng have been reported against a target of 13000

The deviation is due to the fact that during the October Transport Month; A Re Yeng Line 1A provided free ride promote transport month initiative. The negotiations with the Taxi industry has not yet been finalised hence Line 1A is still running a free ride.


The reason provided is not satisfactory because “free ride” should increase the number of passengers for A Re Yeng.

Mitigation measure provided is not clear enough and therefor it will be difficult for CSOP to track the implementation thereof.

280 362 passenger trips on Tshwane Bus Services took place as against a target of 300 000.

Insufficient passengers

Plans are underway to ensure that 165 buses are operating per day. More buses = more passengers

The reason provided is not satisfactory as the department is expected to explain why there are insufficient passengers.

Mitigation measure is satisfactory. CSOP will track the implementation thereof.

No traffic signs were implemented or maintained.



Reasons for non-achievement were not provided due to non-reporting for this KPI. This reflects non-compliance with reporting procedures.

Mitigation measures were not due to non-reporting for this KPI. This reflects non-compliance with reporting procedures.

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42.7m of road markings were repainted against a target of 130m.

The target is actually 0. Not provided by KPI owner

Incorrect reporting by the department because the target on the approved SDBIP is 65km for each quarter. This reflects non-compliance with reporting procedures.

Mitigation measures were not provided by the KPI owner and are required. This reflects non-compliance with reporting procedures.


• 126 Tshepo 10000 cooperatives were supported

• 10 032 income earning opportunities were facilitated by the city

None N/A N/A N/A N/A

Health 100% of City of Tshwane primary health care (PHC) fixed clinics-

• Implemented the Prevention of Mother-to-Child Transmission (PMTCT) of HIV Programme;

• provided immunisation coverage for children under 1 year of age; and

• provided HIV testing facilities for pregnant women.

• 2 drug awareness programmes were implemented

There was no reporting on the clinics with electronic health record systems

The percentage achievement, on e-health coverage would not be achieved based on the reasons that the allocated budget in relation to the KPI has been re adjusted at the beginning of the financial year to cover significant financial shortfall city wide. It is therefore recommended that the above KPI be removed during adjustment, due to non-availability of the budget

Motivation submitted to remove KPI


Mitigation measure provided is not satisfactory. Removing the KPI does not address the issue of under-performance. The department should motive for re-allocation of budget during the adjustment process.

There was no reporting on the people testing for HIV and receiving results.

The KPI on HIV testing, could not be reported on as in its current format it present challenges based on the way the KPI is structured and the prospective evidence that would support the KPI. Therefore the department has reworked the above KPI, and it would be amended during adjustment budget period with the strong

KPI has been reworked the KPI and it is recommended that it be moved from Corporate SDBIP to Departmental SDBIP.

The reason provided is not satisfactory as the department is raising planning issues during implementation phase.

The mitigation measure provided is not satisfactory as it partially addresses the reason for non-performance on this target. It must be noted that shifting the target from the corporate level to the departmental level does not mean that performance on this target will be less important.

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recommendation that it be moved from Corporate SDBIP level to the Departmental SDBIP level


• 2618 households were exited from the indigent register

1311 new households are supported by the city’s indigent policy against an annual target of 4000.



Although progress has been reported against the annual target, the annual target is at risk as halfway through the year only 32,8% of the annual target has been realised

The department should reassess its plans and ensure fast-track measures are in place to achieve the annual target.

Public safety • 56 inner city by-law policing operations took place

• 81 inner city road policing operations took place

• All search warrants issued on drug related matters were executed

• 3060 rescue incidents were responded to

• 207 special and humanitarian services were responded to

• 308 by-law policing operations were executed

• 915 crime prevention operations were executed

• 645 road policing operations were executed

2695 fire incidents were responded to, indicating a higher rate of fires that anticipated.

Due to the unseasonal dry and hot weather experienced in the Gauteng province there was an increased amount of wildland fires when compared over previous seasons (Climate change).

1) Intensifying public awareness campaigns on fire prevention, fire breaks etc. 2) Fire Brigade Bylaw enforcement. 3) Early warning report distributions via media (SA Weather Services).




• Revenue from residential rental yielded R542 749, above target.

Non-revenue electricity remains unreported, despite financial year 2016/17 ending on losses of 20.58%, an increase



Target at risk due to it being an annual target.


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12






• 35.24% of CoT assets, turnover ratio is achieved

• 17.43%

from 19% in the 2015/16 financial year.

93.5% of building plans were approved with 45 days against a target of 100%.

The KPI is worded incorrectly – it should read “% of building plans evaluated” and not “approved” and “within the statutory timeframes: 30 - 60 days” (not “within 45 days”).

Amending the wording of the KPI during the 2017/18 adjusted SDBIP process and ensuring that it is only on Corporate or Departmental level and not both.

The reason provided is not satisfactory as incorrect wording of the KPI does not affect the actual performance on the set target.

Mitigation measure provided is not satisfactory because amending the wording of the KPI does not address the issue of under-performance.

Creditor payment days is at 71 days, as compared to 35 days in December 2016.



Reasons for non-achievement were not provided by the KPI owner and are required. This reflects non-compliance with reporting procedures.


Capital expenditure targets have not been achieved.



Reasons for non-achievement were not provided by the KPI owner and are required. This reflects non-compliance with reporting procedures.


Revenue collection is under-performed.

Not reported Not reported Not reported by the department and this reflects non-compliance with reporting procedures.

Not reported by the department and this reflects non-compliance with reporting procedures.

Awarding of contracts to local SMMEs and cooperatives from the marginalized groups is under-performed

New permanent bid committees were only appointed in November 2017, meaning that their effectiveness was severely limited in the part of the 2nd quarter.

The learning curve of the new bid committees has flattened and their performance is expected to significantly improve.



Revenue from the group property portfolio is under target for business rental, personnel parking and land rental.




The mitigation measure provided is satisfactory. CSOP will track the implementation thereof.

Time taken to connect new businesses to electricity is not reported on.

The City is currently finalising the Reform Action Plan for cost of doing business which include measuring performance (time




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13






taken) for providing electricity connections. The KPI requires the on-line application system which GICT is currently working on.

Employee satisfaction and institutional governance

• All unaccounted-for employees were eliminated

• 88% of senior and middle managers have had their skills audited

• 7286 employees were trained

There has not been adherence to the employment equity plan

Slow progress of appointments towards achieving Annual EE Targets

Fast tracking the progress of recruitment/appointments to achieve EE Annual Targets

The reason provided is not satisfactory as the department did not state reasons for the slow progress of appointments

The mitigation measure provided is satisfactory. CSOP will track the implementation thereof.

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3.2.3 DETAILED PROGRESS AGAINST THE SDBIP SCORECARDS Detailed progress on the SDBIP indicators and targets for quarter 2 and mid-year are reported in the following tables.

Table 4: Detailed progress on the SDBIP scorecard driving the IDP targets

Departmental level reporting Assessment by CSOP department

Department Key

performance indicator

Annual target

Quarter 1 Quarter 2 Mid- year

Assessment of reported

performance against annual and

mid-year target


performance against 2016/17

performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results


Nr. of indigent households exited from the indigent register

2 000 500 933 500 1685 N/A N/A 1000 2618 Mid-year and annual target achieved

Annual target achieved


Nr. of indigent households supported by the city through its Indigent policy

4 000 809 502 N/A N/A 0 1311 Although progress has been reported against the annual target, the annual target is at risk as halfway through the year only 32,8% of the annual target has been realised The department should reassess its plans and ensure fast-track measures are in place to achieve the annual target.

Annual target not achieved therefore this remains a risk for 2017/18



23 000 7000 8205 3000 1827 The division reports in arrears so that all data is cleansed before reporting to CSOP. Officials from CSOP are aware of the arrangement

N/A 10000 10032 Mid-year target achieved

Annual target not achieved therefore this remains a risk

for 2017/18

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15


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results

. 447 reported is for 2 months out 3 months in Q2, December is excluded from the report. December information received from the city departments is currently being verified and will be ready for sign off by the 23rd of January 2018. The information to date is 1380


Number of fire incidents reported and responded to

4 594 1410 1901 1105 794 Due to the unseasonal dry and hot weather experienced in the Gauteng province there was an increased amount of wildland fires when

1) Intensifying public awareness campaigns on fire prevention, fire breaks etc. 2) Fire Brigade Bylaw enforcement. 3) Early

2515 2695 Mid-year target not achieved. Underperformance by -180 fire incidents.


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16


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results

compared over previous seasons (Climate change).

warning report distributions via media (SA Weather Services).


Number of rescue incidents reported and responded to

7 811 2108 1527 1953 1533 N/A N/A 4061 3060 Mid-year target achieved



Number of special and humanitarian services reported and responded to



Community Safety (MP)

Number of by-law policing operations / interventions executed to reduce by-law transgressions

384 96 158 96 150 N/A N/A 192 308 Mid-year target achieved



Number of crime prevention operations / interventions executed to contribute to a reduction of crime throughout Tshwane




Number of road policing operations/interventions



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17


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results

executed in order to comply with the road safety plan (Road Policing)


Rand value investment attracted to the City

R'b 2 400 000 0

00.0

0 0 0 0 The Trade and Investment Section is currently facilitating investment projects that are listed within the investment project pipeline. These projects are at various phases of their respective development life cycle/implementation phases.

0 0 The target has been achieved in prior years; however, it remains at risk due to it being an annual target.



Support through mentorship/training to the Tshepo 10 000 cooperative



Group Finance

% service debtors to revenue

25.00 % 27 35.18 26.25 17.43 N/A N/A 26.25 17.43 Mid-year target achieved


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18


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results

Group Finance

% debt coverage

15.00 % 3.75 27.97 7.5 35.84 N/A 7.5 35.84 Mid-year target achieved


Group Finance

Cost coverage ratio

1.0 0.3 1.59 0.5 1.19 N/A 0.5 1.19 Mid-year target achieved

Annual target not achieved

Group Human Capital

% employees’ satisfaction rating (Annual)

75.0 % 100

NA Performance

on track

Annual Measure.

Performance on track.

The tender is advertised

and the closing date

for submissions by service

providers is 25 January

2018

Target will be assessed at the end of the financial year

Not measured in the 2016/17 financial year A risk as the target for 15/16 was not achieved

Health % of City of Tshwane PHC fixed clinics implementing PMTCT programme

100.0 % 100 100 100 100 N/A N/A 100 100 Mid-year target achieved


Health % of City of Tshwane PHC fixed clinics providing HIV testing facilities for pregnant women

100.0 % 100 100 100 100 Not applicable

Not applicable

100 100 Mid-year target achieved


Health % of City of Tshwane PHC fixed clinics providing immunisation coverage for

100.0 % 100 100 100 100 Not applicable

Not applicable

100 100 Mid-year target achieved


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19


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results

children under 1yr of age


Km of roads constructed

27.00 km 0 0 0 0 Work in progress is as follows: Approval of designs, site establishment completed, contractors have commenced with exposure of existing underground services, site clearing, grubbing, box cutting and excavation.

0 0 Target at risk due to it being an annual target and due to Q1 projects under-performance

Not measured in the 2016/17 financial year


Number of informal settlements formalised

7 0 0 0 0 Work in progress is as follows: Excavation, bedding, pipe laying, blanket and backfilling



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20


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results


Number of serviced stands provided with sewer reticulation (new connections) (Housing and Human Settlements Dept.)

2 800 0 0 0 0 Work in progress is as follows: Excavation, bedding, pipe laying, blanket and backfilling




Number of serviced stands provided with water reticulation (new meter connection) Housing and Human Settlements Dept.)

3 650 0 0 0 0 Work in progress is as follows: Excavation, bedding, pipe laying, blanket and backfilling




Unqualified audit opinion achieved (Annual)


N/A N/A 0 Audits underway

N/A unqualified

audit opinion for FY

2016/17

Annual target The result for this item will be obtained upon conclusion of the 2016/17 AGSA audit.

Roads and Transport

Km of completed TRT Bus way lanes constructed

1.80 km 0 0 0 0 No Target Planned

N/A 0 0 Target will be assessed at the end of Q3 Target at risk due targeting set for the latter part of the year.


Roads and Transport

Km of required municipal storm water drainage

26.00 km 0.35 0 0.6 2.376 Target achieved

N/A 0.95 2.376 Mid-year target achieved


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21


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results

network provided

Roads and Transport

Km of roads provided to the required standard

13.00 km 0 8.2 0 4.194 Target is achieved

N/A 0 12.394 At mid-year the department has almost achieved the annual target.


Utility Services (EE)

Number of completed houses electrified to eradicate backlog (electrification)

5 700 1000 595 1500 1195 Unavailable of material needed to complete projects. Limited capacity for installing meters in areas where the network is energized


2500 1790 Mid-year target not achieved. Underperformance by 710 connections.




Number of new electricity connections provided (New Connections)

2 100 500 380 550 513 KPI’s its application driven






% average of annual non-

16.00 % 20.58%

20.58%7

Final Recon from Corp Finance will

20.58% Target will be assessed at the financial year end


7 Results from the 2016/17 AGSA audit, due to non-reporting of the department

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22


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results

revenue energy (NR.E)(Annual)

be submitted Mid-Jan 2018

The targets should be aligned to the audit results for the previous financial year. Risk of non-achievement at the end of the financial year due to historic under-performance.

Utility Services (WS)

Number of households in formal areas with access to water (new meter connections)

6 500 1500 1078 1500 900 Connections are demand driven, all applications received were processed within 14 days. There were delays due to community unrest in Region 1 and 2.



The department should reassess its estimates when planning



Number of households with access to sanitation service through sewer connections

961 0 10 0 400 0 410 Target will be assessed at the end of Q3 However due to historic under-


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23


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results

performance, the target is at risk.


% reduction in non-revenue water (NR.W) over

25.40 % 26.1 23.6 25.8 23.68 Awaiting finance reconciliations

25.8 23.6 The department didn’t capture December actuals because they receive figures from Finance, after they have done their reconciliation. However, the targets should be aligned to the FY 2016/17 audit results



Number of formalised areas provided with weekly waste removal services




Number of informal settlements with access to rudimentary sanitation services

76 76 66 76 67 Inadequate budget to cater and service all informal settlements


76 66.5 Mid-year target not achieved. Underperformance by 9 informal settlements



8 AGSA 2016/17 results are used as no new results have been made available. These results also indicate a need to re-assess the targets for the financial year as the

baseline is lower than the year target.

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24


Department Key


Annual target




mid-year target



performance Q1

Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons

not achieved

Q2 Mitigation

plan

Mid-year

target (Midter

m)

Mid-year

reported

results


Number of informal settlements with access to rudimentary water services

134 134 135.7 134 164.3 N/A N/A 134 150 Mid-year target achieved


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25

Table 5: Performance on the second scorecard of the SDBIP

Departmental level reporting Assessment by CSOP

department

Department Key performance

indicator Annual target

Quarter 1 Quarter 2 Mid-year CSOP Assessment of reported performance against Q2 target

CSOP Assessment of reported performance against mid-year and annual target

Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target

Mid-year reported results


Nr of arts and culture programmes developed and implemented

10 5 2 2 1 not reported not reported 7 3 Q2 target not achieved

Mid-year target not achieved


Nr of heritage programmes developed and implemented

8 1 1 1 1 N/A N/A 2 2 Q2 target achieved

Mid-year target achieved


Nr of inner city by-law policing operations/interventions executed to reduce by-law transgressions




Nr of inner city road policing operations/interventions executed in order to comply with the road safety plan




% of issued search warrants on drug related matters executed

100.0 % 100 100 100 100 N/A N/A 100 100 Q2 target achieved



% of calls answered within 20 seconds towards international best standard of 80%

80.0 % 50 42.0 60 52 Temba Call centre protests. System errors, Stats validity, AMI centre move to Temba and Centurion

Continuous engagement with ICT department and logging of incident reports, Temba Call centre protests

60 52 Q2 target not achieved


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26


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target



Completion of a Customer Satisfaction Survey

Completed

customer Satisfacti

on Survey

Project Planni

ng

Finalisation of

procurement

processes

The report was

approved at BAC meeting

as administr

ative approval

in 14 December 2017

Finalisation of

procurement

processes

The report was

approved at BAC

meeting as administrative approval

in 14 December

2017

Q2 target achieved



Nr of strategic projects fast-tracked by the Strategic Investment Committee within 60 days

6 1 0 1 10 There has been limited progress with Investor and Developer projects, due to institutional challenges with implementing approved structures instituted to fast track projects. New applications cannot be submitted to the Joint Investment Committee (JIC) and/or

None 2 10 Q2 target achieved

Mid-year and annual target achieved

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27


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


the Strategic Investment Committee (STRIC), due to lack of political guidance.


Nr of township automotive SMMEs supported through the City’s partnership with the Automotive Industry Development Centre (AIDC)

4 2 0 0 10 Annual target has been achieved. Annual target is exceeded.

None 2 10 Q2 target achieved

Mid-year and annual target achieved


Nr of township tourism SMMEs supported through the City’s partnership with the Small Enterprise Development Agency/SEDA

50 15 5 10 17 This KPI is at risk, due to the delayed signing of the Memorandum of Agreement between the City and SEDA. SEDA indicated that they will not be able to continue to sustain this work, due to

Continuous follow-ups with SEDA (the training has started to take place in Quarter 2, but there is still a slight backlog.

25 22 Q2 target achieved


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28


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


limited funding


% of building plans approved within 45 days

100.0 % 100 87 100 100 The KPI is worded incorrectly – it should read “% of building plans evaluated” (and not “approved”) and “within the statutory timeframes: 30 - 60 days” (not “within 45 days”). The KPI wording is brought in line with the statutory legislation (National Building Regulations and Standards Act, No 103 of 1977, as amended).

Discussions took place with staff of both City Strategy and Organisational Performance and Internal Audit on the matter. Amending the wording of the KPI during the 2017/18 adjusted SDBIP process and ensuring that it is only on Corporate or Departmental level and not both.

100 93.5 Q2 target achieved


75

29


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target



% of planned building by-laws executed

100.0 % 100 23.33 100 100 The KPI is worded incorrectly – it should read “% of building contraventions executed”. The manner in which the KPI was previously worded, was not in line with the function being executed. The Division deals with statutory law enforcement.

Discussions took place with staff of both City Strategy and Organisational Performance and Internal Audit on the matter. Amending the wording of the KPI during the 2017/18 adjusted SDBIP process and ensuring that it is only on Corporate or Departmental level and not both.

100 61.67 Q2 target achieved


Group Finance % collection of revenue in respect to service bills

96.0 % 96 0 96 79.19 not reported not reported 96 79.19 The target was not achieved

The mid-year revenue target was not achieved

Group Finance % of all contracts on the procurement plan awarded to local SMMEs and cooperatives from the marginalized groups

25.00 % 25 0 25 2.28 New permanent bid committees were only appointed in November 2017, meaning that

The learning curve of the new bid committees has flattened and their performance is expected to

25 Not reported

Target not reported

Target not reported

76

30


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


their effectiveness was severely limited in the part of the 2nd quarter.

significantly improve.

Group Finance % of CoT assets, turnover ratio

80.0 % 20.0 % 5.7 30 35.24 not reported not reported 30 35.24 Q2 target not achieved


Group Finance % of planned capital expenditure achieved

95.0 % 95 25.78333333

95 36.14% not reported not reported 95 36.14% Q2 target not achieved


Group Finance % of revenue targets achieved

96.0 % 25 87% 50 not reported

not reported not reported 50 Not reported

Target not reported

Target not reported

Group Finance % of valid invoices paid within legislated timeframes

100.0 % 100 0 100 Current creditor payment period is 71 days

not reported not reported 100 Current creditor payment

period is 71 days

instead of the

legislated 30 days

Q2 target not achieved

Mid-year target not achieved. The payment period in December 2016 was 35 days.

Group Finance Nr of days taken to issue Clearance Certificates

7 7 0 7 not reported

not reported not reported 7 Not reported

Target not reported

Target not reported

Group Human Capital

Nr of employees on whose skills are enhanced through training and development programmes

10 000 2500 3682 2500 3604 Target Achieved

Target Achieved



Group Human Capital

% of senior and mid managers whose skills have been audited

100.0 % 0 100 50 88 Target Achieved

Target Achieved



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31


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


Group Human Capital

% compliance to Employment Equity Plan

100.0 % 100 0 100 91 Outstanding Employment Equity Plan and appointments made without targets set out pending the EE Plan and Micro Structure

Fastracking recruitment process in accordance with the approved Micro Structure and EE Plan already served at Mayco in January 2018

100 45.5 Q2 target not achieved


Group Human Capital

% of unaccounted for employees eliminated

100.0 % 25 0 50 100 Target Achieved

Target Achieved



Group Property % of revenue collected for business rental portfolio

95.0 % 15 0 35 (R

5,229,672.21)

12.79% 36.56% of target

(R 1,911,922.41)

Leases have expired, no new leases have been entered into, debt collection needs to instituted, unlawful occupants need to be removed.


35 (R

10459344.42)

44.84% of the rand

value target was

achieved

(R 4689457.5)

Q2 target not achieved The department has not reported against the approved SDBIP targets. It is recommended that internal audit, audit the results for accuracy.


78

32


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


Group Property % of revenue collected for land rental portfolio

95.0 % 15 0 35

(R 7,039,27

0.56)

19.77%

56.48% of target of 35%

(R 3,975,823.08)



35

(R14078539.8)

75.97% of the rand

value target was

achieved

(R10695944.73)

Q2 target not achieved The department has not reported against the approved SDBIP targets. It is recommended that internal audit, audit the results for accuracy


Group Property % of revenue collected for personnel parking

95.0 % 15 0 35

(R 353,991)

53.67%

153.32% of target of 35%

(R 542,749.05)

N/A N/A 35

(R 353,991)

53.67%

153.32% of target of

35%

(R 542,749.05)

Q2 target achieved The department however was reporting against a target of 20% in its reporting. It is recommended that internal audit, audit the results


79

33


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


for accuracy.

Group Property % of revenue collected for residential rental portfolio

95.0 % 15 35 (R9,228,357.72)

21.77%

62.21% of target

of 35 (R5,740,774.44)

Leases have expired, no new leases have been entered into, debt collection needs to instituted, unlawful occupants need to be removed.


35 (R184567

12.48)

62.23% of the rand

value target was

achieved

(R11485974.31)

Q2 target not achieved The department has not reported against the approved SDBIP targets. It is recommended that internal audit, audit the results for accuracy.


Health Nr of drug awareness programmes implemented



Health % of clinics with electronic health record system

29 % 29 0 29 0 The percentage achievement, on e-health coverage would not be achieved based on the reasons that the allocated budget in relation to

Recommended removal of the KPI during adjustment budget.



80

34


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


the KPI has been re adjusted at the beginning of the financial year to cover significant financial shortfall city wide. It is therefore recommended that the above KPI be removed during adjustment, due to non-availability of the budget

Health % of people requesting HIV test and receiving results

100.0 % 100 #DIV/0!

100 Not possible to report

The KPI on HIV testing, would not be reported on , as in its current format have challenges base on the way the KPI is structured, and the prospective evidence that would support the KPI. Therefore

Motivation submitted to downgrade/ move the KPI from Corporate scorecard to the departmental scorecard

100 Not possible to

report



81

35


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


the department has reworked the above KPI, and the it would amended during adjustment with the recommendation that it be reported at the departmental level


Nr of title deeds transferred to eligible beneficiaries

5 000 1000 1189 1500 799 No new title deeds were received from the Gauteng Department of Human Settlements. Illegal sales of the houses, unresolved estates are also reasons for non-issuing.

Constant issuing of calling letters to beneficiaries. Political/ public events to issue title deeds in collaboration with the Gauteng Dept of Human Settlements. Consumer education on the importance of a title deed. Issuing of referral letters to the Master



82

36


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


of the High Court for resolution of estates. Constant issuing of calling letters to beneficiaries. Political/ public events to issue title deeds in collaboration with the Gauteng Dept of Human Settlements. Consumer education on the importance of a title deed. Issuing of referral letters to the Master of the High Court for resolution of estates.

83

37


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


Roads and Transport

Rand Value increase from TBS

Rm 32.4 8.1 0 8.1 2450127 1. Fare evasion. 2. Shortage of at least 20 drivers. 3. Manual scheduling

1. Re-instate fare evasion cameras for the entire fleet at TBS. 2. Re-instate fare evasion Inspectors for TBS operation. 3. The 20 vacant driver positions needs to be advertised and filled asap. 4. Introduce an automated (APTMS) scheduling system and do away with manual SCHEDULING system currently in use.

16.2 2450127.00 Q2 target not achieved


84

38


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


Roads and Transport

Rand value increase in revenue from A Re Yeng

R 27 872 0

00

6544000

0 6560000 2042159.5

The deviation is since during the October Transport Month; A Re Yeng Line 1A provided free ride promote transport month initiative. The negotiations with the Taxi industry has not yet been finalised hence Line 1A is still running a free ride.




Roads and Transport

Average nr passenger trips on TBS per month

300 000 300000

278083

300000 282641 Insufficient passengers

Plans are underway to ensure that 165 buses are operating per day. More buses = more passengers



85

39


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


Roads and Transport

Average nr. of passenger trips on A Re Yeng per day

13 000 13000 #DIV/0!

13000 2604.3 The deviation is since during the October Transport Month; A Re Yeng Line 1A provided free ride promote transport month initiative. The negotiations with the Taxi industry has not yet been finalised hence Line 1A is still running a free ride.





Nr of Traffic Signs new/maintained

3 250 0 0 1000 0 not reported not reported 1000 0 Q2 target not achieved



Road Length (in) of road markings repainted

260.00 65 0 65 42.74 The target is actually 09.





% achievement of Operations/ Maintenance Plan for swimming pools

90.0 % 90 84 90 90.25 N/A N/A 90 87.75 Q2 target achieved


9 Incorrect reporting by the department because the target on the approved SDBIP is 65km for each quarter.

86

40


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target



% Achievement of Operations/ Maintenance plan of all SRAC facilities, e.g. Libraries / Arts & Culture/ Sport & Recreation

90.0 % 90 77 90 81 The Region is dependent on building maintenance for maintenance of facilities in the region. Tenders are not always loaded correctly on e-procurement. Stores don't always have stock.

Two GH’s to meet before end of January 2018 to address interdependencies between ROC and GPM, and further to engage DH: Supply chain on SCM issues.




% achievement of Operations/ Maintenance Plan of Cemeteries

90.0 % 90 93 90 92.7 N/A N/A 90 92.8 Q2 target achieved



% achievement Operations/ Maintenance Plan for horticultural services (parks, traffic islands, council & sport facilities)

90.0 % 90 90.8 90 83.7 Underperformance due to lack of vehicles (tender lapsed), equipment and EPWP staff.

ROC is in the process of advertising a tender for horticultural services and its planned to be executed Q3. The Regions to explore using the existing corporatives contracts.



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department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target



% adherence to routine maintenance plan for re-gravelling of roads

90.0 % 90 92.4 90 85.7 Limited budget for yellow plant equipment





% gravel roads bladed as per Maintenance plan

80.0 % 80 89.6 80 97.7 80 93.6 Q2 target achieved



% of reported water leaks attended to within 48hours

70.0 % 70 67.4 70 59.3 The under achievement was as a result of the challenges with backlogs on water leaks and the shortage of personnel to perform the task.We prioritised the no water complaints. We combined the Depot teams and attended areas where large number of leaks were reported.

Recruitment of artisans will be finalised in Q3.



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42


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target



% of sewer blockages attended to within 8 hours

70.0 % 70 71.9 70 53.7 The under achievement was as a result of the challenges with backlogs on water leaks and the shortage of personnel to perform the task. We prioritised the no water complaints. We combined the Depot teams and attended areas where large number of leaks were reported.

Recruitment of artisans will be finalised in Q3, engage corporate fleet to accelerate repairs of vacuum jets.




% of streetlight failures repaired within 72 hours

80.0 % 80 80 80 69.7 The section is still under resourced to attend to all reported streetlights. Escalations were made to Top Management on shortage of Cherry pickers due

Unlocking of the challenges of material(ROC to meet before end of January with SCM on outstanding streetlight materials to consider procuring



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43


department





Q1 Target

Q1 Actual

Q2 Target

Q2 Actual

Q2 Reasons not

achieved

Q2 Mitigation plan

Mid-year target


to extended periods for fleet maintenance, shortage of material, unfilled vacancies etc.

items through the existing tenders and to keep to minimum stock level), specialised vehicles and personnel will assist the depot with the needed capacity to operate effectively and efficiently.


Maintenance of the Blue Drop Standard

Maintenance of the Achieved of Blue Drop Standard


not reported


not reported

The responsibility of this KPI lies with Utility Services Department

not reported not reported

not reported Target not reported

Target not reported


% of complete and compliant small scale, embedded generation applications approved

100.0 % 100 not report

ed

100 ! not reported not reported 100 not reported Q2 target not achieved



Nr of days taken to connect electricity to new businesses

Within 40 days

Within 40 days

not reported

Within 40 days

not reported

not reported not reported Within 40 days

not reported



90

44

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4 PERFORMANCE OF MUNICIPAL ENTITIES

Municipal entities are separate legal entities headed by a board of directors and utilised by a municipality to deliver services to its community. Each municipal entity has an annual business plan that is approved by the Council. The city has two municipal entities which must perform according to service delivery agreements and performance objectives set by the Municipality, and they are:

1. Housing Company Tshwane (HCT) 2. Tshwane Economic Development Agency (TEDA)

This second quarter report has been prepared against both entities’ 2017/18 business plans and scorecards. At the end of quarter 2, 72.41% of targets were reported achieved by entities against their planned targets. These are yet unaudited results. The detailed extracts as reported by the entities are found in the appendices to this report.

Table 6: summary of performance of municipal entities for quarter 2

Entity Nr of targets

f

Targets applicable for Q1



Nr of targets Applicable for Q2



Status Mid-year & YTD

TEDA 19 15 6 3 13 10 3 Overall performance of the entities is improved from the first quarter, but still under-performed.


17 10 6 4 16 11 5

Total 36 25 (69.44%)

18 (69.23%)

7 (38.88%)

29 (80.55%) 21 (72.41%) 8 (27.58%)

4.1 PERFORMANCE BY TEDA In total, the entity has 19 targets for the year, and 13 were applicable for Q2 where 10 were achieved and 3 were not achieved. 76.92% of planned targets were realised.

Table 7: achieved targets for Q2

Key Performance Indicator 2nd Quarter Target 2nd Quarter Actual

Number of positions filled 1 3 positions have been filled

Clean Audit opinion by AG achieved Submission of MLAP report Received clean audit opinion

Development of the Agro-processing Hub Solicitation of prequalification proposals

BEC report with recommendations on the prequalifying bidder/proposer.

Facilitation of Tshwane Freight Terminal and Logistics Hub

Projects report Project report for Quarter 2 signed-off

Investment Intelligence Acquired 1 Intelligence report on the analysis of available financing instruments for supporting investment and doing business in Tshwane signed-off.

Number of new, quality investment projects attracted into the pipeline

3 1. PRIME PRODUCTS - Investor Site visit to Ekandustria with Prime Products took place on the 29/11/2017. First Identified site was too big

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for the Investor’s requirements. A second site that was conducted on the 11/12/2017 of which investor seems keen on occupying the identified site. It was agreed in principle that negotiations between the landlord and Prime Products should commence so that Prime Product representative can present the new site to their board in January 2018. 2. SAFRAN - The SAFRAN visit was a follow up to the engagement that took place between TEDA, Aerosud and the SAFRAN executive during the B2B meetings at the Paris Air show in 2017. SAFRAN is a leading French manufacturer and Innovator of products and solutions for the Aerospace and Defence sector. The next meeting of the visit was between SAFRAN and Electrothread held at the Electrothread offices in Samrand. The discussions also yielded positive results, where SAFRAN committed to make use of Eletrothreads product and technology for a contract that they have with the UAE defence force. The 3 new Investment leads generated from the SAFRAN visit: o AEROSUD

o ELECTROTHREAD

o CENTURION AEROSPACE

VILLAGE

3. ITALY SOUTH AFRICA MATCH MAKING - B2B meetings were held with the following companies: DISTRETTO TECNOLOGICO AEROSPAZIALE

(DTA)

Possible areas of collaboration were identified between TEDA & DTA, mainly around the Research & Development to benefit Tshwane based companies under CAMASA. o LAZIO INNOVA S.p.A

This entity is a region agency for the region of Lazio. Discussions were held on possible areas of collaboration in the Aerospace sector, where they can assist in finding Italian Investor who might be interested in Investing in Tshwane. o MARENCO SOUTH AFRICA

Marenco South Africa is a helicopter manufacturing company. They have indicated that they are interested in setting up a manufacturing facility in Tshwane. 4. THAILAND SUMMIT GROUP (TSG) INVESTMENT - TEDA is facilitating a second visit for TSG for their envisaged investment in

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Silverton. TEDA is arranging meetings with other key stakeholders in preparation for the TSG visit.

Number of capacity building workshops held for Tshwane companies

1 3

Number of foreign buying trade missions facilitated by TEDA

1 1

Production of quarterly newsletters to promote City as preferred investment destination published

1 The second quarter newsletter - TEDA Business Review Volume 12 - has been produced

Exhibitions and Trade Shows facilitated by TEDA

1 3

Table 8: targets not achieved for Q2

Key Performance Indicator

2nd Quarter Target

Reason for non-achievement

Corrective measures implemented to date

Planned corrective measures to be implemented

Responsible official for corrective measure

Due date

Two city allocated capital projects managed by TEDA

Project plans for the two projects developed

CoT has not allocated projects for implementation by TEDA. Furthermore, TEDA mandate is under review.

Escalation of the matter to the Shareholder

Confirmation of TEDA’s mandate by the Shareholder. The process of redefining TEDA’s mandate in underway

Executive: PPM To be confirmed by Shareholder

Development of the Agro-processing Hub

Statutory compliance achieved

CoT Property Management delayed processing of land parcel in favour of project. This has resulted in the inability to submit statutory applications.

Escalated the matter to Top management of Economic Development and Spatial Planning. Additionally, requested newly appointed Group Head of Property Management to fast track administrative processes regarding the land parcel.

Fast tracking of administrative processes regarding the land parcel set aside and long-term lease conditions.

Executive: PPM Quarter 1 in 2018/19

Management of City’s selected commercial properties

SLA signed CoT has not allocated projects for implementation by TEDA.

A process to review TEDA’s mandate is underway.

To be confirmed by the Shareholder

CEO To be confirmed by the Shareholder

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Table 9: TEDA detailed scorecard

KPI Annual target Q1 Target Q1 Actual Q2 Target Q2 Actual Assessment of reported performance against annual target

Number of positions to be filled

4 1 0 1 3 positions have been filled

Target achieved. Steady progress shown

Clean Audit opinion by AG achieved

Clean audit opinion achieved at the end of audit

Submission of MLAP report

Signed-off MLAP report has been submitted.

Submission of MLAP report

Received clean audit opinion

Target achieved

Two city allocated capital projects managed by TEDA

90% Annual budget spent on project value of R105 million

Project charters / SLAs entered into/ signed

- Project plans for the two projects developed

CoT has not allocated projects for implementation by TEDA. Target not achieved

Q1 target was not reported on & Q2 target not achieved. The entity should ensure sound mitigation measures to fast track performance

Development of Agro-processing Hub

Sod turning of the Agro- processing Hub

Solicitation Prequalification proposals

Statutory compliance achieved

CoT Property Management delayed processing of land parcel in favour of project. This has resulted in the inability to submit statutory applications.

Q1 target was not reported on & Q2 target not achieved. The entity should ensure sound mitigation measures to fast track performance

Development of Tshwane Bio-energy facility

Project packaging for market of Tshwane Bio-energy facility

Not Applicable for Q2


Development of clothing and textile hub

Project packaging for market of clothing and textile hub



Number of area based development studies produced, reviewed or updated

1 Not Applicable for Q2


Facilitation of Tshwane Freight Terminal and Logistics Hub

Quarterly project report

Projects report Projects report

Project report for Quarter 2 signed-off

Target achieved. Steady progress shown

Investment Intelligence acquired

2 1 1 Intelligence report on the analysis of available financing instruments for supporting investment and doing business in Tshwane signed-off.

Target achieved. Steady progress shown towards annual target

Number of new quality investments projects realised

2 0 Not Applicable for Q2


Rand value of landed investment

1 500 000 000 0 Not Applicable for Q2


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KPI Annual target Q1 Target Q1 Actual Q2 Target Q2 Actual Assessment of reported performance against annual target

projects into the City of Tshwane

No of job opportunities facilitated in Tshwane

350 0 Not Applicable for Q2


Number of new quality investment projects attracted into the pipeline

10 3 2 3 3 Target achieved. Steady progress shown towards annual target

Trade intelligence acquired

2 0 1 1 1 Target achieved. Steady progress shown towards annual target

Number of capacity building workshops held for Tshwane companies

3 1 1 3 Target achieved. Steady progress shown towards annual target

Number of foreign buying trade missions facilitated by TEDA

4 1 0 1 1 Target achieved. Although Q2 target is achieved, the annual target might be at risk as halfway through the year only 25% of the annual target has been realised

Production of quarterly newsletter to promote City as preferred investment destination published

4 1 1 1 1- The second quarter newsletter - TEDA Business Review Volume 12 - has been produced

Although Q2 target is achieved, the annual target might be at risk as halfway through the year only 25% of the annual target has been realised

Exhibitions and Trade Shows facilitated by TEDA

4 1 1 1 3 Target achieved and progress to date satisfactory

Management of City's selected commercial properties

Management of City's selected commercial properties

SLA signed SLA signed SLA not signed. CoT has not allocated projects for implementation by TEDA.

Q1 target & Q2 targets not achieved. The entity should ensure sound mitigation measures to fast track performance

4.2 PERFORMANCE BY HCT The entity has 17 targets for the year, and 16 were applicable for Q2 where 11 were achieved and 5 targets not achieved. 68.75% of the planned targets were achieved.

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Table 10: Achieved targets for Q2 by HCT

KPA Targeted indicator Q2 Target Actual Management comments

1 Deliver and provide new social housing units on a sustainable basis.

Number of new units developed.

Detailed design 50% completed


The professional team progressed further than anticipated with the detail design.

2 Acquisition of the viable

brownfields rental stocks

from the CoT

Number of rental units transferred from CoT to HCT

60 units transferred

The 60 units targeted for Quarter 2 were part of the units which were transferred in the 1st Quarter.

A total of 284 units planned for transfer in the 2017/18 financial year were achieved in the 1st quarter.

3 Deliver services by developing and managing affordable rental housing in the City of Tshwane. Occupancy

Occupancy level in units increased

96% 97.47% Performance will be sustained

4 Deliver services by

developing and

managing affordable

rental housing in the City

of Tshwane.

Occupancy



5 Deliver services by

developing and

managing affordable

rental housing in the City

of Tshwane.

Occupancy



6 Stabilize processes to

ensure increase in rental

revenue.

Rental revenue collected as a percentage of amount billed(Eloff)


7 Stabilize processes to

ensure increase in rental

revenue.

Rental revenue collected as a percentage of amount billed (Silwerkroon)

6% 7.24 Performance will be sustained

8 Stabilise service delivery

through the development

and implementation

Integrated Affordable

Rental Housing Strategy

Entity asset liquidity maintained to an acceptable level

Liquidity ratio of

1:1

Liquidity ratio of 5,91:1

Performance will be sustained

9 Turnaround in resolving

tenant maintenance

requests increased

80 % of the tenant maintenance requests are resolved within agreed turnaround time


10 Turnaround in resolving

tenant complaints

increased

90% of the tenant complaints are resolved within agreed turnaround time

86% 0 As indicated by the entity, no complaints were received during the reporting quarter

11 Revitalise Urban

growth/dismantling

poverty and inequality

Development of BEE & SMME’s


Table 11: Targets not achieved for Q2

KPA Targeted indicator

Q2 Target Reason for non-

achievement




Due date

1 Deliver and provide new social housing units on a sustainable basis

Number of new units developed- Townlands

30

completed

units

The contractor is behind schedule

There are 4 subcontractors currently appointed to assisting the main

A recovery plan to appoint an 8GB subcontractor to assist with the

Acting Property Development Manager

31 January 2018

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Q2 Target Reason for non-

achievement




Due date

contractor to accelerate.

acceleration programme is underway.


Number of new units developed- Chantelle X39

Site establishment and trenching

There was a delay in appointing the professional team and the utilization of the HHS panel of contractors.

Appointment of the professional team and the contractor has been concluded

Contractual documents are planned to be completed by the 12th January 2018 and site handover will follow immediately after.


12 January 2018


Project Procurement Strategy concluded- Sunnyside Erf 708-709

Procurement strategy developed

The revised rentals were concluded in October 2017 by the SHRA and the project had to re-modelled for financial Viability

The financial modelling is currently underway and will be submitted to the SHRA for approval

Request for funding had been submitted to the City for the commencement of infrastructure bulk upgrade.


31 January 2018- Financial Viability 01 March –Appointment the contractor for bulk upgrade.

4 Stabilise

service

delivery

through the

development

and

implementati

on Integrated

Affordable

Rental

Housing

Strategy

Manage budget processes of the entity in accordance with regulatory frameworks

50% 47.29 %( not achieved.) There was a delay in appointing the professional team and the utilization of the HHS panel of contractors.




12 January 2018

5 Stabilize processes to ensure increase in levies.

Increase levies collection rate of billed units by 8% =30%

8% -13.28% Tenants at Clarina have not gone through HCT’s vetting process as tenant allocations are done by the City, some of the tenants are unemployed, some depend on social grants

Attorneys were appointed to assist with collection.

The City to assist subsidy to bridge the gap of payments of indigents.

Property Manager

28 February 2018

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KPI Annual target

Q1 Target Q1 Actual Q2 Target Q2 Actual Assessment of reported performance against annual

target

Number of new units developed: Townlands

200 30 0 30 completed

units

Not achieved. The contractor is behind schedule

Progress to date not satisfactory. The entity should ensure sound mitigation measures to fast track performance

Number of new units developed: Timberlands


Detailed design 50%

detailed design 90% completed



Target achieved. Steady progress shown.

Number of new units developed: Chantelle X39

Installation of bulk services completed

Site establishment

Bid committee members have been appointed 9BSC, BEC and BAC)


Not achieved. There was a delay in appointing the professional team and the utilization of the HHS panel of contractors.

Progress to date not satisfactory. The entity should ensure sound mitigation measures to fast track performance

Number of new units developed: Sunnyside Erf 708 & 709

Project procurement strategy concluded

Procurement Procurement strategy developed

Not achieved. The revised rentals were concluded in October 2017 by the SHRA and the project had to re-modelled for financial Viability

Performance to date not satisfactory since this target did not perform even in Q1. The entity should ensure sound mitigation measures to fast track performance

Number of rental units transferred from CoT to HCT

121 rental units transferred


266 Rental stock was transferred from CoT to The HCT


The 60 units targeted for Quarter 2 were part of the units which were transferred in the 1st Quarter.

Target achieved. Steady progress shown.

Occupancy level in units increased: Eloff

96.0 % 96.0 % 98.0 % 96% 97.47% Target achieved. Steady progress shown.

Occupancy level in units increased: Clarina


Occupancy level in units increased: Silwerkroon


Turnaround in resolving tenant maintenance request increased: Eloff, Clarina & Silwerkroon

95.0 % 96.0 % 78% 89.86% Target achieved. Steady progress shown.

Turnaround in resolving tenant complaints increased: Eloff, Clarina & Silwerkroon

90.0 % 86.0 % 100.0 % 86% 0

No complaints were received during the reporting quarter

Development of BEE and SMMEs

36.3 % 35.0 % 108.4 % 35% 116.19% Target over-achieved

Manage budget processes of the entity in accordance with regulatory frameworks

95.0 % 50.0 % 14.0 % 50% 47.29 %( not achieved)

Q1 & Q2 targets not achieved. The entity should ensure sound mitigation measures to fast track performance

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KPI Annual target

Q1 Target Q1 Actual Q2 Target Q2 Actual Assessment of reported performance against annual

target

Rental revenue collected as a percentage of amount billed: Eloff

6.0 % 6.0 % 7.0 % 6% 6.42% Target achieved. Steady progress shown

Rental revenue collected as a percentage of amount billed: Silwerkroon

6.0 % 6.0 % 18.7 % 6% 7.24 Target achieved. Steady progress shown

Increase levies collection rate of billed units by 8% =30%

8% 8% -13.28% Tenants at Clarina have not gone through HCT’s vetting process as tenant allocations are done by the City, some of the tenants are unemployed, some depend on social grants

Target not achieved.

Entity's asset liquidity maintenance to an acceptable level

Achieving Liquidity Ratio of 1:1

Liquidity ratio of 1:1

Liquidity ratio of 3.19:1

Liquidity ratio

of 1:1


Target achieved

Internal governance structures and processes reviewed and approved

Entity annual strategic review and approval

N/A N/A N/A Not applicable

5 IMPLEMENTATION OF CAPITAL PROJECTS

The City of Tshwane approved capital budget funds the following:

• Programmes;

• large projects that contain subprojects; and

• individual projects

The categories of projects include service delivery projects (eg water connections), insurance replacements,

institutional facilities (eg improving the safety of stores), social infrastructure projects (eg clinics, libraries and

recreational facilities), mobility related projects (eg roads and transport facilities, and projects designed to

contribute to economic development (eg improving the market facilities and providing local economic

development infrastructure).

The detailed project annexure to this report contains reporting on each project, and an assessment by the

CSOP department on the performance, risks and mitigation measures.

The total approved budget of the City of Tshwane capital projects, is R3,942,658,576.00.

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5.1 Performance of projects at mid-year

53 of 231 projects had achieved milestones by mid-year, with 146 projects behind schedule.

Under spending is mainly on the following projects:

• City Manager: Revitalization of City’s industrial and economic nodes (R331m) – A catch up plan is

being developed to ensure spending in the next quarter. Funds will be transferred to implementing

departments during the adjustment budget

• Community and Social Development Services (Sport and Recreation): Upgrading of Caledonian

Stadium (R32m) – Project put on hold. The Legal Department is assisting with outstanding legal

matters.

• Economic Development & Spatial Planning: Business Process Outsourcing (BPO) Park

Construction (R50m) – Following the approval of all outstanding documents, the township

establishment was approved on 25 October 2017. The SDP was approved on 21 November 2017 and

the building plans on 6 December 2017. Discussions with the Council for Scientific and Industrial

Research (CSIR) and the Principal Agent regarding their reinstatement, was held on 13 December 2017

and will continue early in January 2018, due to the Builders'/construction break.

• Group Financial Services: MSCOA Automation (R28m) – Spending will only be done when mSCOA

go live. Turnaround of Municipality Water Services (R58m) losses) – Spending will be in quarter 3.

The budget will be adjusted during the adjustment budget.

• Housing and Human Settlement: Winterveldt bulk sewer (R66m), Construction of roads &

stormwater – Thorntreeview (R50m), Construction of roads & stormwater - Olievenhoutbosch

x60 (R30m), Construction of roads & stormwater - Soshanguve X5 (R72m) – work in progress,

expenditure will increase in the third quarter.

• Roads and Transport: Wonderboom Intermodal Facility (R77m) – The issue of the appointment

letter to the contractor will be expedited and the program will be adjusted. Railway Bridges (WP6)

(R50m) – The appointment of the contractor has been delayed due to the change of the contractor

panel from housing to the new Roads and Transport panel. Menlyn Taxi Interchange (R47m) –The

Menlyn temporary transfer interchange facility has been reconsidered for implementation. Expenditure

on the temporary facility is expected from January 2018. The program will be adjusted.

• Shared Services: One Integrated Transaction Processing System (R20m) – tender process in

progress. Upgrading of IT Networks (R15m), implementation of storage area network – requisitions

have been done, funds are committed.

• Utility - Energy and Electricity: Electricity vending infrastructure (R35m), Tender USD EE 31

2017/18 - Vending and Meter Management System approved by BEC and have been advertised and

closing mid-January. Eldoraigne 132/11kv Substation (R30m) - Remaining balance on the project

transferred to other projects due to litigation on transformer contract. Mamelodi-3 132/11kv substation

(2 x 40MVA Power Transformers) (R20m) - The whole budget transferred to other projects due to

litigation on transformer contract.

• Utility - Water and Sanitation: RE - AGA – Tshwane (R83m), Appointment of contractors has been

put on hold, due to Township Layout that has not been approved. Projects that have contractors

appointed have payment certificates that could not be processed on time, due to WBS being blocked.

Doornkloof Reservoir (R20m) – The tender report has been completed and is waiting for presentation

at BAC. Bronkhorstbaai: Refurbishment and upgrade of Water Purification Plant (R7m) – The

action plan was prepared. However, the action plans are already behind schedule due to the delays in

advertising the tender by SCM. The consultant Glad Africa is appointed by the CM through the PMU to

intervene and assist Project Managers.

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The detailed project appendix contains the list of projects behind schedule with reasons for non-performance and mitigation plans.

Status of supply chain progress as at 31 December 2017 Table 12: Supply chain progress of capital projects

NO Bid/ Tender Number

Description of Work, Goods or and Services Closing Date Procurement Plan

STATUS

1 USD EE 12 - 2017/18

Tender for the supply, delivery, installation and commissioning of equipment for the upgrading of Soshanguve 32/11kV substation: 3 Year Period: With Effect from 01 August 2017 or nearest date

12/12/2017 yes

Admin Compliance

2 USD EE 13 - 2017/18

Tender for the supply, delivery, installation and commissioning of equipment for the refurbishment of Kentron132/11kV substation: 3 Year Period: With Effect from 01 August 2017 or nearest date

8/12/2017 yes

Admin Compliance

3 USD EE 14 - 2017/18

Tender for the supply, delivery, installation and commissioning of equipment for the upgrading of Bronkhorstspruit 132/11kV substation: 3 Year Period: With Effect from 01 August 2017 or nearest date

11/12/2017 yes

Admin Compliance

4 GPM 12-2017/18

Tender to appoint panel of contractors for maintenance, repairs, upgrades and extension of city of tshwane facilities for period of three ( 3) years as and when required.

8/12/2017 yes

Admin Compliance

5 USD EE 16 - 2017/18

Tender to appoint a service provider to supply, install, and test a new alternative engine on Locomotive no.4 and repair the imbalance of locomotive no.5 drive train at Rooiwal power station.

16-01-2018 yes

On Advert

6 USD EE 25-2017/18

Tender for the supply, delivery, offloading, installation and commissioning of new standby generator sets, as well as a maintenance contract for routine maintenance and repair of the standby generator sets, as and when required over a three (3) year period

24-01-2018 yes

On Advert

7 USD WS 09 -2017/18

Tender for the refurbishment of Baviaanspoort and Sunderland Ridge WWTW

30-01-2018 yes

On Advert

8 EMS 01-2017/18

Tender for the supply, delivery and fitting as well as repairs, maintenance and refurbishment of Agricultural infrastructure

1/2/2018 yes

On Advert

9 GICT 01-2017/18

Tender for the development of a new electronic way leave management system.

24-01-2018 yes

On Advert

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6 AUDIT OUTCOMES FOR THE 2016/17 FINANCIAL YEAR

The City of Tshwane received an unqualified audit opinion for the 2016/17 financial year. There were however

material findings for three indicators on the audit of predetermined objectives, findings related to the compliance

with legislation on the annual financial statements, and internal control deficiencies identified.

The municipal manager, together with the chief financial officer and other senior management will put in place

measures to address the recommendations of the auditor-general.

The audit opinions of the municipal entities are summarised below:

Table 13: Audit opinions of the municipal entities

Municipal entity Audit opinion Audit of Predetermined Objectives

Compliance with laws and Regulations


Unqualified Emphasis of Matter:

• Restatement of corresponding figures

• Material impairments

No Material findings Material Findings:

• Annual financial statements

• Expenditure management

• Procurement and contract management

Sandspruit Works Association

Unqualified Emphasis of Matter:

• Restatement of corresponding figures

• Material losses

• Material impairments

• Transfer of functions

Material Findings on reliability of selected strategic objectives

Material Findings:

• Annual financial statements

• Consequence management

• Revenue management

• Expenditure management

• Procurement and contract management

Tshwane Economic Development Agency

Unqualified No emphasis of matter

No Material Findings No Material Findings

7 THE ADJUSTED SDBIP

The process for assessing possible adjustments to the SDBIP is currently underway and will be guided by any

proposals for adjustment to the 2017/18 budget, without compromising service delivery. The matters raised by

the AGSA in the 2016/17 FY audit will also be considered during this process. The possible impact which delays

in projects and transfers of project funding might have on the achievement of targets will be taken into

consideration.

The 2016/17 Annual report reflecting the performance of the City on its IDP and the AGSA audited performance

has been used to update the baselines for all key performance indicators contained in the IDP scorecard. The

baselines for KPI’s in the approved IDP scorecard was based on a projected baseline as implementation was

still underway in the 2016/17 FY when the 2017/21 IDP was approved. The audited results have subsequently

contributed to the update of the targets set for the 2017/18 FY to be in line with the confirmed baseline.

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There is no adjustment to the IDP scorecard, but only an update of the baselines and subsequent 2017/18

targets to be in line with the confirmed baseline.

The updated baselines and 2017/18 targets is contained in the appendix to the report.

8 FINANCIAL PERFORMANCE Detailed financial performance can be viewed in the financial report of the city presented to Council in the mid-year. However, this section of the report presents a summary of the ratios. The financials indicate that:

• the city is under-performing on revenue collection;

• creditors invoices are not being paid within the regulated timelines of 30 days;

• departments are under-performing on capital projects implementation affecting capital expenditure;

• certain departments are over-spending on over-time;

• whilst the regions are under-spending on repairs and maintenance.

Table 14: Performance on financial ratios

Financial Position

Norm/ Benchmark

Measure Financial ratio and norm December

2017 December

2016

Asset Management Capital expenditure to total expenditure (%) 10% - 20 % 5.77 9.23

Impairment of PPE (including investment property and intangible assets) (%) 0% 0.00 0.00

Repairs and maintenance as % of PPE and investment property (%) 8% 1.28 1.36

Borrowing to assets (PPE) (%) < 50 % 31.70 36.47

Debtor Management Collection rate (%) 95% 79.19 101.78

Bad debts written off as % of bad debt provision (%) 100% 1.18 1.21

Net debtor days (days) 30 days 142 199

Growth in total gross debtors (%) Management interpretation 22.28 -0.30

Growth in total net debtors (%) Management interpretation -28.03 4.07

Growth in total net consumer debtors (%) Management interpretation -56.28 20.95

Net debtors to total annual operating revenue Management interpretation 16.19 25.57

Liquidity Management

Cash/Cost coverage ratio (excl unspent conditional grants) (months) 1 - 3 months 0.66 0.44

Current ratio Between 1.5 : 1

and 2 : 1 0.76 1.80

Acid test ratio 1 : 1 0.69 1.67

Solvability ratio 2 : 1 1.97 2.13

Inventory turnover Between 2 and 3 1.82 2.49

Liquidity ratio > 0.2 4.52 3.95

Liability management

Capital cost (interest paid + redemption) as % of total operating revenue 6 % - 8 % 6.50 4.14

Capital cost as % of total operating expenditure 6 % - 8 % 11.55 9.66

Debt (total borrowing) to Total operating revenue (incl. grants) 45% 35.44 36.64

% Debt coverage (debt service repayment to operating revenue less grants)

1.15 to 1.35 times 35.84 47.55

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Gearing ratio* (Total long-term debt to total revenue less grants) 25% - 50% 48.09 39.58

Financing to capital expenditure Management interpretation -0.31 0.50

Sustainability Level of cash backed reserves (net assets - accumulated surplus) (%) 100% 488.00 304.70

* According to credit rating companies the benchmark for local government is a ratio of less than 50%

Financial Performance

Norm/ Benchmark

Measure Financial ratio and norm Decembe

r 2017 Decembe

r 2016

Efficiency Net operating surplus margin Equal to or greater than 0% 6.36 21.56

Net surplus/(deficit) electricity Between 0% and 15 % 0.00 0.00

Net surplus/(deficit) water and sanitation Equal to or greater than 0% 0.00 0.00

Distribution losses Electricity distribution losses (%)

Between 7 % and 10% Not available monthly

Water distribution losses (%) Between 15 % and 30 % Not available monthly

Revenue Management Growth in number of active consumer accounts

No norm proposed by NT 11.62 -0.04

Revenue growth (%) Rate of CPI -2.74 13.20

Revenue growth (%) - excluding capital grants Rate of CPI -1.63 14.31

Growth in grants Rate of CPI -18.40 5.78

Growth in service charges Rate of CPI 1.16 15.74

Expenditure Management Creditors payment period (trade creditors) (days) 30 days 71 35

Irregular, Fruitless & Wasteful and Unauthorised expenditure to total operating expenditure 0% 0 0

Remuneration as % of total operating expenditure Between 25 % and 40% 28.32 30.54

Contracted services as % of total operating expenditure

Between 2% and 5 % 8.16 10.28

Operating expenditure growth (%) Rate of CPI 16.10 -1.82

Capital expenditure growth (%) Rate of CPI -27.46 -19.70

Repairs and maintenance to annual operating revenue Budget policy 2.86 2.76

Grant dependency

Own funded capital expenditure (internally generated funds + borrowing) to Total Capital expenditure (%)

No norm proposed by NT 10.12 16.20

Own funded capital expenditure (internally generated funds) to Total Capital expenditure (%)


Own source revenue to Total operating revenue (including agency revenue) (%)


* According to credit rating companies the benchmark for local government is a ratio of less than 50%

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Cash flow

Norm/ Benchmark


2017 December

2016

Efficiency Cashbook balance (plus short-term loans) to total operating revenue # (%)

Management policy 7.82 4.63

Cash to interest coverage 1 : 1 2.31 1.48

Debt to cash ratio 1 : 1 5.62 14.24

Debt to equity (%) 1 : 1 or

100% 0.00 0.00

Interest Cost coverage 2 -0.19 0.20

Number of days total cash held (cash and investments) >45 days 333 609

Number of days total cash held (operating cash)( less encumbered investments, loans & grants) >45 days -8 7

Number of days cash on hand (less encumbments & non-cash expense) 90 - 180 days

Cash and cash equivalents

R 188,450,58

8

R 110,953,72

0

# According to credit rating companies the bench mark for local government is a ratio of less than 5%

Budget Implementation

Norm/ Benchmark


2017 December

2016

Efficiency Capital expenditure budget implementation indicator 95 % - 100 % 21.96 26.17

Operating expenditure budget implementation indicator 96 % - 100 % 48.98 45.79

Operating revenue budget implementation indicator 97 % - 100 % 49.42 50.51

Service charges & property rates revenue budget implementation indicator 98 % - 100 % 49.19 50.37

Table 15: Consolidated summary of financial performance

Description

Original

Budget YTD Actual YTD Budget Variance Variance

R'000 R'000 R'000 R'000 %

Total Revenue (excluding capital transfers) 30,226,013 14,975,154 15,914,494 (939,340) -5.9%

Total Operating Expenditure 29,994,829 14,713,384 16,787,501 (2,074,117) -12%

Surplus/ (Deficit) 231,184 261,769 (873,007) 1,134,777

CONSOLIDATED SUMMARY STATEMENT OF FINANCIAL PERFORMANCE: 31 DECEMBER 2017

The actual revenue realised for the period (excluding capital transfers) amounts to R14,9 billion against a YTD

budget of R15,9 billion. This represents a variance of R939 million for the period. The under recovery is mainly

on service charges water revenue and transfer and subsidies, due to the delay in the transfer of the equitable

share.

Expenditure amounts to R14,7 billion against a YTD budget of R16,8 billion. A variance of R2 billion is reflected.

The variance is mainly on Contracted Services, Employee Related Costs and Other expenditure.

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Table 16: Revenue

Description Original Budget Monthly Actual YTD Actual YTD Budget

YTD

Variance

YTD

Variance

R'000 R'000 R'000 R'000 R'000 %

Revenue by Source

Property Rates 6,514,409 571,772 3,273,840 3,123,179 150,661 5%

Service Charges: Electricity 11,176,494 810,829 5,753,343 5,788,049 (34,706) -1%

Service Charges: Water 3,996,886 128,956 1,673,314 2,042,341 (369,028) -18%

Service Charges: Sanitation 982,879 75,280 485,169 500,216 (15,047) -3%

Service charges - refuse revenue 1,410,506 139,876 670,738 701,053 (30,315) -4%

Rental of Facilities and Equipment 151,864 9,877 57,048 80,557 (23,509) -29%

Interest Earned - External Investments 79,493 6,750 78,484 39,839 38,646 97%

Interest Earned - Outstanding Debtors 466,691 52,107 311,339 236,400 74,939 32%

Fines 332,854 24,081 89,375 166,624 (77,249) -46%

Licences and Permits 54,796 13,476 66,367 71,391 (5,025) -7%

Agency services 6,650 – – – – #DIV/0!

Transfers recognised - operational 4,159,532 544,935 2,161,104 2,750,548 (589,444) -21%

Other revenue 887,079 41,982 355,033 411,356 (56,323) -14%

Gains on disposal of PPE 5,880 – 0 2,940 (2,940) -100%

Total Revenue (excluding capital

transfers and contributions) 30,226,013 2,419,922 14,975,154 15,914,494 (939,340) -5.9%

2017/18 FINANCIAL YEAR

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE: 31 DECEMBER 2017

The following main line items are contributing to the under recovery on the revenue line item.

• Service charges: Electricity Revenue (R34,7 million unfavourable) – mainly on smart prepaid electricity.

Technical audits on all meters are being conducted and all notification and placement of meters

attended to.

• Service charges: Water (R369 million unfavourable) and Sanitation (R15 million unfavourable) – due to

a decline in usage. The budget for water and sewerage is based on statistical trends.

• Service Charges refuse (R30 million unfavourable) – mainly on Bulk Containers and Landfill Sites. The

income on billing of landfill sites for December is not reflecting yet. Impact of weighbridges at 4 landfill

sites and billing of waste contractors are still being evaluated, and information on billing documents are

being corrected and processed.

• Rental of facilities and equipment (R23,5 million unfavourable) – mainly due to under recovery on the

rental of housing accommodation, facilities and commercial properties. Expired lease agreements are

in the process of being advertised and renewed.

• Fines and penalties (R77 million unfavourable) – mainly due to outstanding income from AARTO traffic

fines. There is a delay in capturing transactions, as data is only available after the closing of each

month.

• Licences and permits (R5 million unfavourable) – mainly due to a decline in applications on drivers

licences.

• Transfers and subsidies (R589 million unfavourable) – mainly due to the outstanding transfer of the

equitable share.

• Other Revenue (R56 million unfavourable) – due to under - recovery on market fees, transport,

township development electricity and rezoning.

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Table 17: Expenditure by type

DescriptionOriginal

Budget

Monthly

Actual YTD Actual YTD Budget

YTD

Variance % Spent

R'000 R'000 R'000 R'000 R'000 %

Expenditure By Type

Employee Related Costs 8,778,736 686,472 4,142,077 4,531,767 (389,690) -9%

Remuneration of Councillors 125,281 10,511 60,604 66,643 (6,039) -9%

Debt Impairment 1,175,973 – 493,289 591,155 (97,866) -17%

Depreciation and Asset Impairment 1,961,302 138,709 732,140 988,483 (256,343) -26%

Finance Cost 1,417,357 334,833 1,006,687 757,207 249,480 33%

Bulk Purchases 7,462,684 540,059 4,316,363 4,577,537 (261,174) -6%

Other Materials 3,261,702 223,227 1,299,328 1,439,867 (140,538) -10%

Contracted Services 2,874,971 289,845 1,298,812 2,061,379 (762,567) -37%

Tranfers and Grants 49,980 2,026 48,590 66,681 (18,091) -27%

General Expenditure 2,886,842 207,052 1,315,494 1,706,782 (391,288) -23%

Loss on Disposal of PPE 1 – – 1 (1) -100%

Total Expenditure 29,994,829 2,432,734 14,713,384 16,787,501 (2,074,117) -12%

2017/18 FINANCIAL YEAR

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE: 31 DECEMBER 2017

Listed below are the main line items that are currently underspent when compared to the YTD projections:

• Employee-related costs (R390 million under budget) – mainly relates to service bonus, salaries,

provision for leave, post-employment pension and long-service benefits. The actual spending on the

provisions are posted at year end. Overtime salaries is overspent by R46 million, mainly due to the

payment of employees attending unplanned power outages and cable thefts.

• Debt impairment (R97,9 million under budget) – Journal for December was processed late, to reflect in the following month.

• Depreciation (R256 million under budget). The calculation aligns with the asset verification and purification process.

• Bulk purchases Electricity (R151 million under budget) – due to outstanding invoices from Eskom. Bulk Purchases Water is under budget due to the outstanding invoices and sign off by the City of the Service Level Agreement between the CoT and the Cullinan Diamond Mine for the provision of potable water and the treatment of sewage by the Cullinan Diamond Mine.

• Other Materials (R140m) – mainly due to underspending on substations, chemicals and stationery.

• Contracted Services (R763m) – underspending on the repairs maintenance budget on roads, buildings, connections, grounds, electricity and water reticulation. Expenditure is expected to increase in the third quarter.

• Transfers and grants (R18 million) – due to underspending on the payment of Municipal Entities and for the Early Childhood Development NGO Support.

• Other Expenditure (R391m) – mainly on telecommunications, rental of plant and equipment, LED initiatives, EPWP Job creation and implementation of OITPS.

Listed below are the main line items that are currently over budget when compared to the YTD projections:

• Finance Charges (R249m) – due to the interest paid on external loans.

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• Employee Related Costs: Overtime-salaries (R46m) - mainly due to the payment of employees attending unplanned power outages and cable thefts. Unifix Allowance (R16m), Standby Allowance (R8,6m), Scheduled Public Day (R11 million).

• Leased Building (R58m) - The lease exit plan was not realised as planned.

• Insurance Premiums and Excesses (R29m) – Group Audit and Risk Department – due to the payment of annual insurance premiums.

• PTNOG Grant (R48m) – Due to payment of second quarter invoices.

• Rental Vehicles Vatable (R20m), Rental Vehicles Non-VAT (R5m) and Leased Vehicles Non-VAT (R6m) – due to the payment of previous year invoices. The Department is still busy with the de-fleeting process, expenditure is expected to be reduced once the process is finalised.

• Legal Costs (R9,8m) – Over spending due to legal cost invoices (Court Orders, Sheriff costs and outstanding invoices).

• Rudimentary Services (R4,5m) – due to payment of previous year invoices.

• System Ware Software (R5m) – dependent on the maintenance work done at each point, which triggers expenditure.

• Power Stations (R4m) – due to maintenance done on power station to generate electricity.

• Coal (R4m) –The Pretoria West Power Station is generating, as per commitment made, and coal has been procured.

• Petrol and Diesel (R6m) – dependant on consumption, actual was higher than projected.

• Project Linked Housing (R18,2m) – due to payment made on Housing Top Structures at Ezithobeni and Mamelodi Erf.

9 MANAGEMENT COMMITMENTS TO IMPROVE PERFORMANCE

The city manager engaged with management on the reasons for under-performance, and on departmental

mitigation measures. Strict measures and consequences will be implemented for non-performance.

Departments committed to reported on annual targets quarterly. Going forward departments must ensure that

supply chain processes are implemented from the first quarter of a financial year, however, in the current

financial year, departments committed to complete supply chain processes by the 15th of February 2018, with

purchase orders in the system, to ensure that implementation is ramped up.

There is agreement that contracts management and project management capacity needs to be improved in the

City. However, in the short term, the existence of the enterprise project management office, had enabled the

provision of project capacity, and departments are fast-tracking the development of task orders to seek specific

assistance on the projects. The enterprise project management unit is to design a system to ensure that designs

are in place when the city goes into the new financial year, and to assist with developing the pipeline of projects

going forward.

The departments in the chief operations cluster committed to ensure project site meetings take place every two

weeks. Project reporting on physical and financial progress of projects is to take place every two weeks to the

administration. The cluster is to collaborate with stores to ensure availability of materials as required. The

community and social development services department is to ensure that all departments understand the new

EPWP model, and how it is to be rolled out, to ensure that the job opportunities targets are realised.3 Housing

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projects to the value of R200m are at appointment stage, and the department committed to submit those

documents to the city manager by Friday 19 January 2018 for sign off.

Revenue collection efforts are to be intensified and all departments commit to ensure more realistic planning is

implemented during the adjustments budget. Submissions have been made to transfer funds from certain

projects to projects on track needing additional funding.

The governance cluster committed to the following remedial actions:

• To begin a process of reviewing the governance structures in the administration.

• In so doing to facilitate that governance sub-structures are put in place, function effectively and report

regularly.

• Business processes are to be streamlined and documented

• It was emphasised that management has to accept responsibility for the overall management of each

department, in terms of labour relations, staff discipline, performance and service delivery

• It was agreed that Tshwane specific induction is required for new members of management.

The cluster committed to finalising the following in quarter 3:

• Upgrading of network sites

• One Integrated Transaction Processing System

• Implementation of Storage Area Network

• E-Initiatives supporting the Smart City

• Completion of blueprint and plan being fast tracked

• Credit Control Solutions

• Procurement done, delivery awaited

• Integrating Credit Control Solution to GIS

• The tender served at the Bid Specification and referred back for refinement. The amendments were

made.

• Planned integration of Emergency Services and GIS systems explored

• Dependencies on service providers and no proper management of service providers and contracts

• Implementation of mSCOA

• Review of the micro-structure of Group Property to address its key functions.

• The placement of officials into the micro structure must be fast-tracked to ensure stability.

• Legal services is to assess the expenditure on legal matters and advise the city manager whether

expenditure has been on the big cases. Departments must be billed for the cases not paid for by the

legal services limited budget.

• The GSO must ensure that fleet availability and procurement is re-prioritised based on critical and

burning needs, until there is sufficient funding to address all the fleet needs of the city.

Finance and the Utility Services department are to resolve the interdependencies pertaining reporting on non-

revenue water and non-revenue electricity.

Departments are to collaborate with the Tshwane Metro Police department to prioritise facilities that require

watchmen services.

Employment equity must be implemented with the appointment of the divisional head positions.

With regard to supply chain management matters, the finance department (supply chain management) has to

ensure more proactive engagement with management to ensure correct and qualitative specifications are

developed. In addition, management must ensure that meetings are attended, and supply chain management

must implement a schedule of meetings based on the need to address the current backlog (it cannot be business

as usual). A committee is to be established to review the entire value chain for supply chain management.

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APPENDIX A: UPDATES OF BASELINES TO THE IDP SCORECARD DUE TO THE AGSA FINAL AUDIT RESULS 2016/17


Indicator Target: 2017–21

New baseline as informed by performance reported in the 2016/17 Annual Report

Approved Target: 2017/18

Updated target for 2017/18 based on the new confirmed baseline

Reason for update


Percentage of households in formal areas with access to water (metered connections)

86,70%

(43 050 new connections)

82.58%

(752 775 households)

83,09%

(10 150 new connections for the year)

83.69% (762 925 households)

Baseline updated in terms of performance reported in the 2016/17 Annual Report and target updated accordingly

Percentage of formalised areas provided with weekly waste removal services

100% 100% 100% None N/A

Percentage of households with access to sanitation

81,44%


79,64%


79,56%

(3 761 new connections for the year)

80.05% (729 749 households)


Percentage of formal households with access to electricity

85,86%


81,97%


82,31% (7 800 new connections for the year)

82.82% (755 008 households)


Mobility optimisation Percentage of required municipal storm water drainage network provided

50,41%

(211 km)

39,40% of a backlog calculated in 2015/16 to be 1 780 km

41,53%

(53 km for the year)

42,38% (53 km for the year)


Percentage of roads provided to the required standard (km)

30,11%

(183 km)

25,16% of a backlog calculated in 2015/16 to be 3 036 km

25,40%

(40 km for the year)

26,47% (40 km for the year)


Percentage of completed TRT bus lanes constructed

85,33% 40,20% 44,82% None Baseline updated in terms of performance

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Reason for update

(17,6 km) (15,68 km of a target of 39 km)

(1,8 km for the year) reported in the 2016/17 Annual Report

Upgrading and development of informal settlements

Percentage of informal settlements with access to rudimentary water services10

100% of 134 informal settlements provided with rudimentary water services

100% of 130 informal settlements

100% of 134 informal settlements provided with rudimentary water services

None Baseline updated in terms of performance reported in the 2016/17 Annual Report

Percentage of informal settlements with access to rudimentary sanitation services11

100% of 76 informal settlements provided with rudimentary sanitation

100% of 64 informal settlements

100% of 76 informal settlements provided with rudimentary sanitation


Number of informal settlements formalised

32 0 7 None Baseline updated in terms of performance reported in the 2016/17 Annual Report

Job-intensive economic growth

Number of new income-earning opportunities facilitated by the City

104 000 17 183 23 000 for the year None Baseline updated in terms of performance reported in the 2016/17 Annual Report

Rand value investment attracted to Tshwane (annual)

R10,8 billion R2,298 billion R2,4 billion for the year


10 The reported number of informal settlements with access to water and a sanitation service is in accordance with the manual count and survey conducted by the City of Tshwane’s Housing and Human Settlement Department. There are currently 173 informal settlements in Tshwane. 11 The reported number of informal settlements with access to water and a sanitation service is in accordance the manual count and survey conducted by the City of Tshwane’s Housing and Human Settlement Department. There are currently 173 informal settlements in Tshwane.

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Reason for update

Support through mentorship/training to the Tshepo 10 000 cooperative

1097 289 257 for the year None Baseline updated in terms of performance reported in the 2016/17 Annual Report


100% 100% 100% None Baseline updated in terms of performance reported in the 2016/17 Annual Report


Number of indigent households supported by the City through its social packages

16 000 2 837 4 000 additional households for the year


Public safety Percentage of reduction in safety incidents (annual)

5% decrease between 2016 and 2021 (decrease in safety incidents from 13 688 to 13 003)

10 414 13 414 incidents for the year


Percentage of increase in interventions to root out crime and related incidents (annual)

5% increase over the five years (1% increase per year) (2 878)

3 968 2 792 interventions for the year


Institutional governance

Unqualified audit opinion achieved (annual)

Unqualified audit opinion





Percentage of financial targets met (regulated targets = cost coverage,

100% 100% 100% None Baseline updated in terms of performance reported in the

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Reason for update

debt coverage and percentage of service debtors to revenue)

2016/17 Annual Report

Percentage reduction of non-revenue water (NRW)

Reduce with 3,5% over five years to 23%

23,66% < 25,4% None Baseline updated in terms of performance reported in the 2016/17 Annual Report

Percentage average of annual non-revenue energy (NRE) (annual)

< 10% 20,58% < 16% None Baseline updated in terms of performance reported in the 2016/17 Annual Report

Employee satisfaction Percentage of employee satisfaction (annual)

80% 60% 75% None Baseline updated in terms of performance reported in the 2016/17 Annual Report

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Capital Projects performance Appendix to the Q2 and mid-year performance report

CSOP department 1/7/18 [Course title]

ANNEXURE B

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Department

Project Name Q2 Milestone

Q2 Actual work done Q2 Reason not completed Q2 Mitigation Plan (catch up for quarter's target)

Project status as at 31 December 2017

Comments on Revised Mitigation Plans

CSOP Comments on overall status


9.710692.2.015 Upgrading of HM Pitje Stadium

Finalisation of detail design and compile draft bill of quantities

Submit Task Order to PMU to appoint sub-consultants to assist with desgin process.

Appointmnet of consultants in process.

Appointmnet of consultants in process by PMU.

Behind schedule

Status quo still the same

How far is PMU in appointing consultants as per initial mitigation plan?


9.712773.1.013 Capital Funded From Operating (Capital Moveable)

Procurement as per selection list. Based on availability of library books. Further procurement of library furniture and IT equipment.



None required. Purchasing of books, furniture and IT equipment in process.

On track Status quo still the same

Specify legal issues hamperong the projects


9.712915.1.015 Upgrading of Caledonian Stadium

01 Dec - Refurbishment of existing buildings and demolishing of dilapidated buildings. Installation of electrical reticulation and fire protection.

Project put on hold. Project put on hold. Project put on hold. Tshwane Legal assisting to resolve all outstanding legal matters.

Behind schedule

Actual work done was revised: Appointment of contractor to be finalised in Feb 2018. Envisaged site establishment in from March/April.

Noted that contractor appointment will be finalised in Feb 2018

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9.712916.1.015 Upgrade Refilwe Stadium

Bulk Services, bulk earthworks. Foundation

Task Orders submitted to PMU to appoint consultants.

Appointment of contractor to be finalised in Feb 2018. Envisaged site establishment in from March/April.

Task Orders submitted to PMU to appoint consultants.

Behind schedule

Engaged with SCMU to intervene with the appointed consultant for Mamelodi station – required confirmation from the consultant in terms of stages of the project to be completed within the budget allocation of R2,4m.

What is the scope for Mamelodi? What about the Q2 outstanding scope not achieved for Wonderboom kitchen renovation?


9.712948.1.017 Social Development centre in Hammanskraal



n/a Gauteng commitment received for additional grant funding. Deviations for time extension in process. Completion of project by April 2018.


No submission


9.712954.1 017 Social Development centre in Winterveldt





Submitted SAP Report


9.712955.1.017 Social Development centre in Mabopane

Construction: snag list for Administration Building, Early Childhood Development Centre, Adult




Submitted SAP Report

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Community Centre and Guard Hut

Community Safety: Emergency Services

9.711455.1.015 Renovation & Upgrading Of Facilities

Install backup generator at Rosslyn Station and Wonderboom Station Kitchen renovation.

The supply, delivery, installation of the new standby generator (Emergency power supply system) was completed at Rosslyn Emergency Services Station. Medical waste container delivered at Hazelwood Emergency Services Station. 12x Roller- shutter doors installed at Centution Emergency Services Station.

New air-con installations could not be completed as the Corporate tender expired and the Emergency Services had to reprioritise project deliverables which still forms part of the scope of the project. Due to reprioritisation of project deliverables the construction of a new wash bay area could not commence. The construction of a wash bay will not be completed before the end of 30 June 2018 and the department decided to focus on quick project deliverables which also need to be addressed.

Installation of new roller-shutter doors at Mabopane and Central Emergency Services Stations to be completed during January/ February 2018. Payment of appointed principle for work done such as a project inception report, detail design and documentation and procurement.

Behind schedule

Other priorities within the project plan, such as new pumps and motors for the ripening centre and probes for the cold rooms, were accelerated. It was confirmed that the tender for the upgrading of roads will be approved in January 2018. A revised tender report on the appointment of a Consultant was finalised, and the appintment will be effected at the end of January 2018

Tender report will be approved in Jan 2018. Noted


9.712587.1.015 Disaster risk management tools and equipment

Supply and delivery of fire suits, TETRA communication equipment and rescue tools

Completed: 7x carb cutters delivered 7x washing machines delivered, breathing apparatus equipment purchased still to be delivered. 2x radiation meters delivered 2x Skid units delivered

None Breathing apparatus equipment purchased was not delivered during December 2017. Service provider confirmed delivery January/ February 2018.

Achieved

Final quotes for the upgrading of the network infrastructure and hardware were finalised in the week of 4 December 2017 and the market is waiting for purchase orders.

Clarify whether the quotes are for system audit or system implementation?


9.712765.1.007 Capital funded from operating


The following items were purchased and delivered: 1x television, 1x fluke tester, 1x laptop, 5x printers, 1x rectifier cabinet, 2x PC screens, 1x fridge and 1x tone set tester.

None None Achieved

Following the approval of all outstanding documents, the township establishment was approved on 25 October 2017. The SDP was approved on 21 November 2017 and the building plans on 6 December 2017. Discussions with the Council for

Contractors will be back on site at the end of January 2018. Noted

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Scientific and Industrial Research (CSIR) and the Principal Agent regarding their reinstatement, was held on 13 December 2017 and will continue early in January 2018, due to the Builders'/construction break. the contractors will be back on site at the end of January 2018


9.713052.1.001 Construction of Emergency Services Station Mamelodi 2

None Tender RTD04-2014/15 (EMS02) was awarded. Appointment letter of principle agent received 15 August 2017 to the value of R2, 4mil.

None None Achieved

A request to move funds to the BPO Park project, has already been submitted to the Group Financial Services Department for consideration and approval during the 2017/18 adjustments budget process.

Project put on hold. Noted

Community Safety : TMPD

9.712500.1.015 Purchasing of Policing Equipment

Awaiting importation and delivery of 500 x shotguns. Details for procurement to be finalized as part of prioritization

December 2017 • Report procurement of TETRA communication served and approved at BAC 14/12/2017 • PO’s issued: 4501077181 – Kudu Lawnmowers x 4 4501076860 – Bullet Traps x 34 • Invoice submitted : Bullet Traps x 34

Awaiting the issue of Letter of Acceptance to proceed with the procurement of Tetra Communication radios

Once letter of aaceptance is receive the Department will continue immediately with the procurement of the Tetra Radios

Behind schedule

The Department will make use of EPMU to fastrack the implementation of the project

Department has 7 pending procurement requests awaiting specification approval. Indicate the assistance required from EPMU

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9.713025.1.105 Call centre furniture and equipment

Procurement of Centurion chill area tables, chairs & other kitchen supplies

Kitchen supplies (microwaves delivered) Other supplies procured on OPEX

None None On track Proposed that the remainder of the budget be reprioritised for security infrastructure during budget adjustment.

Submit revised procurement plan


9.713026.1.015 Construction Centurion Call Centre Chill Room

2nd & final constructing phase (companion stage

Completed construction of shelter None None On track Status quo still the same

Indicate the outcome of the MAYCO decision


9.713027.1.015 Call Centre - IT Equipment

Procuring Wall mounted projector, BGA & DVI cable & Computers

BGA & DVI not procured; Projectors delivered and installed

BGA & DVI : To be procured on OPEX as being categorised as consumables

None Behind schedule

Follow up made with COO's and CM's offices to finalise appointment of contractor for Hartherly and fastracking the implementation of the project. The funds earmarked for Tshwane North road be redirected to the construction of a fence to extend Klipkruisfontein cemetery.

Indicate the esimated date for receiving the appointment letter from COO/City Manager. Submit procurement plan for fencing of Klipkruisfontein cemetery

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9.713028.1.015 SAP CRM Contact Centre optimization

Completion: Change Management Programme

None Not possible to complete the project due to insufficient funds

Awaiting outcome of Midterm Budget Adjustment.

Behind schedule

Fastracked implementation plan for Bronkhorstspruit project . Funds identified for Hartherly will be redirected to Soshanguve landfill site for fencing.

Submit procurement plan for Soshanguve


9.710276.1.015 Upgrading and Extension of Market Facilities

Appointed contractors, work comence on fencing and rocker bins

The tender for the appointment of a Consultant for the designs of various smaller works within the market took longer than anticipated. The tender for the panel of contractors on the other hand for Roads and Stormwater maintenance expired, and in the process of being finalised.

Other priorities within the project plan, such as new pumps and motors for the ripening centre and probes for the cold rooms, were accelerated. It was confirmed that the tender for the upgrading of roads will be approved in January 2018. A revised tender report on the appointment of a Consultant was finalised, and the appintment will be effected at the end of January 2018

Behind schedule

Planned delivery of buses at end of April 2018. Chassis to be delivered January 2018. Production /building of body during February and March 2018. Busses completed by April 2018.

Status quo remains the same


9.712751.1.007 Capital Funded from Operating


Procurement of assets with lifespan > 1 year. Priority list completed and procurement procedures followed.

Supply Chain Management processes followed, certain items re-advertised, due to quotes received over budget.

On track The new permanent Bid committees will fast track the specifications, evaluation and adjudication processes.


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9.712868.1.015 Upgrading of the market trading system

Completed sales system.

Quotes received for the installation of the phase 2 WiFi system was found to be too high and revised quotes were requested. Changes to the upgrading of the network infrastructure were made, which delayed the final quotes for additional hardware.

Final quotes for the upgrading of the network infrastructure and hardware were finalised in the week of 4 December 2017 and the market is waiting for purchase orders.

Behind schedule

The new permanent Bid committees will fast track the specifications, evaluation and adjudication processes.



9.712977.1015 Business Process Outsourcing (BPO) Park Construction

Building 2: Continued- Building Trades and Finishes, Facades – West, East, North, South, External Works – General Site landscaping, roads, Completion - Commission services, IT installation

The project is still on hold, following the suspension of services by the Principal Agent on 9 May 2017, pending the approval of the township establishment, the site development plan (SDP) and the building plans. The resident Engineer was not available to sign off on the planned pre-concrete and underground services and as a result, the Contractor could not proceed with the mentioned trades and stopped working at the end of June 2017.

Following the approval of all outstanding documents, the township establishment was approved on 25 October 2017. The SDP was approved on 21 November 2017 and the building plans on 6 December 2017. Discussions with the Council for Scientific and Industrial Research (CSIR) and the Principal Agent regarding their reinstatement, was held on 13 December 2017 and will continue early in January 2018, due to the Builders'/construction break. the contractors will be back on site at the end of January 2018

Behind schedule



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9.712988.1015 Informal Trade Market(Inner City)

Construct front food stalls, construct back food stalls

Insufficient funds, funds subsequently transferred to the BPO Park during the 2017/18 adjustments budget process.

The budget for the project is insufficient. It is proposed that the funding for this project be allocated to the BPO Park project.

A request to move funds to the BPO Park project, has already been submitted to the Group Financial Services Department for consideration and approval during the 2017/18 adjustments budget process.

Behind schedule




9.713023.1.005 Rosslyn Urban Realm Upgrade and Multi Modal Interchange

Project Identification

not reported The project is not delayed as the projection for implementation is the third quarter

Transport and Roads is finalising the appointment of a Contractor on the existing panel of Contractors through supply chain process. It is targeted that the conactor will be appinted during the first week of February 2018.

Inconclusive


What is the timelines for GICT for the acquisition of the new SAP Modules required for mSCOA


9.713023.1.021 Inner City Regeneration

Detail project plans available.

not reported The project is not delayed as the projection for implementation is the third quarter.

Transport and Roads is finalising the appointment of a Contractor on the existing panel of Contractors through supply chain process. It is targeted that the conactor will be appinted during the first week of February 2018.

Inconclusive




9.711562.1.015 Atmospheric Pollution Monitoring Network

Installation of the air quality shelter in Rosslyn. Await delivery of 3 meteorological equipment and 2 mobile PM10 active monitors

Took delivery of 3 meteoroligical equipment (windfill sensors for Ekandastria, Mamelodi and Pretoria West) The installation of pressure sensor.

The shelter could not be done because of inadequate budget.

Part purchase of the shelter.

Behind schedule



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with meteorological equipment. Installation of 3


9.713024.1.015 Upgrading of Resorts and reserves of security infrastructure

Contractor on site to erect game proof fence and upgrade entrance gate, Klapperkop Nature Reserve, October 2017* Upgrade security fence and entrance building Kwaggaspruit Resort, November 2017

None Procedures for procurement requisitions to SCM changed. New procedure finalised in Nov 2017 which requires that the COO office has to approve specification before the request can be submitted to SCM. The new process took longer to process.

The Department will make use of EPMU to fastrack the implementation of the project

Behind schedule




9.713040.1.015 Furniture and equipment for overnight accommodation at Resorts

Equip and do repair work at 17 chalets Rietvlei Nature Reserve, complete December 2017

Adjudication completed for 50% of the budget and awaiting SCM report.

Delays in procurement processess and risk of theft an vandalism due to lack of security.

Proposed that the remainder of the budget be reprioritised for security infrastructure during budget adjustment.

Behind schedule

Q3 performance to reach a target of the stated 20%. The SCM processes are at an advanced stage.



9.713043.1.05 Development of waste transfer stations

Continue erection and complete the project November 2017

Alternative sites were identified and a report has been prepared to Mayco to approve implementation at alternative sites.

When the Department was finalizing implementation plans, it learned that the site that was approved for the facility also had a plan for provincial road.

Alternative sites were identified and a report has been prepared to Mayco to approve implementation at an alternative sitea.

Behind schedule


Department changed progress report and changes were not considered

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9.713044.1.015 Provision of burial facilities

Contractor on site to start with construction on access road, Tshwane North Cemetery, finish project. Contractor on site to start with construction of boundary wall, Heatherley Cemetery finish project.

Report for the appointment of the recommended service provider for the fencing of Heartherly Cemetery. (R3 000 000) submitted. Engagement with Group Legal and Secretariat Services Department to finalize the issue of the acquisition of the servitude on private and communal property.

Awaiting approval of the SCM report by the COO for the appointment of the recommended service provider for the fencing of Heartherly Cemetery. (R3 000 000) The Department is awaiting to finalize the issue of the acquisition of the servitude on private and communal property.

Follow up made with COO's and CM's offices to finalise appointment of contractor for Hartherly and fastracking the implementation of the project. The funds earmarked for Tshwane North road be redirected to the construction of a fence to extend Klipkruisfontein cemetery.

Behind schedule


Department changed progress report and changes were not considered

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9.713045.1.015 Provision of waste containers

Procure and distribute 240-liter house hold bins in Regions 1 and 6

Distributed 342 (240l bins) in Region 1, 2,3 , 4 and 6. Procured receptacle bins worth R2,2m

N/A N/A On track Request for approval of BAC to be submitted for OEM. Three year maintenance contracts to be drafted. Required adjustments budget to reduce CAPEX for replacement/modernisation of all the lifts from R5million to R1 million due to inability to appoint service providers and anticipated delay in spending.

Noted


9.713046.1.015 Upgrade of access control at waste disposal sites

Erection of fence, Heatherley landfill site. Installation of access control gates and upgrading of ablution facilities, Bronkhorstspruit landfill site

Procurement for Bronkhorspruit landfill site project finalised. Procurement for ercection of fence in Hartherly landfill site cancelled due to security concerns.

Delay in SCM processeses and the Hartherly project had to be abondoned due to security concerns.

Fastracked implementation plan for Bronkhorstspruit project . Funds identified for Hartherly will be redirected to Soshanguve landfill site for fencing.

Behind schedule

Requisitions to be processed in Quarter. Budget adjustment is required to move this provision from R200 000 to R100 000, due to re-prioritisation of Departmental spending and review of current requirements.

Noted

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9.712449.1.001 Insurance replacements(CTMM Contribution)

Replacement of capital assets for which the claims were settled.

Capital Items replaced. The number and Rand value of WBS numbers allocated per capital asset insurance claims settled is subject to the budget amount of R8-million for the financial year. Reinstatement must be regarded as emergency replacement by Group Financial Services Department and Deviation Reports be approved as the reinstatement of capital assets are also subject to the Supply Chain Management process. Income received from the Insurer be allocated as budget to the CAPEX Project to accelerate the reinstatement of the capital assets per the MFMA to not affect service delivery further. Income is received from the Insurer for the claims settled, but not allocated back to CAPEX Project 9.712449.1 to reinstate the capital asset i.e. Kentron Substation damaged in a fire is not yet repaired as the income received from the Insurer was not allocated back as budget to CAPEX 9.712449.1 in a multi-year budget. Relevant departments/regions proceed with the procurement process and the award of the tender in the financial year in which the claim was settled and budget allocated to ensure that the available budget is spend. Letters are to be circulated by the Acting Chief Risk Officer to the Group Heads on 18 January 2018, who have not procured against the allocated WBS numbers in order to ensure that all reinstatements are finalized against the allocated WBS numbers before the close-off of the 2017/2018 financial year.

Approval letters sent to departments. Capturers and Approvers Role Mapped on E-Procurement as needed. Reinstatement be regarded as emergency replacement. Budget be made available in order for service delivery not to be hampered. Relevant department proceed with the procurement process and the award of the tender in the financial year in which the claim was settled


Submit key milestones for catch up plan

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9.712450.1.001 Insurance replacements

Replacement of Vehicles, for claims approved, by Corporate and Shared Services Department after the Tender has been awarded.

No Procurement done The 2017/2018 budget on CAPEX 9.712450.1 is R5-million. For the 2017/2018 financial year, priority was given to the replacement of x2 buses that burned-out per settled insurance claims, to not further hamper service delivery on bus routes affected by the buses not being available. The Actual figure as at 15 January 2018 on SAP reflects the amount of R544 842.37 for the replacement of the Emergency Management Services Department vehicle. The x2 buses ordered have an allocated Commitment of R4 146 791.08 against the R5-million as reflecting on SAP. A total of 93.83% of the budget against CAPEX Project 9.712450.1 has been allocated. The progress on the delivery of the x2 buses were communicated in the Q2 performance report and status-quo remains. “Planned delivery of buses at end of April 2018. Chassis to be delivered January 2018. Production /building of body during February and March 2018. Busses completed by April 2018.”

The Roads and Transport Department, Tshwane Bus Services and Shared Services Department, Corporate Fleet Management Division finalized the specification of the x2 buses to be procured on the RT57/2016 tender. WBS numbers to the value of R 5 million created during Otober 2017

Behind schedule


Indicate key milestone dates on the recovery plan


9.712444.1.015 Buildings & Equipment (security at the stores)

creation of WBS

None Permanent Bid committees appointed late in the 2nd Quarter. Previously we had adhoc committees which were disbanded.


Behind schedule


Indicate anticipated date for appointment of contractor


9.712989.1.007 Corporate Capital Movables

creation of WBS



Behind schedule

Request the recently established PMU to assist the Department with the implementation of the project.

Indicate the assistance required from PMU as there is an external stakeholder (Province) involved

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9.712997.1.015 Handheld terminals and battery charges

creation of WBS



Behind schedule


Provide date for site handover and establishment


9.713035.1.015 Fuel Assets Underground Tanks

N/A None Permanent Bid committees appointed late in the 2nd Quarter. Previously we had adhoc committees which were disbanded.


not applicable


Indicate the esimated date for receiving the appointment letter from COO/City Manager


9.713036.1.015 MSCOA Automation

training of officials within the city

None Group ICT is in the process of conducting an ICT due diligence for the acquisition of the new SAP Modules required for mSCOA


Behind schedule


noted


9.713059.1.015 Renovation of Record Management

creation of WBS



behind schedule


noted


9.713060.1.015 Renovation of Tender Advice Center Office

creation of WBS



behind schedule


Provide date for site handover and establishment


9.713061.1.015 Record Management

Projected duplicated and budget will be reallocated during adjustment



behind schedule


Indicate the esimated date for receiving the appointment letter from COO/City Manager

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9.713063.1.015 Turnaround of Municipal Water Service - Reduction of Water losses

pilot project implementation

None The completion of specifications of this project took more time than had been planned for, due to having to consult extensively with the DONOR (IIPSA/DBSA)

Q3 performance to reach a target of the stated 20%. The SCM processes are at an advanced stage.

Behind schedule


Indicate the esimated date for receiving the appointment letter from COO/City Manager (looks like duplicate)

Group Human Capital

9.712953.1.020 Tshwane Leadership and Management Academy (City Wide)

Procurement of Furniture and equipment

Draft Plans has been completed and reviewed by TLMA. Currently in the process doing the final plans. Purchasing of machinery, the department is still awaiting finalisation of SCM processes

SCM tender process not yet finalised



Indicate anticipated date to finalise MOU with Province

Group Human Capital

9.713064.1.007 Capital Movables

Procurement of required assets

New wbs were created in order to enable finalisation procurement

None None on track Status quo still the same

Revise project plan

Group property

9.712743.1.015 Replacement/Modernization of all the Lifts within various Council Buildings (City Wide)

Ordering and shipping of materials.

None Inability to appoint service providers to implement CAPEX targets.

Request for approval of BAC to be submitted for OEM. Three year maintenance contracts to be drafted. Required adjustments budget to reduce CAPEX for replacement/modernisation of all the lifts from R5million to R1 million due to inability to appoint service providers

Behind schedule



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and anticipated delay in spending.

Group property

9.713065.1.007 Capital Movables


Send request for quotes Requisitions not processed by department

Requisitions to be processed in Quarter. Budget adjustment is required to move this provision from R200 000 to R100 000, due to re-prioritisation of Departmental spending and review of current requirements.

Behind schedule


Indicate recovery plan and key milestone dates


9.710865.2.005 Timberlands Project - installation of bulk upgrade (road and storm water)

Design Development

not reported


Provide accelerated construction programme to catch up on lost time

Housing Company TShwane

Project - Marabastad construction of 1,200 social housing units

Construction

not reported



Health 9.712278.1.015 Upgrading Of Clinic Dispensaries

Continue with earth works.

• Superstructure Brick work – 100% • Electrical 35%. • External works 65% • Overall progress – 78.9%

Target achieved None On track Status quo still the same

What is the expected date for receiving report from SCM. Indicate the esimated date for receiving the appointment letter from COO/City Manager

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Health 9.712684.1.015 Refurbishment of Rayton Clinic

Site establishment and busy with Earthworks.

• Earthworks: Construction of piles completed. • Concrete, Formwork foundations complete. • Overall progress – 21%

• Available budget insufficient to sustain milestones for the financial year. • Physical progress behind schedule: Brickwork

• Additional budget required during budget adjustment. • Met the contractor and agreed on catch-up by January 2018

Behind schedule



Health 9.712756.1.007 Capital Funded from Operating


• Purchase requisitions were completed. • 75% purchase orders were issued but awaiting delivery.

Lack of targeted selection of specialized service providers through E-Procurement

Advised SCM to target specialized entities.



Health 9.713048.1.015 Extension of Rosslyn Clinic


• Architectural drawings in progress. Target achieved None On track Status quo still the same


Health 9.713049.1.015 New Clinic Lusaka


• Architectural drawings in progress. Target achieved None On track Status quo still the same



9.710863.2.005 Booysens ext. Bulk water

Supply Chain processes

Detailed designs for the reservoir submitted to Utility Services on 11 December 2017 for approval.

None None On track Status quo still the same

Will the construction be done without the design, when do you expect the results of socio-economic survey?

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9.710863.2.005 C Water - Mabopane Ext 1

Pipe laying & blanket

Backfilling and compacting existing trenches.

Letter of appointment issued to contractor on 29 November 2017.

Contractor will work until 22 December 2017 and will be back on site on 1st week of January 2018 to fast track progress on site.

Behind schedule


Will the construction be done without the design, when do you expect the results of socio-economic survey?


9.710863.2.005 Temba View X1 - Bulk line connection


Request to appoint consulting engineers from Roads & Transport approved As-And- When–Required panel RTD04-2014/15 for providing construction monitoring/supervision at Temba View X1.

Bidders did not comply with SCM requirements.

Tender re-advertised on 05/12/2017, tender closed on 11/12/17 and evaluation took place and finalised on 14/12/2017.

Behind schedule

This will be executed simultaneously with the work in Mamelodi West.

Project not on hold anymore as the scope will be covered under the extended scope of Mamelodi West


9.710863.2.005 Water - Rama City


Excavation and bedding. None None On track Work to commence on Friday 26 January 2018 and expected completion date 30 June 2018.

The scope is extended from 16.6 to 25km to cover both East and West at the reduced cost of R25m


9.710863.2.005 Water provision - Hammanskraal ext. 10


Bulk design approved by Utility Services and submitted to the department 07 December 2017.

The MOU and funding arrangements between the City and Province for the implementation of the project are still being finalised.

Request the recently established PMU to assist the Department with the implementation of the project.

Behind schedule

No submission

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9.710863.2.005 Water provision - Zithobeni Heights Phase 1

Steel fixing & concrete works

Installation of valve chamber and replacing stolen valves.


Reasons for non-performance and mitigation plan columns still empy


9.710863.2.005. Water - Chantel X39

Excavation, bedding, pipe laying & testing

Appointment of the professional team and the main contractor has been concluded.

There was a delay in the procurement of the service providers.

HCT obtained permission to utilize the department of Human Settlements panel of contractors for its construction projects. The appointment of the contractor was made through the panel which reduced the tender period significantly.

Behind schedule



9.710863.2.005.L Refilwe Manor - 10 ML Reservoir

Casting of concrete

Structural work: continue with reservoir formwork, reinforcing, concrete & post-tensioning. Continue with construction of control room formwork, reinforcing & concrete. Construction of feeder & delivery pipes between 2 reservoirs plus overflow pipe.



9.710863.2.005.L Water - Winterveldt


SCM to submit adjudication report to the department for signature. Once the report has been signed it will be sent to the office of COO/ City Manager for approval.


Follow up with SCM and fast track the approval of the SCM report and appointment of the service provider.

Behind schedule


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9.710863.2.005.L Water Zithobeni 8 & 9 - Bulk water main line





Behind schedule



9.710863.2.005.M Water - Zithobeni 8&9





Behind schedule



9.710864.2.005 Booysens ext. Bulk Sewer

Supply Chain processes

Detailed designs for the reservoir submitted to Utility Services on 11 December 2017 for approval.

None - letter of appointment issued to contractor on 29 November 2017.

None - appointment of the contractor to commence based on the approved detailed designs.



9.710864.2.005 Bulk Sewer Chantel X39

Excavation, pipe laying & bedding




Behind schedule



9.710864.2.005 Bulk Sewer Winterveld


Procurement of the service provider is at final stages.

Follow up with SCM – and fast track the approval of the SCM report and appointment of the service provider.


Behind schedule


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9.710864.2.005 Refilwe Manor Pump stations

Mechanical works

Structural works: continue with the construction of wet well, dry well, emergency storage, sand trap, manholes, top structures.



9.710864.2.005 Sewer - Rama City


Excavation and bedding. None None On track Status quo still the same


9.710864.2.005 Sewer - Winterveldt



Follow up with SCM – and fast track the approval of the SCM report and appointment of the service provider.


Behind schedule



9.710864.2.005 Sewer provision - Hammanskraal ext. 10


Bulk design approved by Utility Services and submitted to the department 07 December 2017.

The MOU and funding arrangements between the City and Province for the implementation of the project are still being finalised.

Upon conclusion of the MOU, the project will be handed over to the ePMU for fast-tracking of implementation.

Behind schedule



9.710864.2.005 Sewer provision - Kudube 9 Bulk sewer line


Pipe laying and backfilling. None None On track Status quo still the same

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9.710864.2.005.C Sewer - Mabopane Ext1


Backfilling and compacting existing trenches.



Behind schedule



9.710864.2.005.M Sewer - Zithobeni 8&9

Excavation, bedding, pipe laying & blanket

The CM has approved the re appointment of the contractor on deviation. A letter of appointment has been issued to contractor 29 November 2017.

Delays as a result of approval of the appointment on deviation.

Meeting will be held with a contractor to agree on a recovery plan.

Behind schedule



9.710865.2.005 Construction of roads & Storm water - Chantelle ext. 39

Construction of Storm water & selected layer




Behind schedule



9.710865.2.005 Construction of roads & Storm water - Fort west 4&5

Constructed Storm water & selected layer

Clearing, grubbing and excavation. Letter of appointment issued to contractor on 29 November 2017.


Behind schedule


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9.710865.2.005 Construction of roads & Storm water - Olievenhoutbosch x60

Construction of base layer & sub-base

Site handover held on 06 December 2017.

None None Behind schedule



9.710865.2.005 Contsruction of Roads & Storm water - Winterveldt




Follow up with SCM.

Behind schedule



9.710865.2.005.B Construction of Roads & Storm water - Thorntreeview


Clearing, grubbing and excavation.

None None

Behind schedule



9.710865.2.005.I Construction of Roads & Storm water - Soshanguve X5


Excavation and laying of stormwater drainage pipes.




9.710865.2.005.J Construction of Roads & Storm water - Soshanguve X12


Excavation and laying of stormwater drainage pipes.




9.710865.2.005.K Construction of Roads & Storm water - Soshanguve X13


Box cutting and road preparation. None None Behind schedule


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9.711712.2.005 Development of Saulsville hostels

Approved designs

Socio- economic survey in progress. Expected completion date for Socio-economic study: 31 January 2018. Construction work on the units will commence in February 2018.




9.711713.2.005 Development of Mamelodi hostels

Approved designs

Socio- economic survey in progress. Expected completion date 31 January 2018. Construction work will resume 01 February 2018.




9.712533.1.001 Mamelodi East Walkways

100% excavation, 100% subgrade compaction, 80% Subbase preparation, 70% concrete works

Originally the cost estimates submitted amounted to R30 million to construct 16.6 km. This was rejected as external consultants and contractors were mooted to be apppointed. The City has already approved designs for walkways/pavements and the internal construction teams are able to executed this task. Hence, no expenditure occurred during Q1 and Q2. with the revised plan by the OCM, we are now able to construct 25 km of walkways/pavements for R20 million.

This will be executed simultaneously with the work in Mamelodi West. The target will now be 10,5 km for the financial year

Behind schedule


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9.712533.1.003 Mamelodi West Walkways

100% excavation, 100% subgrade compaction, 80% Subbase preparation, 70% concrete works

SCM approval obtained: Sourcing from panel on 28 November 2017

Notwithstanding the above, the R10 million rand Council funding was to build walkways in mamelodi East as part of the VPUU programme done in partnership with German Development Bank. This project could not proceed as the master Plan for the security measures through Urban Design was not approved. Hence, the proposal to move this funding (R10m) to the inner city for the Inner City Precinct development. In view of the above, we are now constructing 25 km of walkways/pavements in Mamelodi West which is over the target origanlly set.

Behind schedule



9.713047.1.001 Revitalisation of City’s industrial and economic nodes (Rosslyn, Babelegi, Enkandustria, Garankuwa)

TBD Project packaging has been finalised and submitted to SCOP & Finance department to be included in the Adjustment Budget Process & SDBIP for 2017/18 fy SCM

not applicable



9.712926.1.007 Capital Moveable's


Procurement of assets is ongoing and is done on a continuous basis.

Inconclusive


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9.713021.1 Jojo Tanks

5 % of pipe laying

Designs are completed and finalized. Process of appointing the service provider has started and 2 appointments will be made in January 2018 then construction commence

Behind schedule


Roads and Transport

9.710115.1.016 Contributions: Services For Township Development

No work Planned

not applicable


Roads and Transport

9.710128.1.015 Concrete Canal: Sam Malema Road, Winterveld Review

detail design

Tender documentation for appointment of consultant

Engage procurement Behind schedule

Tender specification will be submited in jan once the SCM commettees convene

Submit adjusted procurement plan

Roads and Transport

9.710143.1.005 Major Storm water Systems: Klip/Kruisfontein

Obtain approval of tender and advertise tender.

Awaiting for appointment letter

On track Community disruptions have been resolved. The contractor came up with sub-contract package which is being communicated and agreed between the contractor and community. Extension of time adjudication finalized. Revised completion date is end of August 2018.

Noted

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Roads and Transport

9.710229.2.015 Traffic Calming And Pedestrian Safety For Tshwane

Tender process

Compilation of tender document

On track Negotiation with the Denneboom Concessionaire on-going. Matter escalated.

Noted

Roads and Transport

9.710395.1.015 Traffic Lights/Traffic Signal System

Appointment of design consultant.

Planning and procurement stage are in progress, for new and upgrades of signal systems. none

Behind schedule

Contractor to produce a catch-up program.


Roads and Transport

9.710609.1.015 Shova Kalula Bicycle Project Appointmen

t of design consultant.

Tender process & appointment of service provider in progress none

Behind schedule

Negotiations have been finalised.

Submit adjusted monthly milestones for Q3 and Q4

Roads and Transport

9.710657.2.015 Mabopane Station Modal Interchange

Construction of 44 stalls, 1 Administration Building, demolition of existing concrete columns, construction of gabions in pond 2 and construction of Paving

Construction of 44 stalls completed, Ground floor of Administration Building constructed, demolition of existing concrete columns completed, construction of Paving – Bus & taxi rank is 35% complete

None On track Re-advertisement of the tender. Appointment of the successful bidder by end of March 2018

Noted

Roads and Transport

9.711213.2.005 Storm water Drainage Mahube Valley

Appoint consultants, Review of Detail Designs and Application of EIA and Wula

Behind schedule

Fare rationalisation for Line 2A to be elivated to Group Head.

Noted

Roads and Transport

9.711265.1.015 Hartebeest Spruit: Canal Upgrading

Tender advertise and tender process for contractor

Tender Process

On track

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Roads and Transport

9.711268.1.015 Montana Spruit: Channel Improvements

Procure of Contractor

Awaiting appointment of Consultant Engage Procurement and MMC Office

Behind schedule

Evaluation process to be concluded by end of January 2018

Noted

Roads and Transport

9.711273.2.005 Major Storm water Drainage System: Majaneng

Review of Detail Designs

Appointed Consultant busy reviewing designs

On track Procurement to commence by end Jan 2018


Roads and Transport

9.711863.2.005 Internal Roads: Northern Areas 2.5km of

Storm water

0.432 closed Stormwater None

Behind schedule

Awaits infrastruture to finalised SCM process


Roads and Transport

9.712220.1.005 Soshanguve Block L



None On track Requisitions were created to the value of R11m, awaiting delivery from suppliers.

Noted

Roads and Transport

9.712220.1.005 Soshanguve Block FF East Area 1

Tender documentation, approval and advertising. Tender briefing session took place on

04 November 2017 SCM to speedup appointment of consultant

SCM to speedup appointment of consultant

Behind schedule

The issue of deliverables has since been resolved and WBSes will be created for items to be procured.

Noted

Roads and Transport

9.712220.1.005.O Soshanguve Block LL South

Construction of 0,75 KM of side - walks.

0

On track Requisitions were created to the value of R14m, awaiting delivery from suppliers.

Noted

Roads and Transport

9.712220.1.005.R Soshanguve Blocks GG Central Constructio

n of 0.55km roads

0.65 km of sidewalks complete none

Behind schedule

Outstanding payment to be processed after creation of WBSes.

Noted

Roads and Transport

9.712221.1.015 Flooding backlog: Mabopane Area WULA

Application Submitted

Awaiting the Appointment of the Contractor

Engage Procurement to fast track the Appointment of the Contractor

Behind schedule

Requisitions were created to the value of R14m, awaiting delivery from suppliers.

Noted

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Roads and Transport

9.712223.1.005 Flooding backlog: Mamelodi, Eersterust and Pta Eastern Area, Mamelodi Ext 5


The Department will not proceed with appointment of consultant due to lack of budget in the 2018/19 financial year



Behind schedule

The specifications of the demo devices were approved and requisitions were created to the value of R1.4M, awaiting delivery from suppliers.

Noted

Roads and Transport

9.712223.1.005 Flooding Backlogs: Mamelodi, Eersterust & Pta Eastern Area: Mamelodi Extension 2


Tender briefing session took place on 04 November 2017 None


Roads and Transport

9.712223.1.005 Flooding Backlogs: Mamelodi, Eersterust & Pta Eastern Area: Mamelodi Extension 4

Tender evaluation and appoint consultant. The Department will not proceed with

appointment of consultant due to lack of budget in the 2018/19 financial year



Behind schedule

The appointed contractors have been instructed to put additional teams to expedite performance.

Department to indicate how they manage the process of expediting performance.

Roads and Transport

9.712502.1.015 Traffic Flow Improvement at Intersections

Appointment of Service Provider and design reviews

site establishment and preparations for commencement of works

On track Expedite the appointment of the contractor and the construction phase for stage one.

Department to indicate how they are expediting the appointment of a contractor.

Roads and Transport

9.712503.1.005 Flooding backlog: Network 3, Kudube Unit 11


Awaiting appointment of Consultant Engage Procurement and MMC Office

Behind schedule


The department needs to indicate the stage where the SCM process is and what measures they have put in place to ensure the tender gets awarded.

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Roads and Transport

9.712504.1.015 Flooding backlog: Network 2F, Kudube Unit 6


Consultant busy reviewing designs Engage Consultant to fast track review of designs

Behind schedule


Department to indicate what they have done to fastrack the procurement process with commitment date of delivery.

Roads and Transport

9.712506.1.015 Flooding backlog: Network 5A, Matanteng Tender

Process and Appointment of a Contractor.

Awaiting the Appointment of the Consultant


Behind schedule

status quo still the same

The department to agree with Human Setlement Department on the date for the appointment of the township Planners.

Roads and Transport

9.712507.1.005 Flooding backlog: Network 2H, Kudube Unit 7 Procure of

Contractor

Consultants busy preparing document for appointment of Contractor

Engage consultant to fast track preparing document for appointment of Contractor

Behind schedule


A catch-up plan to be submitted with revised project plan to fast track the progress

Roads and Transport

9.712511.1.005 Flooding backlog: Network C5, C6, C11 & C13, Atteridgeville

Tender Advertisement, Tender Adjudication

No work done None



Department to indicated if they have started the process of funds transfer. Also provide details on the agreement with Rand water particularly on the implementation date.

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Roads and Transport

9.712513.1.015 Flooding Backlogs: Soshanguve South (& Akasia Area): Soshanguve Block TT


Tender briefing session took place on 04 November 2017 None



It is noted that the project is going to be implemented through Township Development Programme, .

Roads and Transport

9.712513.1.015 Flooding Backlogs: Soshanguve South (& Akasia Area): Soshanguve Block WW

Tender evaluation and appoint consultant


None On track Status quo still the same

Department to indicate the catchup plan and the status of the appointment of new consultant.

Roads and Transport

9.712513.1.015 Flooding Backlogs: Soshanguve South (& Akasia Area): Soshanguve South Extension 1




Department to indicate steps taken to fastrack the appoinments that are outstanding and possible escalation to COO/Accounting Officer.

Roads and Transport

9.712516.1.005 Flooding backlog: Network 2D, New Eersterust x 2 Tender

Process and Appointment of a Contractor.

Behind schedule


Noted that the project to be handed over to Glad Africa for intervention. Indicate the intervention required from EPMU

Roads and Transport

9.712518.1.015 Flooding backlog: Drainage canals along Hans Strydom Dr, Mamelodi x 4 and 5

Tender documentation, obtain approval and advertise.



Catchup plan required and to be implemented once the

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service provider is in place.

Roads and Transport

9.712521.1.015 Collector Road Backlogs: Mamelodi

Procurement

Awaiting of EIA consultant

Engage procurement to fast track the appoiment of consultant


Behind schedule


It is noted that the project is proposed to be handed over to ePMU for intervention

Roads and Transport

9.712522.1.015 Collector Road Backlogs: Atteridgeville

Procurement

Awaiting of EIA consultant



Behind schedule


SCM delays to be resolved. Catchup plan required and to be implemented once the service provider is in place.

Roads and Transport

9.712523.1.015 Flooding backlog: Network 3A, Kudube Unit 9 Procure of

Contractor

Awaiting for the appointment of design review

Engage Procurement and MMC Office

Behind schedule


Department should have escalated the delay to COO/Accounting Officer

Roads and Transport

9.712545.1.015 Giant Stadium: Buitekant Street

Review of Detail Designs

Awaiting appoinment of consultant engage procurement to expedite the process

Behind schedule


It is noted that the project is proposed to be handed over to ePMU for intervention

Roads and Transport

9.712605.2.005 Upgrading of roads and appurtenant Storm water systems in Soshanguve

Tender evaluation and appoint consultant. Tender briefing session took place on

04 November 2017 None



Department to follow up on the appointment letter of contractor.

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Roads and Transport

9.712611.1.005 Upgrading of Mabopane Roads (red soils) Wula

Application Submitted

Awaiting the Appointment of the Consultant


Behind schedule


Department to follow up on the appointment letter of contractor.

Roads and Transport

9.712612.1.015 Upgrading of Sibande Street, Mamelodi

Procurement

Awaiting appointment of consultant SCM to speedup appointment of consultant


Behind schedule


Department to indicate if the alterations were finalised and plans to fastrack the appointment of a contractor.

Roads and Transport



not reported


Fast track appointment of contractor

Roads and Transport

9.712893.1.005 Upgrading of Road from gravel to tar in Zithobeni Ward 102

Procurement

Busy with proceurement of consultant




Roads and Transport

9.712894.1.005 Upgrading of Road from gravel to tar in Ekangala (previously Ward 11 & 12) - Ward 103 & 104

Procurement

Busy with procurement of consultant



Behind schedule



Roads and Transport

9.712895.1.005 Upgrading of Road from gravel to tar in Ekangala Ward 105 (prev 11&12)

Procurement

Busy with procurement of consultant

Behind schedule


Department to indicate how they will manage the anticipated challenges.

Roads and Transport

9.712944.1.015 Upgrading of roads from gravel to tar in Refilwe

appointment of service providers

Procument process still in progress none

Behind schedule


The current status of the report to be prepared is not known and when it will be approved.

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Roads and Transport

9.712945.1.015 Upgrading of roads from gravel to tar in Rayton


Procurement process still on progress none

Behind schedule


Department to indicate how they are managing the delay due to the outstanding approval for township layout.

Roads and Transport

9.712946.1.015 Upgrading of roads from gravel to tar in Cullinan


Procurement process of Appointments still on progress none

Behind schedule


Roads and Transport - TRT

9.712591.002.Q Design supply and install of APTMS system

1. Approved designs (100%) for the Denneboom Intermodal Facility. 2. Advertisement and adjudication of APTMS tender.

1.Infrastructure to provide the Denneboom intermodal facility consolidated designs for review 2. Tender specification circulated for internal comments. Advertisement has be delayed only one of two tenders (Maintenance) is 95% complete. It was agreed that the tender be split into two - maintenance tender and design, supply and install tender.

Request for extension of time has been been granted

Tender specification will be submited in jan once the SCM commettees convene

Behind schedule



9.712591.1.002 BRT Line 2C - Watloo Rd (btw Simon Vermooten & Denneboom Station)

55% Completion of the BRT Line 2C - Watloo Rd (Denneboom Link)

55% Completion of the BRT Line 2C - Watloo Rd (Denneboom Link)

33% completion of works. First Half of Underpass Bridge abutments and the deck done. Stormwater and surfacings on deviation routes (Love Street & Petroleum in progress).

Construction significantly behind due to delayed way-leave approval. The project also experienced substantial community disruptions.

Behind schedule


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9.712591.1.002 Denneboom Intermodal facility

30% Completion of Denneboom Intermodal facility

Detailed design completed. Delays due to the negotiations agreement with the private developers for implementation of the project.

Negotiation with the Denneboom Concessionaire on-going. Matter escalated.

Behind schedule



9.712591.1.002 Line 2B: Atterbury Rd (btw Lois Avenue Rd to January Masilela Rd)

87% Completion of Line 2B - WP3

79% completion of construction of structural Works. .

Slow progress shown by the contractor's performance

Contractor to produce a catch-up program.

Behind schedule



9.712591.1.002 Planning and Design of BRT Projects

Payment of the Professional Services for the Design and Implementation of the BRT system

SLA's being finalised. Delays experienced to finalise SLA's due to negotiations with Design Engineers.

Negotiations have been finalised.

Behind schedule



9.712591.1.002 Railway Bridges (WP6)

8% Completion of Railway Bridges (WP6)

Tender has been cancelled, re advertisement to take place.

Delays in procurement processes. Supply Chain advised for a different panel of contractors to be used which will result in the re-advertisement of the tender. Awaiting a new panel of contractors to be finalised.

Re-advertisement of the tender. Appointment of the successful bidder by end of March 2018

Behind schedule

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9.712591.1.002 Taxi Industry Compensation

None The agreement reached with the Taxi ndustry was that drop-off will commence when all operators are compensated as per the buy-out agreement. Issues were had with a few operators which was solved buy 24 November 2017. Agreed that the agreed operational reality, wherby the taxis charge less on the feeder trip from Hammanskraal to Rainbow Junction and the A Re Yeng approved fare structure starts, will commence as of 4 December 2017. The 376 vehicles will be branded and they will not be allowed to pass south through Rainbow Junction. TMPD and the Taxi Industry will be on site and assit with any law enforcemnet issues. The delay in the promulgation of the by-laws is problematic. The agreement on the fare rationalisation on Line 2A is a hurdle that is delaying the progress. Scientific method to test the impact of any change in fares lacking. Any change in A Re Yeng Fares also impact on TBS.

The agreement on the fare rationalisation on Line 2A is a hurdle that is delaying the progress.

FAre rationalisation for Line 2A to be elivated to Group Head.

Behind schedule



9.712591.1.002 Urban traffic control (UTC) system - A Re Yeng communication backbone and traffic signals

10 intersections’ Electrical and Communications Designs complete

Signal designs submited to extenal consultant for amendments.

ER assisting to fast track progress

ER assisting to fast track progress

Behind schedule


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9.712591.1.002 Wonderboom Intermodal Facility

10% Completion of Wonderboom Intermodal Facility

Project re-advertised. Evaluation process to be concluded by end of January 2018.

Tender cancelled and re-advertised.

Evaluation process to be concluded by end of January 2018

Behind schedule



9.712591.1.002 Design of Line 3-CBD to Attredgeville

100% Complimentary Preliminary Designs

Terms of reference to appoint the consultant are being finalised. Procurement to commence by end Jan 2018

Delays due to the expiry of the contract for the consultant that has started with design works

Procurement to commence by end Jan 2018

Behind schedule


9.712591.1.002.P The Design, Supply, Installation, Operation and Maintenance of an automated fare Collection (AFC) System

1. Approved designs (100%) for the Denneboom Intermodal Facility. 2. Commence the implementation of KPI’s for the Contract

1. Infrastructure to provide the Denneboom intermodal facility consolidated designs for review 2. KPI evaluation meetings to convene in the next January .

Appointment of the Contractor including the designs is delayed.

Awaits infrastruture to finalised SCM process

Behind schedule

Instruct the service provider to increase capacity and expedite the implementation of projects.


Roads and Transport - Wonderboom Airport

9.711953.2.001 Separation: Airside/Landside: Required legislative compliance with Civil Aviation Regulations, and the National Aviation Security Program (NASP)

Construction of Air-site

Inconclusive

The project has been handed-over to ePMU for intervention

Indicate estimated date for BEC


9.712891.1.015 Main terminal Building, carousel and other mechanical baggage handling equipment upgrade to meet legislative compliance requirements

No activity

not applicable

The project has been handed-over to ePMU for intervention


Roads and Transport - Wonderb

9.712998.1.015 Construct improved security accesses to restricted maintenance areas

Construction and installation of security access

Inconclusive



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oom Airport

with CCTV system and upgraded control room to meet CAA compliance requirements


9.713000.1.015 Elevator/escalator for main terminal building

Construction and installation of elevator.

Inconclusive


9.713002.1.015 Fire sprinklers and smoke detectors in the main terminal building

No activity

not applicable


9.713029.1.015 Additional carports and electronic parking payment equipment

Construction and installation of carports and installation of parking payment equipment

Inconclusive


9.713030.1.015 Arch metal detector and scanners to scan passenger, luggage and baggage

Construction and installation of arch metal detector and scanners

Inconclusive


9.713031.1.015 Firearm safe for airport Visitors

No activity

not applicable


9.713032.1.015 Installation of biometric security system

No activity

not applicable

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9.713033.1.015 Installation of temporary office structures (SARS, Immigration, Metro police, SAPS, Security Service Provider)

Construction and installation of temporary office structure

Inconclusive


9.713034.1.015 Upgrade of Rescue and Firefighting centre with additional office space

Construction and installation of rescue and firefighting center office space

Inconclusive


9.713054.1.015 Construction of a separate entrance for General Aviation passengers

Construction of separate entrance of general aviation passengers

Inconclusive


9.713055.015 Construction of new water and sewage system

Construction of water, sewage and Storm water

Inconclusive


9.713056.015 Public Parking paved with CCTV coverage, carports and access control

Construction of paving and carports for public parking

Inconclusive


9.713057.015 Replacement and upgrade of fire hydrants and equipment

Construction and installation of fire hydrants and equipment

Inconclusive

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9.713058.1.015 Storage facility for rescue and firefighting foam and related equipment

Construction of storage facility and installation of related equipment

Inconclusive

Shared Services

9.710200.1.015 Upgrade of IT Networks

5 network sites upgraded

Requisitions created to the value of R11 million - awaiting issuance of orders then delivery from suppliers

The upgrade of network infrastructure was delayed due to the relocation to Tshwane house and decommissioning of ICT infrastructure at other buildings.


Behind schedule

Shared Services

9.710213.1.015 One Integrated Transaction Proc System

Optimisation of GRC module,

Still busy with tender The deliverables presented by service provider could not be agreed to because they could not satisfy agreed business requirements.

The issue of deliverables has since been resolved and WBSes will be created for items to be procured.

Behind schedule

Shared Services

9.710268.1.015 Computer Equipment Deployment - End user computer hardware equipment

Deployment of computer Equipment

Deployed laptops, Desktops and printers.

Achieved Not Applicable Behind schedule

Shared Services

9.710344.1.015 Implementation of storage Area Network

Procurement of storage equipment,

Requisitions created to the value of R14 million - awaiting issuance of orders then delivery from suppliers

The analysis of requirements was delayed pending the finalization of the appointment of the service provider.


Behind schedule

Shared Services

9.712554.1.015 E-Initiative Supporting the Smart City

System analysis conducted ,,

Completion of blueprint and plan being fast tracked

User acceptance testing was delayed and only completed in Dec 2017. Invoices have since been received for processing.

Outstanding payment to be processed after creation of WBSes.

Behind schedule

Shared Services


Procurement of furniture and office machines as requested not reported

not reported not reported Not reported

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Shared Services

9.712950.1.015 Disaster Recovery System Storage

Procurement of storage equipment,

Requisitions created to the value of R9,3 million - awaiting issuance of orders then delivery from suppliers

The analysis of requirements was delayed pending the finalization of the appointment of the service provider.


Behind schedule

Shared Services

9.712969.1.015 Credit Control Solution

Integrating Credit Control Solution to GIS,

Requisitions created to the value of R1,4 million - awaiting issuance of orders then delivery from suppliers

The testing of demo devices took longer than anticipated.

The specifications of the demo devices were approved and requisitions were created to the value of R1.4M, awaiting delivery from suppliers.

Behind schedule

Tshwane Economic Development Agency

9.713064.1.007 Furniture and Office Equipment


None There were no new appointments nor loss

Procurement of replacement of computers will be done in both quarter 3 and 4

Behind schedule


9.710022.1.001.T Township water services developers: Tshwane contributions

None None : No projected milestones for the month of December 2017

Not applicable None required at this stage

not applicable


9.710023.1.016.W Lengthening of network and supply pipelines

No Activity None : No projected milestones for the month of December 2017

Not applicable, it is application driven

None : No projected milestones for the month of December 2017. Therefore, no mitigation measures are required at this stage.

not applicable

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9.710026.1.015.S Replacement of worn out network pipes City wide

4000m of water pipe installation (upgrade)

The appointments for Babelegi, Moreleta Park and Eersterust have been received. Currently in the process of obtaining all contractual documentation. The contractors are currently in process with site establishment on these projects. The quotations for Garsfontein and Ashlea Gardens were submitted and evaluated on 15 November 2017. The SCM report for appointment of a contractor for Garsfontein has been submitted to the Office of the COO for approval on 11 November 2017, currently awaiting the Ashlea Gardens/Alphenpark appointment report from SCM. The briefing session for Ga-Rankuwa Industrial Phase 2 and Clubview Phase 2 were done and evaluations were completed on 8 December 2017. Due to no responsive quotations submitted for Clubview Phase 2 it will need to be re-invited. There is currently a 6 month delay on this program due to the delay in appointing contractors.

The appointment for Babelegi, Eesterust and Moreleta have only been done in November 2017. All contractual documentation should have been submitted, an official notice letter will be issued to all three contractors for not complying to the date set for handing in documents. The appointments of contractor for water network replacements in Clubview Phase 2, Ga-Rankuwa Industrial Phase 2, Ashlea Gardens, Garsfontein are still outstanding.

Daily follow up is made by the project manager and issues raised are attended to urgently.

Behind schedule

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9.710411.1.015 Baviaanspoort Waste Water Treatment Works

EIA Issued and Commencement of Structural Designs

The Stage 1: Tender was advertised on 17 November 2017 and will close on 30 January 2018.

Budget constraints which caused the project plan to be revised.

Sufficient provision of budget to enable Stage 2 of the project which is for the extension of the plant, to proceed. The project has also been included on the project list for the intervention by Glad Africa.

Behind schedule


9.710411.1.015 Replacement, upgrading and construction of Waste Water Treatment Works (Tshwane Wide)

Design for Baviaanspoort

Behind schedule

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9.710411.1.015 Waste Water Treatment facilities upgrades Minor Capital Projects (City wide)

Appointment of Contractors

The BSC approved the specification on the 12 December 2017.

Delays in finalisation of the specification.

4 xTractor loader backhoes (TLBs) are in process of been procured under government tender RT57. Parallel tender is in process for 2 x Wheel loaders. Specification was completed by Corporate Fleet and is currently been finalised with COOs office. The delivery of these items have shorter lead times as opposed to the submersible mixers.

Behind schedule


9.710878.005 Ramotse - Marokolong Waterborne Sanitation

General Layout Approval Process by Housing

The projected milestone for the month has not been achieved however the Inception Report for Basin 2 &3 has been approved on 07 December 2017.

The Human Settlement Department has not yet appointed Township Planners to develop Lay-out plans.

The Utility Services and the Human Settlement Political Heads and officials had a meeting on 06 November 2017 to discuss a revised action plan towards resolving the challenge. The meeting resolved that the Human Settlement Department appoints Township Planners (no time frame was stated).

Behind schedule

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9.710878.1.005.T Temba Water Purification Plant Extension

Project Hand over and Capitalisation of assets

Installation of the outstanding actuators and instruments at the GAC, the foundation footing was casted at the GAC Handling. The dry test mechanical and electrical was carried out at the Flocculators. The cable and cable racking was installed to the MCC at the OCT. At the raw water pipeline station the re-installation of painted pipework was completed and motors to pumps were installed. Dry test for mechanical and electrical at the process pump station was completed.

The project has had experienced delays that have been reported previously namely; delays in delivery of mechanical equipment, water tight tests and delivery of concrete by the supplier. These are the reasons why the project has not been handed over in accordance with the planned milestone in the current financial year.

The revised program has been submitted. The project manager has to ensure that the contractor recovers the time lost as per the program submitted.

Behind schedule


9.711335.1.015 Bronkhorstspruit bulk pipeline

Contractor Appointment and Preliminary Design

The milestone was not achieved. No deviation, the project will be implemented and financed by Rand Water.

No mitigation measure required at this stage.

Behind schedule

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9.711335.1.015 Bronkhorstspruit Reservoir zone eastern pipe reinforcement and PRV

Technical Evaluation and Appointment of consulting engineer

The project will be implemented through the Township Development Programme as there was a commitment made with the agent for the Park City Development which is one of the MEGA projects done for Gauteng Human Settlement Department. The allocated budget for this project will be moved to the Infrastructure Provision Section to the Infrastructure Planning and System Development Services Section for implementation.

Project will now be implemeted by the Infrastructure Provision Section to the Infrastructure Planning and System Development Services Section.

Project will now be implemeted by the Infrastructure Provision Section to the Infrastructure Planning and System Development Services Section.

Behind schedule

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9.711335.1.015 Heights Iscor Feeder

Appointment of Contractor and Site Handover

The milestone was not achieved. Delays were encountered due to poor performance by the consultant. The appointment of the consultant lapsed on 21 October 2017.

A PBJ was circulated for signatures to appoint a new consultant since the current consultant was not competent in carrying out his duties during the planning stages of the project. A non-compliance letter was already circulated to the office of the GH for endorsement during the validity period of his tender. A PBJ memo was re-submitted on 11 November 2017 for the appointment of a new consultant to complete the project. The PBJ was received back from the GH's office on 06 December 2017. The consultant Glad Africa is appointed by the CM through the PMU to intervene and assist Project Managers.

Behind schedule

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9.711404.2.016 Replacement of Sewers

Advertisement of Tender

HHS01 GA Rankuwa Tender: 695m of pipe has been replaced. WS04: Soshanguve Tender: BAC approved tender on 16 November 2017. Tshwane wide tender: Tender needs approximately 2 weeks of work to be complete.

HHS01 GA Rankuwa Tender: Both contractors' appointments took longer than anticipated - reports had to be re worked a few times. Demands from Councillors and local labourers delayed the project. WS04: Soshanguve Tender: BEC met a few times before finalising the report. Awaiting appointment letter from MM office.

HHS01 GA Rankuwa Tender: Both contractors' appointments took longer than anticipated - reports had to be re worked a few times. Demands from Councillors and local labourers delayed the project. WS04: Soshanguve Tender: BEC met a few times before finalising the report. Following up regards appointment letter delay. Tshwane wide tender: Explained the capacity challenges to the ADH:WSD and proposed appointment of Consultants to assist -The ADH agreed however the Consultant tender will only be approved in March 2018. Project Manager also informed GH of the urgent need for a Consultant and proposed a meeting to discuss options, such as appointing a RE for current Contractors construction management.The consultant Glad Africa is appointed by the CM through the PMU to intervene and assist Project Managers.

Behind schedule

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9.711921.1.015 Bronkhorstspruit Water Purification Plant

Submission and approval of the detailed design Report.

The milestone was not achieved. The procurement process is behind schedule and this was due to delays in finalising the TAR/PBJ. It was planned to appoint the consultant through the RTD panel to fast track the procurement process. However, the PBJ was submitted to the Group Head for signature on 24 August 2017 and was referred back to the Section for revision. The revisions were completed on 4 September 2017. However, the ADH requested that the Section should rather procure the services of a consultant through the normal tender process since the RTD panel will be coming to an end in August 2018. The revised TAR was submitted for signatures on 15 September 2017 and it was referred to the Section on 17 October 2017 with the suggestion of combined appointment for both Bronkhorspruit and Bronkhorsbaai projects. A revised PBJ was submitted on 10 November 2017 and it was returned with comments on 29 November 2017. The PBJ was received back from the GH's office on 11 December 2017 indicating that the project has been allocated to Glad Africa for implementation.

The project has been included in the project list that will intervention by Glad Africa.

Behind schedule

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9.712534.1.015 Replace reservoir fencing (City Wide)

Tender Evaluation

none The tender served at BSC on 14 November 2017 but was referred back for corrections to the specification. The Bid specification served again on 11 December 2017 and was recommended for advertisement.

The tender served at BSC on 14 November 2017 but was referred back for corrections to the specification. The Bid specification served again on 11 December 2017 and was recommended for advertisement.

Behind schedule


9.712534.1.015 Bronkhorstbaai: Refurbishment and upgrade of Water Purification

Abstraction Work, Upgrading of the Existing Purification Plant

Projected milestone not achived. The Consultant and contractor are not appointed yet.

The project was delayed because the BSC was allocated six (6) months subsequent to the loading of TAR.

The action plan was prepared. However, the action plans is already behind schedule due to the delays in advertising the tender by SCM. The consultant Glad Africa is appointed by the CM through the PMU to intervene and assist Project Managers.

Behind schedule

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9.712534.1.015 New Parkmore LL Reservoir

15% Total Construction progress of the Reservoir

The target for the month of December 2017 has not been achieved . The procurement process for the appointment of the contractor has not been finalised yet, hence the projected milestones could not be achieved.

The Infrastructure Provision Section received the BEC resolution recommending that the tender be re-advertised on 07 0ctober 2017.The Bid specification has been approved by the Acting Divisional Head:Water and Sanitation so that it be captured on the BSC agenda and serve.

Behind schedule

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9.712534.1.015.C Doornkloof Reservoir

Reservoir floor construction and Steel fixing

The milestone was not achieved by SCM.

Delays were experienced in allocation of the BEC for the tender evaluation as the tender closed on 25 May 2017. The BEC committee was nominated over two months from the date of tender closure.The evaluation commenced on 16 August 2017 and the tender validity period was extended to six months until 19 November 2017. The procurement process is behind schedule. The tender report has been completed and is waiting for presentation at BAC since 27 October 2017. The date of award was set to 19 November 2017 and it was not met. Numerous follow-ups have been done with SCM. However, there is no response. The new envisaged date of award is unknown since the Water and Sanitation Division is not getting the updates from SCM. The PM is hereby requesting Management to intervene.

Follow-ups are being made with the chairperson of the BEC as to when the tender will be awarded. The project will not completely utilise the allocated funds in the 2017/18 and therefore an amount of R1 204 000 has been included in the budget adjustment process. The consultant Glad Africa is appointed by the CM through the PMU to intervene and assist Project Managers.

Behind schedule


9.712534.1.015.E Installation of telemetry, bulk meters and control equipment at reservoirs

Telemetry Server room Backup Generator Installation and commissioning

The second batch of level sensors is installed together with the back-up generators at the depot

not applicable The installations are going as planned.

On track

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9.712534.1.015.J New Klipgat Reservoir

Commissioning and hand over

The pipeline at the chamber has been completed, the concrete door will be deliverd before the builder's break and the shuttering of the roof was completed.

The backfilling that was done was ripped because of poor workmanship and the poor/wrong material that was used. The contractor is performing very slow. SCM was delaying the payment as they requested the appointment letter which was provided at the commencement stage.

The Contractor fast tracked the progress on site during November but the delayed payment of the invoice affected the progress.

Behind schedule




Not reported


9.712896.1.005 Water Conservation and Demand Management (Installation of water meters Steve

4000 meters installed

1128 water connectios have been installed and a total of 1990 have been completed in Q2

New water meter connections (eclsiding projects) are demand driven, i.e. depends on the number of applicationsd receved from the public\consumers. The project based new connections are delayed by the local communties, they demand that the connections be done by local people and also want to negotiate their own rates.

There are no measures for demand driven water meter connections. A report has been sent to Top Management to ask for political intervention with reagrds to project based water meter connections.

Behind schedule

168

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9.713021.1.005 Re Aga Tshwane: Atteridgeville Ext 19 - 900 housing units - Sewerage network

Upgrading of Existing pump station and Testing of the New non permanent Pump station .

The evaluation of quotations are completed and the evaluation report has been circulated for signatures. Appointment of contractor is anticipated to be finalized on 19 January 2018.

There were delays in the completion of the Detailed Design Report and delays in evaluation quotations.

The evaluation of quotations are completed and the evaluation report has been circulated for signatures. Appointment of contractor is anticipated to be finalized on 19 January 2018.

Behind schedule


9.713021.1.005 Re Aga Tshwane: Hammanskraal Ext 10 - 2767 Housing Units - Sewer Provision (Bulk Services)

Installation of 100 m outfall sewer pipeline.

The detailed design of the bulk water supply was delayed due to the alterations which are needed to be done on the sewer reticulation designs for Ext 10.

The detailed design of the bulk water supply was delayed due to the alterations which are needed to be done on the sewer reticulation designs for Ext 10.

Behind schedule


9.713021.1.005 Re Aga Tshwane: Hammanskraal Ext 10 - 2767 Housing Units - Water Provision (Bulk services)

Installation of 100 m bulk water pipeline.

The specification document has been re-summited to the Office of the COO for approval on 14 December 2017. Therefore the PBJ is in place and will be submitted to the GH's office for approval on 18 December 2017.

The consultant got delayed in finalising/confirm the water demand values for the design of the Bulk Water pipeline.

The detailed designs were approved by the Department on 01 November 2017. A PBJ for the appointment of the contractor has been drafted and will be circulated for signatures on 18 December 2017.

Behind schedule

169

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9.713021.1.005 Re Aga Tshwane: Hammanskraal Ext 2 Stand 3505 - 61 Housing Units - Sewer Provision

Issuing of Completion Certificate.

The specification document has been re-summited to the Office of the COO for approval on 14 December 2017. Therefore the PBJ is in place and will be submitted to the GH's office for approval on 18 December 2017.

The consultant got delayed in finalising/confirm the water demand values for the design of the Bulk Water pipeline.


Behind schedule


9.713021.1.005 Re Aga Tshwane: Kameeldrift 174 & 175 - 356 Housing Units - Water Provision

Testing of pipeline, 56 house connections (including long and short connection, water meters and yard taps),

The milestone was not achieved. The detailed designs were approved by the Department on 01 November 2017. A PBJ for the appointment of the contractor has been drafted and will be circulated for signatures on 18 December 2017.


Behind schedule

170

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9.713021.1.005 Re Aga Tshwane: Kudube Unit 8 - 1784 Housing Units - Water Provision

Testing of pipeline, 178 house connections (including long and short connection, water meters and yard taps)

800m of pipeline were laid. Training of labourers and local emerging contractors.

There may be challenges in processing the payment certificates for the consultant since the consultant did not price for bulk services in the original tender. The budget allocated for the project in the 2017/18 financial year might not be spent. Delays in implementation of the project and possible community protest due to lack of service delivery.

There may be challenges in processing the payment certificates for the consultant since the consultant did not price for bulk services in the original tender. The budget allocated for the project in the 2017/18 financial year might not be spent. Delays in implementation of the project and possible community protest due to lack of service delivery.

Behind schedule

171

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9.713021.1.005 Re Aga Tshwane: Mamelodi Ext 11 - Water network link for 1 859 stands

Installation of 500m of reticulation pipelines.

The milestone was not achieved because the project is not yet at construction stage.

A report is being prepared for the revision of professsional fees since the consultant did not price for bulk services in the original tender. The appointment of the contractor will be done through the panel of approved contractors in order to fast track the appointment process.

A report is being prepared for the revision of professsional fees since the consultant did not price for bulk services in the original tender. The appointment of the contractor will be done through the panel of approved contractors in order to fast track the appointment process.

Behind schedule


9.713021.1.005 Re Aga Tshwane: Midas - 580 housing units - water provision (In situ)

The milestone was not achieved. A letter of non-compliance was prepared and submitted to the office of the Group Head . The Infrastructure Provision Section also liaises with the Human Settlement Department on the status of the Township Layout.

A letter of non-compliance was prepared and submitted to the office of the Group Head . The Infrastructure Provision Section also liaises with the Human Settlement Department on the status of the Township Layout.

Behind schedule

172

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9.710005.1.016 Upgrading/Strengthening of Existing Network Scheme - West



Completed No mitigation plan required

On track


9.710005.1.016 Upgrading /Strengthening of Existing Network Schemes - North




On track


9.710005.1.016 Upgrading/Strengthening of Existing Network Scheme - East




On track


9.710006.1.016 Payments to Townships for Reticulated Towns


On track


9.710176.1.015 Dangerous and obsolete switchgear

Implementation of all identified projects

One project has been completed (Sosh Block XX)

There is a shortage of material to execute our projects.

We have re-scheduled our projects to be completed once material becomes available.

Behind schedule


9.710177.1.001 Low Voltage Network Within Towns (Renewal)

Full implementation of all projects on site. Complete 3 LV areas.

3 areas completed, (UG - M/S Natalensis/Besembiesie; Zithobeni X 8 load splitting & Mamelodi X 20 load split (Cnr Abia Khoza and Maluleke ))

NA, target achieved NA, target achieved On track

173

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9.710178.2. 005.Eletricity for all - Region 1

Construction of the Network backbone infrastructure

commissioning of Ga-Rankuwa Zone 14 township and realing 1195 connections

The allocation of accounts is still unsatisfactory

engage with Customer Care to asssit in increasing input toward meter placement projects

Behind schedule


9.710178.2.006 Electricity for All - Region 3

Construction of the infrastructure backbone with 1500 connections

None none None Behind schedule


9.710178.2.005.F Electricity for All- Region 6

Construction of the infrastructure backbone with connections

100% completion and commissioing of feeder cable work for Mamelodi Ext.11 electroification project.

none None On track


9.710325.1.005 Scada HMI (Capital Park)

To install 15km of optical fibre

Appointment of service provider and issuing of PO for the project

Delay in the appointment of service providers

Expedite the implementation of projects once material are delivered in Jan 2018.

Not reported


9.710556.1.005 USDG Funds : Region 1 (Public Lighting)


0 Streetlights and 0 Highmast lights Scarcity of Material that is causing delays in the commissioning of three streetlights projects and unavailability of Service Provider for the installation of Highmast lights

Upon availability of material, projects will be pushed for implemented, added to the planned Q3 target

Behind schedule

174

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30 Streetlights and 0 Highmast lights Failure to get cooperation from Ward 96 Ward Cllr in the implementation of the project in this ward

Project will be implemented in Q3, as the ward Cllr was awaiting for new EPWP appointment procedure.

Behind schedule




0 Streetlights and 2 Highmast lights Scarecity of Material that is causing delays in the commencement of three streetlights projects and unavailability of Service Provider for the installation of Highmast lights

Upon availability of material, projects will be pushed fro implemented, added to the planned Q3 target

Behind schedule




59 Streetlights and 2 Highmast lights none None On track



Construction of the Network Backbone infrastructure, 100 Streetlights and 0 High mas

0 Streetlights and 0 Highmast lights Community unrest caused by seeking job opportunities on the projects

The enviraged 70 connections will be commissoned by end of Decemer 2017, but their will reported in the Q3 period as an addidional to the Q3 plannned target and the two other delayed commencement date will be implemented in the Q3 reporting period

Behind schedule

175

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57 Streetlights and 0 Highmast lights Scarecity of Material that is causing delays in the commissioning on four streetlights projects and unavailability of Service Provider for the installation of Highmast lights

Upon availability of material, projects will be pushed fro implemented, added to the planned Q3 target

Behind schedule




66 Streetlights and 3 Highmast lights Late approval and issuing of the streetlights connection point by Eskom (for 60 addisional connections)

The enviraged 60 connections will be commissoned by end of Decemer 2017, but their will reported in the Q3 period as an addidional to the Q3 plannned target.

Behind schedule


9.710480.1.015 Strengthening 11KV Cable Network

The period is used mainly to identify the critical projects which will be executed in the financial year. This is based on the Winter Load Readings that give an indication for projects that will be addressed.

Analysis of Winterload completed and 530m of underground medium voltage cables installed and completed.

None None On track


9.710481.1.005 Strengthening 11kV Overhead Network

This period sees a lot of execution work and expenditure is realized more rapidly as compared to Q1. Project that have a shorter

We have realized 3.1km achievement on the upgrading of 11kV lines. (IW 33-IW36 PHASE 3&4 and Z line Phase 3)

NA, target achieved NA, target achieved On track

176

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project time will be realized in this quarter.


9.710484.1.016 Secondary Substations

This period sees a lot of execution work and expenditure is realized more rapidly as compared to Q1. Project that have a shorter project time will be realized in this quarter.

We are busy with projects on site. No projects have been completed.

There have been delays experienced with appointment of service providers due to lapse of the current tender.

We are in the process of readvertising the tender. Those projects not affected by the tender will continue.

Behind schedule


9.710566.2.015 Public Lighting (City Wide)


391 streetlights installed and energized

Still awaiting delivery of Street Lights Steel Poles

Behind schedule


9.711862.1.015 Pre-paid Electricity Meters

Tender process

On track


9.712279.015.J Soshanguve JJ 132/11KV Substation

Install 3 x 40MVA power transformer.

Started with the excavation of the substation building foundation and completed 70% of the outdorr yard equipment foundations. Received delivery of materail and 132kV circuit breakers

Project on schedule Not required On track

177

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9.712279.015.M Mamelodi-3 132/11KV substation (2 x 40MVA Power Transformers)

Delivery of 2x40MVA transformers


N/A N/A On track


9.712279.1.001 Monavoni 132/11KV Substation

Civil works: Complete the construction of substation building and equipment foundation and procurement of material

Completed the design of the substation platform. Established site and placed orders for material with long lead time

Delays in the appointment of service provider

Instruct the service provider to increase capacity and expedite the implementation of projects.

Behind schedule


9.712279.1.001 Soshanguve JJ 132/11 kV Substation (2 x 40MVA Power Transformers)

Complete the construction of the substation building

Tender Process: Received tenders Delays in finalising the tender The project has been handed-over to ePMU for intervention

Behind schedule


9.712279.1.001 Bronkhorstspruit 132/11kv substation

Project closed up

Tender Process: Received tenders Delays in finalising the tender The project has been handed-over to ePMU for intervention

Behind schedule

178

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9.712279.1.015 Kentron 132/11kv Substation refurbishment

Appoint contractor and place orders for all material

Tender Process: Received tenders N/A N/A Behind schedule


9.712279.1.015.E Eldoraigne 132/11kv Substation

Receive delivery of power transformers


N/A N/A On track


9.712279.1.015.G Hartherley 132/11KV Substation

Appoint contractor and procure all material

Completed the installation of the towers on the Hatherley -Mamelodi line

N/A Not required On track


9.712483.1.016 New Connections

Process 585 Connections

Realised 557 residential connections realised

less than anticipated applications received.

Close monitoring the project

On track


9.712861.1.016 Replacement of Obsolete Protection and Testing Instruments

50% OF BUDGET WILL BE SPENT WITH A REFLECTIVE OUTPUT OF 3 UNITS

Funds to be transferred to another project for this financial year

N/A N/A no activity


9.712908.1.015 Electricity vending infrastructure

Tender Process

Unable to spend, Contract reached maximum cap and deviation rejected

Funds to be transferred to another project for this financial year

31 January ‘18 On track

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9.713009.1.015 Digital Trunked Radio Communication

1 x Base Station Site

not reported not reported not reported Not reported

Engaging Procurement Office to fastrack issuing of PO's

Delay was due to CAP on tender Fast track delivery with supplier

180

Tshwane Economic Development Agency SOC Ltd(Registration number 2006/019396/30)

Unaudited Quartely financial statementsfor the period ended 31 December 2017

ANNEXURE C 181

Tshwane Economic Development Agency SOC Ltd(Registration number 2006/019396/30)Unaudited Quartely Financial Statements for the period ended 31 December 2017

General Information

Country of incorporation and domicile South Africa

Nature of business and principal activities Economic Development within the Tshwane Region

Directors Prof LD Mosoma (Chairperson)

Mr H Gouvelis

Ms ZG Mpungose

Ms SP Mzizi

Mr FK Sibanda

Ms N Singh

Adv JL Thubakgale

Mr MW Yates

Mr SD Mogaladi (Executive)

Mr Thami Mkhwanazi (Executive)

Business address 5th Floor, Anker Building

Mike Crawford Road

Centurion

0057

Postal address P O Box 11751

Zwartkop

0051

Parent Municipality City of Tshwane Metropolitan Municipality

Bankers Standard Bank

Auditors Auditor General of South Africa

Secretary Ms LV Mahaye

Company registration number 2006/019396/30

Tax reference number 9053619178

1

182


Index

The reports and statements set out below comprise the unaudited quartely financial statements presented to the board ofdirectors:

Page

Accounting Officer's Responsibilities and Approval 3

Company Secretary’s Certification 4

Statement of Financial Position 5

Statement of Financial Performance 6

Statement of Changes in Net Assets 7

Cash Flow Statement 8

Statement of Comparison of Budget and Actual Amounts 9

Accounting Policies 10 - 31

Notes to the Unaudited Quartely Financial Statements 32 - 58

COID Compensation for Occupational Injuries and Diseases

GRAP Generally Recognised Accounting Practice

IAS International Accounting Standards

IMFO Institute of Municipal Finance Officers

IPSAS International Public Sector Accounting Standards

ME's Municipal Entities

MFMA Municipal Finance Management Act

2

183


Accounting Officer's Responsibilities and Approval

The accounting officer is required by the Municipal Finance Management Act (Act 56 of 2003) (MFMA) and theCompanies Act No.71 of 2008, as amended, to maintain adequate accounting records and is responsible for thecontent and integrity of the quartely financial statements and related financial information included in this report. It isthe responsibility of the accounting officer to ensure that the quartely financial statements fairly represent the state ofaffairs of the municipal entity as at the end of the period and the results of its operations and cash flows for the periodended 31 December 2017.

The quartely financial statements have been prepared in accordance with the Standards of Generally RecognisedAccounting Practices (GRAP) including any interpretations, guidelines and directives issued by the AccountingStandards Board.

The quartely financial statements are based upon appropriate accounting policies consistently applied and supportedby reasonable and prudent judgments and estimates.

The accounting officer acknowledges that he is ultimately responsible for the system of internal financial controlsestablished by the municipal entity and places considerable importance on maintaining a strongly controlledenvironment. To enable the accounting officer to meet these responsibilities, the accounting officer sets standards forinternal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include theproper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequatesegregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the municipalentity and all employees are required to maintain the highest ethical standards in ensuring the municipal entity’sbusiness is conducted in a manner that in all reasonable circumstances is above reproach. The focus of riskmanagement in the municipal entity is on identifying, assessing, managing and monitoring all known forms of riskacross the municipal entity. While operating risks cannot be fully eliminated, the municipal entity endevours tominimise it by ensuring that appropriate infrastructure, controls, systems and ethical behavior are applied andmanaged within predetermined procedures and constraints.

The accounting officer is of the opinion, based on the information and explanations given by management that thesystem of internal control provides reasonable assurance that the financial records may be relied on for thepreparation of the quartely financial statements. However, any system of internal financial control can provide onlyreasonable, and not absolute, assurance against material misstatement or deficit.

The accounting officer has reviewed the municipal entity’s cash flow forecast for the period ended 31 December 2017and current financial position. In the light of this review the accounting officer is satisfied that the entity has access toadequate 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 annualfinancial statements.

The quartely financial statements have not been audited by the municipal entity's external auditors in accordance withSection 126(1) of the Local Government: Municipal Finance Management Act and Companies Act, 2008 (Act No 71 of2008).

The unaudited quartely financial statements set out on pages 4 to 58, which have been prepared on the going concernbasis, were approved by the board on 02 January 2018 and were signed by:

Mr TS Mkhwanazi (CA) SA Mr SD MogaladiDesignation Designation

3

184


Company Secretary’s Certification

Declaration by the company secretary in respect of Section 88(2)(e) of the Companies Act

In terms of Section 88(2)(e) of the Companies Act 71 of 2008, as amended, I certify that the company has lodgedwith the Commissioner all of such returns as required in terms of the Companies Act and that such returns aretrue, correct and up to date.

Ms LV MahayeCompany SecretaryPlace of Signature

4

185


Statement of Financial Position as at 31 December 201731 December 30 June

Figures in Rand Note(s) 2017 2017

Assets

Current Assets

Receivables from exchange transactions 4&5 203,306 241,409

VAT receivable 6 2,156,633 4,363,938

Prepayments 7 397,454 9,580

Cash and cash equivalents 8 14,175,698 7,407,812

Normal taxation 9 1,291,464 858,149

18,224,555 12,880,888

Non-Current Assets

Property, plant and equipment 11 3,376,163 4,102,381

Intangible assets 12 115,936 140,166

Deferred tax 16 78,458 -

3,570,557 4,242,547

Total Assets 21,795,112 17,123,435

Liabilities

Current Liabilities

Payables from exchange transactions 13 121,612 1,072,849

Provisions 14 1,642,837 1,429,688

Unspent conditional grants and receipts 15 8,932,961 4,282,180

10,697,410 6,784,717

Non-Current Liabilities

Operating lease liability 10 238,501 158,483

Deferred tax 16 - 14,045

238,501 172,528

Total Liabilities 10,935,911 6,957,245

Net Assets 10,859,201 10,166,190

Share capital / contributed capital 17 1,000 1,000

Accumulated surplus 10,858,201 10,165,190

Total Net Assets 10,859,201 10,166,190

5

186


Statement of Financial Performance6 months

ended31 December 30 June


Revenue

Revenue from exchange transactions

Sale of tender documents 18 18,860 11,404

Rental income and other income 18 8,893 1,155,116

Interest received 18 161,035 374,606

Total revenue from exchange transactions 188,788 1,541,126

Revenue from non-exchange transactions

Transfer revenue

Grant revenue recognised 18 22,424,219 53,895,848

Total revenue 18 22,613,007 55,436,974

Expenditure

Employee related costs 19 (14,527,519) (30,670,377)

Remuneration of board members 20 (481,634) (1,337,783)

Depreciation and amortisation 21 (750,450) (2,132,265)

Project management 22 (418,550) (4,842,260)

Investment promotion and funding 23 (1,806,290) (4,169,807)

Loss on disposal of assets 24 - (145,247)

General expenses 25 (3,917,521) (9,430,276)

Total expenditure (21,901,964) (52,728,015)

Surplus before taxation 711,043 2,708,959

Taxation 26 (18,032) (758,508)

Surplus (Deficit) for the year 693,011 1,950,451

Attributable to:

Owners of the controlling entity 693,011 1,950,451

Non-controlling interest - -

693,011 1,950,451

6

187


Statement of Changes in Net Assets

Figures in Rand

Share capital /contributed

capital

Accumulatedsurplus

Total netassets

Balance at 01 July 2016 1,000 8,214,740 8,215,740Changes in net assetsSurplus (Deficit) for the year as previously reported - 1,950,450 1,950,450

Total changes - 1,950,450 1,950,450

Balance at 01 July 2017 1,000 10,165,190 10,166,190Changes in net assetsSurplus for the quarter - 693,011 693,011

Total changes - 693,011 693,011

Balance at 31 December 2017 1,000 10,858,201 10,859,201

7

188


Cash Flow Statement6 months



Cash flows from operating activities

Receipts

Grants 27,075,000 54,150,000

Interest income 199,748 353,618

Rental and other income 8,893 1,505,782

Sale of tender documents 18,860 11,404

27,302,501 56,020,804

Payments

Compensation of employees and board fees (14,031,545) (31,865,117)

Suppliers (5,960,821) (19,179,158)

Taxes on surpluses 9 (543,851) (492,225)

VAT paid 1,602 (1,410,051)

(20,534,615) (52,946,551)

Net cash flows from operating activities 27 6,767,886 3,074,253

Cash flows from investing activities

Purchase of property, plant and equipment 11 - (1,983,569)

Net increase/(decrease) in cash and cash equivalents 6,767,886 1,090,684

Cash and cash equivalents at the beginning of the year 7,407,812 6,317,128

Cash and cash equivalents at the end of the year 8 14,175,698 7,407,812

8

189


Statement of Comparison of Budget and Actual AmountsBudget on Accrual Basis

Figures in Rand

Approvedbudget

Adjustments Final Budget Actual amountson comparable

basis

Differencebetween finalbudget and

actual

Reference

Statement of Financial Performance

Revenue

Revenue from exchangetransactions

Sale of tender documents - - - 18,860 18,860 Note 29

Rental income and other income - - - 8,893 8,893 Note 29

Professional fees: commissionon capital projects

6,650,000 - 6,650,000 - (6,650,000) Note 29

Interest received 213,075 - 213,075 161,035 (52,040) Note 29

Total revenue from exchangetransactions

6,863,075 - 6,863,075 188,788 (6,674,287)

Revenue from non-exchangetransactions

Transfer revenue

City of Tshwane - transfers 54,150,000 - 54,150,000 22,424,219 (31,725,781) Note 29

Total revenue 61,013,075 - 61,013,075 22,613,007 (38,400,068)

Expenditure

Employees related costs (34,512,120) - (34,512,120) (14,527,519) 19,984,601 Note 29

Remuneration of boardmembers

(1,908,000) - (1,908,000) (481,634) 1,426,366 Note 29

Depreciation and amortisation (2,805,015) - (2,805,015) (750,450) 2,054,565 Note 29

Investment promotion andfunding

(4,019,051) - (4,019,051) (1,806,289) 2,212,762 Note 29

Project management (5,012,211) - (5,012,211) (418,550) 4,593,661 Note 29

General Expenses (11,956,678) - (11,956,678) (3,917,522) 8,039,156 Note 29

Total expenditure (60,213,075) - (60,213,075) (21,901,964) 38,311,111

Surplus before taxation 800,000 - 800,000 711,043 (88,957)

Taxation (500,000) - (500,000) (18,032) 481,968

Actual Amount on ComparableBasis as Presented in theBudget and ActualComparative Statement

300,000 - 300,000 693,011 184,214

9

190


Accounting Policies

1. Presentation of Unaudited Quartely Financial Statements

The unaudited quartely financial statements have been prepared in accordance with the Standards of GenerallyRecognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section122(3) of the Municipal Finance Management Act (Act 56 of 2003).

These unaudited quartely financial statements have been prepared on an accrual basis of accounting and are inaccordance with historical cost convention as the basis of measurement, unless specified otherwise. They arepresented in South African Rand.

A summary of the significant accounting policies, which have been consistently applied in the preparation of theseunaudited quartely financial statements, are disclosed below.

1.1 Presentation currency

These unaudited quartely financial statements are presented in South African Rand, which is the functionalcurrency of the entity.

1.2 Key management personnel

The key management of TEDA refers to the Chief Executive Officer (CEO), Chief Financial Officer (CFO) andExecutive Managers.

1.3 Going concern assumption

These unaudited quartely financial statements have been prepared based on the expectation that the entity willcontinue to operate as a going concern for at least the next 12 months.

1.4 Significant judgements and sources of estimation uncertainty

In preparing the unaudited quartely financial statements, management is required to make estimates andassumptions that affect the amounts represented in the unaudited quartely financial statements and relateddisclosures. The areas involving a higher degree of judgment or complexity, or areas where assumptions andestimates are significant to the quartely financial statements are disclosed below.

Trade receivables

The entity assesses its trade receivables and loans and receivables for impairment at each statement of financialposition date. In determining whether an impairment loss should be recorded in the statement of financialperformance, the entity makes judgements as to whether there is observable data indicating a measurabledecrease in the estimated future cash flows from a financial asset. The entity assesses its trade receivables andloans 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 judgementsas to whether there is observable data indicating a measurable decrease in the estimated future cash flows from afinancial asset. Each receivable is reviewed individually at year end.

Impairment testing

The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest thatthe carrying amount may not be recoverable. If the recoverable amount is less than the carrying amount, animpairment loss should be recognised in the statement of financial performance.

Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows ofother assets and liabilities.If there are indications that impairment may have occurred, estimates are prepared ofexpected future cash flows for each group of assets. Expected future cash flows used to determine the value inuse of tangible assets are inherently uncertain and could materially change over time.

The recoverable amounts of cash-generating units and individual assets have been determined based on thehigher of value-in-use calculations and fair values less costs to sell. These calculations require the use ofestimates and assumptions. It is reasonably possible that the assumption may change which may then impact ourestimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.

10

191


Accounting Policies

1.4 Significant judgements and sources of estimation uncertainty (continued)

Provisions

Provisions were raised and management determined an estimate based on the information available. Additionaldisclosure of these estimates of provisions are included in note 14 - Provisions.

The provision is recognised at the best estimate of the consideration required to settle the obligation at the end ofthe reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the effect oftime value of money is material, the provision is determined by discounting to present value.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There aremany transactions and calculations for which the ultimate tax determination is uncertain during the ordinary courseof business. The entity recognises liabilities for anticipated tax audit issues based on estimates of whetheradditional taxes will be due. Where the final tax outcome of these matters is different from the amounts that wereinitially recorded, such differences will impact the income tax and deferred tax provisions in the period in whichsuch determination is made.

The entity recognises the net future tax benefit related to deferred income tax assets to the extent that it isprobable that the deductible temporary differences will reverse in the foreseeable future. Assessing therecoverability of deferred income tax assets requires the entity to make significant estimates related toexpectations of future taxable income. Estimates of future taxable income are based on forecast cash flows fromoperations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows andtaxable income differ significantly from estimates, the ability of the entity to realise the net deferred tax assetsrecorded 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 theamount and timing of future taxable income. The entity establishes provisions, based on reasonable estimates, forpossible consequences of audits by the tax authorities of the respective countries in which it operates. The amountof such provisions is based on various factors, such as experience of previous tax audits and differinginterpretations 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 inthe respective company’s domicile. As the Company assesses the probability for litigation and subsequent cashfrom exchange transactions with respect to taxes as remote, no contingent liability has been recognised. Deferredtax assets are recognised for all unused tax losses to the extent that it is probable that taxable surplus will beavailable against which the losses can be utilised. Significant management judgement is required to determine theamount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxablesurplus together with future tax planning strategies.

Effective interest rate

The entity does not have significant exposure to interest rate risk and is not sensitive to interest rate changes thusthe prime interest rate is used to discount future cash flows.

Allowance for doubtful debts

On debtors an impairment loss is recognised in surplus and deficit when there is objective evidence that it isimpaired. The impairment is measured as the difference between the debtors carrying amount and the presentvalue of estimated future cash flows discounted at the effective interest rate, computed at initial recognition.

Property, plant and equipment

The entity’s management determines the estimated useful lives and residual values of property, plant andequipment. These assessments are made on an annual basis and based on the indicator-approach. Where anindication exist the entity shall revise its useful life and residual values as a change in accounting estimate.Administrative computer equipment, office furniture and equipment, and motor vehicles are not componentised.These assets do not have significant parts that are considered to have an estimated useful life different to theestimated useful life of the asset as a whole.

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1.5 Property, plant and equipment

Property, plant and equipment are tangible non-current assets that are held for use in the production or supply ofgoods or services, rental to others, or for administrative purposes, and are expected to be used during more than oneperiod.

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 is initially measured at cost.

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring theasset 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 through a non-exchange transaction, its cost is its fair value as at date of acquisition.

Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetaryassets, or a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value(the cost). If the acquired item's fair value was not determinable, it's deemed cost is the carrying amount of theasset(s) given up.

When significant components of an item of property, plant and equipment have different useful lives, they areaccounted for as separate items (major components) of property, plant and equipment.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costsincurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carryingamount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located isalso included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, andwhere the obligation arises as a result of acquiring the asset or using it for purposes other than the production ofinventories.

Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in thelocation and condition necessary for it to be capable of operating in the manner intended by management.

Items such as spare parts, standby equipment and servicing equipment are recognised when they meet the definitionof property, plant and equipment.

Major inspection costs which are a condition of continuing use of an item of property, plant and equipment and whichmeet the recognition criteria above are included as a replacement in the cost of the item of property, plant andequipment. Any remaining inspection costs from the previous inspection are derecognised.

Property, plant and equipment is 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 theirestimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average usefullife

Furniture and fixtures 3 -16 years Motor vehicles 5 years Office equipment 5 -8 years IT equipment 3-5 years Leasehold improvements Lease termLibrary material 5 years

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1.5 Property, plant and equipment (continued)

The depreciable amount of an asset is allocated on a systematic basis over its useful life.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of theitem is depreciated separately.

The depreciation method used reflects the pattern in which the asset’s future economic benefits or service potentialare expected to be consumed by the entity. The depreciation method applied to an asset is reviewed at least at eachreporting date and, if there has been a significant change in the expected pattern of consumption of the futureeconomic benefits or service potential embodied in the asset, the method is changed to reflect the changed pattern.Such a change is accounted for as a change in an accounting estimate.

The entity assesses at each reporting date whether there is any indication that the entity expectations about theresidual value and the useful life of an asset have changed since the preceding reporting date. If any such indicationexists, the entity revises the expected useful life and/or residual value accordingly. The change is accounted for as achange in an accounting estimate.

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amountof another asset.

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no furthereconomic benefits or service potential expected from the use of the asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus ordeficit when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant andequipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of theitem.

Assets which the entity holds for rentals to others and subsequently routinely sell as part of the ordinary course ofactivities, are transferred to inventories when the rentals end and the assets are available-for-sale. Proceeds fromsales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows fromoperating activities in the cash flow statement.

The entity discloses expenditure to repair and maintain property, plant and equipment in the notes to the financialstatements (see note 25).

1.6 Intangible assets

An asset is identifiable if it either: is separable, i.e. 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, identifiable assets or liability,regardless of whether the entity intends to do so; or

arises from binding arrangements (including rights from contracts), regardless of whether those rights aretransferable or separable from the entity or from other rights and obligations.

A binding arrangement describes an arrangement that confers similar rights and obligations on the parties to it as if itwere in the form of a contract.

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 entity; and the cost or fair value of the asset can be measured reliably.

The entity assesses the probability of expected future economic benefits or service potential using reasonable andsupportable assumptions that represent management’s best estimate of the set of economic conditions that will existover the useful life of the asset.

Where an intangible asset is acquired through a non-exchange transaction, its initial cost at the date of acquisition ismeasured at its fair value as at that date.

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1.6 Intangible assets (continued)

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it isincurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognisedwhen: 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 noforeseeable 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 annually and wheneverthere is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on astraight 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 anindicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carryingamount is amortised over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are notrecognised as intangible assets.

Internally generated goodwill is not recognised as an intangible asset.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:


Computer software 6 years

Intangible assets are derecognised: on disposal; or when no future economic benefits or service potential are expected from its use or disposal.

The gain or loss arising from the derecognition of an intangible assets is included in surplus or deficit when the assetis derecognised (unless the Standard of GRAP on leases requires otherwise on a sale and leaseback).

1.7 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or aresidual interest of another entity.

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 potentiallyfavourable to the entity.

A financial liability is any liability that is a contractual obligation to:

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1.7 Financial instruments (continued) 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.

Derecognition is the removal of a previously recognised financial asset or financial liability from an entity’sstatement of financial position.

Financial instruments at amortised cost are non-derivative financial assets or non-derivative financial liabilities thathave fixed or determinable payments, excluding those instruments that: the entity designates at fair value at initial recognition; or are held for trading.

Classification

The entity has the following types of financial assets (classes and category) as reflected on the face of thestatement of financial position or in the notes thereto:Cash and cash equivalent Financial asset measured at amortised costReceivable from exchange transactions Financial asset measured at amortised costReceivable from non-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 thestatement of financial position or in the notes thereto:Payables from exchange transactions 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 entitybecomes 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 theseinstruments are measured as set out above.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financialliability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisationusing the effective interest method of any difference between that initial amount and the maturity amount, andminus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility in thecase of a financial asset.

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1.7 Financial instruments (continued)

Subsequent measurement of financial assets and financial liabilities

The entity measures all financial assets and financial liabilities after initial recognition using the followingcategories: Financial instruments at amortised cost.

All financial assets measured at amortised cost, or cost, are subject to an impairment review.

Reclassification

The entity does not reclassify a financial instrument while it is issued or held unless it is: combined instrument that is required to be measured at fair value; or an investment in a residual interest that meets the requirements for reclassification.

If fair value can no longer be measured reliably for an investment in a residual interest measured at fair value, theentity reclassifies the investment from fair value to cost. The carrying amount at the date that fair value is no longeravailable becomes the cost.

If a reliable measure becomes available for an investment in a residual interest for which a measure waspreviously not available, and the instrument would have been required to be measured at fair value, the entityreclassifies the instrument from cost to fair value.

Gains and losses

For financial assets and financial liabilities measured at amortised cost or cost, a gain or loss is recognised insurplus or deficit when the financial asset or financial liability is derecognised or impaired, or through theamortisation process.

Impairment and uncollectibility of financial assets

The entity assess at the end of each reporting period whether there is any objective evidence that a financial assetor group of financial assets is impaired.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significantfinancial difficulty, default or delinquency in interest or principal payments, the probability that they will enterbankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease inthe estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Where a determination was made that the likelyhood of recovering the amounts is nil impairment loss will berecognised.

Financial assets measured at amortised cost:

If there is objective evidence that an impairment loss on financial assets measured at amortised cost has beenincurred, the amount of the loss is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows (excluding future credit losses that have not been incurred)discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduceddirectly or through the use of an allowance account. The amount of the loss is recognised in surplus or deficit.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be relatedobjectively to an event occurring after the impairment was recognised, the previously recognised impairment lossis reversed directly or by adjusting an allowance account. The reversal does not result in a carrying amount of thefinancial asset that exceeds what the amortised cost would have been had the impairment not been recognised atthe date the impairment is reversed. The amount of the reversal is recognised in surplus or deficit.

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Derecognition

Financial assets

The entity derecognises a financial asset only when: the contractual rights to the cash flows from the financial asset expire, are settled or waived; the entity transfers to another party substantially all of the risks and rewards of ownership of the financial

asset; or the entity, despite having retained some significant risks and rewards of ownership of the financial asset, has

transferred control of the asset to another party and the other party has the practical ability to sell the asset inits entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing toimpose additional restrictions on the transfer. In this case, the entity :- derecognise the asset; andrecognise separately any rights and obligations created or retained in the transfer.

The carrying amounts of the transferred asset are allocated between the rights or obligations retained and thosetransferred on the basis of their relative fair values at the transfer date. Newly created rights and obligations aremeasured at their fair values at that date. Any difference between the consideration received and the amountsrecognised and derecognised is recognised in surplus or deficit in the period of the transfer.

If the entity transfers a financial asset in a transfer that qualifies for derecognition in its entirety and retains the rightto service the financial asset for a fee, it recognise either a servicing asset or a servicing liability for that servicingcontract. If the fee to be received is not expected to compensate the entity adequately for performing the servicing,a servicing liability for the servicing obligation is recognised at its fair value. If the fee to be received is expected tobe more than adequate compensation for the servicing, a servicing asset is recognised for the servicing right at anamount determined on the basis of an allocation of the carrying amount of the larger financial asset.

If, as a result of a transfer, a financial asset is derecognised in its entirety but the transfer results in the entityobtaining a new financial asset or assuming a new financial liability, or a servicing liability, the entity recognise thenew financial asset, financial liability or servicing liability at fair value.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of theconsideration received is recognised in surplus or deficit.

If the transferred asset is part of a larger financial asset and the part transferred qualifies for derecognition in itsentirety, the previous carrying amount of the larger financial asset is allocated between the part that continues tobe recognised and the part that is derecognised, based on the relative fair values of those parts, on the date of thetransfer. For this purpose, a retained servicing asset is treated as a part that continues to be recognised. Thedifference between the carrying amount allocated to the part derecognised and the sum of the considerationreceived for the part derecognised is recognised in surplus or deficit.

If a transfer does not result in derecognition because the entity has retained substantially all the risks and rewardsof ownership of the transferred asset, the entity continue to recognise the transferred asset in its entirety andrecognise a financial liability for the consideration received. In subsequent periods, the entity recognises anyrevenue on the transferred asset and any expense incurred on the financial liability. Neither the asset, and theassociated liability nor the revenue, and the associated expenses are offset.

Financial liabilities

The entity removes a financial liability (or a part of a financial liability) from its statement of financial position whenit is extinguished — i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived.

An exchange between an existing borrower and lender of debt instruments with substantially different terms isaccounted for as having extinguished the original financial liability and a new financial liability is recognised.Similarly, a substantial modification of the terms of an existing financial liability or a part of it is accounted for ashaving extinguished the original financial liability and having recognised a new financial liability.

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The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished ortransferred to another party and the consideration paid, including any non-cash assets transferred or liabilitiesassumed, is recognised in surplus or deficit. Any liabilities that are waived, forgiven or assumed by another entityby way of a non-exchange transaction are accounted for in accordance with the Standard of GRAP on Revenuefrom Non-exchange Transactions (Taxes and Transfers).

1.8 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 substantiallyenacted 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) thetax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by theStatement 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 taxliability 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 thattaxable surplus will be available against which the deductible temporary difference can be utilised. A deferred taxasset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the timeof 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 and unused STC credits to the extentthat it is probable that future taxable surplus will be available against which the unused tax losses and unused STCcredits can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when theasset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantivelyenacted by the end of the reporting period.

Deferred tax is recognised using the net liability method. .

Taxation expenses and VAT

Current and deferred taxes are recognised as income or an expense and included in surplus or deficit for theperiod, except to the extent that the tax arises from: a transaction or event which is recognised, in the same or a different period, to net assets; or a business combination.

Current tax and deferred taxes are charged or credited to net assets if the tax relates to items that are credited orcharged, in the same or a different period, to net assets.

Revenue, expenses and assets are recognised net of the amount of VAT except: Where the VAT incurred on the purchase of assets or services is not recoverable from the taxation authority,

in which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expenseitem applicable; and

Receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from or payable to, the taxation authority is reported separate from otherreceivables or payables in the statements of financial position.

The entity is registered with the South African Revenue Services (SARS) for VAT on the invoice basis, inaccordance with the VAT Act (Act No. 89 of 1991).

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1.9 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 toownership.

The difference between the amounts recognised as income and the contractual receipts are recognised as anoperating lease asset or liability.

Operating leases - lessor

Operating lease revenue is recognised as revenue on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of theleased asset and recognised as an expense over the lease term on the same basis as the lease revenue.

The aggregate cost of incentives is recognised as a reduction of rental revenue over the lease term on a straight-line basis.

The aggregate benefit of incentives is recognised as a reduction of rental expense over the lease term on astraight-line basis.

Income for leases is disclosed under revenue in statement of financial performance.

When assets are leased out under an operating lease, the asset is included in the statement of financial positionbased on the natureof the asset.

Operating leases - lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Thedifference between the amounts recognised as an expense and the contractual payments are recognised as anoperating lease asset or liability.

All leases that TEDA enters into as a lessee, and where the lessor retains substantially all the risks and rewards ofownership of the underlying asset, are classified as operating leases. Payments made under operating leases arecharged against revenue on a straight-line basis over the term of the lease.

1.10 Income received in advanced and prepayments

In the case of comprehensive and/or medium and long-term contracts, advance payments are negotiated withcustomers and suppliers of the entity. These funds are paid by the entity to secure the right of use of the goodsand/or services as agreed in the contract. Advance payments received are recognised as a current liability for anamount that is estimated to be settled within one year from reporting date and as a non-current liability for theamount to be settled after one year from reporting date. Advance payments made are recognised as a currentassets for an amount (of an expected benefit) that is estimated to be realised within one year from reporting dateand as a non-current assets for the amount (of an expected benefit) to be realised after one year from reportingdate.

Subsequently advance payments are expensed upon receipt of an agreed goods and/ or service, and in the caseof advance receipts are recognised as revenue when the entity has delivered as agreed in the statement offinancial performance.

1.11 Impairment of cash-generating assets

Cash-generating assets are assets managed with the objective of generating a commercial return. An assetgenerates a commercial return when it is deployed in a manner consistent with that adopted by a profit-orientedentity.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematicrecognition of the loss of the asset’s future economic benefits or service potential through depreciation(amortisation).

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1.11 Impairment of cash-generating assets (continued)

Carrying amount is the amount at which an asset is recognised in the statement of financial position afterdeducting any accumulated depreciation and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets managed with the objective of generating acommercial return that generates cash inflows from continuing use that are largely independent of the cash inflowsfrom other assets or groups of assets.

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costsand income tax expense.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transactionbetween knowledgeable, willing parties, less the costs of disposal.

Recoverable amount of an asset or a cash-generating unit is the higher its fair value less costs to sell and its valuein use.

Useful life is either:(a) the period of time over which an asset is expected to be used by the entity; or(b) the number of production or similar units expected to be obtained from the asset by the entity.

Identification

When the carrying amount of a cash-generating asset exceeds its recoverable amount, it is impaired.

The entity assesses at each reporting date whether there is any indication that a cash-generating asset may beimpaired. If any such indication exists, the entity estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the entity also test a cash-generating intangible assetwith an indefinite useful life or a cash-generating intangible asset not yet available for use for impairment annuallyby comparing its carrying amount with its recoverable amount. This impairment test is performed at the same timeevery year. If an intangible asset was initially recognised during the current reporting period, that intangible assetwas tested for impairment before the end of the current reporting period.

Value in use

Value in use of a cash-generating asset is the present value of the estimated future cash flows expected to bederived from the continuing use of an asset and from its disposal at the end of its useful life.

When estimating the value in use of an asset, the entity estimates the future cash inflows and outflows to bederived from continuing use of the asset and from its ultimate disposal and the entity applies the appropriatediscount rate to those future cash flows.

Basis for estimates of future cash flows

In measuring value in use the entity: base cash flow projections on reasonable and supportable assumptions that represent management's best

estimate of the range of economic conditions that will exist over the remaining useful life of the asset. Greaterweight is given to external evidence;

base cash flow projections on the most recent approved financial budgets/forecasts, but excludes anyestimated future cash inflows or outflows expected to arise from future restructuring's or from improving orenhancing the asset's performance. Projections based on these budgets/forecasts covers a maximum periodof five years, unless a longer period can be justified; and

estimate cash flow projections beyond the period covered by the most recent budgets/forecasts byextrapolating the projections based on the budgets/forecasts using a steady or declining growth rate forsubsequent years, unless an increasing rate can be justified. This growth rate does not exceed the long-termaverage growth rate for the products, industries, or country or countries in which the entity operates, or for themarket in which the asset is used, unless a higher rate can be justified.

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Composition of estimates of future cash flows

Estimates of future cash flows include: projections of cash inflows from the continuing use of the asset; projections of cash outflows that are necessarily incurred to generate the cash inflows from continuing use of

the asset (including cash outflows to prepare the asset for use) and can be directly attributed, or allocated ona reasonable and consistent basis, to the asset; and

net cash flows, if any, to be received (or paid) for the disposal of the asset at the end of its useful life.

Estimates of future cash flows exclude: cash inflows or outflows from financing activities; and income tax receipts or payments.

The estimate of net cash flows to be received (or paid) for the disposal of an asset at the end of its useful life is theamount that the entity expects to obtain from the disposal of the asset in an arm's length transaction betweenknowledgeable, willing parties, after deducting the estimated costs of disposal.

Recognition and measurement (individual asset)

If the recoverable amount of a cash-generating asset is less than its carrying amount, the carrying amount of theasset is reduced to its recoverable amount. This reduction is an impairment loss.

An impairment loss is recognised immediately in surplus or deficit.

Any impairment loss of a revalued cash-generating asset is treated as a revaluation decrease.

When the amount estimated for an impairment loss is greater than the carrying amount of the cash-generatingasset to which it relates, the entity recognises a liability only to the extent that is a requirement in the Standard ofGRAP.

After the recognition of an impairment loss, the depreciation (amortisation) charge for the cash-generating asset isadjusted in future periods to allocate the cash-generating asset’s revised carrying amount, less its residual value (ifany), on a systematic basis over its remaining useful life.

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Cash-generating units

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individualasset. If it is not possible to estimate the recoverable amount of the individual asset, the entity determines therecoverable amount of the cash-generating unit to which the asset belongs (the asset's cash-generating unit).

If an active market exists for the output produced by an asset or group of assets, that asset or group of assets isidentified as a cash-generating unit, even if some or all of the output is used internally. If the cash inflowsgenerated by any asset or cash-generating unit are affected by internal transfer pricing, the entity usemanagement's best estimate of future price(s) that could be achieved in arm's length transactions in estimating: the future cash inflows used to determine the asset's or cash-generating unit's value in use; and the future cash outflows used to determine the value in use of any other assets or cash-generating units that

are affected by the internal transfer pricing.

Cash-generating units are identified consistently from period to period for the same asset or types of assets,unless a change is justified.

The carrying amount of a cash-generating unit is determined on a basis consistent with the way the recoverableamount of the cash-generating unit is determined.

An impairment loss is recognised for a cash-generating unit if the recoverable amount of the unit is less than thecarrying amount of the unit. The impairment is allocated to reduce the carrying amount of the cash-generatingassets of the unit on a pro rata basis, based on the carrying amount of each asset in the unit. These reductions incarrying amounts are treated as impairment losses on individual assets.

In allocating an impairment loss, the entity does not reduce the carrying amount of an asset below the highest of: its fair value less costs to sell (if determinable); its value in use (if determinable); and zero.

The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata tothe other cash-generating assets of the unit.

Where a non-cash-generating asset contributes to a cash-generating unit, a proportion of the carrying amount ofthat non-cash-generating asset is allocated to the carrying amount of the cash-generating unit prior to estimation ofthe recoverable amount of the cash-generating unit.

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Reversal of impairment loss

The entity assess at each reporting date whether there is any indication that an impairment loss recognised in priorperiods for a cash-generating asset may no longer exist or may have decreased. If any such indication exists, theentity estimates the recoverable amount of that asset.

An impairment loss recognised in prior periods for a cash-generating asset is reversed if there has been a changein the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.The carrying amount of the asset is increased to its recoverable amount. The increase is a reversal of animpairment loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss doesnot exceed the carrying amount that would have been determined (net of depreciation or amortisation) had noimpairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss for a cash-generating asset is recognised immediately in surplus or deficit.

Any reversal of an impairment loss of a revalued cash-generating asset is treated as a revaluation increase.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the cash-generatingasset is adjusted in future periods to allocate the cash-generating asset’s revised carrying amount, less its residualvalue (if any), on a systematic basis over its remaining useful life.

A reversal of an impairment loss for a cash-generating unit is allocated to the cash-generating assets of the unitpro rata with the carrying amounts of those assets. These increases in carrying amounts are treated as reversalsof impairment losses for individual assets. No part of the amount of such a reversal is allocated to a non-cash-generating asset contributing service potential to a cash-generating unit.

In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset is notincreased above the lower of: its recoverable amount (if determinable); and the carrying amount that would have been determined (net of amortisation or depreciation) had no

impairment loss been recognised for the asset in prior periods.

The amount of the reversal of the impairment loss that would otherwise have been allocated to the asset isallocated pro rata to the other assets of the unit.

1.12 Share capital / contributed capital

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting allof its liabilities.

1.13 Employee benefits

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the relatedservice is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans ifthe entity has a present legal or constructive obligation to pay this amount as a result of past service provided bythe employee and the obligation can be estimated reliably.

Medical benefits

The entity provides medical benefits for its employees through defined contribution plans. The entity has no furtherpayment once contributions have been paid. The contributions are recognised as employee benefit expenses inprofit or loss in the periods during which the services are rendered by the employees.

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1.13 Employee benefits (continued)

Post-employment benefits: Defined contribution plans

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into aseparate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund doesnot hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

When an employee has rendered service to the entity during a reporting period, the entity recognise thecontribution payable to a defined contribution plan in exchange for that service: as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid

exceeds the contribution due for service before the reporting date, an entity recognise that excess as anasset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in futurepayments or a cash refund; and

as an expense, unless another Standard requires or permits the inclusion of the contribution in the cost of anasset.

Where contributions to a defined contribution plan do not fall due wholly within twelve months after the end of thereporting period in which the employees render the related service, they are discounted. The rate used to discountreflects the time value of money. The currency and term of the financial instrument selected to reflect the timevalue of money is consistent with the currency and estimated term of the obligation.

Bonus plans

The entity recognises a provision for performance bonuses where contractually obliged or where there is a pastpractice that has created a constructive obligation as a result of services received from the employee and theobligation can be measured reliably.

The entity also recognises a libility for bonuses (13th Cheque) for employees who have structured their salaries assuch.

Leave entitlement

Employee entitlements to annual leave are recognised when they accrue. An accrual is raised for the estimatedliability for Annual leave as a result of services rendered by employees up to the reporting date. The relatedexpense is recognised as employee benefit expenses in surplus or deficit.

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Termination benefits

The entity recognises termination benefits as a liability and an expense when the entity is demonstrably committedto either: terminate the employment of an employee or group of employees before the normal retirement date; or provide termination benefits as a result of an offer made in order to encourage voluntary redundancy.

The entity is demonstrably committed to a termination when the entity has a detailed formal plan for the terminationand is without realistic possibility of withdrawal. The detailed plan includes [as a minimum]: the location, function, and approximate number of employees whose services are to be terminated; the termination benefits for each job classification or function; and the time at which the plan will be implemented.

Implementation begins as soon as possible and the period of time to complete implementation is such thatmaterial changes to the plan are not likely.

Where termination benefits fall due more than 12 months after the reporting date, they are discounted using anappropriate discount rate. The rate used to discount the benefit reflects the time value of money. The currency andterm of the financial instrument selected to reflect the time value of money is consistent with the currency andestimated term of the benefit.

In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits shall bebased on the number of employees expected to accept the offer.

1.14 Provisions and contingencies

Provisions are recognised when: the entity has a present obligation as a result of a past event; 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.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the presentobligation at the reporting date.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement isdetermined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of anfrom exchange transactions with respect to any one item included in the same class of obligations may be small.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions aremeasured at the present value of the expenditures expected to be incurred to settle the obligation. The increase inthe provision due to passage of time is recognised as interest expense.

Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage oftime. This increase isrecognised as an interest expense.

A provision is used only for expenditures for which the provision was originally recognised.

The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and therisks specific to the liability.

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 ifthe entity settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for thereimbursement does not exceed the amount of the provision.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 38.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only bythe occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity.

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1.14 Provisions and contingencies (continued)

A contingent liability is: a possible obligation that arises from past events and whose existence will be confirmed only by the

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of theentity;

a present obligation that arises from past events but is not recognised because:- it is not probable that an outflow of resources embodying economic benefits or service potential will berequired to settle the obligation;- the amount of the obligation cannot be measured with sufficient reliability.

1.15 Commitments

Commitments are legal obligations to undertake in a given way, at a given time in the future. Usually commitmentsrefer to the requirement for parties to a futures contract to make or receive delivery of the underlying commoditieson the expiration date of the contract or through a valid purchase order.

1.16 Revenue from exchange transactions

Revenue is the gross inflow of economic benefits or service potential during the reporting period when thoseinflows 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, anddirectly gives approximately equal value (primarily in the form of goods, services or use of assets) to the otherparty 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.

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts andvolume rebates.

Sale of tender documents

Revenue from the sale of tender documents is recognised when all the following conditions have been satisfied: the entity has transferred to the purchaser the significant risks and rewards of ownership of the goods; the entity retains neither continuing managerial involvement to the degree usually associated with ownership

nor effective control over the goods sold; 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; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

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1.16 Revenue from exchange transactions (continued)

Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenueassociated with the transaction is recognised by reference to the stage of completion of the transaction at thereporting date. The outcome of a transaction can be estimated reliably when all the following conditions aresatisfied: 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 isrecognised on a straight line basis over the specified time frame unless there is evidence that some other methodbetter represents the stage of completion. When a specific act is much more significant than any other acts, therecognition 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 isrecognised 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.

Interest, royalties and dividends

Revenue arising from the use by others of entity assets yielding interest, royalties and dividends or similardistributions is recognised when: It is probable that the economic benefits or service potential associated with the transaction will flow to the

entity, and The amount of the revenue can be measured reliably.

Interest is recognised, in surplus or deficit, using the effective interest rate method.

Rental income

Revenue from the rental of property is recognised on a straight-line basis over the lease term in accordance with thesubstance of the relevant agreements. Lease incentives granted are recognised as an integral part of the total rentalincome.

1.17 Revenue from non-exchange transactions

Revenue comprises gross inflows of economic benefits or service potential received and receivable by an entity,which represents an increase in net assets, other than increases relating to contributions from owners.

Conditions on transferred assets are stipulations that specify that the future economic benefits or service potentialembodied in the asset is required to be consumed by the recipient as specified or future economic benefits orservice potential must be returned to the transferor.

Control of an asset arise when the entity can use or otherwise benefit from the asset in pursuit of its objectives andcan exclude or otherwise regulate the access of others to that benefit.

Exchange transactions are transactions in which one entity receives assets or services, or has liabilitiesextinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use ofassets) to another entity in exchange.

Expenses paid through the tax system are amounts that are available to beneficiaries regardless of whether or notthey pay taxes.

Fines are economic benefits or service potential received or receivable by entities, as determined by a court orother law enforcement body, as a consequence of the breach of laws or regulations.

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1.17 Revenue from non-exchange transactions (continued)

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, orgives value to another entity without directly receiving approximately equal value in exchange.

Restrictions on transferred assets are stipulations that limit or direct the purposes for which a transferred assetmay be used, but do not specify that future economic benefits or service potential is required to be returned to thetransferor if not deployed as specified.

Stipulations on transferred assets are terms in laws or regulation, or a binding arrangement, imposed upon the useof a transferred asset by entities external to the reporting entity.

Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other thantaxes.

Recognition

An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except tothe 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 andrecognises an amount of revenue equal to that reduction.

Revenue received from conditional grants, donations and funding are recognised as revenue to the extent that theentity has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent that thecriteria, conditions or obligations have not been met a liability is recognised. Once the conditions are met, revenue isrecognised and the corresponding liability is reduced.

Measurement

Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by theentity.

When, as a result of a non-exchange transaction, the entity recognises an asset, it also recognises revenue equivalentto the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required torecognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of theamount 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 issatisfied, 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 economicbenefits will flow to TEDA and when the amount can be measured reliably. A transfer is recognised as revenue to theextent that there is no further obligation arising from the receipt of transfer payment.


Gifts and donations, including goods in-kind

Gifts,sponsorships and donations, including goods in kind, are recognised as assets and revenue when it is probablethat the future economic benefits or service potential will flow to the entity and the fair value of the assets can bemeasured reliably.

1.18 Investment income

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in theStatement of Financial Performance, using the effective interest method.

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1.19 Borrowing costs

Borrowing costs are interest and other expenses incurred by an entity in connection with the borrowing of funds.

Borrowing costs are recognised as an expense in the period in which they are incurred.

1.20 Comparative figures

Prior year comparatives.

When the presentation or classification of items in the quartely financial statements is amended, prior periodcomparative amounts are also reclassified and restated, unless such comparative reclassification and / orrestatement 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, thecorrection 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 asfar as is practicable and the prior year comparatives are restated accordingly.

Where necessary, comparative figures have been reclassified to conform to changes in presentation in the currentyear.

1.21 Offset

Where a legally enforceable right of offset exists for recognised financial assets and financial liabilities, and thereis, an intention to settle the liability and realise the asset simultaneously, or to settle on a net basis, all relatedfinancial effects are offset.

Assets, liabilities, revenues and expenses were not offset, except where offsetting is either required or permitted bya Standard of GRAP.

1.22 Unauthorised, irregular, fruitless and wasteful expenditure

Unauthorised expenditure means any expenditure incurred by the municipality otherwise than in accordance withsection 15 or 11(3) of the Municipal Finance Management Act (Act No. 56 of 2003), and includes: overspending of the total amount appropriated in the municipality’s approved budget; overspending of the total amount appropriated for a vote in the approved budget; expenditure from a vote unrelated to the department or functional area covered by the vote; expenditure of money appropriated for a specific purpose, otherwise than for that specific purpose; spending of an allocation referred to in paragraph (b), (c) or (d) of the definition of ‘‘allocation’’ otherwise than

in accordance with any conditions of the allocation; or a grant by the municipality otherwise than in accordance with the Municipal Finance Management Act.

All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financialperformance in the year that the expenditure was incurred. The expenditure is classified in accordance with thenature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement offinancial performance.

Irregular expenditure means expenditure, other than unauthorised expenditure, incurred in contravention of or notin 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 forprocurement procedures in that provincial government.

Irregular expenditure is treated as expenditure in the statement of financial performance after approval per thedepartmental delegations.

Where irregular expenditure was incurred in the previous financial year and is only condoned in the followingfinancial year, the register and the disclosure note to the financial statements must be updated with the amountcondoned.

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1.22 Unauthorised, irregular, fruitless and wasteful expenditure (continued)

Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided hadreasonable care been exercised. Fruitless and wasteful expenditure must be recovered from the responsibleofficial (a debtor account should be raised), or the vote if the responsible official cannot be determined. It istreated as current assets in the statement of financial position until such expenditure is recovered from theresponsible official or funded from future revenue.

1.23 Budget information

TEDA is typically subject to budgetary limits in the form of transfers from the City of Tshwane, which is given effectthrough authorising legislation or similar.

General purpose financial reporting by entity shall provide information on whether resources were obtained andused in accordance with the legally adopted budget, where management considers a material variance 10% whichwarrants explanation refer to note 29.

The approved budget is prepared on a accrual basis and presented by economic classification linked toperformance outcome objectives.

The approved budget covers the fiscal period from 2017/06/01 to 2018/06/30.

The unaudited quartely financial statements are on accrual basis and the budget is on accrual basis of accountingtherefore a reconciliation between the statement of financial performance and the budget have been included inthe unaudited quartely financial statements. Refer to note 29 & 30.

Comparative information is not required.

1.24 Related parties

A related party is a person or an entity with the ability to control or jointly control the other party, or exercisesignificant influence over the other party, or vice versa, or an entity that is subject to common control, or jointcontrol.

TEDA consider the City of Tshwane (CoT) and its entities as 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 theyare required to perform such functions.

Close members of the family of a person are considered to be those family members who may be expected toinfluence, 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.

1.25 Events after reporting date

Events after reporting date are those events, both favourable and unfavourable, that occur between the reportingdate and the date when the financial statements are authorised for issue. Two types of events can be identified: those that provide evidence of conditions that existed at the reporting date (adjusting events after the

reporting date); and those that are indicative of conditions that arose after the reporting date (non-adjusting events after the

reporting date).

The entity will adjust the amount recognised in the financial statements to reflect adjusting events after thereporting date once the event occurred.

The entity will disclose the nature of the event and an estimate of its financial effect or a statement that suchestimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence theeconomic decisions of users taken on the basis of the financial statements.

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1.26 Prior year adjustments

Prior year adjustments are omissions from, and misstatements in, an entity’s financial statements for one or moreprior periods arising from failure to use or the misuse of reliable information that was available when the financialstatements for that period were issued, and could have been reasonably expected to be taken into account inthose financial statements.

All prior year adjustments are corrected retrospectively to the earliest period practicable. Comparative amounts forprior years in which the error occurred are restated.

1.27 Accummulated surplus

Retained earnings or accummulated surplus (deficit) are the cumulative effect of differences between revenue andexpenditure as per statement of financial performance.

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Notes to the Unaudited Quartely Financial Statements

2. New standards and interpretations

2.1 Standards and interpretations effective and adopted in the current period

In the current period, the entity has adopted the following standards and interpretations that are effective for thecurrent financial period and that are relevant to its operations:

2.2 Standards and Interpretations early adopted

The entity has chosen to early adopt the following standards and interpretations:

GRAP 12 (as amended 2016): Inventories

Amendments to the Standard of GRAP on Inventories resulted from inconsistencies in measurement requirements inGRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs. Other changesresulted from changes made to IPSAS 12 on Inventories (IPSAS 12) as a result of the IPSASB’s Improvements toIPSASs 2015 issued in March 2016.

The most significant changes to the Standard are: General improvements: To clarify the treatment of transaction costs and other costs incurred on assets acquired

in non-exchange transactions to be in line with the principle in GRAP 23 (paragraph .12) IPSASB amendments: To align terminology in GRAP 12 with that in IPSAS 12. The term “ammunition” in IPSAS

12 was replaced with the term “military inventories” and provides a description of what it comprises inaccordance with Government Finance Statistics terminology

The effective date of the amendment is for years beginning on or after 01 April 2018.

The entity has early adopted the amendment for the first time in the 2018 unaudited quartely financial statements.

The impact of the amendment is not material.

GRAP 17 (as amended 2016): Property, Plant and Equipment

Amendments to the Standard of GRAP on Property, Plant and Equipment resulted from editorial changes to theoriginal text and inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards ofGRAP in relation to the treatment of transaction costs. Other changes resulted from changes made to IPSAS 17 onProperty, Plant and Equipment (IPSAS 17) as a result of the IPSASB’s Improvements to IPSASs 2014 issued inJanuary 2015 and Improvements to IPSASs 2015 issued in March 2016.


in non-exchange transactions to be in line with the principle in GRAP 23 (paragraph .12); and To clarify themeasurement principle when assets may be acquired in exchange for a non-monetary asset or assets, or acombination of monetary and non-monetary assets.

IPSASB amendments: To clarify the revaluation methodology of the carrying amount and accumulateddepreciation when an item of property, plant, and equipment is revalued; To clarify acceptable methods ofdepreciating assets; To align terminology in GRAP 17 with that in IPSAS 17. The term “specialist militaryequipment” in IPSAS 17 was replaced with the term “weapon systems” and provides a description of what itcomprises in accordance with Government Finance Statistics terminology; and To define a bearer plant andinclude bearer plants within the scope of GRAP 17, while the produce growing on bearer plants will remain withinthe scope of GRAP 27.




GRAP 21 (as amended 2016): Impairment of non-cash-generating assets

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2. New standards and interpretations (continued)

Amendments to the Standard of GRAP on Impairment of Non-cash Generating Assets resulted from changes made toIPSAS 21 on Impairment of Non-Cash-Generating Assets (IPSAS 21) as a result of the IPSASB’s Impairment ofRevalued Assets issued in March 2016.

The most significant changes to the Standard are: IPSASB amendments: To update the Basis of conclusions and Comparison with IPSASs to reflect the IPSASB’s

recent decision on the impairment of revalued assets.




GRAP 26 (as amended 2016): Impairment of cash-generating assets

Amendments Changes to the Standard of GRAP on Impairment of Cash Generating Assets resulted from changesmade to IPSAS 26 on Impairment of Cash-Generating Assets (IPSAS 26) as a result of the IPSASB’s Impairment ofRevalued Assets issued in March 2016.






GRAP 31 (as amended 2016): Intangible Assets

Amendments to the Standard of GRAP on Intangible Assets resulted from inconsistencies in measurementrequirements in GRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs.Other changes resulted from changes made to IPSAS 31 on Intangible Assets (IPSAS 31) as a result of the IPSASB’sImprovements to IPSASs 2014 issued in January 2015.

The most significant changes to the Standard are: General improvements: To add the treatment of transaction costs and other costs incurred on assets acquired in

non-exchange transactions to be in line with the principle in GRAP 23 (paragraph .12); and To clarify themeasurement principle when assets may be acquired in exchange for a non-monetary asset or assets, or acombination of monetary and non-monetary assets

IPSASB amendments: To clarify the revaluation methodology of the carrying amount and accumulateddepreciation when an item of intangible assets is revalued; and To clarify acceptable methods of depreciatingassets




Directive 12: The Selection of an Appropriate Reporting Framework by Public Entities

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Historically, public entities have prepared financial statements in accordance with generally recognised accountingpractice, unless the Accounting Standards Board (the Board) approved the application of generally acceptedaccounting practice for that entity. “Generally accepted accounting practice” has been taken to mean Statements ofGenerally Accepted Accounting Practice (Statements of GAAP), or for certain entities, International FinancialReporting Standards (IFRSs) issued by the International Accounting Standards Board. Since Statements of GAAPhave been withdrawn from 1 December 2012, public entities will be required to apply another reporting framework inthe future.

The purpose of this Directive is to prescribe the criteria to be applied by public entities in selecting and applying anappropriate reporting framework.

The effective date of the standard is for years beginning on or after 01 April 2018.

The entity has early adopted the standard for the first time in the 2018 unaudited quartely financial statements.

The impact of the standard is not material.

GRAP 109: Accounting by Principals and Agents

The objective of this Standard is to outline principles to be used by an entity to assess whether it is party to a principal-agent arrangement, and whether it is a principal or an agent in undertaking transactions in terms of such anarrangement. The Standard does not introduce new recognition or measurement requirements for revenue, expenses,assets and/or liabilities that result from principal-agent arrangements. The Standard does however provide guidanceon whether revenue, expenses, assets and/or liabilities should be recognised by an agent or a principal, as well asprescribe what information should be disclosed when an entity is a principal or an agent.

It furthermore covers Definitions, Identifying whether an entity is a principal or agent, Accounting by a principal oragent, Presentation, Disclosure, Transitional provisions and Effective date.

The effective date of the standard is not yet set by the Minister of Finance.

The entity has early adopted the standard for the first time when the Minister sets the effective date for the standard.


2.3 Standards and interpretations issued, but not yet effective

The entity has not applied the following standards and interpretations, which have been published and are mandatoryfor the entity’s accounting periods beginning on or after 01 July 2018 or later periods:

GRAP 38: Disclosure of Interests in Other Entities

The objective of this Standard is to require an entity to disclose information that enables users of its financialstatements to evaluate: the nature of, and risks associated with, its interests in controlled entities, unconsolidated controlled entities, joint

arrangements and associates, and structured entities that are not consolidated; and the effects of those interests on its financial position, financial performance and cash flows.

It furthermore covers Definitions, Disclosing information about interests in other entities, Significant judgements andassumptions, Investment entity status, Interests in controlled entities, Interests in joint arrangements and associates,Interests in structured entities that are not consolidated, Non-qualitative ownership interests, Controlling interestsacquired with the intention of disposal, Transitional provisions and Effective date.


The entity expects to adopt the standard for the first time when the Minister sets the effective date for the standard.

The impact of this standard is currently being assessed.

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GRAP 20: Related parties

The objective of this standard is to ensure that a reporting entity’s unaudited quartely financial statements contain thedisclosures necessary to draw attention to the possibility that its financial position and surplus or deficit may havebeen affected by the existence of related parties and by transactions and outstanding balances with such parties.

An entity that prepares and presents financial statements under the accrual basis of accounting (in this standardreferred to as the reporting entity) shall apply this standard in: identifying related party relationships and transactions; identifying outstanding balances, including commitments, between an entity and its related parties; identifying the circumstances in which disclosure of the items in (a) and (b) is required; and determining the disclosures to be made about those items.

This standard requires disclosure of related party relationships, transactions and outstanding balances, includingcommitments, in the consolidated and separate financial statements of the reporting entity in accordance with theStandard of GRAP on Consolidated and Separate Financial Statements. This standard also applies to individualunaudited quartely financial statements.

Disclosure of related party transactions, outstanding balances, including commitments, and relationships with relatedparties may affect users’ assessments of the financial position and performance of the reporting entity and its ability todeliver agreed services, including assessments of the risks and opportunities facing the entity. This disclosure alsoensures that the reporting entity is transparent about its dealings with related parties.

The standard states that a related party is a person or an entity with the ability to control or jointly control the otherparty, or exercise significant influence over the other party, or vice versa, or an entity that is subject to commoncontrol, or joint control. As a minimum, the following are regarded as related parties of the reporting entity: A person or a close member of that person’s family is related to the reporting entity if that person:

- has control or joint control over the reporting entity;- has significant influence over the reporting entity;- is a member of the management of the entity or its controlling entity.

An entity is related to the reporting entity if any of the following conditions apply:- the entity is a member of the same economic entity (which means that each controlling entity, controlledentity and fellow controlled entity is related to the others);- one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member ofan economic entity of which the other entity is a member);- both entities are joint ventures of the same third party;- one entity is a joint venture of a third entity and the other entity is an associate of the third entity;- the entity is a post-employment benefit plan for the benefit of employees of either the entity or an entityrelated to the entity. If the reporting entity is itself such a plan, the sponsoring employers are related to the entity;- the entity is controlled or jointly controlled by a person identified in (a); and- a person identified in (a)(i) has significant influence over that entity or is a member of the management ofthat entity (or its controlling entity).

The standard furthermore states that related party transaction is a transfer of resources, services or obligationsbetween the reporting entity and a related party, regardless of whether a price is charged.

The standard elaborates on the definitions and identification of: Close member of the family of a person; Management; Related parties; Remuneration; and Significant influence

The standard sets out the requirements, inter alia, for the disclosure of: Control; Related party transactions; and Remuneration of management


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It is unlikely that the standard will have a material impact on the entity's unaudited quartely financial statements.

2.4 Standards and interpretations not yet effective or relevant

The following standards and interpretations have been published and are mandatory for the entity’s accountingperiods beginning on or after 01 July 2018 or later periods but are not relevant to its operations:

GRAP 34: Separate Financial Statements

The objective of this Standard is to prescribe the accounting and disclosure requirements for investments in controlledentities, joint ventures and associates when an entity prepares separate financial statements.

It furthermore covers Definitions, Preparation of separate financial statements, Disclosure, Transitional provisions andEffective date.


The entity does not envisage the adoption of the standard until such time as it becomes applicable to the entity'soperations.


GRAP 35: Consolidated Financial Statements

The objective of this Standard is to establish principles for the presentation and preparation of consolidated financialstatements when an entity controls one or more other entities.

To meet this objective, the Standard: requires an entity (the controlling entity) that controls one or more other entities (controlled entities) to present

consolidated financial statements; defines the principle of control, and establishes control as the basis for consolidation; sets out how to apply the principle of control to identify whether an entity controls another entity and therefore

must consolidate that entity; sets out the accounting requirements for the preparation of consolidated financial statements; and defines an investment entity and sets out an exception to consolidating particular controlled entities of an

investment entity.

It furthermore covers Definitions, Control, Accounting requirements, Investment entities: Fair value requirement,Transitional provisions and Effective date.




GRAP 36: Investments in Associates and Joint Ventures

The objective of this Standard is to prescribe the accounting for investments in associates and joint ventures and toset out the requirements for the application of the equity method when accounting for investments in associates andjoint ventures.

It furthermore covers Definitions, Significant influence, Equity method, Application of the equity method, Separatefinancial statements, Transitional provisions and Effective date.


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GRAP 37: Joint Arrangements

The objective of this Standard is to establish principles for financial reporting by entities that have an interest inarrangements that are controlled jointly (i.e. joint arrangements).

To meet this objective, the Standard defines joint control and requires an entity that is a party to a joint arrangement todetermine the type of joint arrangement in which it is involved by assessing its rights and obligations and to accountfor those rights and obligations in accordance with that type of joint arrangement.

It furthermore covers Definitions, Joint arrangements, Financial statements and parties to a joint arrangement,Separate financial statements, Transitional provisions and Effective date.




GRAP 110: Living and Non-living Resources

The objective of this Standard is to prescribe the: recognition, measurement, presentation and disclosure requirements for living resources; and disclosure requirements for non-living resources

It furthermore covers Definitions, Recognition, Measurement, Depreciation, Impairment, Compensation for impairment,Transfers, Derecognition, Disclosure, Transitional provisions and Effective date.




IGRAP 18: Interpretation of the Standard of GRAP on Recognition and Derecogntion of Land

This Interpretation of the Standards of GRAP applies to the initial recognition and derecognition of land in an entity’sfinancial statements. It also considers joint control of land by more than one entity.

When an entity concludes that it controls the land after applying the principles in this Interpretation of the Standards ofGRAP, it applies the applicable Standard of GRAP, i.e. the Standard of GRAP on Inventories, Investment Property(GRAP 16), Property, Plant and Equipment (GRAP 17) or Heritage Assets. As this Interpretation of the Standards ofGRAP does not apply to the classification, initial and subsequent measurement, presentation and disclosurerequirements of land, the entity applies the applicable Standard of GRAP to account for the land once control of theland has been determined. An entity also applies the applicable Standards of GRAP to the derecognition of land whenit concludes that it does not control the land after applying the principles in this Interpretation of the Standards ofGRAP.

In accordance with the principles in the Standards of GRAP, buildings and other structures on the land are accountedfor separately. These assets are accounted for separately as the future economic benefits or service potentialembodied in the land differs from those included in buildings and other structures. The recognition and derecognitionof buildings and other structures are not addressed in this Interpretation of the Standards of GRAP.

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The effective date of the interpretation is for years beginning on or after 01 April 2019.

The entity does not envisage the adoption of the interpretation until such time as it becomes applicable to the entity'soperations.

The impact of this interpretation is currently being assessed.

GRAP 16 (as amended 2016): Investment Property

Amendments to the Standard of GRAP on Investment Property resulted from editorial changes to the original text andinconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation tothe treatment of transaction costs. Other changes resulted from changes made to IAS 40 on Investment Property (IAS40) as a result of the IASB’s amendments on Annual Improvements to IFRSs 2011 – 2013 Cycle issued in December2013.



IASB amendments: To clarify the interrelationship between the Standards of GRAP on Transfer of FunctionsBetween Entities Not Under Common Control and Investment Property when classifying investment property orowner-occupied property.


The entity does not envisage the adoption of the amendment until such time as it becomes applicable to the entity'soperations.

It is unlikely that the amendment will have a material impact on the entity's unaudited quartely financial statements.

GRAP 106 (as amended 2016): Transfers of functions between entities not under common control

Amendments to the Standard of GRAP on Transfer of Functions Between Entities Not Under Common Controlresulted from changes made to IFRS 3 on Business Combinations (IFRS 3) as a result of the IASB’s amendments onAnnual Improvements to IFRSs 2010 – 2012 Cycle issued in December 2013.

The most significant changes to the Standard are: IASB amendments: To require contingent consideration that is classified as an asset or a liability to be measured

at fair value at each reporting period.




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Notes to the Unaudited Quartely Financial Statements31 December 30 June

Figures in Rand 2017 2017

3. Risk management

Financial risk management

The entity’s activities expose it to a variety of financial risks: credit risk and liquidity risk.

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. Furtherquantitative disclosures are included throughout these financial statements.The Board of Directors has overallresponsibility for the establishment and oversight of the entity’s risk management framework. The entity’s riskmanagement policies are established to identify and analyse the risks faced by the entity, to set appropriate risklimits and controls, and to monitor risks and adherence to limits. Risk management policies and systems arereviewed regularly to reflect changes in market conditions and the entity’s activities. The entity aims to develop adisciplined and constructive control environment in which all employees understand their roles and obligations.The quantitative disclosure is provided in this note.

Credit risk

Credit risk is the risk of financial loss to TEDA if a customer or counterparty to a financial instrument fails to meetits contractual obligations, and arises primarily receivables from exchange transactions.Credit risk is controlledthrough the application of a credit control measures and monitoring procedures.

TEDA limits its treasury counter-party exposure arising from money market by only dealing with well establishedfinancial institutions confirmed by the rating agency appointed by the Chief Financial Officer. TEDA only deals withfinancial institutions with a short term credit rating of A+ and long-term credit rating of AA- and higher at anInternational accredited creditrating agency.The entity's exposure is continuously monitored and the aggregatevalue of transactions concluded is spread amongst different types of approved investments and institutions.

Potential concentrations of credit risk consist mainly of cash and cash equivalents.

Exposure to credit risk

Credit risk consists mainly of cash deposits, cash equivalents and receivables from exchange transactions. Theentity only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party.

Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customerson an ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is noindependent rating, risk control assesses the credit quality of the customer, taking into account its financialposition, past experience and other factors. Individual risk limits are set based on internal or external ratings inaccordance with limits set by the board.

There has been no significant change during the financial year, or since the end of the financial year, to the entity'sexposure to credit risk, the approach of measurement or the objectives, policies and processes for managing thisrisk. The carrying amount of financial assets recorded in the financial statements, which is net of impairmentlosses,represents the entity's maximum exposure to credit risk.

Financial assets exposed to credit risk at period end were as follows:

`

Financial instrument 31 December2017

30 June2017

Trade and other receivables 203,306 241,409Cash and cash equivalents 14,175,698 7,407,812

14,175,698 11,886,625

At 31 December 2017, there is no significant concentration of credit risk that had not been adequately providedfor.

No security is held against Cash and Cash Equivalents.

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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 sufficientliquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptablelosses or risking damage to the entity’s reputation.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability offunding through an adequate amount of committed credit facilities and the ability to close out market positions.Due to the dynamic nature of the underlying businesses,the entity maintains flexibility in funding by maintainingavailability under committed credit lines.

The entity receives government grants every year based on budget requirements and additional revenue fromother undertakings.

Cash flow forecasts are prepared and adequately monitored.

The table below analyses the entity’s non-derivative financial instruments which will be settled on a gross basisinto relevant maturity groupings based on the remaining period at the statement of financial position to thecontractual maturity date. The amount disclosed in the table are the contractual undiscounted cash flows.Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

At 31 December 2017 Less than 1year

Between 1and 2 years


Over 5 years

Payables from exchange transactions 121,612 - - -

At 30 June 2017 Less than 1year



Over 5 years

Payables from exchange transactions 1,072,848 - - -

No financial guarantee contracts were issued by the entity and non-derivative finanacial liabilities as at thereporting date.

Market risk

Interest rate risk

TEDA has ensured that the entity’s income and operating cash flows are substantially independent of changes inmarket interest rates, due to the underlying nature of the business. TEDA has no interest bearing assets orliabilities. Accordingly the entity’s income and expenses are substantially independent of changes in markets ratesof interest. As a result, changes in the market rate of interest have a negligible impact on the financial performanceof the entity.

The entity’s interest rate risk arises from short-term investments. Investments are made at a quoted variable rateand the capital invested is secured/guarenteed which limits the entity's exposure to cash flow interest rate risk.Changes in the interest rate do not have significant effect on surplus and deficit.

Capital risk management

TEDA has developed systems and internal controls that are sufficient and effective in maintaining efficient levels ofboth components of working capital, current assets and current liabilities. The working capital managementensures that TEDA has sufficient cash flow in order to meet its short-term debt obligations and operatingexpenses.

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4. Receivables from exchange transactions

Board members and employees 18,104 18,104Trade and other receivables 217,306 203,307Interest income accrued 33,301 38,102Provision for impairment (18,104) (18,104)

250,607 241,409

No trade and other receivables has been pledeged as security by TEDA nor have they been ceded to a third party.

Credit quality of trade and other receivables

The credit quality of trade and other receivables that are neither past nor due nor impaired can be assessed byreference to historical information about counterparty default rates. The entity does not have direct customersother than ad hoc customers who are not subjected to stringent credit quality controls.

Trade and other receivables impaired

As of 31 December 2017, there were no trade and other receivables impaired.

An amount of R18,104 was provided for as at 31 December 2017.

The ageing of this amount is as follows:

Reconciliation of provision for impairment of trade and other receivables

Opening balance 18,104 18,104

The creation and release of provision for impaired receivables have been included in operating expenses insurplus or deficit (note ). Amounts charged to the allowance account are generally written off when there is noexpectation of recovery.

5. Consumer debtors disclosure

Gross balancesConsumer debtors - Trade and other receivables 203,307 550,265

Net balanceConsumer debtors - Trade and other receivables 203,307 550,265

Trade and other receivables> 365 days 203,306 203,306

6. VAT receivable

VAT 2,156,633 4,363,938

VAT receivable is calculated at the standard rate of 14% on all qualifiying goods and services delivered to/byTEDA.

VAT is calculated on all qualifiying goods and services delivered to/by TEDA on an accual basis monthly.

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7. Prepayments

Prepayments 397,454 9,580

Prepaid expenses relate to the branding expense paid in advance. The movement in the current period is due tothe recognition of some branding expenses.

8. Cash and cash equivalents

Cash and cash equivalents consist of the following:

Cash on hand 10,000 1,089Bank balances* 13,731,594 6,978,682Short-term deposits^ 434,104 428,041

14,175,698 7,407,812

*The entity has a primary and a salaries bank account with Standard Bank which is used to meet the entity'sobligations.

^The entity has a short-term deposit account with Investec Bank.

The total amount of undrawn facilities available for future operating activities andcommitments

11,980,389 7,407,812

Credit quality of cash at bank and short term deposits, excluding cash on hand

The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due norimpaired can be assessed by reference to external credit ratings (if available) or historical information aboutcounterparty default rates:

The carrying amount of cash and cash equivalents approximates fair value due to the relatively short-term maturityof these financial assets where changes in interest rate do not affect the financial position of the entity.

Cash and cash equivalents pledged as collateral

No cash and cash equivalents has been pledged as security as at 31 December 2017.

The entity had the following bank accounts

`

Account number /description

Bank statement balances Cash book balances

31 December2017

30 June 2017 30 June 2016 31 December2017

30 June 2017 30 June 2016

Standard Bank - ChequeAccount - Primary Account- 410791830

13,729,519 6,973,374 2,909,873 13,729,519 6,973,374 2,909,873

Standard Bank - ChequeAccount - Salaries Account- 011057491

2,076 5,307 6,059 2,076 5,307 6,059

Investec Bank- InvestmentAccount-50009061311

434,104 428,041 3,399,915 434,104 428,041 3,399,915

Total 14,165,699 7,406,722 6,315,847 14,165,699 7,406,722 6,315,847

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9. Taxation movement

Balance at beginning of the period (858,149) (1,176,843)Current tax for the period recognised in surplus or deficit 110,539 810,919Provisional tax paid (277,567) -Normal income tax paid - prior year (266,284) (492,225)Adjustment in respect of businesses sold and acquired during the periodincluding exchange rate movements

- -

Balance at end of the period (1,291,464) (858,149)

10. Operating lease asset (accrual)

Non-current liabilities (238,501) (158,483)

Operating lease liability is from the rental of offices used by TEDA situated at: 5th Floor; The Anker Building; 1279Mike Crawford Road; Centurion for the period of three years starting from 1st of November 2016. It is caused bythe escalation on rental payable at every anniversary date.

Refer to note 31 for a detailed discloser on operating lease as per GRAP 13 para 50.

11. Property, plant and equipment

2017 2017

Cost /Valuation

Accumulateddepreciation

andaccumulatedimpairment

Carrying value Cost /Valuation



Carrying value

Furniture and fixtures 1,674,174 (613,862) 1,060,312 1,674,174 (529,466) 1,144,708Motor vehicles 1,067,708 (966,235) 101,473 1,067,708 (858,587) 209,121Office equipment 1,190,306 (541,734) 648,572 1,190,306 (466,729) 723,577IT equipment 1,457,268 (1,098,801) 358,467 1,457,268 (964,246) 493,022Leasehold improvements 1,863,465 (661,370) 1,202,095 1,863,465 (337,914) 1,525,551Library material 11,488 (6,244) 5,244 11,488 (5,086) 6,402

Total 7,264,409 (3,888,246) 3,376,163 7,264,409 (3,162,028) 4,102,381

Reconciliation of property, plant and equipment - December 2017

Openingbalance

Depreciation Total

Furniture and fixtures 1,144,708 (84,396) 1,060,312Motor vehicles 209,121 (107,648) 101,473Office equipment 723,577 (75,005) 648,572IT equipment 493,022 (134,555) 358,467Leasehold improvements 1,525,551 (323,456) 1,202,095Library material 6,402 (1,158) 5,244

4,102,381 (726,218) 3,376,163

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11. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment - June 2017

Openingbalance

Additions Disposals Depreciation Total

Furniture and fixtures 1,307,186 - (1,706) (160,772) 1,144,708Motor vehicles 422,663 - - (213,542) 209,121Office equipment 916,676 - (36,142) (156,957) 723,577IT equipment 807,068 120,105 (107,399) (326,752) 493,022Leaseholdimprovements

885,819 1,863,464 - (1,223,732) 1,525,551

Library material 8,848 - - (2,446) 6,402

4,348,260 1,983,569 (145,247) (2,084,201) 4,102,381

Pledged as security

No carrying value of assets has been pledged as security as at the reporting date.

Expenditure incurred to repair and maintain property, plant and equipment

Expenditure incurred to repair and maintain property, plant and equipmentincluded in Statement of Financial PerformanceIT equipment minor screen - 4,638Motor vehicle repairs - 10,752

- 15,390

A register containing the information required by section 96 of the Municipal Finance Management Act is availablefor inspection at the registered office of the entity.

12. Intangible assets

2017 2017

Cost /Valuation

Accumulatedamortisation





Carrying value

Computer software 279,264 (163,328) 115,936 279,264 (139,098) 140,166

Reconciliation of intangible assets - December 2017

Openingbalance

Amortisation Total

Computer software 140,166 (24,230) 115,936

Reconciliation of intangible assets - June 2017

Openingbalance

Amortisation Total


Pledged as security

No intangible assets are pledged as security.

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12. Intangible assets (continued)

Impairment test

*Impairment test is performed by management annually on the 1st of June, on all fixed assets including intangibleassets using the following impairment indicators; Inspection of any physical damage, Disposal plans, Performance of the assets and Changes in technological environment

13. Payables from exchange transactions

Trade creditors 121,612 685,100Board of directors accrued expenses - 223,683Employees accrued expenses - 164,066

121,612 1,072,849

14. Provisions

Reconciliation of provisions - December 2017

OpeningBalance

Additions Utilisedduring the

year

Total

Employee benefit - Leave payentitlement

1,429,688 672,692 (459,543) 1,642,837

Reconciliation of provisions - June 2017

OpeningBalance


year

Total


1,314,430 2,952,656 (2,837,398) 1,429,688

Employee benefit - Leave pay entitlement

The provision is for leave entitlement not utilised by employees as at 31 December 2017 and it is only payable incash upon resignation. Leave days should be utilised within six mounts after the end of the cycle to avoid forfeitureand due operational demands employees are allowed to apply for an extension which creates uncertainties on theexpected timing on leave balances.

15. Unspent conditional grants and receipts

Unspent conditional grants and receipts comprises of:

Transfers from City of Tshwane 8,932,961 4,282,180

Movement during the period

Balance at the beginning of the period 4,282,180 4,028,029Additions during the period 27,075,000 54,149,999Income recognition during the period (22,424,219) (53,895,848)

8,932,961 4,282,180

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15. Unspent conditional grants and receipts (continued)

The unspent grant is a transfer from the CoT to enable the entity to achieve its strategic objectives as per theService Delivery Agreement and business plan.

The unspent grant balance of R8,932,961 will be utilised on commitments raised as at the reporting date.

16. Deferred tax

Deferred tax liability

Property, plant and equipment (446,354) (459,853)Provision for doubtful debts 3,802 3,802Provision for leave 459,994 400,313Unspent grant 2,795,160 1,199,010Section 24C allowance (2,795,160) (1,199,010)Straight lining of operating lease 61,016 44,375Prepayment - (2,682)

Total deferred tax liability 78,458 (14,045)

The deferred tax assets and the deferred tax liability relate to income tax in the same jurisdiction, and the lawallows net settlement. Therefore, they have been offset in the statement of financial position as follows:

Reconciliation of deferred tax liability

At beginning of year (14,045) (66,455)Increases (decrease) in tax loss available for set off against future taxable income- gross of valuation allowance

- (37,256)

Movement on property,plant and equipment as well as intangible assets 13,497 61,710Movement in provision for doubtful debts - (1,267)Movement in provision for leave pay 59,682 32,272Movement on unspent grant 1,596,149 71,162Section 24C allowance (1,596,149) (71,162)Operating lease straight lining 16,642 (2,047)Prepayment 2,682 (1,002)

78,458 (14,045)

17. Share capital / contributed capital

Authorised1000 Ordinary shares of R1 each 1,000 1,000

Reconciliation of number of shares issued:Reported as at 01 July 2017 1,000 1,000

IssuedOrdinary 1,000 1,000

18. Revenue

Sale of tender documents 18,860 11,404Rental and other income 8,893 1,155,116Interest earned - bank; current account 161,035 374,606Grant revenue recognised 22,424,219 53,895,848

22,613,007 55,436,974

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18. Revenue (continued)

The amount included in revenue arising from exchanges of goods orservices are as follows:Sale of tender documents 18,860 11,404Rental and other income 8,893 1,155,116Interest earned- bank current account 161,035 374,606

188,788 1,541,126

The amount included in revenue arising from non-exchange transactions isas follows:

Transfer revenueGrant revenue recognised 22,424,219 53,895,848

19. Employee related costs

Basic 13,226,877 26,897,790Medical aid - company contributions 452,976 1,022,176Leave pay charge movement 213,149 115,258Defined contribution plans 577,678 1,223,053Other payments* 56,839 118,286

14,527,519 29,376,563

*Other payments refer to garnishes.

Detailed information on the remuneration of key personnel refer to Note 20.

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Figures in Rand

20. Remuneration of Executive Managers and Board of Directors

Executive Managers

December 2017

Basic salary Cellphoneallowance

Car allowance Medical aid Definedcontributions

Total

Chief Executive Officer 927,434 18,000 - 39,432 - 984,866Chief Financial Officer 787,348 12,000 - - - 799,348Executive Manager Corporate Services 736,618 12,000 - 21,492 38,728 808,838Executive Manager Marketing & Communications* 102,622 2,000 20,000 8,109 2,121 134,852Executive Manager: Strategy and Performance Monitoring 527,837 8,000 - 24,156 38,324 598,317Executive Manager Projects Portfolio Management 581,075 12,000 54,000 10,314 44,834 702,223Company Secretary 634,966 12,000 - 28,968 - 675,934Executive Manager Investment Promotion and Funding 492,292 12,000 60,000 26,574 29,581 620,447

4,790,192 88,000 134,000 159,045 153,588 5,324,825

*The executive manager marketing and communication resigned in 31 July 2017.

June 2017

Basic salary Other Cellphoneallowance


Total

Chief Executive Officer 1,847,862 - 36,000 - 83,580 - 1,967,442Chief Financial Officer- 1,443,471 7,743 22,000 - - - 1,473,214Executive Manager Corporate Services 1,467,044 393,723 24,000 - 45,528 79,388 2,009,683Executive Manager Marketing &Communications

1,218,298 2,494 24,000 240,000 108,282 26,087 1,619,161

Executive Manager Strategy andPerformance Monitoring

1,043,001 - 24,000 - 51,192 78,559 1,196,752

Executive Manager Projects PortfolioManagement^

1,148,803 29,868 24,000 108,000 21,858 91,283 1,423,812

Company Secretary 1,265,088 - 24,000 - 61,392 - 1,350,480Executive Manager Trade and Investment 988,945 17,813 24,000 110,000 55,800 60,636 1,257,194

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Figures in Rand

20. Remuneration of Executive Managers and Board of Directors (continued)Executive Manager Investment Promotionand Funding^

605,662 787,446 10,000 90,000 32,160 - 1,525,268

11,028,174 1,239,087 212,000 548,000 459,792 335,953 13,823,006

Board of Directors

December 2017

Directors' fees Committeesfees

Audit andperformancecommittee

fees

Total

Prof LD Mosoma (Chairperson) 53,134 5,142 - 58,276Mr H Gouvelis 32,566 23,996 - 56,562Ms ZG Mpungose 23,996 34,280 - 58,276Ms SP Mzizi 23,996 32,566 - 56,562Mr FK Sibanda 32,566 29,138 - 61,704Ms N Singh 23,996 32,566 3,428 59,990Adv JL Thubakgale 32,566 35,994 - 68,560Mr MW Yates 32,566 29,138 - 61,704

255,386 222,820 3,428 481,634

June 2017



fees

Total

Prof LD Mosoma (Chairperson) 116,553 35,138 - 151,691Ms RS Bahula- Ermias 102,840 - - 102,840Mr H Gouvelis 97,698 17,569 - 115,267Ms ZG Mpungose 131,978 17,569 - 149,547Mr CR Mpyane 130,264 17,569 - 147,833

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Figures in Rand

20. Remuneration of Executive Managers and Board of Directors (continued)Ms SP Mzizi 116,552 17,569 - 134,121Mr FK Sibanda 82,272 17,569 - 99,841Ms N Singh 121,694 17,569 10,284 149,547Adv JL Thubakgale 109,696 17,569 - 127,265Mr MW Yates 142,262 17,569 - 159,831

1,151,809 175,690 10,284 1,337,783

21. Depreciation and amortisation

IT equipment 134,555 326,752Furniture and fixtures 84,397 160,771Office equipment 75,006 156,957Leasehold improvements 323,456 1,223,732Library material 1,158 2,446Motor vehicles 107,648 213,542Intangible assets 24,230 48,065

750,450 2,132,265

22. Project management

Agro processing-hub project - 1,395,000Area based development 418,550 -Revatilisation of inner city and design - 106,925Bioenergy facility - 2,193,512Clothing and textile hub - 1,146,823

418,550 4,842,260

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23. Investment promotion and funding

Events 39,145 667,704Marketing productions - 174,561Trade conferences and missions 745,815 976,157Public relations 214,306 68,231Trade and investment intelligence 476,187 728,772Investment attraction - 930,460Export development and promotion 246,391 375,527Branding 84,446 248,395

1,806,290 4,169,807

24. Loss on assets written off

Carrying amounts of assets written off - 145,247

The loss on assets written off is from lost, damaged and redundant assets that were reported and discoveredduring the asset verification process and they have been approved by the Board of Directors to be written off.

25. General expenses

Admin fees (pension and group risk) 78,450 165,948Advertising 193,227 47,290Auditors fees 227,446 518,744Bank charges 21,593 56,188Consulting and professional fees 323,935 721,579Catering and office refreshments 89,019 142,676Office space rental 2,096,543 5,245,701Insurance 77,971 119,451IT expenses 51,554 222,884Staff recruitment 13,799 8,618Printing and stationery 81,069 405,913Staff welfare 32,160 110,047Subscriptions and membership fees 17,525 19,889Communication expense 5,518 23,982Training and development 160,460 459,226Travel and subsistence 170,127 325,063Assets expensed less than R2000 - 1,852Electricity 62,525 320,330Conferences and delegation 5,108 10,716Repairs and maintenance - 15,390Compensation for Occupational Injuries and Diseases - 121,481Occupational Health and Safety - 200Publications and periodicals 199,103 154,142Other expenses 10,389 212,966

3,917,521 9,430,276

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26. Taxation

Major components of the tax expense

CurrentCurrent year 110,536 (37,256)

DeferredCurrent year (92,504) 55,200

18,032 17,944

Reconciliation of the tax expense

Reconciliation between applicable tax rate and average effective tax rate.

Applicable tax rate %28.00 %28.00

A provisional tax payment of R277,566 has been made as at 31 December 2017 for 2017/18 financial year.

27. Cash generated from operations

Surplus 693,011 1,950,450Adjustments for:Depreciation and amortisation 750,450 2,132,265Gain on sale of assets and liabilities - 145,247Movements in operating lease assets and accruals 80,018 (7,311)Movements in provisions 213,149 115,258Changes in working capital:Receivables from exchange transactions 38,103 326,581Prepayments (387,874) 141,743Payables from exchange transactions (951,239) (758,686)VAT 2,207,305 (1,491,730)Taxes (525,818) 266,285Unspent conditional grants and receipts 4,650,781 254,151

6,767,886 3,074,253

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28. Financial instruments disclosure

Categories of financial instruments

December 2017

Financial assets

At amortisedcost

Total

Trade and other receivables from exchange transactions 203,306 203,306Cash and cash equivalents 14,175,698 14,175,698

14,379,004 14,379,004


At amortisedcost

Total

Trade and other payables from exchange transactions 121,612 121,612

June 2017

Financial assets

At amortisedcost

Total


7,649,221 7,649,221


At amortisedcost

Total

Trade and other payables from exchange transactions 1,072,849 1,072,849

29. Budget differences

Material differences between budget and actual amounts

The entity's approved budget is R 61 million excluding the unspent grant of R4.2 million from 2016-17 financialyear. The approved budget covers the period from 01 July 2017 to 30 June 2018. The budget and accountingbases are the same. The financial statements are prepared on the accrual basis using a classification on thenature of expenses in the statement of financial performance.

A reconciliation between the actual amounts on the comparable basis as presented in the statement ofcomparison of budget and actual amounts and the actual amounts in the cash flow statement for the period ended31 December 2017 is presented below. The financial statements and budget documents are prepared for thesame period. There is a basis difference between the budget and the cash flow statement presented by thereconciliation statement below which is attributed to the purchase of propert, plant and equipment.

TEDA considers 10% a material variance in monitoring spending trends (used at the end of the financial year),where a detail explanation of the variance is important in order to aid planning and decision making. The budget isas per the economic classification and explanation on spending is as follows;

Revenue Analysis

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29. Budget differences (continued)

Revenue for the entity constitute of the grant received from CoT, rental income and other income, professionalfees: commission on capital projects, interest income from positive bank balance and short term investments andsale of tender documents. Grant revenue from CoT is transfered to TEDA every quarter in four equal installments. As at the reporting

date 50% of the budgeted revenue has been received and of the received amount 41% was realised asrevenue as a result of spending as per the approved 2017/18 business plan.

Other income emanates from the Service SETA refunds on training which are not budgeted for and thereceipts are adhoc.

Professional fees commission from capital projects revenue is envisaged from the management of projectsby TEDA onbehalf of CoT where the receipt as at the reporting date is nil which necesitates the reveiw of thebusiness plan pertaining to the planned revenue.

Interest income earned for the period is as planned. Revenue from the sale of tender documents is at 100% and was not budgeted for, these funds are adhoc in

nature.

Expenditure Analysis

Total expenditure for the period is at 36% of the total budget excluding capital expenditure, below is the detailedexpenditure analysis per type: Remuneration of employees is at 42% and is as planned at this stage of the financial year. Remuneration of board of directors is at 25% and is expected to increase in the next coming quarters. Depreciation and ammortisation are non-cash items and the expense is at 27% as planned. Investment promotion and funding spending is at 45% and is expected to increase in the coming quarters. Projects spending is at 8% with plans in place resulting in expenditure from the second quarter of the

financial year. General expenses spending is at 33% and is as planned. Taxation expense is as expected at 4%, although a total of R277,566 provisional tax has been paid as at 31

December 2017.

30. Reconciliation between budget and cash flow statement

Reconciliation of budget surplus/deficit with the net cash generated from operating, investing and financingactivities:

Operating activitiesActual amount as presented in the budget statement 693,011 1,950,451Basis differences 6,074,875 1,123,802

Net cash flows from operating activities 6,767,886 3,074,253

Investing activitiesBasis differences - (1,983,569)

Net cash flows from investing activities - (1,983,569)

Net cash generated from operating, investing and financing activities 6,767,886 1,090,684

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31. Commitments

Authorised operational expenditure

Already contracted for and authorised Commitments less than one year 3,122,331 1,306,283

Total operational commitmentsAlready contracted for and authorised 3,122,331 1,306,283

Operating leases commitmets - as lessee (expense)

Minimum lease payments due - within one year 4,158,626 4,039,764 - in second to fifth year inclusive 3,637,082 5,736,982

7,795,708 9,776,746

Operating lease commitment is the rental of offices used by TEDA situated at: 5th Floor; The Anker Building; 1279Mike Crawford Road; Centurion for the period of three years starting from 1st of November 2016. No contingentrent is payable.

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32. Related parties

`

RelationshipsBoard of directos and executive management Refer to directors' report noteControlling entity City of Tshwane Metropolitan MunicipalityMunicipal entity under the same control Housing Company TshwaneMunicipal entity under the same control Sandspruit Water Works Association

Related party balances

Amounts included in Trade receivable (Trade Payable) regarding relatedpartiesCity of Tshwane Metropolitan Municipality 2,900 2,900

Related party transactions

Transfers received from related partyCity of Tshwane Metropolitan Municipality 27,075,000 54,150,000

Rent paid to (received from) related partiesCity of Tshwane Metropolitan Municipality - 1,159,468

Expenses incurred and paid by the related party on behalf of TEDACoT (Interns remuneration) - 60,000

TEDA benefited from the use of the following services provided by the related party at no cost to TEDA: Risk mangement and internal audit resources from CoT, Audit and Performance Committee from CoT, Use of network, telecommunication, desktop and server support provided by CoT, mSCOA implementation (SAP) by CoT, OHS services and Records management from CoT, Insurance management by CoT and JOC Services from CoT, QPR - Performance Management Solution, and Cross check system.

Remuneration of management

Executive management and board members

*Refer to note 20

No loans were awarded to key management of TEDA during the year.

None of the key management has or had significant influence in any entity with whom TEDA had significant transactions duringthe year.

33. Fruitless and wasteful expenditure

Opening balance - 424,272Written off - (424,272)

- -

The following fruitless and wasteful expenditure were reported in the year ended 30 June 2016 and weresubsequently written off after the finalisation of the investigation in the period ended 30 June 2017 . Interest charged by SARS under the Voluntary Disclosure Programme (VDP) on VAT 201 returns that were

not submitted correctly amounted to R382,449 with only R12,824 payable. Understatement charge on VAT201 and EMP201 totaling to R41,823.

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34. Irregular expenditure TEDA did not incur irregular expenditure for the period ended 30 December 2017 and 30 June 2017.

35. Regulation 45

The financial statements of a municipality must disclose particulars of any award of more than R2 000 to a personwho 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 theprevious 6 months indicating: The name of that person, The capacity in which that person is in the service of the state/municipality; and The amount of the awardNo Awards were made in terms of regulation 45.

36. Additional disclosure in terms of Municipal Finance Management Act

Consultants/Professional Services

Opening balance 12,412 29,367Current year fees 323,935 721,579Amount paid - current year (323,935) (709,167)Amount paid - previous years (12,412) (29,367)

- 12,412

Audit fees

Current year fees 227,446 518,744Amount paid - current year (227,446) (518,744)

- -

PAYE and UIF

Current year payroll deductions 4,186,143 9,189,818Amount paid - current year (4,186,143) (9,189,818)

- -

Pension and Medical Aid Deductions

Current year raised 1,087,493 2,245,229Amount paid - current year (1,087,493) (2,245,229)

- -

The entity has a pension fund defined contribution plan with Momentum where employees pay a fixed amount andthe 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 paysfor the administration fees.

Medical Aid contributions are with Discovery Medical Aid Scheme and Bonitas Medical Aid Scheme.

VAT

VAT receivable 2,156,633 4,363,938

VAT is calculated on all qualifiying goods and services delivered to/by TEDA on an invoice basis. All VAT returnshave been submitted by the due date throughout the year.

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36. Additional disclosure in terms of Municipal Finance Management Act (continued)

Supply chain management regulations

Paragraph 12(1)(a)-(d)of Government gazette No. 27636 issued on 30 May 2005 states that a supply chainmanagement 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 procurementprocess in certain circumstances, provided that he records the reasons for any deviations and then reports them tothe 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 dispensewith 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.

TEDA deviated from the official procurement processes during the financial year were a s follow;-

IncidentRe-appointment of services provider to continue with the service - 142,100Contracts extended on a month to month basis with service providers due touncertainties emerging from the review of the entity by the City of Tshwane

124,968 2,587,694

124,968 2,729,794

37. Going concern

The financial statements have been prepared on the basis of accounting policies applicable to a going concern.This basis presumes that the funds will be available to finance future operations and that the realisation of assetsand settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.In assessing the going concern, the accounting authority considers financial position, potential sources of fundingand political factors.

We draw attention to the fact that at 31 December 2017, the entity had accumulated surplus of R 10,858,201 andthat the entity's total assets exceed its liabilities by R 10,859,201. TEDA continues to operate as a going concern more so now after the new City administration resolved not to

disestablish the entity.The entity’s business plan and budget for 2017/18 was approved by the shareholderand there is no indication or intention to cease funding.

38. Contingencies

The entity as at 30 December 2017 had the following contingent liabilities:

Litigation is in the process on a dispute with a service provider whereby the service provider is seekingdamages of R873,125 including legal costs and disbursements. The entity's lawyers and managementconsider the likelihood of the action against the entity being successful as unlikely.

39. Events after the reporting date

The directors are not aware of any matter or circumstance arising since the end of the period that requiresadjustment to or disclosure in the financial statements.

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Tshwane Economic Development Agency SOC Ltd(Registration number 2006/019396/30)

Unaudited Quartely financial statementsfor the period ended 31 December 2017

ANNEXURE D 240


General Information

Country of incorporation and domicile South Africa

Nature of business and principal activities Economic Development within the Tshwane Region

Directors Prof LD Mosoma (Chairperson)

Mr H Gouvelis

Ms ZG Mpungose

Ms SP Mzizi

Mr FK Sibanda

Ms N Singh

Adv JL Thubakgale

Mr MW Yates

Mr SD Mogaladi (Executive)

Mr Thami Mkhwanazi (Executive)

Business address 5th Floor, Anker Building

Mike Crawford Road

Centurion

0057

Postal address P O Box 11751

Zwartkop

0051

Parent Municipality City of Tshwane Metropolitan Municipality

Bankers Standard Bank

Auditors Auditor General of South Africa

Secretary Ms LV Mahaye

Company registration number 2006/019396/30

Tax reference number 9053619178

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Index

The reports and statements set out below comprise the unaudited quartely financial statements presented to the board ofdirectors:

Page

Accounting Officer's Responsibilities and Approval 3

Company Secretary’s Certification 4

Statement of Financial Position 5

Statement of Financial Performance 6

Statement of Changes in Net Assets 7

Cash Flow Statement 8

Statement of Comparison of Budget and Actual Amounts 9

Accounting Policies 10 - 31

Notes to the Unaudited Quartely Financial Statements 32 - 58

COID Compensation for Occupational Injuries and Diseases

GRAP Generally Recognised Accounting Practice

IAS International Accounting Standards

IMFO Institute of Municipal Finance Officers

IPSAS International Public Sector Accounting Standards

ME's Municipal Entities

MFMA Municipal Finance Management Act

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Accounting Officer's Responsibilities and Approval

The accounting officer is required by the Municipal Finance Management Act (Act 56 of 2003) (MFMA) and theCompanies Act No.71 of 2008, as amended, to maintain adequate accounting records and is responsible for thecontent and integrity of the quartely financial statements and related financial information included in this report. It isthe responsibility of the accounting officer to ensure that the quartely financial statements fairly represent the state ofaffairs of the municipal entity as at the end of the period and the results of its operations and cash flows for the periodended 31 December 2017.

The quartely financial statements have been prepared in accordance with the Standards of Generally RecognisedAccounting Practices (GRAP) including any interpretations, guidelines and directives issued by the AccountingStandards Board.

The quartely financial statements are based upon appropriate accounting policies consistently applied and supportedby reasonable and prudent judgments and estimates.

The accounting officer acknowledges that he is ultimately responsible for the system of internal financial controlsestablished by the municipal entity and places considerable importance on maintaining a strongly controlledenvironment. To enable the accounting officer to meet these responsibilities, the accounting officer sets standards forinternal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include theproper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequatesegregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the municipalentity and all employees are required to maintain the highest ethical standards in ensuring the municipal entity’sbusiness is conducted in a manner that in all reasonable circumstances is above reproach. The focus of riskmanagement in the municipal entity is on identifying, assessing, managing and monitoring all known forms of riskacross the municipal entity. While operating risks cannot be fully eliminated, the municipal entity endevours tominimise it by ensuring that appropriate infrastructure, controls, systems and ethical behavior are applied andmanaged within predetermined procedures and constraints.

The accounting officer is of the opinion, based on the information and explanations given by management that thesystem of internal control provides reasonable assurance that the financial records may be relied on for thepreparation of the quartely financial statements. However, any system of internal financial control can provide onlyreasonable, and not absolute, assurance against material misstatement or deficit.

The accounting officer has reviewed the municipal entity’s cash flow forecast for the period ended 31 December 2017and current financial position. In the light of this review the accounting officer is satisfied that the entity has access toadequate 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 annualfinancial statements.

The quartely financial statements have not been audited by the municipal entity's external auditors in accordance withSection 126(1) of the Local Government: Municipal Finance Management Act and Companies Act, 2008 (Act No 71 of2008).

The unaudited quartely financial statements set out on pages 4 to 58, which have been prepared on the going concernbasis, were approved by the board on 02 January 2018 and were signed by:

Mr TS Mkhwanazi (CA) SA Mr SD MogaladiDesignation Designation

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243


Company Secretary’s Certification

Declaration by the company secretary in respect of Section 88(2)(e) of the Companies Act

In terms of Section 88(2)(e) of the Companies Act 71 of 2008, as amended, I certify that the company has lodgedwith the Commissioner all of such returns as required in terms of the Companies Act and that such returns aretrue, correct and up to date.

Ms LV MahayeCompany SecretaryPlace of Signature

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244


Statement of Financial Position as at 31 December 201731 December 30 June


Assets

Current Assets

Receivables from exchange transactions 4&5 203,306 241,409

VAT receivable 6 2,156,633 4,363,938

Prepayments 7 397,454 9,580

Cash and cash equivalents 8 14,175,698 7,407,812

Normal taxation 9 1,291,464 858,149

18,224,555 12,880,888

Non-Current Assets

Property, plant and equipment 11 3,376,163 4,102,381

Intangible assets 12 115,936 140,166

Deferred tax 16 78,458 -

3,570,557 4,242,547

Total Assets 21,795,112 17,123,435

Liabilities

Current Liabilities

Payables from exchange transactions 13 121,612 1,072,849

Provisions 14 1,642,837 1,429,688

Unspent conditional grants and receipts 15 8,932,961 4,282,180

10,697,410 6,784,717

Non-Current Liabilities

Operating lease liability 10 238,501 158,483

Deferred tax 16 - 14,045

238,501 172,528

Total Liabilities 10,935,911 6,957,245

Net Assets 10,859,201 10,166,190

Share capital / contributed capital 17 1,000 1,000

Accumulated surplus 10,858,201 10,165,190

Total Net Assets 10,859,201 10,166,190

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Statement of Financial Performance6 months



Revenue

Revenue from exchange transactions

Sale of tender documents 18 18,860 11,404

Rental income and other income 18 8,893 1,155,116

Interest received 18 161,035 374,606

Total revenue from exchange transactions 188,788 1,541,126

Revenue from non-exchange transactions

Transfer revenue

Grant revenue recognised 18 22,424,219 53,895,848

Total revenue 18 22,613,007 55,436,974

Expenditure

Employee related costs 19 (14,527,519) (30,670,377)

Remuneration of board members 20 (481,634) (1,337,783)

Depreciation and amortisation 21 (750,450) (2,132,265)

Project management 22 (418,550) (4,842,260)

Investment promotion and funding 23 (1,806,290) (4,169,807)

Loss on disposal of assets 24 - (145,247)

General expenses 25 (3,917,521) (9,430,276)

Total expenditure (21,901,964) (52,728,015)

Surplus before taxation 711,043 2,708,959

Taxation 26 (18,032) (758,508)

Surplus (Deficit) for the year 693,011 1,950,451

Attributable to:

Owners of the controlling entity 693,011 1,950,451

Non-controlling interest - -

693,011 1,950,451

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Statement of Changes in Net Assets

Figures in Rand

Share capital /contributed

capital

Accumulatedsurplus

Total netassets

Balance at 01 July 2016 1,000 8,214,740 8,215,740Changes in net assetsSurplus (Deficit) for the year as previously reported - 1,950,450 1,950,450

Total changes - 1,950,450 1,950,450

Balance at 01 July 2017 1,000 10,165,190 10,166,190Changes in net assetsSurplus for the quarter - 693,011 693,011

Total changes - 693,011 693,011

Balance at 31 December 2017 1,000 10,858,201 10,859,201

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Cash Flow Statement6 months



Cash flows from operating activities

Receipts

Grants 27,075,000 54,150,000

Interest income 199,748 353,618

Rental and other income 8,893 1,505,782

Sale of tender documents 18,860 11,404

27,302,501 56,020,804

Payments

Compensation of employees and board fees (14,031,545) (31,865,117)

Suppliers (5,960,821) (19,179,158)

Taxes on surpluses 9 (543,851) (492,225)

VAT paid 1,602 (1,410,051)

(20,534,615) (52,946,551)

Net cash flows from operating activities 27 6,767,886 3,074,253

Cash flows from investing activities

Purchase of property, plant and equipment 11 - (1,983,569)

Net increase/(decrease) in cash and cash equivalents 6,767,886 1,090,684

Cash and cash equivalents at the beginning of the year 7,407,812 6,317,128

Cash and cash equivalents at the end of the year 8 14,175,698 7,407,812

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Statement of Comparison of Budget and Actual AmountsBudget on Accrual Basis

Figures in Rand

Approvedbudget

Adjustments Final Budget Actual amountson comparable

basis

Differencebetween finalbudget and

actual

Reference

Statement of Financial Performance

Revenue

Revenue from exchangetransactions

Sale of tender documents - - - 18,860 18,860 Note 29

Rental income and other income - - - 8,893 8,893 Note 29

Professional fees: commissionon capital projects

6,650,000 - 6,650,000 - (6,650,000) Note 29

Interest received 213,075 - 213,075 161,035 (52,040) Note 29

Total revenue from exchangetransactions

6,863,075 - 6,863,075 188,788 (6,674,287)

Revenue from non-exchangetransactions

Transfer revenue

City of Tshwane - transfers 54,150,000 - 54,150,000 22,424,219 (31,725,781) Note 29

Total revenue 61,013,075 - 61,013,075 22,613,007 (38,400,068)

Expenditure

Employees related costs (34,512,120) - (34,512,120) (14,527,519) 19,984,601 Note 29

Remuneration of boardmembers

(1,908,000) - (1,908,000) (481,634) 1,426,366 Note 29

Depreciation and amortisation (2,805,015) - (2,805,015) (750,450) 2,054,565 Note 29

Investment promotion andfunding

(4,019,051) - (4,019,051) (1,806,289) 2,212,762 Note 29

Project management (5,012,211) - (5,012,211) (418,550) 4,593,661 Note 29

General Expenses (11,956,678) - (11,956,678) (3,917,522) 8,039,156 Note 29

Total expenditure (60,213,075) - (60,213,075) (21,901,964) 38,311,111

Surplus before taxation 800,000 - 800,000 711,043 (88,957)

Taxation (500,000) - (500,000) (18,032) 481,968

Actual Amount on ComparableBasis as Presented in theBudget and ActualComparative Statement

300,000 - 300,000 693,011 184,214

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Accounting Policies

1. Presentation of Unaudited Quartely Financial Statements

The unaudited quartely financial statements have been prepared in accordance with the Standards of GenerallyRecognised Accounting Practice (GRAP), issued by the Accounting Standards Board in accordance with Section122(3) of the Municipal Finance Management Act (Act 56 of 2003).

These unaudited quartely financial statements have been prepared on an accrual basis of accounting and are inaccordance with historical cost convention as the basis of measurement, unless specified otherwise. They arepresented in South African Rand.

A summary of the significant accounting policies, which have been consistently applied in the preparation of theseunaudited quartely financial statements, are disclosed below.

1.1 Presentation currency

These unaudited quartely financial statements are presented in South African Rand, which is the functionalcurrency of the entity.

1.2 Key management personnel

The key management of TEDA refers to the Chief Executive Officer (CEO), Chief Financial Officer (CFO) andExecutive Managers.

1.3 Going concern assumption

These unaudited quartely financial statements have been prepared based on the expectation that the entity willcontinue to operate as a going concern for at least the next 12 months.

1.4 Significant judgements and sources of estimation uncertainty

In preparing the unaudited quartely financial statements, management is required to make estimates andassumptions that affect the amounts represented in the unaudited quartely financial statements and relateddisclosures. The areas involving a higher degree of judgment or complexity, or areas where assumptions andestimates are significant to the quartely financial statements are disclosed below.

Trade receivables

The entity assesses its trade receivables and loans and receivables for impairment at each statement of financialposition date. In determining whether an impairment loss should be recorded in the statement of financialperformance, the entity makes judgements as to whether there is observable data indicating a measurabledecrease in the estimated future cash flows from a financial asset. The entity assesses its trade receivables andloans 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 judgementsas to whether there is observable data indicating a measurable decrease in the estimated future cash flows from afinancial asset. Each receivable is reviewed individually at year end.

Impairment testing

The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest thatthe carrying amount may not be recoverable. If the recoverable amount is less than the carrying amount, animpairment loss should be recognised in the statement of financial performance.

Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows ofother assets and liabilities.If there are indications that impairment may have occurred, estimates are prepared ofexpected future cash flows for each group of assets. Expected future cash flows used to determine the value inuse of tangible assets are inherently uncertain and could materially change over time.

The recoverable amounts of cash-generating units and individual assets have been determined based on thehigher of value-in-use calculations and fair values less costs to sell. These calculations require the use ofestimates and assumptions. It is reasonably possible that the assumption may change which may then impact ourestimations and may then require a material adjustment to the carrying value of goodwill and tangible assets.

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Accounting Policies

1.4 Significant judgements and sources of estimation uncertainty (continued)

Provisions

Provisions were raised and management determined an estimate based on the information available. Additionaldisclosure of these estimates of provisions are included in note 14 - Provisions.

The provision is recognised at the best estimate of the consideration required to settle the obligation at the end ofthe reporting period, taking into account the risks and uncertainties surrounding the obligation. Where the effect oftime value of money is material, the provision is determined by discounting to present value.

Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There aremany transactions and calculations for which the ultimate tax determination is uncertain during the ordinary courseof business. The entity recognises liabilities for anticipated tax audit issues based on estimates of whetheradditional taxes will be due. Where the final tax outcome of these matters is different from the amounts that wereinitially recorded, such differences will impact the income tax and deferred tax provisions in the period in whichsuch determination is made.

The entity recognises the net future tax benefit related to deferred income tax assets to the extent that it isprobable that the deductible temporary differences will reverse in the foreseeable future. Assessing therecoverability of deferred income tax assets requires the entity to make significant estimates related toexpectations of future taxable income. Estimates of future taxable income are based on forecast cash flows fromoperations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows andtaxable income differ significantly from estimates, the ability of the entity to realise the net deferred tax assetsrecorded 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 theamount and timing of future taxable income. The entity establishes provisions, based on reasonable estimates, forpossible consequences of audits by the tax authorities of the respective countries in which it operates. The amountof such provisions is based on various factors, such as experience of previous tax audits and differinginterpretations 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 inthe respective company’s domicile. As the Company assesses the probability for litigation and subsequent cashfrom exchange transactions with respect to taxes as remote, no contingent liability has been recognised. Deferredtax assets are recognised for all unused tax losses to the extent that it is probable that taxable surplus will beavailable against which the losses can be utilised. Significant management judgement is required to determine theamount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxablesurplus together with future tax planning strategies.

Effective interest rate

The entity does not have significant exposure to interest rate risk and is not sensitive to interest rate changes thusthe prime interest rate is used to discount future cash flows.

Allowance for doubtful debts

On debtors an impairment loss is recognised in surplus and deficit when there is objective evidence that it isimpaired. The impairment is measured as the difference between the debtors carrying amount and the presentvalue of estimated future cash flows discounted at the effective interest rate, computed at initial recognition.

Property, plant and equipment

The entity’s management determines the estimated useful lives and residual values of property, plant andequipment. These assessments are made on an annual basis and based on the indicator-approach. Where anindication exist the entity shall revise its useful life and residual values as a change in accounting estimate.Administrative computer equipment, office furniture and equipment, and motor vehicles are not componentised.These assets do not have significant parts that are considered to have an estimated useful life different to theestimated useful life of the asset as a whole.

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Accounting Policies

1.5 Property, plant and equipment

Property, plant and equipment are tangible non-current assets that are held for use in the production or supply ofgoods or services, rental to others, or for administrative purposes, and are expected to be used during more than oneperiod.

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 is initially measured at cost.

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring theasset 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 through a non-exchange transaction, its cost is its fair value as at date of acquisition.

Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetaryassets, or a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value(the cost). If the acquired item's fair value was not determinable, it's deemed cost is the carrying amount of theasset(s) given up.

When significant components of an item of property, plant and equipment have different useful lives, they areaccounted for as separate items (major components) of property, plant and equipment.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costsincurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carryingamount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located isalso included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, andwhere the obligation arises as a result of acquiring the asset or using it for purposes other than the production ofinventories.

Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in thelocation and condition necessary for it to be capable of operating in the manner intended by management.

Items such as spare parts, standby equipment and servicing equipment are recognised when they meet the definitionof property, plant and equipment.

Major inspection costs which are a condition of continuing use of an item of property, plant and equipment and whichmeet the recognition criteria above are included as a replacement in the cost of the item of property, plant andequipment. Any remaining inspection costs from the previous inspection are derecognised.

Property, plant and equipment is 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 theirestimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows:


Furniture and fixtures 3 -16 years Motor vehicles 5 years Office equipment 5 -8 years IT equipment 3-5 years Leasehold improvements Lease termLibrary material 5 years

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Accounting Policies

1.5 Property, plant and equipment (continued)

The depreciable amount of an asset is allocated on a systematic basis over its useful life.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of theitem is depreciated separately.

The depreciation method used reflects the pattern in which the asset’s future economic benefits or service potentialare expected to be consumed by the entity. The depreciation method applied to an asset is reviewed at least at eachreporting date and, if there has been a significant change in the expected pattern of consumption of the futureeconomic benefits or service potential embodied in the asset, the method is changed to reflect the changed pattern.Such a change is accounted for as a change in an accounting estimate.

The entity assesses at each reporting date whether there is any indication that the entity expectations about theresidual value and the useful life of an asset have changed since the preceding reporting date. If any such indicationexists, the entity revises the expected useful life and/or residual value accordingly. The change is accounted for as achange in an accounting estimate.

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amountof another asset.

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no furthereconomic benefits or service potential expected from the use of the asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus ordeficit when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant andequipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of theitem.

Assets which the entity holds for rentals to others and subsequently routinely sell as part of the ordinary course ofactivities, are transferred to inventories when the rentals end and the assets are available-for-sale. Proceeds fromsales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows fromoperating activities in the cash flow statement.

The entity discloses expenditure to repair and maintain property, plant and equipment in the notes to the financialstatements (see note 25).

1.6 Intangible assets

An asset is identifiable if it either: is separable, i.e. 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, identifiable assets or liability,regardless of whether the entity intends to do so; or

arises from binding arrangements (including rights from contracts), regardless of whether those rights aretransferable or separable from the entity or from other rights and obligations.

A binding arrangement describes an arrangement that confers similar rights and obligations on the parties to it as if itwere in the form of a contract.

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 entity; and the cost or fair value of the asset can be measured reliably.

The entity assesses the probability of expected future economic benefits or service potential using reasonable andsupportable assumptions that represent management’s best estimate of the set of economic conditions that will existover the useful life of the asset.

Where an intangible asset is acquired through a non-exchange transaction, its initial cost at the date of acquisition ismeasured at its fair value as at that date.

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1.6 Intangible assets (continued)

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it isincurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognisedwhen: 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 noforeseeable 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 annually and wheneverthere is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on astraight 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 anindicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carryingamount is amortised over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are notrecognised as intangible assets.

Internally generated goodwill is not recognised as an intangible asset.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:


Computer software 6 years

Intangible assets are derecognised: on disposal; or when no future economic benefits or service potential are expected from its use or disposal.

The gain or loss arising from the derecognition of an intangible assets is included in surplus or deficit when the assetis derecognised (unless the Standard of GRAP on leases requires otherwise on a sale and leaseback).

1.7 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or aresidual interest of another entity.

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 potentiallyfavourable to the entity.

A financial liability is any liability that is a contractual obligation to:

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1.7 Financial instruments (continued) 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.

Derecognition is the removal of a previously recognised financial asset or financial liability from an entity’sstatement of financial position.

Financial instruments at amortised cost are non-derivative financial assets or non-derivative financial liabilities thathave fixed or determinable payments, excluding those instruments that: the entity designates at fair value at initial recognition; or are held for trading.

Classification

The entity has the following types of financial assets (classes and category) as reflected on the face of thestatement of financial position or in the notes thereto:Cash and cash equivalent Financial asset measured at amortised costReceivable from exchange transactions Financial asset measured at amortised costReceivable from non-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 thestatement of financial position or in the notes thereto:Payables from exchange transactions 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 entitybecomes 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 theseinstruments are measured as set out above.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financialliability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisationusing the effective interest method of any difference between that initial amount and the maturity amount, andminus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility in thecase of a financial asset.

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Subsequent measurement of financial assets and financial liabilities

The entity measures all financial assets and financial liabilities after initial recognition using the followingcategories: Financial instruments at amortised cost.

All financial assets measured at amortised cost, or cost, are subject to an impairment review.

Reclassification

The entity does not reclassify a financial instrument while it is issued or held unless it is: combined instrument that is required to be measured at fair value; or an investment in a residual interest that meets the requirements for reclassification.

If fair value can no longer be measured reliably for an investment in a residual interest measured at fair value, theentity reclassifies the investment from fair value to cost. The carrying amount at the date that fair value is no longeravailable becomes the cost.

If a reliable measure becomes available for an investment in a residual interest for which a measure waspreviously not available, and the instrument would have been required to be measured at fair value, the entityreclassifies the instrument from cost to fair value.

Gains and losses

For financial assets and financial liabilities measured at amortised cost or cost, a gain or loss is recognised insurplus or deficit when the financial asset or financial liability is derecognised or impaired, or through theamortisation process.

Impairment and uncollectibility of financial assets

The entity assess at the end of each reporting period whether there is any objective evidence that a financial assetor group of financial assets is impaired.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significantfinancial difficulty, default or delinquency in interest or principal payments, the probability that they will enterbankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease inthe estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Where a determination was made that the likelyhood of recovering the amounts is nil impairment loss will berecognised.

Financial assets measured at amortised cost:

If there is objective evidence that an impairment loss on financial assets measured at amortised cost has beenincurred, the amount of the loss is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows (excluding future credit losses that have not been incurred)discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduceddirectly or through the use of an allowance account. The amount of the loss is recognised in surplus or deficit.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be relatedobjectively to an event occurring after the impairment was recognised, the previously recognised impairment lossis reversed directly or by adjusting an allowance account. The reversal does not result in a carrying amount of thefinancial asset that exceeds what the amortised cost would have been had the impairment not been recognised atthe date the impairment is reversed. The amount of the reversal is recognised in surplus or deficit.

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Derecognition

Financial assets

The entity derecognises a financial asset only when: the contractual rights to the cash flows from the financial asset expire, are settled or waived; the entity transfers to another party substantially all of the risks and rewards of ownership of the financial

asset; or the entity, despite having retained some significant risks and rewards of ownership of the financial asset, has

transferred control of the asset to another party and the other party has the practical ability to sell the asset inits entirety to an unrelated third party, and is able to exercise that ability unilaterally and without needing toimpose additional restrictions on the transfer. In this case, the entity :- derecognise the asset; andrecognise separately any rights and obligations created or retained in the transfer.

The carrying amounts of the transferred asset are allocated between the rights or obligations retained and thosetransferred on the basis of their relative fair values at the transfer date. Newly created rights and obligations aremeasured at their fair values at that date. Any difference between the consideration received and the amountsrecognised and derecognised is recognised in surplus or deficit in the period of the transfer.

If the entity transfers a financial asset in a transfer that qualifies for derecognition in its entirety and retains the rightto service the financial asset for a fee, it recognise either a servicing asset or a servicing liability for that servicingcontract. If the fee to be received is not expected to compensate the entity adequately for performing the servicing,a servicing liability for the servicing obligation is recognised at its fair value. If the fee to be received is expected tobe more than adequate compensation for the servicing, a servicing asset is recognised for the servicing right at anamount determined on the basis of an allocation of the carrying amount of the larger financial asset.

If, as a result of a transfer, a financial asset is derecognised in its entirety but the transfer results in the entityobtaining a new financial asset or assuming a new financial liability, or a servicing liability, the entity recognise thenew financial asset, financial liability or servicing liability at fair value.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of theconsideration received is recognised in surplus or deficit.

If the transferred asset is part of a larger financial asset and the part transferred qualifies for derecognition in itsentirety, the previous carrying amount of the larger financial asset is allocated between the part that continues tobe recognised and the part that is derecognised, based on the relative fair values of those parts, on the date of thetransfer. For this purpose, a retained servicing asset is treated as a part that continues to be recognised. Thedifference between the carrying amount allocated to the part derecognised and the sum of the considerationreceived for the part derecognised is recognised in surplus or deficit.

If a transfer does not result in derecognition because the entity has retained substantially all the risks and rewardsof ownership of the transferred asset, the entity continue to recognise the transferred asset in its entirety andrecognise a financial liability for the consideration received. In subsequent periods, the entity recognises anyrevenue on the transferred asset and any expense incurred on the financial liability. Neither the asset, and theassociated liability nor the revenue, and the associated expenses are offset.


The entity removes a financial liability (or a part of a financial liability) from its statement of financial position whenit is extinguished — i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived.

An exchange between an existing borrower and lender of debt instruments with substantially different terms isaccounted for as having extinguished the original financial liability and a new financial liability is recognised.Similarly, a substantial modification of the terms of an existing financial liability or a part of it is accounted for ashaving extinguished the original financial liability and having recognised a new financial liability.

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The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished ortransferred to another party and the consideration paid, including any non-cash assets transferred or liabilitiesassumed, is recognised in surplus or deficit. Any liabilities that are waived, forgiven or assumed by another entityby way of a non-exchange transaction are accounted for in accordance with the Standard of GRAP on Revenuefrom Non-exchange Transactions (Taxes and Transfers).

1.8 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 substantiallyenacted 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) thetax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by theStatement 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 taxliability 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 thattaxable surplus will be available against which the deductible temporary difference can be utilised. A deferred taxasset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the timeof 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 and unused STC credits to the extentthat it is probable that future taxable surplus will be available against which the unused tax losses and unused STCcredits can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when theasset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantivelyenacted by the end of the reporting period.

Deferred tax is recognised using the net liability method. .

Taxation expenses and VAT

Current and deferred taxes are recognised as income or an expense and included in surplus or deficit for theperiod, except to the extent that the tax arises from: a transaction or event which is recognised, in the same or a different period, to net assets; or a business combination.

Current tax and deferred taxes are charged or credited to net assets if the tax relates to items that are credited orcharged, in the same or a different period, to net assets.

Revenue, expenses and assets are recognised net of the amount of VAT except: Where the VAT incurred on the purchase of assets or services is not recoverable from the taxation authority,

in which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expenseitem applicable; and

Receivables and payables that are stated with the amount of VAT included.

The net amount of VAT recoverable from or payable to, the taxation authority is reported separate from otherreceivables or payables in the statements of financial position.

The entity is registered with the South African Revenue Services (SARS) for VAT on the invoice basis, inaccordance with the VAT Act (Act No. 89 of 1991).

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1.9 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 toownership.

The difference between the amounts recognised as income and the contractual receipts are recognised as anoperating lease asset or liability.

Operating leases - lessor

Operating lease revenue is recognised as revenue on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of theleased asset and recognised as an expense over the lease term on the same basis as the lease revenue.

The aggregate cost of incentives is recognised as a reduction of rental revenue over the lease term on a straight-line basis.

The aggregate benefit of incentives is recognised as a reduction of rental expense over the lease term on astraight-line basis.

Income for leases is disclosed under revenue in statement of financial performance.

When assets are leased out under an operating lease, the asset is included in the statement of financial positionbased on the natureof the asset.

Operating leases - lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Thedifference between the amounts recognised as an expense and the contractual payments are recognised as anoperating lease asset or liability.

All leases that TEDA enters into as a lessee, and where the lessor retains substantially all the risks and rewards ofownership of the underlying asset, are classified as operating leases. Payments made under operating leases arecharged against revenue on a straight-line basis over the term of the lease.

1.10 Income received in advanced and prepayments

In the case of comprehensive and/or medium and long-term contracts, advance payments are negotiated withcustomers and suppliers of the entity. These funds are paid by the entity to secure the right of use of the goodsand/or services as agreed in the contract. Advance payments received are recognised as a current liability for anamount that is estimated to be settled within one year from reporting date and as a non-current liability for theamount to be settled after one year from reporting date. Advance payments made are recognised as a currentassets for an amount (of an expected benefit) that is estimated to be realised within one year from reporting dateand as a non-current assets for the amount (of an expected benefit) to be realised after one year from reportingdate.

Subsequently advance payments are expensed upon receipt of an agreed goods and/ or service, and in the caseof advance receipts are recognised as revenue when the entity has delivered as agreed in the statement offinancial performance.

1.11 Impairment of cash-generating assets

Cash-generating assets are assets managed with the objective of generating a commercial return. An assetgenerates a commercial return when it is deployed in a manner consistent with that adopted by a profit-orientedentity.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematicrecognition of the loss of the asset’s future economic benefits or service potential through depreciation(amortisation).

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Carrying amount is the amount at which an asset is recognised in the statement of financial position afterdeducting any accumulated depreciation and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets managed with the objective of generating acommercial return that generates cash inflows from continuing use that are largely independent of the cash inflowsfrom other assets or groups of assets.

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costsand income tax expense.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transactionbetween knowledgeable, willing parties, less the costs of disposal.

Recoverable amount of an asset or a cash-generating unit is the higher its fair value less costs to sell and its valuein use.

Useful life is either:(a) the period of time over which an asset is expected to be used by the entity; or(b) the number of production or similar units expected to be obtained from the asset by the entity.

Identification

When the carrying amount of a cash-generating asset exceeds its recoverable amount, it is impaired.

The entity assesses at each reporting date whether there is any indication that a cash-generating asset may beimpaired. If any such indication exists, the entity estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the entity also test a cash-generating intangible assetwith an indefinite useful life or a cash-generating intangible asset not yet available for use for impairment annuallyby comparing its carrying amount with its recoverable amount. This impairment test is performed at the same timeevery year. If an intangible asset was initially recognised during the current reporting period, that intangible assetwas tested for impairment before the end of the current reporting period.

Value in use

Value in use of a cash-generating asset is the present value of the estimated future cash flows expected to bederived from the continuing use of an asset and from its disposal at the end of its useful life.

When estimating the value in use of an asset, the entity estimates the future cash inflows and outflows to bederived from continuing use of the asset and from its ultimate disposal and the entity applies the appropriatediscount rate to those future cash flows.

Basis for estimates of future cash flows

In measuring value in use the entity: base cash flow projections on reasonable and supportable assumptions that represent management's best

estimate of the range of economic conditions that will exist over the remaining useful life of the asset. Greaterweight is given to external evidence;

base cash flow projections on the most recent approved financial budgets/forecasts, but excludes anyestimated future cash inflows or outflows expected to arise from future restructuring's or from improving orenhancing the asset's performance. Projections based on these budgets/forecasts covers a maximum periodof five years, unless a longer period can be justified; and

estimate cash flow projections beyond the period covered by the most recent budgets/forecasts byextrapolating the projections based on the budgets/forecasts using a steady or declining growth rate forsubsequent years, unless an increasing rate can be justified. This growth rate does not exceed the long-termaverage growth rate for the products, industries, or country or countries in which the entity operates, or for themarket in which the asset is used, unless a higher rate can be justified.

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Composition of estimates of future cash flows

Estimates of future cash flows include: projections of cash inflows from the continuing use of the asset; projections of cash outflows that are necessarily incurred to generate the cash inflows from continuing use of

the asset (including cash outflows to prepare the asset for use) and can be directly attributed, or allocated ona reasonable and consistent basis, to the asset; and

net cash flows, if any, to be received (or paid) for the disposal of the asset at the end of its useful life.

Estimates of future cash flows exclude: cash inflows or outflows from financing activities; and income tax receipts or payments.

The estimate of net cash flows to be received (or paid) for the disposal of an asset at the end of its useful life is theamount that the entity expects to obtain from the disposal of the asset in an arm's length transaction betweenknowledgeable, willing parties, after deducting the estimated costs of disposal.

Recognition and measurement (individual asset)

If the recoverable amount of a cash-generating asset is less than its carrying amount, the carrying amount of theasset is reduced to its recoverable amount. This reduction is an impairment loss.

An impairment loss is recognised immediately in surplus or deficit.

Any impairment loss of a revalued cash-generating asset is treated as a revaluation decrease.

When the amount estimated for an impairment loss is greater than the carrying amount of the cash-generatingasset to which it relates, the entity recognises a liability only to the extent that is a requirement in the Standard ofGRAP.

After the recognition of an impairment loss, the depreciation (amortisation) charge for the cash-generating asset isadjusted in future periods to allocate the cash-generating asset’s revised carrying amount, less its residual value (ifany), on a systematic basis over its remaining useful life.

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Cash-generating units

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individualasset. If it is not possible to estimate the recoverable amount of the individual asset, the entity determines therecoverable amount of the cash-generating unit to which the asset belongs (the asset's cash-generating unit).

If an active market exists for the output produced by an asset or group of assets, that asset or group of assets isidentified as a cash-generating unit, even if some or all of the output is used internally. If the cash inflowsgenerated by any asset or cash-generating unit are affected by internal transfer pricing, the entity usemanagement's best estimate of future price(s) that could be achieved in arm's length transactions in estimating: the future cash inflows used to determine the asset's or cash-generating unit's value in use; and the future cash outflows used to determine the value in use of any other assets or cash-generating units that

are affected by the internal transfer pricing.

Cash-generating units are identified consistently from period to period for the same asset or types of assets,unless a change is justified.

The carrying amount of a cash-generating unit is determined on a basis consistent with the way the recoverableamount of the cash-generating unit is determined.

An impairment loss is recognised for a cash-generating unit if the recoverable amount of the unit is less than thecarrying amount of the unit. The impairment is allocated to reduce the carrying amount of the cash-generatingassets of the unit on a pro rata basis, based on the carrying amount of each asset in the unit. These reductions incarrying amounts are treated as impairment losses on individual assets.

In allocating an impairment loss, the entity does not reduce the carrying amount of an asset below the highest of: its fair value less costs to sell (if determinable); its value in use (if determinable); and zero.

The amount of the impairment loss that would otherwise have been allocated to the asset is allocated pro rata tothe other cash-generating assets of the unit.

Where a non-cash-generating asset contributes to a cash-generating unit, a proportion of the carrying amount ofthat non-cash-generating asset is allocated to the carrying amount of the cash-generating unit prior to estimation ofthe recoverable amount of the cash-generating unit.

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Reversal of impairment loss

The entity assess at each reporting date whether there is any indication that an impairment loss recognised in priorperiods for a cash-generating asset may no longer exist or may have decreased. If any such indication exists, theentity estimates the recoverable amount of that asset.

An impairment loss recognised in prior periods for a cash-generating asset is reversed if there has been a changein the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.The carrying amount of the asset is increased to its recoverable amount. The increase is a reversal of animpairment loss. The increased carrying amount of an asset attributable to a reversal of an impairment loss doesnot exceed the carrying amount that would have been determined (net of depreciation or amortisation) had noimpairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss for a cash-generating asset is recognised immediately in surplus or deficit.

Any reversal of an impairment loss of a revalued cash-generating asset is treated as a revaluation increase.

After a reversal of an impairment loss is recognised, the depreciation (amortisation) charge for the cash-generatingasset is adjusted in future periods to allocate the cash-generating asset’s revised carrying amount, less its residualvalue (if any), on a systematic basis over its remaining useful life.

A reversal of an impairment loss for a cash-generating unit is allocated to the cash-generating assets of the unitpro rata with the carrying amounts of those assets. These increases in carrying amounts are treated as reversalsof impairment losses for individual assets. No part of the amount of such a reversal is allocated to a non-cash-generating asset contributing service potential to a cash-generating unit.

In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset is notincreased above the lower of: its recoverable amount (if determinable); and the carrying amount that would have been determined (net of amortisation or depreciation) had no

impairment loss been recognised for the asset in prior periods.

The amount of the reversal of the impairment loss that would otherwise have been allocated to the asset isallocated pro rata to the other assets of the unit.

1.12 Share capital / contributed capital

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting allof its liabilities.

1.13 Employee benefits

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the relatedservice is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans ifthe entity has a present legal or constructive obligation to pay this amount as a result of past service provided bythe employee and the obligation can be estimated reliably.

Medical benefits

The entity provides medical benefits for its employees through defined contribution plans. The entity has no furtherpayment once contributions have been paid. The contributions are recognised as employee benefit expenses inprofit or loss in the periods during which the services are rendered by the employees.

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Post-employment benefits: Defined contribution plans

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into aseparate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund doesnot hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

When an employee has rendered service to the entity during a reporting period, the entity recognise thecontribution payable to a defined contribution plan in exchange for that service: as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid

exceeds the contribution due for service before the reporting date, an entity recognise that excess as anasset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in futurepayments or a cash refund; and

as an expense, unless another Standard requires or permits the inclusion of the contribution in the cost of anasset.

Where contributions to a defined contribution plan do not fall due wholly within twelve months after the end of thereporting period in which the employees render the related service, they are discounted. The rate used to discountreflects the time value of money. The currency and term of the financial instrument selected to reflect the timevalue of money is consistent with the currency and estimated term of the obligation.

Bonus plans

The entity recognises a provision for performance bonuses where contractually obliged or where there is a pastpractice that has created a constructive obligation as a result of services received from the employee and theobligation can be measured reliably.

The entity also recognises a libility for bonuses (13th Cheque) for employees who have structured their salaries assuch.

Leave entitlement

Employee entitlements to annual leave are recognised when they accrue. An accrual is raised for the estimatedliability for Annual leave as a result of services rendered by employees up to the reporting date. The relatedexpense is recognised as employee benefit expenses in surplus or deficit.

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Termination benefits

The entity recognises termination benefits as a liability and an expense when the entity is demonstrably committedto either: terminate the employment of an employee or group of employees before the normal retirement date; or provide termination benefits as a result of an offer made in order to encourage voluntary redundancy.

The entity is demonstrably committed to a termination when the entity has a detailed formal plan for the terminationand is without realistic possibility of withdrawal. The detailed plan includes [as a minimum]: the location, function, and approximate number of employees whose services are to be terminated; the termination benefits for each job classification or function; and the time at which the plan will be implemented.

Implementation begins as soon as possible and the period of time to complete implementation is such thatmaterial changes to the plan are not likely.

Where termination benefits fall due more than 12 months after the reporting date, they are discounted using anappropriate discount rate. The rate used to discount the benefit reflects the time value of money. The currency andterm of the financial instrument selected to reflect the time value of money is consistent with the currency andestimated term of the benefit.

In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits shall bebased on the number of employees expected to accept the offer.

1.14 Provisions and contingencies

Provisions are recognised when: the entity has a present obligation as a result of a past event; 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.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the presentobligation at the reporting date.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement isdetermined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of anfrom exchange transactions with respect to any one item included in the same class of obligations may be small.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions aremeasured at the present value of the expenditures expected to be incurred to settle the obligation. The increase inthe provision due to passage of time is recognised as interest expense.

Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage oftime. This increase isrecognised as an interest expense.

A provision is used only for expenditures for which the provision was originally recognised.

The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and therisks specific to the liability.

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 ifthe entity settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for thereimbursement does not exceed the amount of the provision.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 38.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only bythe occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity.

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1.14 Provisions and contingencies (continued)

A contingent liability is: a possible obligation that arises from past events and whose existence will be confirmed only by the

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of theentity;

a present obligation that arises from past events but is not recognised because:- it is not probable that an outflow of resources embodying economic benefits or service potential will berequired to settle the obligation;- the amount of the obligation cannot be measured with sufficient reliability.

1.15 Commitments

Commitments are legal obligations to undertake in a given way, at a given time in the future. Usually commitmentsrefer to the requirement for parties to a futures contract to make or receive delivery of the underlying commoditieson the expiration date of the contract or through a valid purchase order.

1.16 Revenue from exchange transactions

Revenue is the gross inflow of economic benefits or service potential during the reporting period when thoseinflows 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, anddirectly gives approximately equal value (primarily in the form of goods, services or use of assets) to the otherparty 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.

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts andvolume rebates.

Sale of tender documents

Revenue from the sale of tender documents is recognised when all the following conditions have been satisfied: the entity has transferred to the purchaser the significant risks and rewards of ownership of the goods; the entity retains neither continuing managerial involvement to the degree usually associated with ownership

nor effective control over the goods sold; 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; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

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Accounting Policies

1.16 Revenue from exchange transactions (continued)

Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenueassociated with the transaction is recognised by reference to the stage of completion of the transaction at thereporting date. The outcome of a transaction can be estimated reliably when all the following conditions aresatisfied: 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 isrecognised on a straight line basis over the specified time frame unless there is evidence that some other methodbetter represents the stage of completion. When a specific act is much more significant than any other acts, therecognition 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 isrecognised 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.

Interest, royalties and dividends

Revenue arising from the use by others of entity assets yielding interest, royalties and dividends or similardistributions is recognised when: It is probable that the economic benefits or service potential associated with the transaction will flow to the

entity, and The amount of the revenue can be measured reliably.

Interest is recognised, in surplus or deficit, using the effective interest rate method.

Rental income

Revenue from the rental of property is recognised on a straight-line basis over the lease term in accordance with thesubstance of the relevant agreements. Lease incentives granted are recognised as an integral part of the total rentalincome.

1.17 Revenue from non-exchange transactions

Revenue comprises gross inflows of economic benefits or service potential received and receivable by an entity,which represents an increase in net assets, other than increases relating to contributions from owners.


Control of an asset arise when the entity can use or otherwise benefit from the asset in pursuit of its objectives andcan exclude or otherwise regulate the access of others to that benefit.

Exchange transactions are transactions in which one entity receives assets or services, or has liabilitiesextinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use ofassets) to another entity in exchange.

Expenses paid through the tax system are amounts that are available to beneficiaries regardless of whether or notthey pay taxes.

Fines are economic benefits or service potential received or receivable by entities, as determined by a court orother law enforcement body, as a consequence of the breach of laws or regulations.

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1.17 Revenue from non-exchange transactions (continued)

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, orgives value to another entity without directly receiving approximately equal value in exchange.

Restrictions on transferred assets are stipulations that limit or direct the purposes for which a transferred assetmay be used, but do not specify that future economic benefits or service potential is required to be returned to thetransferor if not deployed as specified.

Stipulations on transferred assets are terms in laws or regulation, or a binding arrangement, imposed upon the useof a transferred asset by entities external to the reporting entity.

Transfers are inflows of future economic benefits or service potential from non-exchange transactions, other thantaxes.

Recognition

An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except tothe 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 andrecognises an amount of revenue equal to that reduction.

Revenue received from conditional grants, donations and funding are recognised as revenue to the extent that theentity has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent that thecriteria, conditions or obligations have not been met a liability is recognised. Once the conditions are met, revenue isrecognised and the corresponding liability is reduced.

Measurement

Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by theentity.

When, as a result of a non-exchange transaction, the entity recognises an asset, it also recognises revenue equivalentto the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required torecognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of theamount 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 issatisfied, 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 economicbenefits will flow to TEDA and when the amount can be measured reliably. A transfer is recognised as revenue to theextent that there is no further obligation arising from the receipt of transfer payment.


Gifts and donations, including goods in-kind

Gifts,sponsorships and donations, including goods in kind, are recognised as assets and revenue when it is probablethat the future economic benefits or service potential will flow to the entity and the fair value of the assets can bemeasured reliably.

1.18 Investment income

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in theStatement of Financial Performance, using the effective interest method.

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1.19 Borrowing costs

Borrowing costs are interest and other expenses incurred by an entity in connection with the borrowing of funds.

Borrowing costs are recognised as an expense in the period in which they are incurred.

1.20 Comparative figures

Prior year comparatives.

When the presentation or classification of items in the quartely financial statements is amended, prior periodcomparative amounts are also reclassified and restated, unless such comparative reclassification and / orrestatement 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, thecorrection 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 asfar as is practicable and the prior year comparatives are restated accordingly.

Where necessary, comparative figures have been reclassified to conform to changes in presentation in the currentyear.

1.21 Offset

Where a legally enforceable right of offset exists for recognised financial assets and financial liabilities, and thereis, an intention to settle the liability and realise the asset simultaneously, or to settle on a net basis, all relatedfinancial effects are offset.

Assets, liabilities, revenues and expenses were not offset, except where offsetting is either required or permitted bya Standard of GRAP.

1.22 Unauthorised, irregular, fruitless and wasteful expenditure

Unauthorised expenditure means any expenditure incurred by the municipality otherwise than in accordance withsection 15 or 11(3) of the Municipal Finance Management Act (Act No. 56 of 2003), and includes: overspending of the total amount appropriated in the municipality’s approved budget; overspending of the total amount appropriated for a vote in the approved budget; expenditure from a vote unrelated to the department or functional area covered by the vote; expenditure of money appropriated for a specific purpose, otherwise than for that specific purpose; spending of an allocation referred to in paragraph (b), (c) or (d) of the definition of ‘‘allocation’’ otherwise than

in accordance with any conditions of the allocation; or a grant by the municipality otherwise than in accordance with the Municipal Finance Management Act.

All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financialperformance in the year that the expenditure was incurred. The expenditure is classified in accordance with thenature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement offinancial performance.

Irregular expenditure means expenditure, other than unauthorised expenditure, incurred in contravention of or notin 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 forprocurement procedures in that provincial government.

Irregular expenditure is treated as expenditure in the statement of financial performance after approval per thedepartmental delegations.

Where irregular expenditure was incurred in the previous financial year and is only condoned in the followingfinancial year, the register and the disclosure note to the financial statements must be updated with the amountcondoned.

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1.22 Unauthorised, irregular, fruitless and wasteful expenditure (continued)

Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided hadreasonable care been exercised. Fruitless and wasteful expenditure must be recovered from the responsibleofficial (a debtor account should be raised), or the vote if the responsible official cannot be determined. It istreated as current assets in the statement of financial position until such expenditure is recovered from theresponsible official or funded from future revenue.

1.23 Budget information

TEDA is typically subject to budgetary limits in the form of transfers from the City of Tshwane, which is given effectthrough authorising legislation or similar.

General purpose financial reporting by entity shall provide information on whether resources were obtained andused in accordance with the legally adopted budget, where management considers a material variance 10% whichwarrants explanation refer to note 29.

The approved budget is prepared on a accrual basis and presented by economic classification linked toperformance outcome objectives.

The approved budget covers the fiscal period from 2017/06/01 to 2018/06/30.

The unaudited quartely financial statements are on accrual basis and the budget is on accrual basis of accountingtherefore a reconciliation between the statement of financial performance and the budget have been included inthe unaudited quartely financial statements. Refer to note 29 & 30.

Comparative information is not required.

1.24 Related parties

A related party is a person or an entity with the ability to control or jointly control the other party, or exercisesignificant influence over the other party, or vice versa, or an entity that is subject to common control, or jointcontrol.

TEDA consider the City of Tshwane (CoT) and its entities as 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 theyare required to perform such functions.

Close members of the family of a person are considered to be those family members who may be expected toinfluence, 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.

1.25 Events after reporting date

Events after reporting date are those events, both favourable and unfavourable, that occur between the reportingdate and the date when the financial statements are authorised for issue. Two types of events can be identified: those that provide evidence of conditions that existed at the reporting date (adjusting events after the

reporting date); and those that are indicative of conditions that arose after the reporting date (non-adjusting events after the

reporting date).

The entity will adjust the amount recognised in the financial statements to reflect adjusting events after thereporting date once the event occurred.

The entity will disclose the nature of the event and an estimate of its financial effect or a statement that suchestimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence theeconomic decisions of users taken on the basis of the financial statements.

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1.26 Prior year adjustments

Prior year adjustments are omissions from, and misstatements in, an entity’s financial statements for one or moreprior periods arising from failure to use or the misuse of reliable information that was available when the financialstatements for that period were issued, and could have been reasonably expected to be taken into account inthose financial statements.

All prior year adjustments are corrected retrospectively to the earliest period practicable. Comparative amounts forprior years in which the error occurred are restated.

1.27 Accummulated surplus

Retained earnings or accummulated surplus (deficit) are the cumulative effect of differences between revenue andexpenditure as per statement of financial performance.

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2. New standards and interpretations

2.1 Standards and interpretations effective and adopted in the current period

In the current period, the entity has adopted the following standards and interpretations that are effective for thecurrent financial period and that are relevant to its operations:

2.2 Standards and Interpretations early adopted

The entity has chosen to early adopt the following standards and interpretations:

GRAP 12 (as amended 2016): Inventories

Amendments to the Standard of GRAP on Inventories resulted from inconsistencies in measurement requirements inGRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs. Other changesresulted from changes made to IPSAS 12 on Inventories (IPSAS 12) as a result of the IPSASB’s Improvements toIPSASs 2015 issued in March 2016.


in non-exchange transactions to be in line with the principle in GRAP 23 (paragraph .12) IPSASB amendments: To align terminology in GRAP 12 with that in IPSAS 12. The term “ammunition” in IPSAS

12 was replaced with the term “military inventories” and provides a description of what it comprises inaccordance with Government Finance Statistics terminology




GRAP 17 (as amended 2016): Property, Plant and Equipment

Amendments to the Standard of GRAP on Property, Plant and Equipment resulted from editorial changes to theoriginal text and inconsistencies in measurement requirements in GRAP 23 and other asset-related Standards ofGRAP in relation to the treatment of transaction costs. Other changes resulted from changes made to IPSAS 17 onProperty, Plant and Equipment (IPSAS 17) as a result of the IPSASB’s Improvements to IPSASs 2014 issued inJanuary 2015 and Improvements to IPSASs 2015 issued in March 2016.



IPSASB amendments: To clarify the revaluation methodology of the carrying amount and accumulateddepreciation when an item of property, plant, and equipment is revalued; To clarify acceptable methods ofdepreciating assets; To align terminology in GRAP 17 with that in IPSAS 17. The term “specialist militaryequipment” in IPSAS 17 was replaced with the term “weapon systems” and provides a description of what itcomprises in accordance with Government Finance Statistics terminology; and To define a bearer plant andinclude bearer plants within the scope of GRAP 17, while the produce growing on bearer plants will remain withinthe scope of GRAP 27.




GRAP 21 (as amended 2016): Impairment of non-cash-generating assets

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Amendments to the Standard of GRAP on Impairment of Non-cash Generating Assets resulted from changes made toIPSAS 21 on Impairment of Non-Cash-Generating Assets (IPSAS 21) as a result of the IPSASB’s Impairment ofRevalued Assets issued in March 2016.






GRAP 26 (as amended 2016): Impairment of cash-generating assets

Amendments Changes to the Standard of GRAP on Impairment of Cash Generating Assets resulted from changesmade to IPSAS 26 on Impairment of Cash-Generating Assets (IPSAS 26) as a result of the IPSASB’s Impairment ofRevalued Assets issued in March 2016.






GRAP 31 (as amended 2016): Intangible Assets

Amendments to the Standard of GRAP on Intangible Assets resulted from inconsistencies in measurementrequirements in GRAP 23 and other asset-related Standards of GRAP in relation to the treatment of transaction costs.Other changes resulted from changes made to IPSAS 31 on Intangible Assets (IPSAS 31) as a result of the IPSASB’sImprovements to IPSASs 2014 issued in January 2015.

The most significant changes to the Standard are: General improvements: To add the treatment of transaction costs and other costs incurred on assets acquired in

non-exchange transactions to be in line with the principle in GRAP 23 (paragraph .12); and To clarify themeasurement principle when assets may be acquired in exchange for a non-monetary asset or assets, or acombination of monetary and non-monetary assets

IPSASB amendments: To clarify the revaluation methodology of the carrying amount and accumulateddepreciation when an item of intangible assets is revalued; and To clarify acceptable methods of depreciatingassets




Directive 12: The Selection of an Appropriate Reporting Framework by Public Entities

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Historically, public entities have prepared financial statements in accordance with generally recognised accountingpractice, unless the Accounting Standards Board (the Board) approved the application of generally acceptedaccounting practice for that entity. “Generally accepted accounting practice” has been taken to mean Statements ofGenerally Accepted Accounting Practice (Statements of GAAP), or for certain entities, International FinancialReporting Standards (IFRSs) issued by the International Accounting Standards Board. Since Statements of GAAPhave been withdrawn from 1 December 2012, public entities will be required to apply another reporting framework inthe future.

The purpose of this Directive is to prescribe the criteria to be applied by public entities in selecting and applying anappropriate reporting framework.

The effective date of the standard is for years beginning on or after 01 April 2018.

The entity has early adopted the standard for the first time in the 2018 unaudited quartely financial statements.


GRAP 109: Accounting by Principals and Agents

The objective of this Standard is to outline principles to be used by an entity to assess whether it is party to a principal-agent arrangement, and whether it is a principal or an agent in undertaking transactions in terms of such anarrangement. The Standard does not introduce new recognition or measurement requirements for revenue, expenses,assets and/or liabilities that result from principal-agent arrangements. The Standard does however provide guidanceon whether revenue, expenses, assets and/or liabilities should be recognised by an agent or a principal, as well asprescribe what information should be disclosed when an entity is a principal or an agent.

It furthermore covers Definitions, Identifying whether an entity is a principal or agent, Accounting by a principal oragent, Presentation, Disclosure, Transitional provisions and Effective date.


The entity has early adopted the standard for the first time when the Minister sets the effective date for the standard.


2.3 Standards and interpretations issued, but not yet effective

The entity has not applied the following standards and interpretations, which have been published and are mandatoryfor the entity’s accounting periods beginning on or after 01 July 2018 or later periods:

GRAP 38: Disclosure of Interests in Other Entities

The objective of this Standard is to require an entity to disclose information that enables users of its financialstatements to evaluate: the nature of, and risks associated with, its interests in controlled entities, unconsolidated controlled entities, joint

arrangements and associates, and structured entities that are not consolidated; and the effects of those interests on its financial position, financial performance and cash flows.

It furthermore covers Definitions, Disclosing information about interests in other entities, Significant judgements andassumptions, Investment entity status, Interests in controlled entities, Interests in joint arrangements and associates,Interests in structured entities that are not consolidated, Non-qualitative ownership interests, Controlling interestsacquired with the intention of disposal, Transitional provisions and Effective date.



The impact of this standard is currently being assessed.

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GRAP 20: Related parties

The objective of this standard is to ensure that a reporting entity’s unaudited quartely financial statements contain thedisclosures necessary to draw attention to the possibility that its financial position and surplus or deficit may havebeen affected by the existence of related parties and by transactions and outstanding balances with such parties.

An entity that prepares and presents financial statements under the accrual basis of accounting (in this standardreferred to as the reporting entity) shall apply this standard in: identifying related party relationships and transactions; identifying outstanding balances, including commitments, between an entity and its related parties; identifying the circumstances in which disclosure of the items in (a) and (b) is required; and determining the disclosures to be made about those items.

This standard requires disclosure of related party relationships, transactions and outstanding balances, includingcommitments, in the consolidated and separate financial statements of the reporting entity in accordance with theStandard of GRAP on Consolidated and Separate Financial Statements. This standard also applies to individualunaudited quartely financial statements.

Disclosure of related party transactions, outstanding balances, including commitments, and relationships with relatedparties may affect users’ assessments of the financial position and performance of the reporting entity and its ability todeliver agreed services, including assessments of the risks and opportunities facing the entity. This disclosure alsoensures that the reporting entity is transparent about its dealings with related parties.

The standard states that a related party is a person or an entity with the ability to control or jointly control the otherparty, or exercise significant influence over the other party, or vice versa, or an entity that is subject to commoncontrol, or joint control. As a minimum, the following are regarded as related parties of the reporting entity: A person or a close member of that person’s family is related to the reporting entity if that person:

- has control or joint control over the reporting entity;- has significant influence over the reporting entity;- is a member of the management of the entity or its controlling entity.

An entity is related to the reporting entity if any of the following conditions apply:- the entity is a member of the same economic entity (which means that each controlling entity, controlledentity and fellow controlled entity is related to the others);- one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member ofan economic entity of which the other entity is a member);- both entities are joint ventures of the same third party;- one entity is a joint venture of a third entity and the other entity is an associate of the third entity;- the entity is a post-employment benefit plan for the benefit of employees of either the entity or an entityrelated to the entity. If the reporting entity is itself such a plan, the sponsoring employers are related to the entity;- the entity is controlled or jointly controlled by a person identified in (a); and- a person identified in (a)(i) has significant influence over that entity or is a member of the management ofthat entity (or its controlling entity).

The standard furthermore states that related party transaction is a transfer of resources, services or obligationsbetween the reporting entity and a related party, regardless of whether a price is charged.

The standard elaborates on the definitions and identification of: Close member of the family of a person; Management; Related parties; Remuneration; and Significant influence

The standard sets out the requirements, inter alia, for the disclosure of: Control; Related party transactions; and Remuneration of management


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2.4 Standards and interpretations not yet effective or relevant

The following standards and interpretations have been published and are mandatory for the entity’s accountingperiods beginning on or after 01 July 2018 or later periods but are not relevant to its operations:

GRAP 34: Separate Financial Statements

The objective of this Standard is to prescribe the accounting and disclosure requirements for investments in controlledentities, joint ventures and associates when an entity prepares separate financial statements.

It furthermore covers Definitions, Preparation of separate financial statements, Disclosure, Transitional provisions andEffective date.




GRAP 35: Consolidated Financial Statements

The objective of this Standard is to establish principles for the presentation and preparation of consolidated financialstatements when an entity controls one or more other entities.

To meet this objective, the Standard: requires an entity (the controlling entity) that controls one or more other entities (controlled entities) to present

consolidated financial statements; defines the principle of control, and establishes control as the basis for consolidation; sets out how to apply the principle of control to identify whether an entity controls another entity and therefore

must consolidate that entity; sets out the accounting requirements for the preparation of consolidated financial statements; and defines an investment entity and sets out an exception to consolidating particular controlled entities of an

investment entity.

It furthermore covers Definitions, Control, Accounting requirements, Investment entities: Fair value requirement,Transitional provisions and Effective date.




GRAP 36: Investments in Associates and Joint Ventures

The objective of this Standard is to prescribe the accounting for investments in associates and joint ventures and toset out the requirements for the application of the equity method when accounting for investments in associates andjoint ventures.

It furthermore covers Definitions, Significant influence, Equity method, Application of the equity method, Separatefinancial statements, Transitional provisions and Effective date.


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GRAP 37: Joint Arrangements

The objective of this Standard is to establish principles for financial reporting by entities that have an interest inarrangements that are controlled jointly (i.e. joint arrangements).

To meet this objective, the Standard defines joint control and requires an entity that is a party to a joint arrangement todetermine the type of joint arrangement in which it is involved by assessing its rights and obligations and to accountfor those rights and obligations in accordance with that type of joint arrangement.

It furthermore covers Definitions, Joint arrangements, Financial statements and parties to a joint arrangement,Separate financial statements, Transitional provisions and Effective date.




GRAP 110: Living and Non-living Resources

The objective of this Standard is to prescribe the: recognition, measurement, presentation and disclosure requirements for living resources; and disclosure requirements for non-living resources

It furthermore covers Definitions, Recognition, Measurement, Depreciation, Impairment, Compensation for impairment,Transfers, Derecognition, Disclosure, Transitional provisions and Effective date.




IGRAP 18: Interpretation of the Standard of GRAP on Recognition and Derecogntion of Land

This Interpretation of the Standards of GRAP applies to the initial recognition and derecognition of land in an entity’sfinancial statements. It also considers joint control of land by more than one entity.

When an entity concludes that it controls the land after applying the principles in this Interpretation of the Standards ofGRAP, it applies the applicable Standard of GRAP, i.e. the Standard of GRAP on Inventories, Investment Property(GRAP 16), Property, Plant and Equipment (GRAP 17) or Heritage Assets. As this Interpretation of the Standards ofGRAP does not apply to the classification, initial and subsequent measurement, presentation and disclosurerequirements of land, the entity applies the applicable Standard of GRAP to account for the land once control of theland has been determined. An entity also applies the applicable Standards of GRAP to the derecognition of land whenit concludes that it does not control the land after applying the principles in this Interpretation of the Standards ofGRAP.

In accordance with the principles in the Standards of GRAP, buildings and other structures on the land are accountedfor separately. These assets are accounted for separately as the future economic benefits or service potentialembodied in the land differs from those included in buildings and other structures. The recognition and derecognitionof buildings and other structures are not addressed in this Interpretation of the Standards of GRAP.

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The effective date of the interpretation is for years beginning on or after 01 April 2019.

The entity does not envisage the adoption of the interpretation until such time as it becomes applicable to the entity'soperations.

The impact of this interpretation is currently being assessed.

GRAP 16 (as amended 2016): Investment Property

Amendments to the Standard of GRAP on Investment Property resulted from editorial changes to the original text andinconsistencies in measurement requirements in GRAP 23 and other asset-related Standards of GRAP in relation tothe treatment of transaction costs. Other changes resulted from changes made to IAS 40 on Investment Property (IAS40) as a result of the IASB’s amendments on Annual Improvements to IFRSs 2011 – 2013 Cycle issued in December2013.



IASB amendments: To clarify the interrelationship between the Standards of GRAP on Transfer of FunctionsBetween Entities Not Under Common Control and Investment Property when classifying investment property orowner-occupied property.


The entity does not envisage the adoption of the amendment until such time as it becomes applicable to the entity'soperations.


GRAP 106 (as amended 2016): Transfers of functions between entities not under common control

Amendments to the Standard of GRAP on Transfer of Functions Between Entities Not Under Common Controlresulted from changes made to IFRS 3 on Business Combinations (IFRS 3) as a result of the IASB’s amendments onAnnual Improvements to IFRSs 2010 – 2012 Cycle issued in December 2013.

The most significant changes to the Standard are: IASB amendments: To require contingent consideration that is classified as an asset or a liability to be measured

at fair value at each reporting period.




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3. Risk management

Financial risk management

The entity’s activities expose it to a variety of financial risks: credit risk and liquidity risk.

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. Furtherquantitative disclosures are included throughout these financial statements.The Board of Directors has overallresponsibility for the establishment and oversight of the entity’s risk management framework. The entity’s riskmanagement policies are established to identify and analyse the risks faced by the entity, to set appropriate risklimits and controls, and to monitor risks and adherence to limits. Risk management policies and systems arereviewed regularly to reflect changes in market conditions and the entity’s activities. The entity aims to develop adisciplined and constructive control environment in which all employees understand their roles and obligations.The quantitative disclosure is provided in this note.

Credit risk

Credit risk is the risk of financial loss to TEDA if a customer or counterparty to a financial instrument fails to meetits contractual obligations, and arises primarily receivables from exchange transactions.Credit risk is controlledthrough the application of a credit control measures and monitoring procedures.

TEDA limits its treasury counter-party exposure arising from money market by only dealing with well establishedfinancial institutions confirmed by the rating agency appointed by the Chief Financial Officer. TEDA only deals withfinancial institutions with a short term credit rating of A+ and long-term credit rating of AA- and higher at anInternational accredited creditrating agency.The entity's exposure is continuously monitored and the aggregatevalue of transactions concluded is spread amongst different types of approved investments and institutions.

Potential concentrations of credit risk consist mainly of cash and cash equivalents.

Exposure to credit risk

Credit risk consists mainly of cash deposits, cash equivalents and receivables from exchange transactions. Theentity only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party.

Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customerson an ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is noindependent rating, risk control assesses the credit quality of the customer, taking into account its financialposition, past experience and other factors. Individual risk limits are set based on internal or external ratings inaccordance with limits set by the board.

There has been no significant change during the financial year, or since the end of the financial year, to the entity'sexposure to credit risk, the approach of measurement or the objectives, policies and processes for managing thisrisk. The carrying amount of financial assets recorded in the financial statements, which is net of impairmentlosses,represents the entity's maximum exposure to credit risk.

Financial assets exposed to credit risk at period end were as follows:

`

Financial instrument 31 December2017

30 June2017

Trade and other receivables 203,306 241,409Cash and cash equivalents 14,175,698 7,407,812

14,175,698 11,886,625

At 31 December 2017, there is no significant concentration of credit risk that had not been adequately providedfor.

No security is held against Cash and Cash Equivalents.

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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 sufficientliquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptablelosses or risking damage to the entity’s reputation.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability offunding through an adequate amount of committed credit facilities and the ability to close out market positions.Due to the dynamic nature of the underlying businesses,the entity maintains flexibility in funding by maintainingavailability under committed credit lines.

The entity receives government grants every year based on budget requirements and additional revenue fromother undertakings.

Cash flow forecasts are prepared and adequately monitored.

The table below analyses the entity’s non-derivative financial instruments which will be settled on a gross basisinto relevant maturity groupings based on the remaining period at the statement of financial position to thecontractual maturity date. The amount disclosed in the table are the contractual undiscounted cash flows.Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

At 31 December 2017 Less than 1year



Over 5 years

Payables from exchange transactions 121,612 - - -

At 30 June 2017 Less than 1year



Over 5 years

Payables from exchange transactions 1,072,848 - - -

No financial guarantee contracts were issued by the entity and non-derivative finanacial liabilities as at thereporting date.

Market risk

Interest rate risk

TEDA has ensured that the entity’s income and operating cash flows are substantially independent of changes inmarket interest rates, due to the underlying nature of the business. TEDA has no interest bearing assets orliabilities. Accordingly the entity’s income and expenses are substantially independent of changes in markets ratesof interest. As a result, changes in the market rate of interest have a negligible impact on the financial performanceof the entity.

The entity’s interest rate risk arises from short-term investments. Investments are made at a quoted variable rateand the capital invested is secured/guarenteed which limits the entity's exposure to cash flow interest rate risk.Changes in the interest rate do not have significant effect on surplus and deficit.

Capital risk management

TEDA has developed systems and internal controls that are sufficient and effective in maintaining efficient levels ofboth components of working capital, current assets and current liabilities. The working capital managementensures that TEDA has sufficient cash flow in order to meet its short-term debt obligations and operatingexpenses.

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4. Receivables from exchange transactions

Board members and employees 18,104 18,104Trade and other receivables 217,306 203,307Interest income accrued 33,301 38,102Provision for impairment (18,104) (18,104)

250,607 241,409

No trade and other receivables has been pledeged as security by TEDA nor have they been ceded to a third party.

Credit quality of trade and other receivables

The credit quality of trade and other receivables that are neither past nor due nor impaired can be assessed byreference to historical information about counterparty default rates. The entity does not have direct customersother than ad hoc customers who are not subjected to stringent credit quality controls.

Trade and other receivables impaired

As of 31 December 2017, there were no trade and other receivables impaired.

An amount of R18,104 was provided for as at 31 December 2017.

The ageing of this amount is as follows:

Reconciliation of provision for impairment of trade and other receivables

Opening balance 18,104 18,104

The creation and release of provision for impaired receivables have been included in operating expenses insurplus or deficit (note ). Amounts charged to the allowance account are generally written off when there is noexpectation of recovery.

5. Consumer debtors disclosure

Gross balancesConsumer debtors - Trade and other receivables 203,307 550,265

Net balanceConsumer debtors - Trade and other receivables 203,307 550,265

Trade and other receivables> 365 days 203,306 203,306

6. VAT receivable

VAT 2,156,633 4,363,938

VAT receivable is calculated at the standard rate of 14% on all qualifiying goods and services delivered to/byTEDA.

VAT is calculated on all qualifiying goods and services delivered to/by TEDA on an accual basis monthly.

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7. Prepayments

Prepayments 397,454 9,580

Prepaid expenses relate to the branding expense paid in advance. The movement in the current period is due tothe recognition of some branding expenses.

8. Cash and cash equivalents

Cash and cash equivalents consist of the following:

Cash on hand 10,000 1,089Bank balances* 13,731,594 6,978,682Short-term deposits^ 434,104 428,041

14,175,698 7,407,812

*The entity has a primary and a salaries bank account with Standard Bank which is used to meet the entity'sobligations.

^The entity has a short-term deposit account with Investec Bank.

The total amount of undrawn facilities available for future operating activities andcommitments

11,980,389 7,407,812

Credit quality of cash at bank and short term deposits, excluding cash on hand

The credit quality of cash at bank and short term deposits, excluding cash on hand that are neither past due norimpaired can be assessed by reference to external credit ratings (if available) or historical information aboutcounterparty default rates:

The carrying amount of cash and cash equivalents approximates fair value due to the relatively short-term maturityof these financial assets where changes in interest rate do not affect the financial position of the entity.

Cash and cash equivalents pledged as collateral

No cash and cash equivalents has been pledged as security as at 31 December 2017.

The entity had the following bank accounts

`

Account number /description

Bank statement balances Cash book balances

31 December2017

30 June 2017 30 June 2016 31 December2017

30 June 2017 30 June 2016

Standard Bank - ChequeAccount - Primary Account- 410791830

13,729,519 6,973,374 2,909,873 13,729,519 6,973,374 2,909,873

Standard Bank - ChequeAccount - Salaries Account- 011057491

2,076 5,307 6,059 2,076 5,307 6,059

Investec Bank- InvestmentAccount-50009061311

434,104 428,041 3,399,915 434,104 428,041 3,399,915

Total 14,165,699 7,406,722 6,315,847 14,165,699 7,406,722 6,315,847

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9. Taxation movement

Balance at beginning of the period (858,149) (1,176,843)Current tax for the period recognised in surplus or deficit 110,539 810,919Provisional tax paid (277,567) -Normal income tax paid - prior year (266,284) (492,225)Adjustment in respect of businesses sold and acquired during the periodincluding exchange rate movements

- -

Balance at end of the period (1,291,464) (858,149)

10. Operating lease asset (accrual)

Non-current liabilities (238,501) (158,483)

Operating lease liability is from the rental of offices used by TEDA situated at: 5th Floor; The Anker Building; 1279Mike Crawford Road; Centurion for the period of three years starting from 1st of November 2016. It is caused bythe escalation on rental payable at every anniversary date.

Refer to note 31 for a detailed discloser on operating lease as per GRAP 13 para 50.

11. Property, plant and equipment

2017 2017

Cost /Valuation






Carrying value

Furniture and fixtures 1,674,174 (613,862) 1,060,312 1,674,174 (529,466) 1,144,708Motor vehicles 1,067,708 (966,235) 101,473 1,067,708 (858,587) 209,121Office equipment 1,190,306 (541,734) 648,572 1,190,306 (466,729) 723,577IT equipment 1,457,268 (1,098,801) 358,467 1,457,268 (964,246) 493,022Leasehold improvements 1,863,465 (661,370) 1,202,095 1,863,465 (337,914) 1,525,551Library material 11,488 (6,244) 5,244 11,488 (5,086) 6,402

Total 7,264,409 (3,888,246) 3,376,163 7,264,409 (3,162,028) 4,102,381

Reconciliation of property, plant and equipment - December 2017

Openingbalance

Depreciation Total

Furniture and fixtures 1,144,708 (84,396) 1,060,312Motor vehicles 209,121 (107,648) 101,473Office equipment 723,577 (75,005) 648,572IT equipment 493,022 (134,555) 358,467Leasehold improvements 1,525,551 (323,456) 1,202,095Library material 6,402 (1,158) 5,244

4,102,381 (726,218) 3,376,163

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11. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment - June 2017

Openingbalance

Additions Disposals Depreciation Total

Furniture and fixtures 1,307,186 - (1,706) (160,772) 1,144,708Motor vehicles 422,663 - - (213,542) 209,121Office equipment 916,676 - (36,142) (156,957) 723,577IT equipment 807,068 120,105 (107,399) (326,752) 493,022Leaseholdimprovements

885,819 1,863,464 - (1,223,732) 1,525,551

Library material 8,848 - - (2,446) 6,402

4,348,260 1,983,569 (145,247) (2,084,201) 4,102,381

Pledged as security

No carrying value of assets has been pledged as security as at the reporting date.

Expenditure incurred to repair and maintain property, plant and equipment

Expenditure incurred to repair and maintain property, plant and equipmentincluded in Statement of Financial PerformanceIT equipment minor screen - 4,638Motor vehicle repairs - 10,752

- 15,390

A register containing the information required by section 96 of the Municipal Finance Management Act is availablefor inspection at the registered office of the entity.

12. Intangible assets

2017 2017

Cost /Valuation






Carrying value

Computer software 279,264 (163,328) 115,936 279,264 (139,098) 140,166

Reconciliation of intangible assets - December 2017

Openingbalance

Amortisation Total


Reconciliation of intangible assets - June 2017

Openingbalance

Amortisation Total


Pledged as security

No intangible assets are pledged as security.

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12. Intangible assets (continued)

Impairment test

*Impairment test is performed by management annually on the 1st of June, on all fixed assets including intangibleassets using the following impairment indicators; Inspection of any physical damage, Disposal plans, Performance of the assets and Changes in technological environment

13. Payables from exchange transactions

Trade creditors 121,612 685,100Board of directors accrued expenses - 223,683Employees accrued expenses - 164,066

121,612 1,072,849

14. Provisions

Reconciliation of provisions - December 2017

OpeningBalance


year

Total


1,429,688 672,692 (459,543) 1,642,837

Reconciliation of provisions - June 2017

OpeningBalance


year

Total


1,314,430 2,952,656 (2,837,398) 1,429,688

Employee benefit - Leave pay entitlement

The provision is for leave entitlement not utilised by employees as at 31 December 2017 and it is only payable incash upon resignation. Leave days should be utilised within six mounts after the end of the cycle to avoid forfeitureand due operational demands employees are allowed to apply for an extension which creates uncertainties on theexpected timing on leave balances.

15. Unspent conditional grants and receipts

Unspent conditional grants and receipts comprises of:

Transfers from City of Tshwane 8,932,961 4,282,180

Movement during the period

Balance at the beginning of the period 4,282,180 4,028,029Additions during the period 27,075,000 54,149,999Income recognition during the period (22,424,219) (53,895,848)

8,932,961 4,282,180

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15. Unspent conditional grants and receipts (continued)

The unspent grant is a transfer from the CoT to enable the entity to achieve its strategic objectives as per theService Delivery Agreement and business plan.

The unspent grant balance of R8,932,961 will be utilised on commitments raised as at the reporting date.

16. Deferred tax

Deferred tax liability

Property, plant and equipment (446,354) (459,853)Provision for doubtful debts 3,802 3,802Provision for leave 459,994 400,313Unspent grant 2,795,160 1,199,010Section 24C allowance (2,795,160) (1,199,010)Straight lining of operating lease 61,016 44,375Prepayment - (2,682)

Total deferred tax liability 78,458 (14,045)

The deferred tax assets and the deferred tax liability relate to income tax in the same jurisdiction, and the lawallows net settlement. Therefore, they have been offset in the statement of financial position as follows:

Reconciliation of deferred tax liability

At beginning of year (14,045) (66,455)Increases (decrease) in tax loss available for set off against future taxable income- gross of valuation allowance

- (37,256)

Movement on property,plant and equipment as well as intangible assets 13,497 61,710Movement in provision for doubtful debts - (1,267)Movement in provision for leave pay 59,682 32,272Movement on unspent grant 1,596,149 71,162Section 24C allowance (1,596,149) (71,162)Operating lease straight lining 16,642 (2,047)Prepayment 2,682 (1,002)

78,458 (14,045)

17. Share capital / contributed capital

Authorised1000 Ordinary shares of R1 each 1,000 1,000

Reconciliation of number of shares issued:Reported as at 01 July 2017 1,000 1,000

IssuedOrdinary 1,000 1,000

18. Revenue

Sale of tender documents 18,860 11,404Rental and other income 8,893 1,155,116Interest earned - bank; current account 161,035 374,606Grant revenue recognised 22,424,219 53,895,848

22,613,007 55,436,974

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18. Revenue (continued)

The amount included in revenue arising from exchanges of goods orservices are as follows:Sale of tender documents 18,860 11,404Rental and other income 8,893 1,155,116Interest earned- bank current account 161,035 374,606

188,788 1,541,126

The amount included in revenue arising from non-exchange transactions isas follows:

Transfer revenueGrant revenue recognised 22,424,219 53,895,848

19. Employee related costs

Basic 13,226,877 26,897,790Medical aid - company contributions 452,976 1,022,176Leave pay charge movement 213,149 115,258Defined contribution plans 577,678 1,223,053Other payments* 56,839 118,286

14,527,519 29,376,563

*Other payments refer to garnishes.

Detailed information on the remuneration of key personnel refer to Note 20.

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Figures in Rand

20. Remuneration of Executive Managers and Board of Directors

Executive Managers

December 2017

Basic salary Cellphoneallowance


Total

Chief Executive Officer 927,434 18,000 - 39,432 - 984,866Chief Financial Officer 787,348 12,000 - - - 799,348Executive Manager Corporate Services 736,618 12,000 - 21,492 38,728 808,838Executive Manager Marketing & Communications* 102,622 2,000 20,000 8,109 2,121 134,852Executive Manager: Strategy and Performance Monitoring 527,837 8,000 - 24,156 38,324 598,317Executive Manager Projects Portfolio Management 581,075 12,000 54,000 10,314 44,834 702,223Company Secretary 634,966 12,000 - 28,968 - 675,934Executive Manager Investment Promotion and Funding 492,292 12,000 60,000 26,574 29,581 620,447

4,790,192 88,000 134,000 159,045 153,588 5,324,825

*The executive manager marketing and communication resigned in 31 July 2017.

June 2017

Basic salary Other Cellphoneallowance


Total

Chief Executive Officer 1,847,862 - 36,000 - 83,580 - 1,967,442Chief Financial Officer- 1,443,471 7,743 22,000 - - - 1,473,214Executive Manager Corporate Services 1,467,044 393,723 24,000 - 45,528 79,388 2,009,683Executive Manager Marketing &Communications

1,218,298 2,494 24,000 240,000 108,282 26,087 1,619,161

Executive Manager Strategy andPerformance Monitoring

1,043,001 - 24,000 - 51,192 78,559 1,196,752

Executive Manager Projects PortfolioManagement^

1,148,803 29,868 24,000 108,000 21,858 91,283 1,423,812

Company Secretary 1,265,088 - 24,000 - 61,392 - 1,350,480Executive Manager Trade and Investment 988,945 17,813 24,000 110,000 55,800 60,636 1,257,194

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Figures in Rand

20. Remuneration of Executive Managers and Board of Directors (continued)Executive Manager Investment Promotionand Funding^

605,662 787,446 10,000 90,000 32,160 - 1,525,268

11,028,174 1,239,087 212,000 548,000 459,792 335,953 13,823,006

Board of Directors

December 2017



fees

Total

Prof LD Mosoma (Chairperson) 53,134 5,142 - 58,276Mr H Gouvelis 32,566 23,996 - 56,562Ms ZG Mpungose 23,996 34,280 - 58,276Ms SP Mzizi 23,996 32,566 - 56,562Mr FK Sibanda 32,566 29,138 - 61,704Ms N Singh 23,996 32,566 3,428 59,990Adv JL Thubakgale 32,566 35,994 - 68,560Mr MW Yates 32,566 29,138 - 61,704

255,386 222,820 3,428 481,634

June 2017



fees

Total

Prof LD Mosoma (Chairperson) 116,553 35,138 - 151,691Ms RS Bahula- Ermias 102,840 - - 102,840Mr H Gouvelis 97,698 17,569 - 115,267Ms ZG Mpungose 131,978 17,569 - 149,547Mr CR Mpyane 130,264 17,569 - 147,833

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Figures in Rand

20. Remuneration of Executive Managers and Board of Directors (continued)Ms SP Mzizi 116,552 17,569 - 134,121Mr FK Sibanda 82,272 17,569 - 99,841Ms N Singh 121,694 17,569 10,284 149,547Adv JL Thubakgale 109,696 17,569 - 127,265Mr MW Yates 142,262 17,569 - 159,831

1,151,809 175,690 10,284 1,337,783

21. Depreciation and amortisation

IT equipment 134,555 326,752Furniture and fixtures 84,397 160,771Office equipment 75,006 156,957Leasehold improvements 323,456 1,223,732Library material 1,158 2,446Motor vehicles 107,648 213,542Intangible assets 24,230 48,065

750,450 2,132,265

22. Project management

Agro processing-hub project - 1,395,000Area based development 418,550 -Revatilisation of inner city and design - 106,925Bioenergy facility - 2,193,512Clothing and textile hub - 1,146,823

418,550 4,842,260

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23. Investment promotion and funding

Events 39,145 667,704Marketing productions - 174,561Trade conferences and missions 745,815 976,157Public relations 214,306 68,231Trade and investment intelligence 476,187 728,772Investment attraction - 930,460Export development and promotion 246,391 375,527Branding 84,446 248,395

1,806,290 4,169,807

24. Loss on assets written off

Carrying amounts of assets written off - 145,247

The loss on assets written off is from lost, damaged and redundant assets that were reported and discoveredduring the asset verification process and they have been approved by the Board of Directors to be written off.

25. General expenses

Admin fees (pension and group risk) 78,450 165,948Advertising 193,227 47,290Auditors fees 227,446 518,744Bank charges 21,593 56,188Consulting and professional fees 323,935 721,579Catering and office refreshments 89,019 142,676Office space rental 2,096,543 5,245,701Insurance 77,971 119,451IT expenses 51,554 222,884Staff recruitment 13,799 8,618Printing and stationery 81,069 405,913Staff welfare 32,160 110,047Subscriptions and membership fees 17,525 19,889Communication expense 5,518 23,982Training and development 160,460 459,226Travel and subsistence 170,127 325,063Assets expensed less than R2000 - 1,852Electricity 62,525 320,330Conferences and delegation 5,108 10,716Repairs and maintenance - 15,390Compensation for Occupational Injuries and Diseases - 121,481Occupational Health and Safety - 200Publications and periodicals 199,103 154,142Other expenses 10,389 212,966

3,917,521 9,430,276

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26. Taxation

Major components of the tax expense

CurrentCurrent year 110,536 (37,256)

DeferredCurrent year (92,504) 55,200

18,032 17,944

Reconciliation of the tax expense

Reconciliation between applicable tax rate and average effective tax rate.

Applicable tax rate %28.00 %28.00

A provisional tax payment of R277,566 has been made as at 31 December 2017 for 2017/18 financial year.

27. Cash generated from operations

Surplus 693,011 1,950,450Adjustments for:Depreciation and amortisation 750,450 2,132,265Gain on sale of assets and liabilities - 145,247Movements in operating lease assets and accruals 80,018 (7,311)Movements in provisions 213,149 115,258Changes in working capital:Receivables from exchange transactions 38,103 326,581Prepayments (387,874) 141,743Payables from exchange transactions (951,239) (758,686)VAT 2,207,305 (1,491,730)Taxes (525,818) 266,285Unspent conditional grants and receipts 4,650,781 254,151

6,767,886 3,074,253

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28. Financial instruments disclosure

Categories of financial instruments

December 2017

Financial assets

At amortisedcost

Total


14,379,004 14,379,004


At amortisedcost

Total

Trade and other payables from exchange transactions 121,612 121,612

June 2017

Financial assets

At amortisedcost

Total


7,649,221 7,649,221


At amortisedcost

Total

Trade and other payables from exchange transactions 1,072,849 1,072,849

29. Budget differences

Material differences between budget and actual amounts

The entity's approved budget is R 61 million excluding the unspent grant of R4.2 million from 2016-17 financialyear. The approved budget covers the period from 01 July 2017 to 30 June 2018. The budget and accountingbases are the same. The financial statements are prepared on the accrual basis using a classification on thenature of expenses in the statement of financial performance.

A reconciliation between the actual amounts on the comparable basis as presented in the statement ofcomparison of budget and actual amounts and the actual amounts in the cash flow statement for the period ended31 December 2017 is presented below. The financial statements and budget documents are prepared for thesame period. There is a basis difference between the budget and the cash flow statement presented by thereconciliation statement below which is attributed to the purchase of propert, plant and equipment.

TEDA considers 10% a material variance in monitoring spending trends (used at the end of the financial year),where a detail explanation of the variance is important in order to aid planning and decision making. The budget isas per the economic classification and explanation on spending is as follows;

Revenue Analysis

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29. Budget differences (continued)

Revenue for the entity constitute of the grant received from CoT, rental income and other income, professionalfees: commission on capital projects, interest income from positive bank balance and short term investments andsale of tender documents. Grant revenue from CoT is transfered to TEDA every quarter in four equal installments. As at the reporting

date 50% of the budgeted revenue has been received and of the received amount 41% was realised asrevenue as a result of spending as per the approved 2017/18 business plan.

Other income emanates from the Service SETA refunds on training which are not budgeted for and thereceipts are adhoc.

Professional fees commission from capital projects revenue is envisaged from the management of projectsby TEDA onbehalf of CoT where the receipt as at the reporting date is nil which necesitates the reveiw of thebusiness plan pertaining to the planned revenue.

Interest income earned for the period is as planned. Revenue from the sale of tender documents is at 100% and was not budgeted for, these funds are adhoc in

nature.

Expenditure Analysis

Total expenditure for the period is at 36% of the total budget excluding capital expenditure, below is the detailedexpenditure analysis per type: Remuneration of employees is at 42% and is as planned at this stage of the financial year. Remuneration of board of directors is at 25% and is expected to increase in the next coming quarters. Depreciation and ammortisation are non-cash items and the expense is at 27% as planned. Investment promotion and funding spending is at 45% and is expected to increase in the coming quarters. Projects spending is at 8% with plans in place resulting in expenditure from the second quarter of the

financial year. General expenses spending is at 33% and is as planned. Taxation expense is as expected at 4%, although a total of R277,566 provisional tax has been paid as at 31

December 2017.

30. Reconciliation between budget and cash flow statement

Reconciliation of budget surplus/deficit with the net cash generated from operating, investing and financingactivities:

Operating activitiesActual amount as presented in the budget statement 693,011 1,950,451Basis differences 6,074,875 1,123,802

Net cash flows from operating activities 6,767,886 3,074,253

Investing activitiesBasis differences - (1,983,569)

Net cash flows from investing activities - (1,983,569)

Net cash generated from operating, investing and financing activities 6,767,886 1,090,684

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31. Commitments

Authorised operational expenditure

Already contracted for and authorised Commitments less than one year 3,122,331 1,306,283

Total operational commitmentsAlready contracted for and authorised 3,122,331 1,306,283

Operating leases commitmets - as lessee (expense)

Minimum lease payments due - within one year 4,158,626 4,039,764 - in second to fifth year inclusive 3,637,082 5,736,982

7,795,708 9,776,746

Operating lease commitment is the rental of offices used by TEDA situated at: 5th Floor; The Anker Building; 1279Mike Crawford Road; Centurion for the period of three years starting from 1st of November 2016. No contingentrent is payable.

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32. Related parties

`

RelationshipsBoard of directos and executive management Refer to directors' report noteControlling entity City of Tshwane Metropolitan MunicipalityMunicipal entity under the same control Housing Company TshwaneMunicipal entity under the same control Sandspruit Water Works Association

Related party balances

Amounts included in Trade receivable (Trade Payable) regarding relatedpartiesCity of Tshwane Metropolitan Municipality 2,900 2,900

Related party transactions

Transfers received from related partyCity of Tshwane Metropolitan Municipality 27,075,000 54,150,000

Rent paid to (received from) related partiesCity of Tshwane Metropolitan Municipality - 1,159,468

Expenses incurred and paid by the related party on behalf of TEDACoT (Interns remuneration) - 60,000

TEDA benefited from the use of the following services provided by the related party at no cost to TEDA: Risk mangement and internal audit resources from CoT, Audit and Performance Committee from CoT, Use of network, telecommunication, desktop and server support provided by CoT, mSCOA implementation (SAP) by CoT, OHS services and Records management from CoT, Insurance management by CoT and JOC Services from CoT, QPR - Performance Management Solution, and Cross check system.

Remuneration of management

Executive management and board members

*Refer to note 20

No loans were awarded to key management of TEDA during the year.

None of the key management has or had significant influence in any entity with whom TEDA had significant transactions duringthe year.

33. Fruitless and wasteful expenditure

Opening balance - 424,272Written off - (424,272)

- -

The following fruitless and wasteful expenditure were reported in the year ended 30 June 2016 and weresubsequently written off after the finalisation of the investigation in the period ended 30 June 2017 . Interest charged by SARS under the Voluntary Disclosure Programme (VDP) on VAT 201 returns that were

not submitted correctly amounted to R382,449 with only R12,824 payable. Understatement charge on VAT201 and EMP201 totaling to R41,823.

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34. Irregular expenditure TEDA did not incur irregular expenditure for the period ended 30 December 2017 and 30 June 2017.

35. Regulation 45

The financial statements of a municipality must disclose particulars of any award of more than R2 000 to a personwho 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 theprevious 6 months indicating: The name of that person, The capacity in which that person is in the service of the state/municipality; and The amount of the awardNo Awards were made in terms of regulation 45.

36. Additional disclosure in terms of Municipal Finance Management Act

Consultants/Professional Services

Opening balance 12,412 29,367Current year fees 323,935 721,579Amount paid - current year (323,935) (709,167)Amount paid - previous years (12,412) (29,367)

- 12,412

Audit fees

Current year fees 227,446 518,744Amount paid - current year (227,446) (518,744)

- -

PAYE and UIF

Current year payroll deductions 4,186,143 9,189,818Amount paid - current year (4,186,143) (9,189,818)

- -

Pension and Medical Aid Deductions

Current year raised 1,087,493 2,245,229Amount paid - current year (1,087,493) (2,245,229)

- -

The entity has a pension fund defined contribution plan with Momentum where employees pay a fixed amount andthe 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 paysfor the administration fees.

Medical Aid contributions are with Discovery Medical Aid Scheme and Bonitas Medical Aid Scheme.

VAT

VAT receivable 2,156,633 4,363,938

VAT is calculated on all qualifiying goods and services delivered to/by TEDA on an invoice basis. All VAT returnshave been submitted by the due date throughout the year.

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36. Additional disclosure in terms of Municipal Finance Management Act (continued)

Supply chain management regulations

Paragraph 12(1)(a)-(d)of Government gazette No. 27636 issued on 30 May 2005 states that a supply chainmanagement 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 procurementprocess in certain circumstances, provided that he records the reasons for any deviations and then reports them tothe 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 dispensewith 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.

TEDA deviated from the official procurement processes during the financial year were a s follow;-

IncidentRe-appointment of services provider to continue with the service - 142,100Contracts extended on a month to month basis with service providers due touncertainties emerging from the review of the entity by the City of Tshwane

124,968 2,587,694

124,968 2,729,794

37. Going concern

The financial statements have been prepared on the basis of accounting policies applicable to a going concern.This basis presumes that the funds will be available to finance future operations and that the realisation of assetsand settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.In assessing the going concern, the accounting authority considers financial position, potential sources of fundingand political factors.

We draw attention to the fact that at 31 December 2017, the entity had accumulated surplus of R 10,858,201 andthat the entity's total assets exceed its liabilities by R 10,859,201. TEDA continues to operate as a going concern more so now after the new City administration resolved not to

disestablish the entity.The entity’s business plan and budget for 2017/18 was approved by the shareholderand there is no indication or intention to cease funding.

38. Contingencies

The entity as at 30 December 2017 had the following contingent liabilities:

Litigation is in the process on a dispute with a service provider whereby the service provider is seekingdamages of R873,125 including legal costs and disbursements. The entity's lawyers and managementconsider the likelihood of the action against the entity being successful as unlikely.

39. Events after the reporting date

The directors are not aware of any matter or circumstance arising since the end of the period that requiresadjustment to or disclosure in the financial statements.

58

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TSHWANE ECONOMIC DEVELOPMENT AGENCY

2nd QUARTER PERFORMANCE REPORT

(October - December 2017)

SIGN OFF

CHIEF EXECUTIVE OFFICER

Mr. Solly Mogaladi

DATE

ANNEXURE E 299

2 | P a g e

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY 3

2 PERFORMANCE AGAINST THE ENTITY BUSINESS PLAN 4

2.1 SUMMARY OF PROGRESS AGAINST THE ENTITY BUSINESS PLAN TARGETS 4

3 PERFORMANCE ON OTHER STRATEGIC MATTERS 7

3.1 ESTABLISHMENT OF THE TSHWANE CLOTHING AND TEXTILE HUB 7

3.2 ESTABLISHMENT OF THE TSHWANE AGRO-PROCESSING HUB 7

3.3 ESTABLISHMENT OF THE TSHWANE BIO-ENERGY FACILITY 7

3.4 INVESTMENT PROMOTION AND FUNDING 8

3.5 IMPACT OF JOB CREATION INITIATIVES ON THE ECONOMY OF TSHWANE AS A WHOLE 8

4. FINANCIAL PERFOMANCE 9

5. GOVERNANCE 10

5.1 BOARD COMPOSITION 10

5.2 BOARD AND COMMITTEES 11

5.3 DIRECTORS REMUNERATION 12

5.4 RISK MANAGEMENT AND INTERNAL CONTROLS 12

5.5 LITIGATIONS 13

6. HUMAN RESOURCES 14

7. DEPENDENCIES AND CROSS CUTTING ISSUES 17

8. OPERATION CLEAN AUDIT 17

9 CONCLUSION AND RECOMMENDATIONS 20

ANNEXURE A: EXTRACT OF ENTITY’S BUSINESS PLAN REPORT FROM QPR 21

ANNEXURE B: STATEMENT OF FINANCIAL POSITION AND PERFORMANCE 22

ANNEXURE C: RISK REGISTER 23

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3 | P a g e

1 EXECUTIVE SUMMARY

This second quarter report has been prepared against the TEDA’s 2017/18 business plan and

scorecard which consists of 19 Key Performance Indicators (KPI) and 12 KPIs are applicable for

quarter 2. The entity achieved 10 performance targets and 3 performance targets were not

achieved.

Performance highlights for the quarter are as follows:

The Auditor General completed 2016/17 audit in November 2017. The entity was able to

achieve a clean audit opinion for the 2016/17 financial year – the first such performance since

its inception.

A total number of three (3) critical positions have been filled and two are awaiting finalization

of appointments.

The entity realized 4 new, quality investment projects attracted into the pipeline which would

assist in the facilitation of jobs and contribute toward the R1.5 billion target of rand value of

landed investment projects into the City of Tshwane.

Three Capacity Building Workshops were held as follows:

o United Nations Page Organic Workshop whereby 26 companies attended the workshop.

The workshop took place from the 20 – 21 November 2017 in the TEDA business lounge.

o TEDA in collaboration with the DTI jointly hosted a Global Exporter Passport Programme

(GEPP) training session for 30 participants. The programme aims to prepare companies

to be export ready and sustainable in export markets.

o TEDA Led Delegation to the African Agri Investment Indaba 2017. Three (3) Tshwane

based companies were identified and participated at the Indaba and B2B meetings

were facilitated.

TEDA embarked on one (1) foreign buying trade mission. The entity led a delegation to the

BME Symposium which took place from 8 – 10 November 2017 in Berlin, Germany. 10 South

African companies participated at the BME Symposium and where exposed to German

buyers interested in sourcing South African products.

TEDA participated in three (3) exhibitions and trade shows as follows.

o Participated at the BME Symposium by staging an exhibition and distributing 200 booklets

with information on Tshwane Companies. The event took place from the 8 - 10 November

2017.

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4 | P a g e

o Participated at the Africa Agri Indaba in Cape Town on 20 -22 November 2017. Staging

an Exhibition and distributing 200 booklet with information on Tshwane based companies.

o Lastly, the entity participated at the Italy-South Africa Matchmaking and Exhibition Event

on Aerospace from the 4 – 5 December 2017

2 PERFORMANCE AGAINST THE ENTITY BUSINESS PLAN

2.1 SUMMARY OF PROGRESS AGAINST THE ENTITY BUSINESS PLAN TARGETS

Table 1: Summary of performance against the business plan Total Nr of targets

for the financial

year

Number of

targets for the

quarter

Nr of targets not

achieved for the

quarter

Nr of targets

achieved for the

quarter

Nr of targets not

achieved year to

date

Nr or targets

achieved year to

date

19 13 3 10 4 10

Table 2: Business plan targets not achieved Key

Performance

Indicator

2nd Quarter

Target

Reason for non-

achievement

Corrective

measures

implemented to

date

Planned

corrective

measures to be

implemented

Responsible

official for

corrective

measure

Due date

Two city

allocated

capital projects

managed by

TEDA

Project plans

for the two

projects

developed

CoT has not

allocated

projects for

implementation

by TEDA.

Furthermore,

TEDA mandate

is under review.

Escalation of

the matter to

the Shareholder

Confirmation of

TEDA’s

mandate by

the

Shareholder.

The process of

redefining

TEDA’s

mandate in

underway

Executive:

PPM

To be

confirmed

by

Shareholder

Development

of the Agro-

processing Hub

Statutory

compliance

achieved

CoT Property

Management

delayed

processing of

land parcel in

favour of

project. This has

resulted in the

inability to

submit statutory

applications.

Escalated the

matter to Top

management

of Economic

Development

and Spatial

Planning.

Additionally,

requested

newly

appointed

Group Head of

Property

Management

to fast track

administrative

processes

regarding the

land parcel.

Fast tracking of

administrative

processes

regarding the

land parcel set

aside and long

term lease

conditions.

Executive:

PPM

Quarter 1 in

2018/19

Management

of City’s

selected

commercial

properties

SLA signed CoT has not

allocated

projects for

implementation

by TEDA.

A process to

review TEDA’s

mandate is

underway.

To be

confirmed by

the Shareholder

CEO To be

confirmed

by the

Shareholder

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5 | P a g e

Table 3: Business plan targets achieved Key Performance Indicator 2nd Quarter Target 2nd Quarter Actual

Number of positions filled 1 3 positions have been filled

Clean Audit opinion by AG

achieved Submission of MLAP report Received clean audit opinion

Development of the Agro-

processing Hub

Solicitation of

prequalification proposals

BEC report with recommendations on the

prequalifying bidder/proposer.

Facilitation of Tshwane Freight

Terminal and Logistics Hub Projects report Project report for Quarter 2 signed-off

Investment Intelligence Acquired 1

Intelligence report on the analysis of available

financing instruments for supporting investment

and doing business in Tshwane signed-off.

Number of new, quality investment

projects attracted into the pipeline 3

1. PRIME PRODUCTS - Investor Site visit to

Ekandustria with Prime Products took place on

the 29/11/2017. First Identified site was too big for

the Investor’s requirements. A second site that

was conducted on the 11/12/2017 of which

investor seems keen on occupying the identified

site. It was agreed in principle that negotiations

between the landlord and Prime Products should

commence so that Prime Product representative

can present the new site to their board in

January 2018.

2. SAFRAN - The SAFRAN visit was a follow up to

the engagement that took place between TEDA,

Aerosud and the SAFRAN executive during the

B2B meetings at the Paris Airshow in 2017. SAFRAN

is a leading French manufacturer and Innovator

of products and solutions for the Aerospace and

Defence sector.

The next meeting of the visit was between

SAFRAN and Electrothread held at the

Electrothread offices in Samrand. The discussions

also yielded positive results, where SAFRAN

committed to make use of Eletrothreads product

and technology for a contract that they have

with the UAE defence force. The 3 new

Investment leads generated from the SAFRAN

visit:

o AEROSUD

o ELECTROTHREAD

o CENTURION AEROSPACE VILLAGE

3. ITALY SOUTH AFRICA MATCH MAKING - B2B

meetings were held with the following

companies:

o DISTRETTO TECNOLOGICO AEROSPAZIALE

(DTA)

Possible areas of collaboration were identified

between TEDA & DTA, mainly around the

Research & Development to benefit Tshwane

based companies under CAMASA.

o LAZIO INNOVA S.p.A

This entity is a region agency for the region of

Lazio. Discussions were held on possible areas of

collaboration in the Aerospace sector, where

they can assist in finding Italian Investor who

might be interested in Investing in Tshwane.

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6 | P a g e


o MARENCO SOUTH AFRICA

Marenco South Africa is a helicopter

manufacturing company. They have indicated

that they are interested in setting up a

manufacturing facility in Tshwane.

4. THAILAND SUMMIT GROUP (TSG) INVESTMENT -

TEDA is facilitating a second visit for TSG for their

envisaged investment in Silverton. TEDA is

arranging meetings with other key stakeholders in

preparation for the TSG visit.

Number of capacity building

workshops held for Tshwane

companies

1 3

Number of foreign buying trade

missions facilitated by TEDA 1 1

Production of quarterly newsletters

to promote City as preferred

investment destination published

1 The second quarter newsletter - TEDA Business

Review Volume 12 - has been produced

Exhibitions and Trade Shows

facilitated by TEDA 1 3

2.2 SUMMARY OF PROGRESS ON PROJECTS

Table 4: Summary of projects Total nr of Projects Nr of projects that

achieved planned

non-financial

milestones for the

quarter

Nr of projects that did

not achieve planned

non-financial milestones

for the quarter

Nr of projects that

achieved planned

non-financial

milestones year to date

Nr of projects that did

not achieve planned

non-financial

milestones year to

date

1 0 1 0 1

Table 5: Non achieved milestone targets on projects and corrective measures

IDP project nr Corrective measures

implemented for non-

achieved milestone

Corrective measures to

be implemented

Date of

implementation

Responsible official

9.713064.1.007

Furniture and

Office

Equipment

Procurement of

replacement of

computers will be done

in both quarter 3 and 4

Procurement of

replacement of

computers will be done

in both quarter 3 and 4

Quarter 4 Chief Financial

Officer

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3 PERFORMANCE ON OTHER STRATEGIC MATTERS

3.1 ESTABLISHMENT OF THE TSHWANE CLOTHING AND TEXTILE HUB

Progress to date

o Pre-feasibility/ Opportunity study completed.

o Detailed Market feasibility underway.

Successes and specific wards/ communities that have benefitted

o Locality definition not commissioned yet.

Key challenges

o Feasibility funding declined at GIFA.

Matters requiring intervention

o None as yet.

3.2 ESTABLISHMENT OF THE TSHWANE AGRO-PROCESSING HUB

Progress to date


o Detailed Market feasibility completed.

o Detailed infrastructure feasibility completed.

o Procurement process (request for qualification or prequalifying bidders).


o Rayton/Cullinan and surrounding areas.

Key challenges

o Servitude acquisition to supplement water supply to site; and

o Delay (approximately 12months) in long term lease over land parcel.

o Township establishment application not submitted.

o Statutory approvals application not processed.

o Rezoning or consent application.


o Long term lease administrative process to be fast tracked.

3.3 ESTABLISHMENT OF THE TSHWANE BIO-ENERGY FACILITY

Progress to date


o High level feasibility completed.

o Detailed technical, financial feasibility underway.


o Secured R 6 million from GIFA.

o Municipal wide beneficiaries.

Key challenges

o Digester feedstock volume, stability and consistency from Fresh Produce Market.


o Genetically Modified (GM) or non GM energy crop to supplement organic waste

from the Fresh Produce Market.

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8 | P a g e

3.4 INVESTMENT PROMOTION AND FUNDING

Progress to date

o SAFRAN - Follow up discussion will be taken up in 2018 between SAFRAN and the

various entities that they met with.

o PRIME PRODUCTS - The Prime Products board will meet in January 2018 to take a

decision on whether they will take up the lease for the visited/identified factory

space.

o B2B Meetings with MARENCO SA, LAZIO INNOVA & PCENTRO ESTERO

INTERNAZIONALIZZAZIONE - Emails have been sent to the companies mentioned

above, follow ups will be done in 2018.

o Three (3) Trade and Investment Missions identified and internal preparations are

underway (Netherlands, China, Tanzania).


o Prime Products are keen in moving into a facility which TEDA assisted in identifying.

Prime products currently employs 200 people with more employment

opportunities to come should they move into the new identified facility.

Key challenges

o Lack of sufficient city owned industrial facilities.


o City of Tshwane should facilitate the development of council owned industrial

facilities.

3.5 IMPACT OF JOB CREATION INITIATIVES ON THE ECONOMY OF TSHWANE AS A WHOLE

Investment projects and number of jobs created are to be realized once committed.

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4. FINANCIAL PERFOMANCE

PLEASE REFER TO ANNEXURE B.

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5. GOVERNANCE

5.1 BOARD COMPOSITION

Table 8: TEDA Board of Directors Board Members Position Race Gender

Prof. DL Mosoma Board Chairperson African Male

Mr. H Gouvelis Non-Executive Director White Male

Ms. ZG Mpungose Non-Executive Director African Female

Ms. SP Mzizi Non-Executive Director African Female

Mr. FK Sibanda Non-Executive Director African Male

Ms. N Singh Non-Executive Director Indian Female

Adv. JL Thubakgale Non-Executive Director African Female

Mr. MW Yates Non-Executive Director White Male

Mr. S Mogaladi Chief Executive Officer African Male

Mr. T Mkhwanazi Chief Financial Officer African Male

Table 7 TEDA Board of Directors

Board Member Capacity:

Executive / Non Executive Race Gender Board Committee Membership

Prof. David Luka

Mosoma

Chairperson

African Male

- Board Chairperson

- Social & Ethics Chairperson

Mr. Haralabos Gouvelis Non-Executive White Male

- Board Member

- HR & Remco

- Projects Committee

Mr. Solly Daniel

Mogaladi Executive Director African Male

- CEO

- Board Member

Mr. Thami Mkhwanazi Executive Director African Male - CFO

- Board Member

Ms. Zandile Mpungose Non-Executive African Female

- Board Member

- Trade & Investment Chairperson

- HR & Remco

Ms. Sizo Mzizi Non-Executive African Female

- Board Member

- Finance & Risk Committee


Mr. Fungai Khumbule

Sibanda Non- Executive African Male

- Board Member

- Trade & Investment Committee

- HR & Remco

Ms. Nadira Singh Non-Executive Indian Female

- Board Member


Chairperson

- Social & Ethics Committee

- APC

Mr. Jan Letsepe

Thubakgale Non-Executive African Male

- Board Member

- HR & Remco Chairperson


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5.2 BOARD AND COMMITTEES

Indicated in the table below are the board and committee’s meetings held during the period under

review. Attendance at meetings held during the quarter under review was as follows:

Table 8: Board and board committee meetings (October 2017 – December 2017) Name Trade and

Investment

HR and

Remco

Projects

Committee

Fin Risk Board

Prof. DL Mosoma

(Chairperson)

- - - - 2

Mr. H Gouvelis - 2 - - 2

Ms. Z Mpungose 1 2 - - -

Ms. S Mzizi - - 1 2 2

Mr. FK Sibanda 1 3 - - 1

Ms. N Singh - - - 2 2

Adv. JL Thubakgale - 3 - 1 2

Mr. MW Yates 1 - 1 - 2

Mr. Mike William Yates Non-Executive White Male

- Board Member

- Trade & Investment Committee


Chairperson

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5.3 DIRECTORS REMUNERATION

Table9: of TEDA Board remuneration for the quarter

No Surname October November December Total

1 Mosoma R 13 712.00 R 5 142.00 R 13 712.00 R 32 566.00

2 Gouvelis R 8 570.00 R 5 142.00 R 17 140.00 R 30 852.00

3 Mpungose R 11 988.00 R 5 142.00 R 5 142.00 R 22 282.00

4 Mzizi R 10 284.00 - R 13 712.00 R 23 996.00

5 Sibanda R 18 854.00 - R 17 140.00 R 35 994.00

6 Singh R 15 426.00 R 5 142.00 R 15 426.00 R 35 994.00

7 Thubakgale R 20 568.00 - R 5 142.00 R 25 710.00

8 Yates R 20 568.00 R 5 142.00 R 8 570.00 R 34 280.00

Total R 119 980.00 R 25 710.00 R 95 984.00 R 241 674.00

Table 10: Executive remuneration for the quarter

No Name Designation

Total Cost to

Company per

annum

Total Cost to

Company:

Monthly Before

All Deductions

Total Cost to

Company: Before

All Deductions for

quarter 1

1 Solly Mogaladi Chief Executive Officer R 1910265.72 R159 188.81 R477 566.43

2 Boledi Seopela

Executive Manager:

Corporate Services R 1574 892.84 R131 241.07 R393 723.21

3 Karin Liebenberg Executive Manager: IPF R 1201 963.68 R100 163.64 R300 490.92

5 Lebogang Mahaye Company Secretary R1 312 410.48 R109 367.54 R328 102.62

6 Mogau Leshilo Executive Manager: PPM R1 364 583.12 R113 715.26 R341 145.78

7 Sello Sefuthi

Executive Manager:

Strategic Performance

and Monitoring R1 166 000.04 R97 166.67 R291 500.01

8 Thami Mkhwanazi Chief Financial Officer R1 557 100.00 R129 758.33 R 389 274.99

Total R10 087 215.88 R840 601.32 R2 521 803.97

5.4 RISK MANAGEMENT AND INTERNAL CONTROLS

The entity has since identified six (6) Strategic Risks and relevant risk responses have been

established in order to mitigate those risks. The Strategic Risk Monitoring for quarter 2 is

currently underway and is due by the 15 December 2017.

The Operational Risk Monitoring for quarter 2 has been concluded and the report is

awaiting sign-off. The entity has a total of 16 operational risks for the current year, of which

81% of those risks are on a low and acceptable level. However, from the Operational Risk

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Monitoring, two risks have been escalated to the strategic Risk register for immediate

action, namely:

o Failure to implement MSCOA (Financial Services); and

o Non-allocation of Capital projects from the CoT (Projects Portfolio Management)

The above identified risks have a high dependency rate on the CoT.

The Risk Management division together with the Office of the Company Secretary will

coordinate efforts to highlight key risks to all Risk and Action Owners.

5.5 LITIGATIONS

There are no pending litigation matters.

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6. HUMAN RESOURCES

6.1 RECRUITMENT

The table presents filled and vacant positions as per the new structure:

Table 11: Number of approved positions filled and vacant

Sixty (60) approved positions exists on the organizational structure, of which thirty (30) are

filled and thirty (30) are vacant.

The following positions have been filled:

Supply Chain Officer;

Senior Manager: Financial Management; and

Senior Manager: Investment Centre

Recruitment process is underway to fill the following vacancies:

Senior Manager: Project Development Facilitation

Senior Manager: Strategic Services

There was one termination in the period under review.

6.2 SKILLS DEVELOPMENT

No Competency for development Course name Training provider

1. Flexibility & adaptability Change Management Jamela Consulting

2. Taxation for business Income tax UNISA

3. Report writing Effective Business Writing and Report Writing

Skills

Basitsana Training

Consultants

6.3 MINIMUM COMPETENCIES FOR FINANCIAL OFFICIALS

Two supply chain officials have successfully completed the Municipal Finance

Management Programme; whereas two financial services officials await the process of

certification to be completed.

Business Units Approved Posts as per the

structure

No of filled posts Vacant posts

Office of the CEO 7 3 4

Company Secretary 3 3 -

CFO 8 6 2

Corporate Services 13 9 4

Asset Management 6 - 6

Investment Promotion & Funding 10 6 4

Internal Audit 2 - 2

Risk and Compliance 1 - 1

Projects Portfolio 10 3 7

Total 60 30 30

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Executive Management team are on track with the RPL implementation plan towards

obtaining Municipal Finance Management Programme. The following unit standards were

submitted:

US 116343: Apply the principles of ethics in a municipal environment

US 116364: Plan a municipal budgeting and reporting cycle

US 116363: Prepare and analyze municipal financial reports

US 119350: Apply accounting principles and procedure in the preparation of reports

and decision making

US 119348: Apply selected GRAP to periodic accounting reporting process

US 116341: Conduct performance management to a South African municipal

environment

6.4 PERFORMANCE MANAGEMENT

Performance Management was adopted as a positive management strategy rather than

a punitive process, and in this way employees feel comfortable to be part of the process.

It was implemented for all employee levels (including contractors/ temporary staff) in the

organisational structure.

The balanced scorecard is the tool being used for measurement. 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


People Management & empowerment

Problem Solving

Audit

Performance review for quarter two will be completed once the quarter is fully completed,

however only quarter one (1) performance review is depicted below:

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Figure 1: Illustration of Performance review compliance

Head count at quarter 1 review period was 31. Ninety-four (94%) compliance was achieved

on performance review for Q1. Two employees not reviewed, one of whom is reviewed

annually.

6.5 HUMAN RESOURCE POLICY REVIEWS

The entity is continuously in the process of reviewing its policies to ensure that they are in

line with best practice and legislation. There are currently no Human Resource policies due

for review.

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7. DEPENDENCIES AND CROSS CUTTING ISSUES

Good relationships between City’s Departments and TEDA have been established and are

maintained.

8. OPERATION CLEAN AUDIT

Table 12: Evidence Evidence for the

quarter submitted

with report (Yes/

No)

Entity evidence files

updated, centralised

and verified in the

department (Yes/ No)

If no, indicate

corrective

measure

Entity project files for the

quarter compiled,

centralised and verified

(Yes/No)

If no indicate

corrective measure

Yes N/A N/A

The table below depicts the progress against the action plan based on the audit outcome

of the 2016/17 audit report. The action plans were constructed to address the root cause

as highlighted by the auditors.

Table 13: Action plan based on 2016/17 Auditor-General’s report CLASSIFICATION NUMBER OF

FINDINGS

REPEAT

FINDINGS

NUMBER OF

FINDINGS

RESOLVED

NUMBER OF

FINDINGS NOT YET

RESOLVED

Annexure A: Matters affecting

the audit report

0 0 0 0

Annexure B: Other important

matters

2 0 2 0

Annexure C: Administrative

matters

0 0 0 0

TOTAL 2 0 2 0

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Number Finding Recommendation

s by the Auditor

General

Background Action

plan

Responsibl

e person

Due date Progress

ANNEXURE B: OTHER IMPORTANT MATTERS

1.

Provision for

leave pay:

Understateme

nt of Leave

Provision

Audit finding

It was noted that

provision for leave

was understated

on the annual

financial

statements. A

difference or R 353

375 was noted

between the

amounts per the

schedule and the

supporting

documents.

Internal control

deficiency

Management did

not prepare

regular, accurate

and complete

financial and

performance

reports that are

supported and

evidenced by

reliable

information.

Impact

This will result in an

understatement of

provisions and

expenses.

Recommendation

Management

should also ensure

that when

calculating

provisions for leave

pay, all leave days

in the current

cycle and

previous cycle are

included.

Management

comment on

audit finding:

Managemen

t agrees with

audit finding,

the leave pay

provision

balance will

be corrected

and AFS will

be adjusted

as well as

other

affected

accounts.

The leave

pay provision

balance

report is

generated by

the service

provider who

manages the

payroll, the

leave

provision

report was

supposed to

have two

columns

showing both

current and

previous

accumulated

portion of the

leave days,

the report

received

from the

service

provider only

had one

column

which was

only the

current leave

balance. To

prepare the

AFS we used

the report as

provided. A

correct report

has been

supplied by

the service

provider and

the service

provider

confirmed

that the

report used

No further

action

required

as this was

an

isolated

error that

was

corrected

.

Chief

Financial

Officer

Immediat

e

No further

action

required

as this was

corrected

.

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19 | P a g e


s by the Auditor

General

Background Action

plan

Responsibl

e person

Due date Progress

had

erroneously

omitted the

prior year

leave

balance

cycle

column.

Managemen

t believes the

internal

controls

relative to the

preparation,

review and

disclosure of

the leave

provision

balance, are

intact

therefore, this

is an isolated

error.

2.

Commitments:

Understateme

nt of

Commitments

Audit finding

It was identified

that commitments

disclosure was

understated on

the annual

financial

statements. The

table below shows

the difference

between the

amount on the

AFS and the

amount as per the

commitment

register. Internal control

deficiency

Management did

not prepare

regular, accurate

and complete

financial and

performance

reports that are

supported and

evidenced by

reliable

information.

Impact This will result in the

understatement of

the commitment

amounts

disclosed.

Recommendation

Management

comment on

audit finding:

Managemen

t agrees with

the audit

finding and

as such the

commitments

and the

annual

financial

statements

will be

corrected,

managemen

t

endeavoure

d to check

the

commitment

register to

ascertain the

root cause of

the error and

discovered

that the

controls to

review and

approve the

register by

senior

managemen

t is in place

(as provided

to the

auditors).

The error is an

isolated

event since

the

No further

action

required

as this was

an

isolated

error that

was

corrected

.

Chief

Financial

Officer

Immediat

e

No further

action

required

as this was

corrected

.

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20 | P a g e


s by the Auditor

General

Background Action

plan

Responsibl

e person

Due date Progress

Management

should ensure that

the commitments

register is

reviewed by

senior

management and

casted for

accuracy.

commitment

register is

maintained

on the excel

spreadsheet

inherently

susceptible to

minor errors.

9 CONCLUSION AND RECOMMENDATIONS

The review of the entity’s service delivery agreement and mandate is still underway with

the ultimate aim of ensuring that the entity’s direction and financial sustainability are

resolved. As management we are focusing on improving capacity requirements and

supporting structures, processes and systems so as to mitigate challenges and assist in

achieving the performance expected.

.

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21 | P a g e

ANNEXURE A: EXTRACT OF ENTITY’S BUSINESS PLAN REPORT FROM QPR

319

22 | P a g e

ANNEXURE B: STATEMENT OF FINANCIAL POSITION AND PERFORMANCE

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23 | P a g e

ANNEXURE C: RISK REGISTER

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Initiator Msizi Myeza (3330) MAYORAL COMMITTEE:

OFFICE OF THE CITY MANAGER MID-YEAR BUDGET AND PERFORMANCE ASSESSMENT REPORT IN TERMS OF SECTION 88 OF THE MUNICIPAL FINANCE MANAGEMENT ACT, 2003 FOR TSHWANE ECONOMIC DEVELOPMENT AGENCY (TEDA) (JULY TO DECEMBER 2017)

1. PURPOSE

The purpose of this report is to present the Mid-Year Budget and Performance Assessment of the Tshwane Economic Development Agency (TEDA) in terms of Section 88 of the Municipal Finance Management Act, 2003 (MFMA) for 2016/17 financial year, being July to December 2017. The mid-year and performance assessment reports of TEDA for this period is attached as Annexures A, B and C. Please note that the quarter 2 performance report for the period October 2017 to December 2017 is included herewith as Annexure C.

2. STRATEGIC PILLARS

2.1 A CITY THAT FACILITATES ECONOMIC GROWTH AND JOB CREATION

2.2 A CITY THAT CARES FOR RESIDENTS AND PROMOTES INCLUSIVITY

2.3 A CITY THAT IS OPEN, HONEST AND RESPONSIVE

3. BACKGROUND

The Shareholder Operations Unit is concerned with reviewing, monitoring and “overseeing” the affairs, practices, activities, behaviour and conduct of municipal-owned entities (MOEs) to ensure the City of Tshwane that the business of MOEs is being conducted in a manner expected in accordance with commercial legislative and other prescribed or agreed conventions.

The unit is poised to assist the institution and its MOEs to comply with applicable legislation by providing regular advice and reports on compliance and recommending remedial action where required. The Division regulates the functions of MOEs and co-ordinates these with prevailing political imperatives, whilst ensuring alignment with departmental SDBIPs.

In terms of Section 88 of Municipal Finance Management Act, 2003, the accounting officer of the municipal entity must by the 20 January each year:

ANNEXURE F 322

1. Assess the performance of the entity during the first half of the financial year, taking into account the monthly statements referred to Section 87 for the first half of the financial year, the targets set in the service delivery, business plan or other agreement with the entity’s parent municipality; and the entity’s annual report for the past year, and progress in resolving problems identified in the annual report; and

2. Submit such report to the board of directors of the entity and to the parent municipality of the entity.

3. A report referred to in subsection (1) must be made public.

Therefore in compliance to the above-mentioned legislation, TEDA was requested to submit their Mid-Year Budget and Performance Report to the City of Tshwane on the 4 January 2018, in order to comply with the internal process of the Mayoral Cluster System. The documents received are attached to this report as Annexures A, B and C.

4. DISCUSSION

OVERALL BUSINESS PERFORMANCE TEDA successfully obtained a clean audit report for the financial period 2016/17 and it is commendable. Participated at the Gauteng Infrastructure Investment Conference in July 2017 and also showcased City of Tshwane projects in private and public events; BME Symposium, Africa Agri Indaba in Cape Town in November 2017 and Italy-South Africa Matchmaking and Exhibition Event on Aerospace in December 2017. TEDA has challenges in terms of interdependencies with certain City’s departments, however, its mandate is currently being redefined and will be finalised soon to ensure that it is in line with City’s objectives.

PERFORMANCE AGAINST SDBIP AND THE SCORECARD TEDA has nineteen (19) annual KPIs in terms of its scorecard, ten (10) KPIs have been achieved against the target of 13 for the period of six months under review, i.e. from July to December 2017. The other three (3) targets are set to be achieved during quarter 3 and 4. Summary of Business Plan Targets

Mid-Year Targets

Annual Targets

Targets 13 19

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Targets achieved

10 16

Targets not achieved

3 3

FINANCIAL PERFORMANCE REVENUE Entity recorded total revenue of R61, 5 million for the period under review, of which R58, 4 million is the subsidy from the City; interest income of R393 thousand; other income R2, 6 million and R20 thousand sale of tender documents. Entity had developed a Financial Sustainability Model, which had a potential of yielding R6, 6 million revenue, as no capital projects have been transferred from the City for implementation during the period under review. EXPENDITURE Total expenditure for the period under review is R61 million. Attributable to the expenditure is mainly on remuneration of board members of R1, 4 million; employee related costs of R33, 7 million; general opex of R13 million; investment promotion of R4, 3 million and R5 million project costs. SOLVENCY

Total assets for the quarter under revenue was recorded at R21, 7 million and the total liabilities are R10, 9 million, thus implying a solvency ratio of 1.990 against the standard norm of 2:1. The entity is able to meet its long-term obligations as its total assets exceeds its total liabilities by R10, 8 million. LIQUIDITY The entity’s current assets for the quarter under review are R18, 2 million and the current liabilities are R238 501 thousand. TEDA is able to meet its short-term liabilities as its current assets exceed its current liabilities by R17, 9 million GOVERNANCE ISSUES City is in the final process of appointing a new Board. The term of current board has been extended on a month to month basis not exceeding a period of 3 months, i.e. from 01 January 2018.

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The existing Board as well Management of TEDA are applauded for ensuring that the entity obtains a clean audit report for the financial period 2016/17.

ICT GOVERNANCE TEDA participates at CoT Group ICT Steering Committee and there are no matters reported for the period under review. COMPLIANCE WITH LEGISLATION The entity has recorded four deviations, which were condoned by the Board.

The Auditor General two (2) findings for the 2016/17 financial period were successfully resolved. HUMAN RESOURCES GOVERNANCE During the period under review TEDA successfully filled critical positions namely, Senior Managers: Project Development Facilitation, Financial Management, Investment Centre and Supply Chain Management Officer. Entity implemented performance management except for one person, which was not finalised due to extended leave. 5. COMMENNT OF THE STAKEHOLDER DEPARTMENT

5.1 COMMENTS OF THE CHIEF FINANCIAL OFFICER 5.2 COMMENCE OF THE GROUP HEAD: ECONOMIC DEVELOPMENT AND SPATIAL PLANNING

5.3 COMMENTS OF THE GROUP LEGAL COUNSEL

None

6 IMPLICATIONS 6.3 HUMAN RESOURCES

The report does not have any human resource related implications for the CoT.

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6.4 FINANCES

The report does not have any direct financial implications for the CoT. 6.5 CONSTITUTIONAL AND LEGAL FACTORS

This report is in accordance with the legislative provisions and processes stipulated in the Local Government: Municipal Finance Management Act, 56 of 2003 as amended. Municipal Systems Act, Act 32 of 2000 as amended as well as the relevant National Treasury Regulations and Circulars.

6.6 COMMUNICATION

The communication implications for the CoT are dealt with in the report. 6.7 PREVIOUS COUNCIL OR MAYORAL COMMITTEE RESOLUTIONS

None 7 CONCLUSION Section 88 of the MFMA requires entities to submit mid-year budget and

performance assessment reports to the Shareholder (City) by the 20th of January every year and these reports must be approved by the board, mayoral committee and council before made public. Non-compliance to this section could result to an audit finding by the Auditor General, hence these reports must be tabled during the January reporting cycle.

ANNEXURES: A. TEDA Mid-Year Report 2017-18 1_2.pdf B. TEDA Mid-Year Report 2017-18 2_2.pdf C. TEDA Quarter 2 Performance Report 2017-18.pdf

RECOMMENDED: That it be recommended to the Mayoral Committee: 1. The assessment of TEDA as detailed in the report and the Annexures be

accepted as a reflection of the performance of TEDA for the mid-year of 2017/18 financial year in respect of its approved budget and IDP scorecard in

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http://ceoctviis058.tshwane.gov.za/c9_tshwane/GovFlowAjax/DownloadAttachment/4209078



accordance with provisions of Local Government; Municipal Systems Act, 2000 and the Local Government: Municipal Finance Management Act, 2003.

2. That the mid-year budget and performance assessment report of TEDA for the

2017/18 financial year attached to the report as Annexures A, B and C, be noted.

3. That the mid-year assessment as detailed in this report and Annexures be

made public in accordance with the provisions of section 21A of the Local Government: Municipal Systems Act, 2000.

327

1

2017/18 MID-YEAR REPORT (JULY-DECEMBER 2017)

HOUSING COMPANY TSHWANE

NON PROFIT COMPANY

Registration No: 2001/029821/08

(In terms of Section 88 of the Municipal Finance Management Act, 2003)

SIGN OFF

ACTING CHIEF EXECUTIVE

OFFICER:

Ms. A. Mothoagae

___________________________________

DATE: 02 January 2018

ANNEXURE G 328

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

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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 Human Settlement) 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: Information and Communications Technology Governance Section 13: Supply Chain Management and Black Economic Empowerment 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 CHAPTER FIVE: FINANCIAL PERFORMANCE Section 1: Statement of Financial Performance Section 2: Statement of Financial Position Section 3: Statement of Capital Expenditure Section 4: Cash Flow Statement Section 5: Report in Irregular, Fruitless and Wasteful Expenditure and Legal Processes 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

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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 (Strategic Intent) outlines the city’s IDP Vision 2030 and the

five Strategic Pillar guiding development in this term of office. The Strategic Pillars and the 18 priority areas as

well as their actions recognize the need for a continuous and sustainable provision of basic services to the

Tshwane residents, including a variety of housing opportunities.

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 2019.

Key Strategic Objective 4: Promote and practice sound governance.

The HCT strategic objectives contribute to the attainment of the CoT’s strategic objectives and associated

service delivery performance areas:

City of Tshwane

Strategic Pillars

HCT Strategic Objective Key Performance area(s)

Pillar 3: A City that

delivers excellent

services and

protects the

environment

1. Provision of new Social Housing

units on a sustainable basis

Deliver and provide new affordable rental units

2.Effective and efficient

management of HCT and Social

Housing portfolio)

- Acquisition of brownfields rental stock from the

CoT

- Management of affordable rental housing in

the City

- Turnaround time for resolving tenant

maintenance requests

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City of Tshwane

Strategic Pillars

HCT Strategic Objective Key Performance area(s)

-Turnaround time for resolving tenant

complaints

A city that facilitates

economic growth

and job creation

3. Strive for financial sustainability

by 2019

Effective financial management

A City that is open,

honest and

responsive

4. Promote and practice sound

governance

Promote good governance

332

Section 3: Salient Features This section has highlights what the entity has achieved in the six months period (July 2017 – December 2017).

3.1 Revenue Collection:

HCT’s revenue collection target for the six months period (July 2017 – December 2017) for Eloff building was 96% of the billing. For the period under review, the collection level achieved was 96.73%, thereby exceeding the target by 0.73%.

3.2 Levies Collection:

HCT’s levies collection target for the six months period (July 2017 – December 2017) for Clarina was 30% of the billing. For the period under review, the collection level achieved was 20.08%, which is below the targeted collection by 9.92%.

3.3 Financial Management: The following analysis is drawn from the financial performance report for the period ended 31 December 2017. The summary is provided from different income and expenditure categories.

Housing Company Tshwane - Table F2 Monthly Budget Statement - Financial Performance (revenue and expenditure) - M06 December

Description

2016/17 Current

Year 2017/18

Audited Outcome

Original Budget

Monthly actual

Year-TD actual

Year-TD budget

YTD variance

YTD variance

Full Year Forecast

R thousands %

Revenue By Source

Rental of facilities and equipment 5,478 10,176 712 4,255 5,086 (830)

-16.3% 10,176

Interest earned - external investments – 25 1 7 12 (6)

-46.0% 25

Interest earned - outstanding debtors 136 106 12 71 52 18

35.1% 106

Transfers and subsidies 30,629 31,275 2,866 11,004 15,476 (4,472)

-28.9% 31,275

Other revenue 209 87 10 59 43 16

37.4% 87

Gains on disposal of PPE – – – – – – –

Total Revenue (excluding capital transfers and contributions) 36,452 41,669 3,601 15,396 20,670 (5,274) -25.5% 41,669

Expenditure By Type

Employee related costs 8,004 14,594 566 3,512 6,521 (3,009)

-46.1% 14,594

Remuneration of Directors 1,325 1,377 55 324 586 (263)

-44.8% 1,377

Debt impairment 729 – – – – – –

Depreciation & asset impairment 215 324 224 447 154 293

189.6% 324

Finance charges 285 240 21 126 126 (0)

0.0% 240

Other materials – 1,452 103 382 686 (304)

-44.3% 1,452

Contracted services 8,888 11,191 (6,870) (4,808) 5,571

(10,380)

-186.3% 11,191

Other expenditure 5,344 9,046 286 1,812 4,874 (3,062)

-62.8% 9,046

Total Expenditure 24,790 38,224 (5,615) 1,795 18,519

(16,724)

-90.3% 38,224

Surplus/(Deficit) 11,662 3,445 9,216 13,600 2,150 11,450

532.5% 3,445

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Transfers and subsidies - capital (monetary allocations) (National / Provincial and District) 26,824 110,626 20,905 57,149 61,252 (4,103)

-6.7% 110,626 Transfers and subsidies - capital (in-kind -

all) – – – – – –

–

Surplus/(Deficit) before taxation 38,486 114,072 30,122 70,749 63,403 7,347

11.6% 114,072

Taxation – – – – – – –

Surplus/(Deficit) for the year 38,486 114,072 30,122 70,749 63,403 7,347 114,072

3.4 Capital Expenditure:

As at the end of December 2017, the entity’s performance on operating capital reflected an actual expenditure of R189, 480 against a budget of R466, 256. This translated to a percentage non-achievement of 60%. On the capital project for both Townlands and Chantelle projects, the entity has spent R57 million against the budget of R60, 7 million which translated to percentage achievement of 94%.

3.5 Solvency ratio:

As at the end of December 2017, the entity continued to operate as a going concern for the foreseeable future. The going concern of HCT over the short term (12 months) was demonstrated considering the positive support from the City of Tshwane and it was also supported by the current ratio which showed the liquidity of the entity as 5,91:1 (current assets to current liabilities).

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1

Section 4: High-level organisational structure

HUMAN SETTLEMENT (COT)

HCT BOARD OF DIRECTORS

CHIEF EXECUTIVE OFFICER (CEO)

CHIEF OPERATIONS

OFFICER (COO)

PA TO COO

FINANCE MANAGER

BOOKKEEPER

COMPANY

SECRETARY

ACCOUNTS CLERK

SUPPLY

CHAIN OFFICER

SECURITY

GUARD

SUPERVISOR

MAINTENANCE

OFFICER

SENIOR CREDIT

CONTROLLER

SUPPLY CHAIN

MANAGER

HUMAN

RESOURCE

SUPPORT OFFICER

SECURITY

GUARDS(x10)

COMMUNITY

DEVELOPMENT

OFFICER

OFFFICE

CLEANER

HOUSING

SUPERVISOR (x6)

GENERAL WORKER

(x6)

MARKETING AND

COMMUNICATION

OFFICER

TENANT

PORTFOLIO

OFFICER

CREDIT

CONTROLLER

CLIENT SERVICE

MANAGER PROPERTY DEVELOPMENT

MANAGER

PROJECT SUPPORT

OFFICER

CLIENT SERVICE AND

OFFICE SUPERVISOR

EXEC PA TO CEO

COMPLIANCE

OFFICER

SUPPLY CHAIN

ASSISTANT

OFFICE

ASSISTANT

PROPERTY MANAGER

SENIOR HUMAN

RESOURCE OFFICER

CHIEF FINANCIAL OFFICER

(CFO)

PA TO CFO

ACCOUNTANT

CLERK OF WORKS

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1

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. HCT is expected to complete 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 R1500 to R5500 (for Community Residential Units) R 5 501 and R15 000 (Social Housing) ( 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, as and when such is transferred to HCT.

HCT is embarking on construction of one of City of Tshwane’s first catalytic social housing projects, Townlands, with 1,200 social housing units. This will alleviate shortage of rental housing opportunities and will bring low income earners closer to work and economic opportunities. Furthermore, the entity is beginning to attract funding from national and provincial government for its Social housing projects. Corporate governance of HCT has been enhanced and the entity recanted its constructional accreditation with SHRA. In this financial year, HCT received … buildings translating into … units under category Self-Sufficient Elderly. There are more council-owned internal stock which will be handed over to HCT to increase its rental stock under management and contribute to HCT’s financial sustainability.

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Section 6: Chairperson’s Foreword During the period under review, the Board considered and approved the advertisement and the filling of critical posts i.e. CEO, CFO. The appointment of these executives together with the appointment of the Supply Chain Manager and the Clerk of Works will go a long in strengthening the internal capacity of the entity and address some of the identified challenges especially within the supply chain department and project/property development department. The recruitment process is expected to be done and concluded before the end of the financial year. . The Board further approved the draft turnaround strategy document after a successful turnaround strategy workshop attended by the Board members, management and shareholder representatives. The report will be forwarded to the City Manager’s Office for consideration and endorsement. The HCT has expanded its network with other Social housing sector stakeholders and social housing institutions. This enabled HCT to constantly benchmark itself while achieving continuous improvement in the first half of this financial year.. The HCT has strengthened its partnership with CoT departments for mutual benefit. HCT has accessed bulk infrastructure funding through Urban Services Development Grant which was facilitated by CoT department of Human Settlements and housing. Moreover, HCT has secured funding from SHRA for the first time in its history, a major milestone. HCT has engaged with HDA with regards to land parcels which HDA can release for social housing projects. There is also a possibility of a strategic relationship between HCT and HDA on project development. HCT endeavours to discharge its mandate as per the existing Service Delivery Agreement (SDA) with the shareholder, the City of Tshwane. There was a further transfer of CoT rental stock to HCT, which improved HCT’s cash flow in the period under review. HCT tightened its internal controls, resulting in no irregular, fruitless and wasteful expenditure in Quarter 1 and 2. HCT is committed to addressing all queries raised by AG in 2016/17 audit and HCT management will implement an internal tracking system to monitor matters raised in the audit report to the board. The Change Management project is on-going with Performance and Value-driven culture as its centre. Major tenders handled by the HCT Supply Chain unit were audited by the Internal Audit Unit of CoT and found to be above board. The Supply Chain Policy will be reviewed in Quarter 3/4 to align it with National Treasury Regulation. HCT is embarking on an mSCOA readiness project and HCT board has an oversight role on this project. The prioritization of project development bore fruit in Quarter 1 and Quarter 2 as work will be commencing at the Chantelle Extension 39 project (1,131units) in Quarter 3. HCT will intensify public participation to ensure disruption at construction sites are minimised. HCT Board is delighted that the entity maintained its unqualified audit status from the Auditor General for 2016/17 and HCT is poised to perform very well in the next half of this financial year because the first half provided a solid foundation. Section 7: Chief Executive Officer’s Report GENERAL PERFORMANCE HCT’s performance has improved significantly in the period under review compared to the same time, last financial year. The capacity of the Supply Chain Unit was enhanced resulting in the appointment of a main contractor for the Townlands Project (1,200) units. The procurement process was audited by CoT Internal Audit and was found to be compliant with HCT Supply Chain Policy and MFMA. The procurement for the contractor to upgrade or install bulk infrastructure at Chantelle Extension 39 Project (1,131units) will be finalized in Quarter 3. HCT has achieved an average of 50% of the targets in the period under review. OPERATIONS HCT prioritized the turn-around strategy of the entity and identifying the entities shortfalls and corrective measures. The development department focused on the two projects that are in construction and finalizing the projects under planning. The Timberlands project that was objected by neighboring developers and property managers has been uplifted and the tribunal has ruled in favor of HCT to continue with the development. This will result in the approval of the rezoning application submitted. Once the detailed design has been finalized, the project can be submitted to the SHRA for funding approval. With the amended subsidy quantum, income bands and rental adjustment, the Sunnyside project has been submitted for financial viability. Few procedures

337

and processes were reviewed to improve HCT operations. Vacancy rate has been maintained at a low level of 2%. A collection rate of 96, 73% was maintained throughout the period under review. (Rent Collection Rate: 96.73%, Levies Collection Rate: 20.08 %). Tenant management consists of tenant meetings and community development events. Communication with tenants is done through a newsletter and office walk-ins. Document Management and Communication has also improved. HCT complied with MFMA, Social Housing Act and Rental Housing Act in the period under review. HCT’s cash fora position improved and cost-to-ratio declined slightly. HCT operations were improved during the period under review. HCT procures mainly from BEE companies and each social housing project contract mandates the main contractor to sub-contract from BEE SMME’S about 30% of the value of the contract. UNITS UNDER MANAGEMENT HCT currently has 656 units in its property management portfolio. These properties include the affordable rental property that has been recently refurbished, Eloff (91 units) and 4 commercial stores, the management of a transitional accommodation property, Clarina Estates (160 units) on behalf of CoT. Recently, HCT took over management of the sufficient elderly property, Silwerkroons (121 Units). On the 01st July 2017 HCT took over the administration and management of additional 284 Self-sufficient Elderly Rental Units from the City of Tshwane. In all these properties, HCT adheres to best practices of property management. FUNDING HCT secured R96, 346,705 funding from SHRA for top-structure construction of 676 social housing units for Townlands Project. R 70 Million from Internal funding for the bridging finance for Townlands & the bulk upgrade of Chantelle x 39 and R 17 529 262 from Institutional grant. RISK ASSESSMENT HCT adopted the Enterprise Risk Management (ERM) strategy and policy of shareholder COT. A risk register is updated quarterly and presented to the Finance, Risk and Social Ethics Committee before it is approved by HCT Board of Directors. HCT endeavors to embed risk management in all its operations. Employees are made aware of how to identify, monitor and mitigate risk in their functional areas of work. PREVIOUS YEARS AUDIT HCT has been able through MLAP to resolve most of the audit findings for 2015/16. The audit queries have increased by 15% in the recent audit, from 13 in 2015/16 to 15 in 2016/17, the reasons being implementation of new projects (Townlands and Chantelle) where the performance on the targets were not aligned to the financials. To mitigate against regression, management has advertised senior management positions to capacitate Supply Chain and Finance department. THE YEAR AHEAD HCT will focus on implementing the recommendations of the strategy, skills review, organogram and possible restructuring of the organization. Continue with the construction of Townlands and Chantelle Extension 39 social housing projects and start the implementation of Timberlands & Sunnyside. Ms A Mothoagae Acting Chief Executive Officer

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Section 8: Chief Financial Officer’s Report

1. Review of Operating results

1.1 Summary of financial operating results

The financial performance of the entity for quarter2 period (July 2017 - December 2017) resulted into an

accumulated surplus of R70 million. This was attributed to the capital grant revenue recognized on both

Townlands and Chantelle project for the development of 1,200 Social Housing units and installation of

reticulation services respectively. Below is the graphical presentation of operating results:

1.2. Operating revenue

Recorded variances from the budget were from revenue categories such as rental revenue, operational grant,

interest income, and other revenue and capital grant transfers. The variances can be explained as follows:

1.2.2 Rental income

For the period under review, the Company realized revenue of R4, 3 million as compared to the budgeted

amount of R5 million. The variance is as a result of not delivering 100 social housing units at the end of the

financial year due to the contractors non- performance. The contractor has been put into terms to deliver 100

units by the end of quarter 3.

1.2.3 Operational grant

The Company recognized an operational grant of R11 million as compared to the budgeted amount of R15, 4

million. The variance was attributed to certain marketing activities not carried out due to the entity not

delivering Townlands project and vacant senior management positions not filled. The grant is recognized once

the entity has fulfilled the mandate as per the Service Delivery Agreement between the City and the entity. The

variance amounts to R4, 4 million. Management has advertised senior management position and those

positions will be filled the beginning of the quarter 3. The non-performing contractor has been put in terms.

1.2.4 Interest Income

For the period under review, the Company earned interest income of R70, 609 as compared to the budgeted

figure of R52, 256. The variance of R18, 353 is attributed to interest charged to Clarina tenants on outstanding

levies payment. Clarina building is the complex transferred to Housing Company Tshwane by the City. The

complex is utilized to provide alternative accommodation to ex-Schubart Park residents. As a mitigation

strategy towards non collection of levies, some tenants have now been handed over to the Rental Housing

(10 000 000,00) -

10 000 000,00 20 000 000,00 30 000 000,00 40 000 000,00 50 000 000,00 60 000 000,00 70 000 000,00 80 000 000,00 90 000 000,00

Inco

me

Exp

end

itu

re

Surp

lus

Origional Budget

Actual

Variance

339

Tribunal who have issued the tenants with letters instructing them to pay or failure which they will have to

come for a hearing set for mid-November 2017, where a final order will be issued. This is the last resort that

the entity has in its available avenues, eviction processes will have to be effected.

1.2.5 Other Income

The Company realized revenue of R59, 126 as compared to the budget figure of R43, 027. The variance of R16,

099 was as a result of non- budgeted items like parking bays at Silwerkroon. The entity started charging parking

bays at Silwerkroon towards the end of the financial year. The income on parking bays has been included in the

adjustment budget process.

1.2.6 Capital Grant Transfers

The Company realized capital grant revenue of R57 million as compared to the budget figure of R61, 3 million.

The variance of R4, 1 million was due to the contractor’s non-performance on Townlands project.

1.3 Operating expenses

1.3.1Expenditure

Major expenditure variances were recorded from broad expenditure categories such as employee related

costs, remuneration of directors, finance charges, contracted services and other expenditures.

1.3.2 Employee related costs

The Company has spent R3, 5 million as compared to the budgeted figure of R6, 5 million. The variance of R3

million is due to the resignation of the CEO at the end of February 2017 and other senior management unfilled

vacant positions. Management has advertised senior management position and those positions will be filled

the beginning of the quarter 3.

1.3.3 Remuneration Of Directors

The Company has spent R323, 722 on Directors’ remuneration as compared to the budgeted amount of R 586,

494. Directors’ remuneration is lower than the budgeted amount due to a reduction in the number of board

and committee meetings hence the variance of R262, 772. Budget management will be maintained.

1.3.4 Depreciation

For the period under review, the entity has recorded depreciation of R447, 144 as compared to the budget

amount of R154, 377. The variance of R291, 767 is as a result of reclassification of investment property to

property, plant and equipment which is carried at revaluation model less accumulated depreciation. The

depreciation has been adjusted during the adjustment budget process.

1.3.5 Finance Charges

For the period under review, the entity has paid R 126, 410 as compared to the budgeted amount of R126, 454

in finance charges with the variance of R44. This relates to the loan with National Housing Finance Corporation

(NHFC).

1.3.6 Contracted Services

The Company has reversed contracted services related to Townlands projects which were accrued in the last

financial year as per the recommendation of the Auditor General hence negative amount on contracted

services. Minus R4, 8 million on contracted services as compared to the budgeted amount of R5, 5 million.

However, in real terms the variance was due to certain marketing activities not carried out due to the entity

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not delivering 100 social housing units at the end of the financial year due to the contractors non-

performance. The contractor has been put into terms to deliver 100 units by the end of quarter 3.

1.3.7 Other Expenditures

The Company has spent R1, 8 million on other expenditures as compared to the budgeted amount of R4, 8

million. The variance of R3 million was as a result of less maintenance or operating expenditures at Townlands,

impacted by not delivering 100 social housing units at the end of the financial year due to the contractors non-

performance. The contractor has been put into terms to deliver 100 units by the end of quarter 3.

1.4 CASH FLOW

The entity has received both operational and capital grant from the City to the value of R41 million. The

collection rate at Silwerkroon building has been very good since the collection is higher by 6, 78% as compared

to the budgeted collection rate of 6%. The entity ended the midterm in a favourable cash position with cash

on hand being R16 million.

1.5 STATEMENT OF FINANCIAL POSITION

The financial position reflects that the entity is capable of meeting its financial obligations given that the total

assets exceed total liabilities by R 142 million. This is a reflection that the company could be not be plunged

into insolvency as long as it receives the necessary support from the shareholder. Current assets exceed

current liabilities by R 30 million which indicates that the entity is liquid. The current ratio is currently 5, 9:1

versus standard norm of 1:1.

1.6 IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE

The entity has not incurred fruitless and wasteful expenditure during the period under review of the current

financial year.

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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-term 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 its 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 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.

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Section 2: Board of Directors Housing Company Tshwane has a unitary board, which consist of three (3) executives and seven (5) non-executive 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 & Ethics

Development & Projects

Human Resources

and Remuneration

Remuneration

No. of meetings held 3

3

1

1

Mr. T.S Phetla 2 R61, 460, 44.

Dr M. Matlou 3 3 1 R64,628,70

Dr R.W Rowland 3 1 R58,783,54

Dr A.J Singh 3 1 R65,689,10

Adv. T.S Kholong 2 3 1 R76,104,31

R326,666,09

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 committees have been formed, each of which is chaired by a non-executive director.

Finance, Ethics and Risk Committee

Human Resources and Remuneration Committee

Development and Projects Committee

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Audit Committee The City of Tshwane 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).

Finance, Risk and Social Ethics Committee

The Board of Directors Finance Social and Ethics committee consists of the following non-executive directors:

Dr M. Matlou

Adv. S.T Kholong

The committee met three [3] 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.

Human Resources and Remuneration Committee

The Board of Directors, Human Resources and Remuneration committee consist of the following non-executive directors:

Dr W. Rowland

Dr M. Matlou 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 once [1] during the period under review. Development And Projects Committee The projects and development committee consists of the following non-executive directors, i.e.

Dr. A.J Singh;

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

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framework and Treasury Regulations issued in terms of Municipal Finance Management Act 56 of 2003. The committee met once [1] during the period under review. Risk Management Committee The entity does not have its own risk management committee, but is a member of CoT Audit and Performance Committee and is represented by the Chief Executive Officer. Section 4: Director’s Remuneration 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:

Name Designation Q1 Meeting Fee

R

Q2 Meeting Fee

R

Total

R

1 Mr T.S Phetla Chairperson

R31,052,76(includes reimbursable travel)

R30,407,68 (includes of reimbursable travel)

R61,460.44

2 Dr M. Matlou Non-executive R27,409,70 R37,219,00

R64,628,70

3 Dr W Rowland Non- executive

R27,446,78

R31,336,76

R58,783,54

4 Dr A.J Singh Non-executive R31,251,19 R34,437,91

R65,689,10

5 Adv. T.S Kholong Non-executive R44,516,60 R31,587,71

R76,104,31

TOTAL R161,677,03 R164,984,06 R326,666,09

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Section 5: Company Secretarial Function The Company Secretary manages the processes that ensure that the organization complies with the company legislation and regulations and keeps board members informed of their legal responsibilities. The Company Secretary is responsible for calling board meetings and ensuring the implementation of their decisions. It is also the responsibility of the Company Secretary to communicate with the shareholder on matters dealing with governance and shareholder reporting. A Company Secretary’s work covers a wide variety of functions, including but not limited to:

Organising, preparing agendas, and taking minutes of meetings;

Dealing with correspondence, collating information, writing report, ensuring decisions made are communicated to the relevant people;

Contributing to meeting discussions, as and when required; and

Arranging the annual general meeting. Section 6: Risk Management and internal controls HCT board monitors risk through the Finance, Risk and Ethics committee as well as Development and projects committees. The committees monitor finance risks and project risks and make recommendations to HCT board. Moreover, the committees are accountable for ensuring that there is an effective risk management system within HCT. The entity adopted the Enterprise Risk Management (ERM) strategy of the stakeholder, CoT. The HCT board is accountable and responsible for ensuring that an adequate and effective risk management system is in place. The board is expected to exercise the duty of care, skill and diligence in identifying, assessing and monitoring risks as presented by Finance, Risk and Ethics committee and Development and Projects committee. HCT embeds risk management in all its operations. All identified risk areas are managed at departmental level. HCT has a risk register where risks identified are constantly recorded and monitored. HCT provides its risk register to CoT Internal Audit Risk Management Unit. HCT maintains a strategic and operational risk register for monitoring and evaluating the implementation and efficiency of controls and actions identified to improve current controls in the risk register. HCT has tightened its internal controls in compliance with MFMA and HCT policies and procedures. Section 7: Internal Audit Function The entity relies on the City of Tshwane Internal Audit Department. 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 the Audit and Performance Committee and HCT Board. 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.

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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.

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Section 10: Corporate Social Responsibility Report The Company does not have any Corporate Social Investment function at this stage. Section 11: Anti-corruption and Anti-Fraud Framework HCT has put in place strategies to prevent corruption, fraud and theft. The risk areas are around supply chain and sub-letting. The Separation of Duties Policy is in place to mitigate such risks. The CoT Internal Audit also reviews internal control processes of HCT including our supply chain processes. Fruitless, Wasteful Expenditure are reported to the HCT Board quarterly. HCT Board has established a Disciplinary Committee to take disciplinary action against employees who commit fraud, corruption or theft. Anti-Corruption and Ant-Corruption Policy have been developed. This is complemented by the Anti-Corruption and Fraud Prevention Plan. This is 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. Those who report incidents of fraud of corruption are protected by the Whistleblowing Policy. The approach in preventing fraud and corruption is focused into 3 areas, namely:

Structural Strategies;

Operational Strategies; and

Maintenance Strategies.

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Section 12: Information and Communications Technology

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.

Section 13: Supply Chain Management and Black Economic Empowerment Supply Chain Processes During the current financial 2016/2017, the entity has developed the new Supply Chain Policy that is aligned with the provisions of the MFMA and the National Treasury: Municipal Supply Chain Management Regulations, 2005. And the policy was approved by the board. The entity’s SCM policy provides for the exclusion of awards to persons in the service of the state subject to the exemptions and regulations issued by National Treasury from time to time. The entity has started implementing bidding processes with separate Bid specification, Bid evaluation and Bid Adjudication committees having been set up.

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Table

Supply Chain Management Committees: Committee

Guidelines Functions and purpose of the Committee

No of Meetings targeted

Actual Reasons Intervention/ Action Taken

Bid Specification Committee

Municipal Finance Management Act, Board Terms of Reference

Consideration and approval of the project’s scope of works for upcoming tender/bid.

1 Consideration of bid specification for: 1. Development

of a Social Housing Scheme in Chantelle X 39, Pretoria, Bulk Infrastructure Upgrade.

All the 01 Bid specification was considered and approval.

None

Bid Evaluation Committee


Bids evaluation. 1 1. 1. Development of a Social Housing Scheme in Chantelle X 39, Pretoria, Bulk Infrastructure Upgrade

The BEC evaluated 01 tender and no tender was referred back by BAC to BEC

None

Bid Adjudication Committee


Considers the evaluation report from the evaluation committee.

1 1. Development of a Social Housing Scheme in Chantelle X, Pretoria, Bulk Infrastructure Upgrade

1 tender was approved by BAC

None

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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. HCT is committed to the development of BEE SMME’s. No unsolicited bids were made by the company in the per iod under review.In

instances where there are deviations from the Supply Chain processes, irregular, wasteful and fruitless expenditure, management report these to

the board.

HCT’s Bid Adjudication Committee Structure and non-compliance with the requirements Table

Supply Chain Management procurement threshold and delegations (Table 10) Value of Purchase

Procurement method and requirements

Delegated Authority

Oversight role Procurement requirements defaults

Reasons Intervention/ Action Taken

0 to R2,000 Petty cash Accounting Officer

Senior Finance Officer

None Entity Complied

None

R2 001 to R10 000 Three quotations system

Accounting Officer



None

R10,000 to R30 000 Three quotations system

Accounting Officer



None

R30 001 to R200 000

Three written quotations system.

Accounting Officer


R 169,759.68 It was impractical and impossible to follow the official procurement processes

None

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Supply Chain Management procurement threshold and delegations (Table 10) Value of Purchase

Procurement method and requirements

Delegated Authority

Oversight role Procurement requirements defaults

Reasons Intervention/ Action Taken

Tenders above R200 000 to R10 million and long term contracts

Competitive Bidding Accounting Officer


R 6,086,702.75 Sunnyside Deviation Continuous Professional Services

It was impractical and impossible to follow the official procurement processes

None

Tenders above R10 million

Competitive Bidding Accounting Officer/Board of Directors

Accounting Officer

R 16,310,024.43 Chantelle Deviation Continuous Professional Services

It was impractical and impossible to follow the official procurement processes

None

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BEE SMME Spend

HCT procures mainly from BEE companies and all major contracts have a sub-contracting clause of 30% of the

value of the contract to BEE SMME’s in line with one of HCT’s strategic objectives. HCT has achieved a 85.32%

BEE SMME spend against the target 35%.

BEE SMME Summary:

Table 8 Capex and Opex BEE SMME Spend

CAPEX Quarter 1 Quarter 2 TOTAL

Annual capex spent 17,603,603.44 39,734,727.61 57,338,331

Annual capex spent on BEE SMME’s 17,603,603.44 39,734,727.61 57,338,331

% Actual Capex spent on BEE SMME’s

100.00% 100.00% 100.00%

OPEX

Actual Opex spent 2,003,068.59 2,688,946.74 4,692,015.33

Actual Opex spent on BEE SMME’s 1,961,773.00 2,457,311.52 4,419,084.52

% Actual Opex spent on BEE SMME’s

97.94% 91.39% 94.18%

TOTAL SPENT OVERALL 19,606,672.03 42,423,674.35 62,030,346.39

TOTAL SPENT ON BEE SMME’s 19,565,376.44 42,192,039.13 61,757,415.57

TOTAL BUDGET ON BEE SMME 36,070,644.33 36,313,091.28 72,383,735.62

% SPENT ON BEE SMME’s AS COMPARED TO THE BUDGET

54.24% 116.19% 85.32%

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CHAPTER THREE: SERVICE DELIVERY PERFORMANCE

Section 1: Highlights and Achievements

Highlights Narrative

1. Timberlands rezoning application approved.

The objection raised by the private developers and property management companies has been lifted. The tribunal has ruled in favour of HCT and the rezoning application has been approved.

2 Securing of R 70 Million Rands from the City internal funding.

The City managed to make available R 34 Million for Townlands and R 36 Million for Chantelle x39

3. Retention of Conditional Accreditation with SHRA

HCT retained its conditional accreditation with SHRA, enabling the entity to access grant funding for its social housing projects.

4. Implementation of Organizational Performance Management System

HCT now has a Balanced Scorecard dashboard to monitor its operations every month

5. Management of CoT-Sufficient-Elderly residents.

284 Units were transferred from the City to HCT in Q1. The annual target has been achieved.

Section 2: Financial Performance

Table 3.3 below reflected the total unit projections on the capital projects to be implemented by the entity during the outer years. 2.1.1 Revenue The Company posted revenue of R 72 million for the six months period, an increase of 503%% as compared to the previous year Mid-Year. The operational grant from the Shareholder contributed 94% of the total revenue received, this being an increase of 647% as compared to the previous year. Rental revenue increased by 56% to R 4, 2 million (2016: R2, 7 million). Other income decreased by 50% as compared to the previous year, R59, 126 (2016: R119, 639).

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2.1.2 Results of Operations

Operational costs decreased by 81% as compared to the previous year to R1, 7 million during this period

(2016: R9, 9 million). The key operational costs that contributed to lower expenditure relates to employee

costs due to the resignation of the CEO at the end of February 2017 and other senior management unfilled

vacant position, reduction in the number of board and committee meetings.. Management has also reversed

contracted services related to Townlands projects which were accrued in the last financial year as per the

recommendation of the Auditor General hence negative amount on contracted services.

The entity posted a surplus of R 70 million for the period under review, against a surplus of R 2 million for

the previous year. This surplus is as a result of capital grant revenue recognized on both Townlands and Chantelle project for the development of 1,200 Social Housing units and installation of reticulation services respectively. 2.1.3 Cash Flow The entity has received R41 million grant from the City for the implementation of projects and to sustain its operations. The operational grant contributed 94% of operational costs. The rental income increased by 56% (R4, 2 million) as compared to prior year (2016: R2, 7 million. The company ended the year in a favourable cash position with cash on hand being R16 million (2016: R2, 6 million). The increased cash balance is a result of delay on the implementation of Chantelle project, upgrading of bulk services.

2.1.4 Statement of Financial Position The Investment property has been reclassified to property, plant and equipment (PPE) due to amendments on GRAP standards. Fixed assets (PPE) increased by R 98 million due to implementation of Townlands and Chantelle projects which are capitalized as assets under construction. The ability of the company to meet its financial obligations increased as compared to the previous year, with the current ratio test increasing to 5, 91:1 (2016= 1:1). The net current asset base increased by R106 million. The inecrease in the Trade and Other Receivables was as a result of higher bad debts provision for Clarina tenants, the estate that was declared as rental-free accommodation for ex-Schubert and Kruger Park residents as per the 2012 Constitutional Court ruling against the COT. The company bills Clarina tenants only R546 for levies and not residential rentals. However, during the current financial year the collection rate has declined since 20% of the tenants are unemployed. There has been a significant decrease in Trade and Payables due to spending on grant from the City of Tshwane. The entity is spending the grant according to the budget.

Section 3: Capital Projects During the period under review, HCT has not been able to deliver completed units on Townlands project. However, certain milestones have been achieved for quarter 2. The rezoning objection for Timberlands has been set aside and the tribunal has ruled in favor of HCT, The development can now proceed and finalise the design and submit for approval with relevant City internal departments. Townlands is behind schedule and the contractor has submitted a recovery plan to accelerate the works. Chantelle x39, the professional team and the contractor has been appointed and construction will commence in the 3rd quarter. The subsidy quantum, income bands and rentals have been increased which is making the Sunnyside project financially viable. The revised financial model is being prepared and will be submitted to the SHRA for approval. HCT has requested funds through the budget adjustment process to commence with the infrastructure bulk upgrade.

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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 2017/2018 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: Deliver and provide new social housing units on a sustainable basis

Construction of Social Housing Units (Targets: Installation of bulk infrastructure in Townlands; Detailed Planning and Design for Timberland completed) The rezoning objection for Timberlands has been set aside and the tribunal has ruled in favor of HCT, The development can now proceed and finalise the detail design stage which is at 90% and submit for approval with relevant City internal departments. Townlands is behind schedule and the contractor has submitted a recovery plan to accelerate the works. Chantelle x39, the professional team and the contractor has been appointed and construction will commence in the 3rd quarter. The subsidy quantum, income bands and rentals have been increased which is making the Sunnyside project financially viable. The revised financial model is being prepared and will be submitted to the SHRA for approval. HCT has requested funds through the budget adjustment process to commence with the infrastructure bulk upgrade

2. Key performance area: Effective and Efficient management of HCT and Social Housing portfolio

Occupancy level in units under management (Targets: Occupancy: 96 % - Eloff; Occupancy 97% - Clarina, Silwerkroon; Occupancy 97%) Eloff target has been over-achieved by 1.74% at 97%. Clarina target has been over-achieved by 2% at 94.5%.

Turnaround in resolving Maintenance requests (Target: 77%). Target has been over-achieved by 15.93% 92.93 100% Turnaround in resolving complaints (Target: 85%). No complaints were received during these quarters but only requests for maintenance

3. Key performance area: Strive for financial sustainability by 2017 ( 35% BEE SMME spend; 85.32% of Annual budget spent; Rent Collection Rate of 96.73% - Eloff, 102.78% -Silwerkroon & Levies Collection Rate of 20.08%; Liquidity Ratio of 5, 91:1 )

Development of BEE SMMEs (Target: 35% BEE SMME spend) Target has been not been achieved with the actual expenditure of 85.32%

Manage budget processes of the entity in accordance with regulatory framework (Target: 50% of Annual Budget spent) Target has not been achieved with the actual expenditure of 47.29%.

Rental Collection (Target: Rent Collection Rate of 96% for Eloff) Eloff target has been achieved with actual collection rate of 96.73%

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Rental Collection (Target: Rent Collection Rate of 96% for Silwerkroon) Silwerkroon target has been achieved with actual collection rate of 102.78% Levies Collection (Target: Levies Collection Rate of 30% for Clarina)

Under the current SDA between HCT and CoT, HCT does not vet and process applicants before they are accommodated in Clarina. This is done by CoT and they present those tenants (most of whom are

unemployed and indigent), to HCT to accommodate them in available rental units. Thus, this target was not achieved.

Maintaining entity asset liquidity to an acceptable level (Target: Achieving Liquidity Ratio of 1:1). Target has been achieved.

4. Key performance area: Promote and practices sound governance (Strategic Review; Policies Review )

Entity annual strategic review and approval (Target: 1 x Reviewed Strategic Plan) Target has been achieved.

Policy Reviews and Approvals (Target: Supply Chain Management Policy, Delegation of Authority Policy, Human Resources Policy, Marketing And Communication, Management, Financial and Internal Control). Target has been achieved.

Section 5: Assessment of Arrears on rental revenue

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

R166,607

R119,589

R 113,295

R 104,534

R 968,288

R1,472,312

The total debtor’s amount to R1, 472, 312 managed by entity. The accumulated provision for bad debts amounts to R 1, 306, 787. 5.2 Amounts owed by entity for service charges

Name of Entity Amount Owed Status Comments


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 2016

Comments

T. Phetla Director (Chairperson)

Polokwane Municipality

Up to date

358

M. Matlou Director City of Tshwane Up to date

S. S. Kholong Director City of JHB Up to date

W. Rowland Director City of Tshwane Up to date

A. J. Singh Director City of JHB Up to date

A. Mothoagae ACEO City of JHB Up to date

O. Nyundu City of JHB Up to date

L. M Makibinyane Finance Manager City of Tshwane Up to date

K. W Ramotshela Property Manager City of Tshwane Up to date

Section 6: Statement on amounts owed by Government Departments and Public Entities

Name of Department

Amounts owed Account Status Comments

City of Tshwane N/A N/A N/A

Section 7: Recommendation and Plans for next six months

HCT will prioritize the following:

Fill in the vacant critical positions

Present the turnaround strategy to the City Manager and obtain approval

Review and revise the entity’s organogram

Implement the first phase of the strategy

Construction of 250 units in Townlands and approval of Detailed Designs for Timberland;

Installation of bulk infrastructure in Chantelle Extension 39.

359

CHAPTER FOUR: HUMAN RESOURCES AND ORGANISATIONAL MANAGEMENT

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. We aim to be at the top end of compliance by including such requirements into our working practices. 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 Table

Units Nr of posts as per the amended structure that was approved by the board for 2017/2018

Nr of filled posts

Nr of vacancies

Vacancies %

Office of the Chief Executive Officer (CEO)

8 5 3 37.5 %

Office of the Chief Financial Officer (CFO)

8 4 4 50 %

Office of the Chief Operations Officer (COO)

39 28 11 28.20%

TOTAL 55 37 18 32,72 %

360

Human Resources Head Count per UNIT

Training and development

Management

Type of training

2016/17 2017/18

Gender

Employees in Post As 30 June 2016/17

Learnerships

Skills Programmes & Other Short Courses

Other Forms of Training

Total Gender Employees in Post As 30 June 2017/18

Learnerships

Skills Programmes & Other Short Courses

Other Forms of Training

Total Remark

Rental Tribunal Training

2 Males 3 Females

R10,

687.50

MFMA Training

1 Male

R36,000.0

0

Engineering Construction Training

3 Males

R8,810.00

Organizational and Organogram Workshop

4 Males 1 Female

R10,834.8

4

Website Management Training

1 Male

R2,000.00

Project Management with Microsoft Project

Males 2

1 Male Resigned

R 16,416.00

Housing Supervisors 4 Males Training Programme

4 Males Yes R 24,000.00

361

The conditions or opportunities for previously disadvantaged individuals (esp. women) to progress through the municipal entity.

Human Resources Gender and Race

Indicator Baseline 2015/16 Target

2016/17 Actual

2017/18 Actual

Challenges Comments

African staff % of total staff

90% 100% 97,29%

Female staff as % of total staff

51% 50% 50% 59,45%

African Female managers % of senior management

20% 20% 25% 75 %

Staff turnover as % of total staff

0% 6.25% 5,40%

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

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.

FY

2011/2012 FY

2012/2013 FY

2013/2014 FY

2014/2015 FY

2016/2017 FY

2017/2018

Total Salary Cost (inclusive of directors remuneration)

R3,246,257 R4,098,771 R4,914,447

R4,989,811

R8,996,240

R3, 835, 657

Current Employment Equity Profile

Black Indian White Coloured Total

Males 15 0 0 0 15

Females 21 0 1 0 22

Total 36 0 1 0 37

362

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 2015/16 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 trainng 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. 5.1 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.

363

Section 6: Employee Benefits The Company does not participate in any retirement benefit scheme at this stage. However management has started doing a benchmarking exercise, which is comparing what other Municipal owned entities and SHI are paying versus what HCT is currently paying. CHAPTER FIVE: FINANCIAL PERFORMANCE

Section 1: Statement of Financial Performance


Description

2016/17 Current

Year 2017/18

Audited Outcome

Original Budget

Monthly actual

Year-TD actual

Year-TD budget

YTD variance

YTD variance

Full Year Forecast

R thousands %

Revenue By Source

Rental of facilities and equipment 5,478 10,176

712 4,255

5,086

(830)

-16.3% 10,176

Interest earned - external investments – 25 1 7

12

(6)

-46.0% 25

Interest earned - outstanding debtors 136 106

12 71

52

18

35.1% 106

Transfers and subsidies 30,629 31,275

2,866 11,004

15,476

(4,472)

-28.9% 31,275

Other revenue 209 87

10 59

43

16

37.4% 87


Total Revenue (excluding capital transfers and contributions)

36,452

41,669

3,601

15,396

20,670

(5,274) -25.5%

41,669

Expenditure By Type

Employee related costs 8,004

14,594

566 3,512

6,521

(3,009)

-46.1%

14,594

Remuneration of Directors 1,325

1,377

55 324

586

(263)

-44.8%

1,377

Debt impairment 729 – – – – –

–

Depreciation & asset impairment 215

324

224 447

154

293

189.6%

324

Finance charges 285

240

21 126

126

(0)

0.0%

240

Other materials – 1,452

103 382

686

(304)

-44.3%

1,452

Contracted services 8,888

11,191

(6,870) (4,808)

5,571

(10,380)

-186.3%

11,191

Other expenditure 5,344

9,046

286 1,812

4,874

(3,062)

-62.8%

9,046

Total Expenditure 24,790

38,224

(5,615)

1,795

18,519

(16,724)

-90.3%

38,224

Surplus/(Deficit) 11,662

3,445

9,216

13,600

2,150

11,450

532.5%

3,445

Transfers and subsidies - capital (monetary allocations) (National / Provincial and District)

26,824

110,626

20,905

57,149

61,252

(4,103)

-6.7% 110,626

Transfers and subsidies - capital (in-kind - all) – – – – – –

–

Surplus/(Deficit) before taxation 38,486

114,072

30,122

70,749

63,403

7,347

11.6%

114,072

Taxation – – – – – – –

Surplus/(Deficit) for the year 38,486

114,072

30,122

70,749

63,403

7,347

114,072

364

Section 2: Statement of Financial Position Housing Company Tshwane - Table F4 Monthly Budget Statement - Financial Position - M06 December

Vote Description

2016/17 Current

Year 2017/18

Audited Outcome

Original Budget

Year-TD actual

Full Year Forecast

R thousands

ASSETS

Current assets

Cash 39,397 11,892 16,735 11,892

Consumer debtors 127 241 166 241

Other debtors 53,338 167 19,422 167

Current portion of long-term receivables – –

Total current assets 92,861 12,300 36,322 12,300

Non- current assets

Investment property 13,500 13,500 13,500

Property, plant and equipment 45,761 194,943 113,786 194,943

Intangible 11 5 8 5

Other non-current assets – –

Total non- current assets 59,272 208,448 113,794 208,448

TOTAL ASSETS 152,133 220,748 150,116 220,748

LIABILITIES

Current liabilities

Bank overdraft – –

Borrowing 315 315 158 315

Consumer deposits 553 527 595 527

Trade and other payables 77,072 953 4,995 953

Provisions 335 577 400 577

Total current liabilities 78,275 2,372 6,147 2,372

Non- current liabilities

Borrowing 1,542 1,227 1,542 1,227

Provisions – –

Total non- current liabilities 1,542 1,227 1,542 1,227

TOTAL LIABILITIES 79,817 3,599 7,689 3,599

NET ASSETS 72,316 217,149 142,427 217,149

COMMUNITY WEALTH/EQUITY

Accumulated Surplus/(Deficit) 67,702 212,536 128,790 212,536

Reserves – 9,023 –

Share capital 4,614 4,614 4,614 4,614

TOTAL COMMUNITY WEALTH/EQUITY 72,316 217,149 142,427 217,149

365

Section 3: Statement of Capital Expenditure

Housing Company Tshwane - Supporting Table F8a Entity capital expenditure on new assets by asset class - M06 December

Description

2016/17 Current

Year 2017/18

Audited Outcome

Original Budget

Monthly actual

Year-TD actual

Year-TD budget

YTD variance

YTD variance

Full Year

Forecast

R thousands %

Capital expenditure on new assets by Asset Class/Sub-class

Other assets – 121,825

29,958

57,338

61,077

3,738

6.1%

121,825

Operational Buildings – 580

–

189

291

101

34.8%

580

Municipal Offices 580

–

189

291

101

34.8%

580

Housing – 121,245

29,958

57,149

60,786

3,637

6.0%

121,245

Staff Housing –

–

–

– –

–

Social Housing 121,245

29,958

57,149

60,786

3,637

6.0%

121,245

Capital Spares –

–

–

– –

–

Computer Equipment 16 100

–

–

50

50

100.0%

100

Computer Equipment 16 100

–

–

50

50

100.0%

100

Furniture and Office Equipment 50 250

–

–

125

125

100.0%

250

Furniture and Office Equipment 50 250

–

–

125

125

100.0%

250

Total Capital Expenditure on new assets 67 122,175

29,958

57,338

61,252

3,914

6.4%

122,175

366

Section 4: Cash Flow Statement

Housing Company Tshwane - Table F5 Monthly Budget Statement - Cash Flows - M06 December

Description

2016/17 Current

Year 2017/18

Audited Outcome

Original Budget

Monthly actual

Year-TD actual

Year-TD budget

YTD variance

YTD variance

Full Year Forecast

R thousands %

CASH FLOW FROM OPERATING ACTIVITIES

Receipts

Property rates 5,827 8,008

623

4,022

4,107

(85)

-2.1% 8,008

Other revenue – 87 – – 45 (45)

-100.0% 87

Government - operating 44,891

31,275 –

10,425

15,638

(5,213)

-33.3%

31,275

Government - capital 35,634

110,626

40,885

40,885

55,313

(14,428)

-26.1%

110,626

Interest 18 131 1 7 65 (59)

-89.7% 131

Payments

Suppliers and employees (46,996)

(24,225)

(6,038)

(25,422)

(12,374)

(13,048)

105.4%

(24,225)

Finance charges (285)

(240)

(41)

(126)

(126) 0

0.0%

(240)

NET CASH FROM/(USED) OPERATING ACTIVITIES

39,089

125,662

35,430

29,790

62,666

(6,781)

-10.8%

125,662

CASH FLOWS FROM INVESTING ACTIVITIES

Receipts

Payments

Capital assets (18,390)

(122,175)

(31,267)

(56,944)

(61,252)

4,308

-7.0%

(122,175)

NET CASH FROM/(USED) INVESTING ACTIVITIES

(18,390)

(122,175)

(31,267)

(56,944)

(61,252)

(4,308)

7.0%

(122,175)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts

Short term loans – – – – – – –

Payments

Repayment of borrowing (316)

(315)

(53)

(158) –

(158)

#DIV/0! (315)

NET CASH FROM/(USED) FINANCING ACTIVITIES

(316)

(315)

(53)

(158) –

158

#DIV/0! (315)

NET INCREASE/ (DECREASE) IN CASH HELD 20,383 3,172

4,110

(27,312)

1,414

(28,726)

-2031.3% 3,172

Cash/cash equivalents at the year begin: 14,164

14,164

12,624

230,613 –

230,613

#DIV/0! 14,164

Cash/cash equivalents at the year -end: 34,547

17,336

16,735

203,301

1,414

201,887

14275.7%

17,336

Section 5: Report on Irregular Fruitless and Wasteful Expenditure and Legal Processes In Quarter 1 and Quarter 2 of this period under review, there were no irregular, fruitless and wasteful expenditure.

367

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 2015/16 2016/17

Audit Opinion Unqualified Unqualified Unqualified Unqualified Unqualified

Section 2: Historical Audit Findings and Remedial Action

ANALYSIS OF 2016/17

NEW IN 2016/17 REPEAT

FINDINGS

AG FINDINGS

RESOLVED

Matters affecting

Audit Opinion

6 0 2

Compliance 2 0 0

Important Matters 7 2 2

Total 15 2 5

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.

The HCT Board noted, considered and approved the management action plans/remedial actions at its special

meeting of 06 December 2017 as recommended by the Finance and Risk Committee.

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.

368

PERFORMANCE INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2017

Department

Departmental

Focus Area Key


Project Name

Annual Target

Q1 Target Q1 Actual Q2 Target Q2

Actual

YTD

Target

(mid-year)

YTD Actual

Comments Work done / Reasons for

non-performance

Mitigation plan

Property Development

Deliver and provide new social housing units on a sustainable basis

Number of new units developed

Townlands

200

completed

units

60

completed

units

0

completion,

49

completed

foundations

, 38

superstruct

ure

brickwork

completed

and 11 in

progress.

30

completed

units

Not achieved

90 completed units

Not achieved


There are 4 subcontractors currently appointed to assist the main contractor to accelerate.

Timberland

Detailed

design

100%

completed

Detailed

design 25%

completed

Detailed design 90% completed The hearing

was held for

the Town

Planning

application

on

13/09/2017

Detailed

design

50%

completed




The contractor is behind schedule A recovery plan

to appoint an 8GB subcontractor to assist with the acceleration programme is underway.

Chantelle

X39

Installation

of bulk

services

completed

Tendering

and award

Bid committee members have been appointed BSC, BEC and BAC)

Site

establishm

ent and

trenching

Not achieved


Not achieved

There was a delay in appointing the professional team and the utilization of the HHS panel

Contractual documents are planned to be completed by the 12th January 2018 and site

369

Department

Departmental

Focus Area Key


Project Name

Annual Target


Actual

YTD

Target

(mid-year)

YTD Actual


non-performance

Mitigation plan

Regulation

32 has been

approved by

the City

Manager

of contractors. handover will follow immediately after.

Sunnyside Erf

708 & 709

Project

Procureme

nt Strategy

concluded

0

Procurem

ent

strategy

developed

Not achieved


Not achieved

The revised rentals were concluded in October 2017 by the SHRA and the project had to be re-modeled for financial Viability

Request for funding had been submitted to the City for the commencement of infrastructure bulk upgrade

Property Management

Acquisition of

the viable

brownfields

rental stocks

from the CoT

Number of

rental units

transferred

from CoT to

HCT

Capital Park D – 42 units Capital Park S – 27 units Oosmoot – 60 units Claremont – 50 units Danville D – 57 units Danville S – 30 units

Self-sufficient Elderly Rental stock units transferred


266 Rental stock was transferred from CoT to the HCT


266 Rental stock were transferred from CoT to The HCT in the first quarter which also includes the 60 units targeted for quarter 2


266 Rental stock were transferred from CoT to The HCT in the first quarter

Target was achieved and exceeded

N/A

Deliver services

by developing

Occupancy

level in units

Eloff

96% 96% 98% 96% 97.47% 96% 97.74% Target was achieved

N/A

370

Department

Departmental

Focus Area Key


Project Name

Annual Target


Actual

YTD

Target

(mid-year)

YTD Actual


non-performance

Mitigation plan

and managing

affordable

rental housing in

the City of

Tshwane.

increased Clarina

97% 97% 97% 97% 98.22% 97% 97.61% Target was achieved

N/A

Silwerkroon

96% 96% 98% 96% 98.05% 96% 98% Target was

achieved

N/A

Turnaround in

resolving tenant

maintenance

requests

increased

80 % of the

tenant

maintenance

requests are

resolved within

agreed

turnaround

time.

Eloff, Clarina

&

Silwerkroon

75%

76% 96% 78% 89.86% 77% 92.93% Target was

achieved

N/A

Turnaround in

resolving tenant

complaints

increased

90% of the

tenant

complaints are

resolved within

agreed

turnaround

time.

Eloff, Clarina

&

Silwerkroon

80% 84% 100% 86% 0 85 0% No complaints were received

N/A

Finance & SCM)

Revitalise Urban

growth/dismantl

ing poverty and

inequality

Development

of BEE &

SMME’s

31%

33% 54,24%

35% 116.19% 34% 85.22 Target was

achieved

N/A

371

Department

Departmental

Focus Area Key


Project Name

Annual Target


Actual

YTD

Target

(mid-year)

YTD Actual


non-performance

Mitigation plan

Stabilise service

delivery through

the

development

and

implementation

Integrated

Affordable

Rental Housing

Strategy

Manage

budget

processes of

the entity in

accordance

with regulatory

frameworks

Budget

management

90% 25% 14,04% 50% 47.29% 50% 47.29% There was a delay in appointing the professional team and the utilization of the HHS panel of contractors.

Appointment of the professional team and the contractor has been concluded. Contractual documents are planned to be completed by the 12th January 2018 and site handover will follow immediately after.

Stabilize

processes to

ensure increase

in rental

revenue.

Rental revenue

collected as a

percentage of

amount billed

Eloff 90% 6% 7.04%% 6% 6.42% 6% 6.73% Target was

achieved

N/A

Silwerkroon 90% 6% 18.68% 6% 7.24 6% 12.96% Target was

achieved

N/A

Stabilize

processes to

ensure increase

in levies.

Clarina 22% 8%

-6.57% 8% -13.28% 8% -9.93 Tenants at Clarina have not gone through HCT’s vetting process as tenant allocations are done by the City, some of the tenants are unemployed, some depend on social


372

Department

Departmental

Focus Area Key


Project Name

Annual Target


Actual

YTD

Target

(mid-year)

YTD Actual


non-performance

Mitigation plan

grants

Stabilise service

delivery through

the

development

and

implementation

Integrated

Affordable

Rental Housing

Strategy

Entity asset liquidity maintained to an acceptable level

Liquidity

ratio of 1:1

Liquidity

ratio of 1:1

Liquidity ratio of 3.19:1

Liquidity

ratio of

1:1


Liquidity

ratio of

1:1

Target was

achieved

N/A

Governance Promote

effective and

efficient

management of

HCT and Social

Housing

portfolio

Internal

Governance

Structures and

Processes

reviewed and

approved

Policy review

and approval

i.e. Supply

Chain,

Delegations of

Authority,

Human

Resources,

Marketing &

Entity annual strategic review and approval.

N/A N/A N/A N/A N/A N/A

373

Department

Departmental

Focus Area Key


Project Name

Annual Target


Actual

YTD

Target

(mid-year)

YTD Actual


non-performance

Mitigation plan

Communicatio

n,

Management ,

Financial and

Internal

control

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QUARTER 2 PERFORMANCE REPORT

(2017 – 2018 FINANCIAL YEAR)

SIGN OFF

ACTING CHIEF EXECUTIVE OFFICER

Ms. A. G. Mothoagae _____________________________________________

DATE: 02 January 2018

ANNEXURE H 376

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TABLE OF CONTENT

1. EXECUTIVE SUMMARY 4

2. PERFORMANCE AGAINST THE ENTITY’S DEPARTMENTAL BUSINESS PLAN 4

2.1 SUMMARY OF PROGRESS AGAINST ENTITY’S BUSINESS PLAN TARGETS 5

3. PERFORMANCE AGAINST THE CORPORATE SDBIP 7

3.1 PERFORMANCE AGAINST THE SDBIP TARGETS 7

3.2 SUMMARY OF PROGRESS ON PROJECTS 8

4. PERFORMANCE ON THE 180 AND 18 MONTH PROGRAMME 9

5. FINANCIAL PERFORMANCE 9

5.1 REVENUE 9

5.2 RESULTS OF OPERATIONS 10

5.3 CASH FLOW 11

5.4 STATEMENT OF FINANCIAL POSITION 11

5.5 IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE 11

6. GOVERNANCE 12

6.1 BOARD COMPOSITION 12

6.2 BOARD AND COMMITTEE MEETINGS 12

6.3 DIRECTORS REMUNERATIONS 12

6.4 RISK MANAGEMENT AND INTERNAL CONTROLS 13

6.5 HUMAN RESOURCES 13

6.6 STRATEGIC AND INTERNAL CONTROLS 13

7. DEPENDENCIES AND CROSS CUTTING ISSUES 14

8. OPERATION CLEAN AUDIT 15

9. CONCLUSION AND RECOMMENDATIONS 18

ANNEXURE A: ENTITY’S BUSINESS PLAN REPORT 19

ANNEXURE B: STATEMENT OF FINANCIAL POSITION AND FINANCIAL PERORMANCE 23

ANNEXURE C: RISK REGISTER 28

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TABLE 1: SUMMARY OF PERFORMANCE AGAINST THE BUSINESS PLAN ............................................................................................. 5

TABLE 2: BUSINESS PLAN TARGETS ACHIEVED .................................................................................................................................. 5

TABLE 3: SUMMARY OF PERFORMANCE AGAINST THE SDBIP TARGETS .......................................................................................... 7

TABLE 4: SDBIP TARGETS NOT ACHIEVED ........................................................................................................................................ 8

TABLE 5: SUMMARY OF PROJECTS .................................................................................................................................................... 8

TABLE 6: NON ACHIEVED MILESTONE TARGETS ON PROJECTS AND CORRECTIVE MEASURES ........................................................ 8

TABLE 7: SUMMARY OF PERFORMANCE ON THE 18 MONTH PROGRAMME ........................................................................................ 9

TABLE 8: CHALLENGES .................................................................................................................................................................... 14

TABLE 9 DEPENDENCIES .................................................................................................................................................................. 14

TABLE 10: EVIDENCE ....................................................................................................................................................................... 15

TABLE 11: OPCA CONTROLS AND INTERVENTIONS ........................................................................................................................ 15

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1 EXECUTIVE SUMMARY

The City has seconded Ms Amolemo Mothoagae as ACEO and Ms Obakeng Nyundu as ACOO to capacitate the entity. The entity

has advertised the critical positions identified to keep the entity functional. Management has appointed a service provider to

develop a turnaround strategy that will concentrate on the growth of the entity, strengthening the organogram and the re-

branding of the company. The Townlands Project is at construction phase and the entity has received approval on both the

Restructuring Capital Grant (RCG) from the SHRA and Institutional Provincial Subsidy from the province for the construction of

1200 social housing units. The SHRA agreement and the tripartite agreement between SHRA, HCT and Province have been

signed and the drawdown of this grants have been received by the entity. The development pipeline is underway, Chantelle x39

internal infrastructure installation is at 95% and the appointment of the contractor for the bulk upgrades has been concluded.

Timberlands town planning objections has been set aside and tribunal has ruled in favor of HCT. The detail design process can

now be completed and focus on the implementation of the project in the financial year 2018/2019. The amendment of the

income bands, subsidy quantum and rent setting has contributed positively to the financial viability of the Sunnyside projects. It

has now been re-submitted to SHRA for funding and budget has been requested through the budget adjustment process to start

with the bulk infrastructure upgrade. The projects progress reports have been generated and have been tabled at the HCT’s

Projects and Development Committee meetings, and subsequently included in a report to the Board.

The HCT has further received 284 Self Sufficient Elderly units for management from the City boosting its property management

portfolio.

The HCT is in the process of developing a turnaround strategy, enhancing the property management portfolio, increasing the

property development portfolio, the organogram, Skills match, marketing and branding the entity. The City Manager has also

proposed that all the residential properties managed by group property be transferred to HCT. The strategy should also

determine if this is feasible and if HCT has the capacity and expertise to manage this stock. The SHRA has given HCT’s

Conditional Accreditation Status until March 2019. The Annual Financial Statements were prepared and submitted to the

Auditor-General timeously. Also, the Draft Adjusted Budget has been submitted to the City of Tshwane, the HCT’s sole

shareholder. The main objectives of this year’s budget adjustment is to correct the KPI’s so that they are phrased properly and

the inclusion of the Chantelle X39 internal reticulation because it continued to the current financial year, and the upgrading of

bulk infrastructure services at the Sunnyside project.

2 PERFORMANCE AGAINST THE ENTITY’S DEPARTMENTAL BUSINESS PLAN

In terms of the Social Housing Act, 2008 (Act 16 of 2008), the Tshwane Metropolitan Municipality (TMM), does not implement

social housing itself. However, the TMM creates the milieu and facilitates the environment for the delivery of social housing

units. Within that, the social housing grants can thus only be accessed by accredited social housing institutions. Social housing

must adhere to the general principles laid down in the Housing Act, 1997 (Act 107 of 1997). Moreover, the entities must comply

with Part 1 Section 2, as well as in relevant sections of subsequent legislation such as the Rental Act, 1999 (Act 60of 1999). In

addition, the policy must be read in conjunction with the White Paper on Housing (1994), the Urban Development Framework

(1997) and with the National Housing Code. Social housing must adhere to the general principles laid down in the Housing Act,

1997 (Act 107 of 1997).

The targets set are based on projects that are currently pursued with other private social housing institutions the TMM has

partnered with, including the Housing Company Tshwane (TMM). The HCT has submitted an expression of interest to the Social

Housing Regulatory Authority (SHRA) for the Townlands and Timberlands projects. The RCG Agreement for 767 units for

Townlands has been duly signed. The HCT is incessantly working to prepare the Timberland project up to the level where a

funding application can be lodged, by preparing the built-environment design and planning work required.

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The detailed design for the Chantelle project has been finalized, and is awaiting the approval of the town planning process to be

submitted. The detailed design for the Sunnyside project has been finalized as stated in table 3 below, and the project has been

put on hold due to the project’s viability. The HCT will be finalizing the detailed design for the Timberland project, including the

provision of internal civil services, reticulation for Chantelle X39 as well as the construction of 158 social housing units for the

Townlands project.

2.1 SUMMARY OF PROGRESS AGAINST ENTITY’S BUSINESS PLAN TARGETS

Chantelle x39 internal infrastructure installation is at 95% and the appointment of the contractor for the bulk upgrades has been

concluded. Timberlands town planning objections has been set aside and tribunal has ruled in favor of HCT. The detail design

process can now be completed and focus on the implementation of the project in the financial year 2018/2019. The amendment

of the income bands, subsidy quantum and rent setting has contributed positively to the financial viability of the Sunnyside

projects. It has now been re-submitted to SHRA for funding and budget has been requested through the budget adjustment

process to start with the bulk infrastructure upgrade

Table 1: Summary of performance against the business plan

Total Nr of targets for the financial year

Number of targets for the quarter

Nr of targets not achieved for the quarter

Nr of targets achieved for the quarter

Nr of targets not achieved year to date

Nr or targets achieved year to date

17 16 11 5

Table 2: Business plan targets achieved

KPA Targeted indicator Q2 Target Actual Management comments

1 Deliver and provide new social

housing units on a sustainable

basis.

Number of new units

developed.

Detailed

design 50%

completed

Detailed design 90%

completed

The professional team progressed further than anticipated with the detail design.

2 Acquisition of the viable

brownfields rental stocks from

the CoT

Number of rental units

transferred from CoT to HCT


The 60 units targeted

for Quarter 2 were part

of the units which were

transferred in the 1st

Quarter.

A total of 284 units planned for transfer in the 2017/18 financial year were achieved in the 1st quarter.

3 Deliver services by developing

and managing affordable rental

housing in the City of Tshwane.

Occupancy

Occupancy level in units

increased

96% 97.47% Performance will be

sustained




Occupancy



sustained




Occupancy


increased


sustained

6 Stabilize processes to ensure

increase in rental revenue.

Rental revenue collected as

a percentage of amount

billed( Eloff)


sustained

7 Stabilize processes to ensure

increase in rental revenue.

Rental revenue collected as

a percentage of amount

billed ( Silwerkroon)

6% 7.24 Performance will be sustained

8 Stabilise service delivery through

the development and

Entity asset liquidity

maintained to an acceptable

Liquidity

ratio of 1:1

Liquidity ratio of 5,91:1 Performance will be

sustained

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implementation Integrated

Affordable Rental Housing

Strategy

level

Achieving

9

Turnaround in resolving tenant

maintenance requests increased

80 % of the tenant

maintenance requests are

resolved within agreed

turnaround time


10

Turnaround in resolving tenant

complaints increased

90% of the tenant

complaints are resolved

within agreed turnaround

time

86% 0 No complaints were received during the reporting quarter

11 Revitalise Urban

growth/dismantling poverty and

inequality

Development of BEE &

SMME’s


Table 3: Business plan targets not achieved


Q2 Target





Due date

1

Deliver and

provide new

social housing

units on a

sustainable

basis

Number of new units developed- Townlands

30 completed

units


There are 4 subcontractors currently appointed to assisting the main contractor to accelerate.

A recovery plan to appoint an 8GB subcontractor to assist with the acceleration programme is underway.


31 January 2018

2


Number of new units developed- Chantelle X39






12 January 2018

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Q2 Target





Due date

3

Deliver and

provide new

social housing

units on a

sustainable

basis

Project Procurement Startegy concluded- Sunnyside Erf 708-709



The financial modelling is currently underway and will be submitted to the SHRA for approval

Request for funding had been submitted to the City for the commencement of infrastructure bulk upgrade.


31 January 2018- Financial Viability 01 March –Appointment the contractor for bulk upgrade.

4 Stabilise service

delivery through

the

development

and

implementation

Integrated

Affordable

Rental Housing

Strategy

Manage

budget

processes of

the entity in

accordance

with

regulatory

frameworks

50% 47.29 %( not achieved.) There was a delay in appointing the professional team and the utilization of the HHS panel of contractors.




12 January 2018

5

Stabilize

processes to

ensure increase

in levies.

Increase

levies

collection

rate of billed

units by 8%

=30%

8% -13.28% Tenants at Clarina have not gone through HCT’s vetting process as tenant allocations are done by the City, some of the tenants are unemployed, some depend on social grants

Attorneys

were

appointed to

assist with

collection.


Property Manager

28 February 2018

3 PERFORMANCE AGAINST THE CORPORATE SDBIP

3.1 PERFORMANCE AGAINST THE SDBIP TARGETS

Not Applicable to the entity.

Table 3: Summary of performance against the SDBIP targets

Total Nr of targets for the financial year

Nr of targets for the quarter

Nr of targets not achieved for the quarter

Nr of targets achieved for the quarter

Nr of targets not achieved year to date

Nr or targets achieved year to date


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Table 4: SDBIP targets not achieved

KPA Indicator no.





Due date

N/A N/A N/A N/A N/A N/A N/A

3.2 SUMMARY OF PROGRESS ON PROJECTS

The rezoning objection for Timberlands has been set aside and the tribunal has ruled in favor of HCT, The development can now

proceed and finalise the design and submit for approval with relevant City internal departments. Townlands is behind schedule

and the contractor has submitted a recovery plan to accelerate the works. Chantelle x39, the professional team and the

contractor has been appointed and construction will commence in the 3rd quarter. The subsidy quantum, income bands and

rentals have been increased which is making the Sunnyside project financially viable. The revised financial model is being

prepared and will be submitted to the SHRA for approval. HCT has requested funds through the budget adjustment process to

commence with the infrastructure bulk upgrade.

Table 5: Summary of projects

Total nr of Projects Nr of projects that achieved planned non-financial milestones for the quarter

Nr of projects that did not achieve planned non-financial milestones for the quarter

Nr of projects that achieved planned non-financial milestones year to date

Nr of projects that did not achieve planned non-financial milestones year to date

4 1 3 3 1

Table 6: Non achieved milestone targets on projects and corrective measures

Projects in the Business Plan

Corrective measures implemented for non-achieved milestone

Corrective measures to be implemented

Date of implementation


Townlands Chantelle X39,Sunnyside Erf 708 &709 )

Townlands- The contractor has submitted a recovery plan to appoint an 8 GB subcontractor to assist him in accelerating the works. The re-routing and installation of the sewer pipe line is 95% completed. The remaining 5% consists of installation of the sewer pipe for crossing the road by cutting underground. The City has not yet granted the contractor with a wayleave approval. Chantelle x39- Appointment of the professional team and the main contractor has been concluded. Sunnyside Erf 708&709-The financial modelling for the project is currently underway.

Townlands- The development manager to make sure that the process of appointing the 8GB subcontractor is completed and implemented, failure which the contractor will be place on terms with intensions to terminate. Escalating the matter to the head of transport for intervention. Chantelle x 39- Contractual agreements should be finalized by the 12th January 2018 and hand over the site for construction to commence. Sunnyside- Financial Viability will be submitted to SHRA for approval in January. Funding has been requested to commence with infrastructure upgrade. Detailed designs are circulating for approval with the City’s internal departments.

31 January 2018 Acting Property Development Manager

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4 PERFORMANCE ON THE 180 DAY AND 18 MONTH PROGRAMME

The entity does not have a 180 day and 18 month programme

Table 7: Summary of performance on the 18 month programme

Programme/ project

Non-achieved targets year to date

Reasons for non-achievement

Corrective measures

Date for corrective measures



5 FINANCIAL PERFORMANCE

5.1 REVENUE

5.1.1 Summary of financial operating results

The financial performance of the entity for quarter2 period (July 2017 - December 2017) resulted into an accumulated

surplus of R63 million. This was attributed to the capital grant revenue recognized on both Townlands and Chantelle project

for the development of 1,200 Social Housing units and installation of reticulation services respectively. Below is the graphical

presentation of operating results:

5.1.2 Operating revenue

Recorded variances from the budget were from revenue categories such as rental revenue, operational grant, interest

income, and other revenue and capital grant transfers. The variances can be explained as follows:

5.1.3 Rental income

For the period under review, the Company realized revenue of R4, 3 million as compared to the budgeted amount of R5

million. The variance is as a result of not delivering 100 social housing units at the end of the financial year due to the

contractors non- performance. The contractor has been put into terms to deliver 100 units by the end of quarter 3.

(10 000 000,00) -

10 000 000,00 20 000 000,00 30 000 000,00 40 000 000,00 50 000 000,00 60 000 000,00 70 000 000,00 80 000 000,00 90 000 000,00

Inco

me

Exp

end

itu

re

Surp

lus

Origional Budget

Actual

Variance

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5.1.4 Operational grant

The Company recognized an operational grant of R11 million as compared to the budgeted amount of R15, 4 million. The

variance was attributed to certain marketing activities not carried out due to the entity not delivering Townlands project and

vacant senior management positions not filled. The grant is recognized once the entity has fulfilled the mandate as per the

Service Delivery Agreement between the City and the entity. The variance amounts to R4, 4 million. Management has

advertised senior management position and those positions will be filled the beginning of the quarter 3. The non-performing

contractor has been put in terms.

5.1.5 Interest Income

For the period under review, the Company earned interest income of R70, 609 as compared to the budgeted figure of R52,

256. The variance of R18, 353 is attributed to interest charged to Clarina tenants on outstanding levies payment. Clarina

building is the complex transferred to Housing Company Tshwane by the City. The complex is utilized to provide alternative

accommodation to ex-Schubart Park residents. As a mitigation strategy towards non collection of levies, some tenants have

now been handed over to the Rental Housing Tribunal who have issued the tenants with letters instructing them to pay or

failure which they will have to come for a hearing set for mid-November 2017, where a final order will be issued. This is the

last resort that the entity has in its available avenues, eviction processes will have to be effected.

5.1.6 Other Income

The Company realized revenue of R59, 126 as compared to the budget figure of R43, 027. The variance of R16, 099 was as a

result of non- budgeted items like parking bays at Silwerkroon. The entity started charging parking bays at Silwerkroon

towards the end of the financial year. The income on parking bays has been included in the adjustment budget process.

5.1.7 Capital Grant Transfers

The Company realized capital grant revenue of R57 million as compared to the budget figure of R61, 3 million. The variance

of R4, 1 million was due to the contractor’s non-performance on Townlands project.

5.2 OPERATING EXPENSES

5.2.1 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.

5.2.2 Employee related costs

The Company has spent R3, 5 million as compared to the budgeted figure of R6, 5 million. The variance of R3 million is due to

the resignation of the CEO at the end of February 2017 and other senior management unfilled vacant positions.

Management has advertised senior management position and those positions will be filled the beginning of the quarter 3.

5.2.3 Remuneration Of Directors

The Company has spent R323, 722 on Directors’ remuneration as compared to the budgeted amount of R 586, 494.

Directors’ remuneration is lower than the budgeted amount due to a reduction in the number of board and committee

meetings hence the variance of R262, 772. Budget management will be maintained.

5.2.4 Depreciation

For the period under review, the entity has recorded depreciation of R447, 144 as compared to the budget amount of R154,

377. The variance of R291, 767 is as a result of reclassification of investment property to property, plant and equipment

which is carried at revaluation model less accumulated depreciation. The depreciation has been adjusted during the

adjustment budget process.

5.2.5 Finance Charges

For the period under review, the entity has paid R 126, 410 as compared to the budgeted amount of R126, 454 in finance

charges with the variance of R44. This relates to the loan with National Housing Finance Corporation (NHFC).

5.2.6 Contracted Services

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The Company has reversed contracted services related to Townlands projects which were accrued in the last financial year as

per the recommendation of the Auditor General hence negative amount on contracted services. Minus R4, 8 million on

contracted services as compared to the budgeted amount of R5, 5 million. However, in real terms the variance was due to

certain marketing activities not carried out due to the entity not delivering 100 social housing units at the end of the financial

year due to the contractors non- performance. The contractor has been put into terms to deliver 100 units by the end of

quarter 3.

5.2.7 Other Expenditures

The Company has spent R1, 8 million on other expenditures as compared to the budgeted amount of R4, 8 million. The

variance of R3 million was as a result of less maintenance or operating expenditures at Townlands, impacted by not

delivering 100 social housing units at the end of the financial year due to the contractors non- performance. The contractor

has been put into terms to deliver 100 units by the end of quarter 3.

5.3 CASH FLOW

The entity has received both operational and capital grant from the City to the value of R41 million. The collection rate at

Silwerkroon building has been very good since the collection is higher by 6, 78% as compared to the budgeted collection rate

of 6%. The entity ended the midterm in a favourable cash position with cash on hand being R16 million.

5.4 STATEMENT OF FINANCIAL POSITION

The financial position reflects that the entity is capable of meeting its financial obligations given that the total assets exceed

total liabilities by R 142 million. This is a reflection that the company could be not be plunged into insolvency as long as it

receives the necessary support from the shareholder. Current assets exceed current liabilities by R 30 million which indicates

that the entity is liquid. The current ratio is currently 5, 9:1 versus standard norm of 1:1.

5.5 IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE

The entity has not incurred fruitless and wasteful expenditure during the period under review of the current financial year.

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6. GOVERNANCE

6.1 BOARD COMPOSITION

Housing Company Tshwane has a unitary board, which consists of an executive director (CEO) and five (5) non-executive’s

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 Quarterly, and Annual Reports on its performance and service

delivery to the parent municipality as prescribed in the SDA, the MFMA and the MSA.

The Board has three committees, namely:

Finance, Risk and Ethics Committee

Human Resources and Remunerations Committee

Development and Projects Committee

6.2 BOARD AND COMMITTEE MEETING

Board Committee Number of Meetings

Quarter 2 Year to date

Board meeting (normal) 1 1

Board meeting (special) 2 2

Annual General meeting 0 0

Human Resources 1 1

Finance Risks and Ethics 1 ( normal) 3 (2 special)

Development & Projects 1 1

Strategic Plan Review 0 0

6.3 DIRECTORS REMUNERATION

None-Executive Director Quarter 2 Year to date Mr. T.S Phetla 30,407.68 61,460.44

Dr R.W Rowland 31,331.76 58,783.54

Adv T.S Kholong 31,587.71 76,104.31

Adv A.J Singh 34,437.91 65,689.10

Dr M Matlou 37,219.00 64,628.70

Total 164,984.06 326,666.09

Executive Director (Senior Management) Quarter 2 Year to date Mr J. Mkhonto 121,982.30 302,367.74

Ms L. Makibinyane 221,421.90 442,843.80

Mr K.W Ramotshela 154,475.31 308,950.62

Mr J. Mokadikwa 100,140.70 200,281.50

Mr A. Campbell 55,546,91 55,546,91

Total 659,567.12 1,309,990.57

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6.4 RISK MANAGEMENT AND INTERNAL CONTROLS

The HCTs’ Company Secretary (Cosec), is the entity’s Risk Champion.. He monitors the risk register on a quarterly basis. The

current risk register is aligned to HCT’s 2017/18 Business Plan and identifies risks which may have a negative impact on the

HCT’s achievement of quarterly targets. Management has a responsibility to mitigate or eliminate the risk. At the previous Risk

Committee meeting, the HCT was encouraged to compile their risk mitigation/elimination plan in a clear and understandable

language. The Risk Register is tabled at the CoT’s Finance and Risk Committee, APC meetings as well as HCT Board meetings. The

filling of the position of Chief Financial Officer (CFO), has been identified as an action that would mitigate the HCT’s lega l

compliance risk and contribute towards the achievement of a clean audit... The HCT has scored very well in the reliability of its

internal-controls. To prevent future irregular, fruitless and wasteful expenditure, only the CEO has the authority to effect a

deviation. The Auditor General has concluded an audit in November 2017, for the previous financial year 2016/17, and the

entity has received an unqualified audit opinion.

6.5 HUMAN RESOURCES

6.6 STRATEGIC AND OPERATIONAL CHALLENGES

HCT has strategic positions that are vacant which is impacting on the performance of the entity. The organogram of the entity

needs to be revised and the job descriptions need to be enhanced. A skills audit and matching needs to be conducted in order to

maximize the potential of the employees and developing a growth plan. A turn-around strategy has been commissioned and will

be submitted to the City Manager for endorsement. Capital funding is required for the refurbishment of the existing buildings in

order to have the buildings in good shape and reduce the maintenance costs incurred.

2017/18

Units

No. of posts

No. of filled posts

No. of vacancies

Vacancies %

Challenges Intervention/Action to be taken

Office of the Chief Executive Officer (CEO)

8 5 3 37.5 % It was discovered that the salaries offered by the entity are not aligned to the municipal owned social housing sector, this resulted in a high turnover of stuff.

A benchmarking, grading and skills matching exercise needs to be done in order to ensure growth & staff retention. Office of the Chief

Financial Officer (CFO) 8 4 4 50 %

Office of the Chief Operations Officer (COO)

39 28 11 28.20%

TOTAL

55

38

18

32,72 %

Current Employment Equity Profile Black Indian White Coloured Total

Males 15 0 0 0 15

Females 21 0 1 0 22

Total 36 0 1 0 37

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Table 8: Challenges

Challenges Interventions implemented Assistance required

1. Reduced budget allocation for operational purposes.

Submission of draft adjusted budget. Full Commitment of the CoT to fund the capex projects.

2. HCT Organogram A service provider has been appointed to conduct the turn-around strategy which will inform the amendment of the organogram

Approval of the salary revision and support from the City should a restructuring process be required.

3. Staff Turnover Salary Benchmarking and Grading was submitted to the board for approval. However, the report was not approved.

A review of the report is required and approval thereof.

4. Lack of capacity within the Supply Chain division

The recruitment process to fill the position is underway.

A qualified & experienced personnel needs to be appointed for the position.

5. Non- payment of Clarina levies)

Management had engagements with the residents and the committee to inform, educate and motivate to pay their levies. Phone calls were made, several letters of demand were sent. After assessing the employment status of residents, 20 employed tenants were handed over to the lawyer for action.

Engagement with the City on the SLA. Operational fund to subsidize the maintenance, rates & taxes & salaries.

7. DEPENDENCIES AND CROSS-CUTTING ISSUES

Table 9 Dependencies

No Inter-

Departmental

Dependency

Description

Department & Individuals

Assigned Responsibility

Departmental

Response

Joint Action (Provide details on

how the dependency will be

managed)

1 Access to suitable land for social housing development/s

*City Planning *Department of Human Settlement and Housing

City Planning is identifying all land parcels suitable for social Housing. The Department of Housing and Settlements is coordinating Social Housing developmental pipeline.

HCT and CoT’s Department of Housing and Human Settlements are working closely and much more collaboratively than before.

2 Slow approval processes

* The CoT’s Service Departments

The CoT’s Service Departments and the HCT have held meetings to establish a working relationship and establish a mechanism of fast racking approvals.

Providing a programme of works and submit it to the services department. Schedule by-monthly meetings to provide comments and amendments.

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8 OPERATION CLEAN AUDIT

Table 10: Evidence

Evidence for the quarter submitted with report (Yes/ No)

Departmental evidence files updated, centralized and verified in the department (Yes/ No)

If no, indicate corrective measure

Departmental project files for the quarter compiled, centralized and verified (Yes/No)

If no indicate corrective measure

Yes Yes N/A

Table 11: OPCA controls and interventions

AG or internal audit finding not resolved Corrective action Responsible official

Due date

Incomplete disclosure of commitments on the Annual Financial Statement under note 30 due to lack of proper communication between Project Development Division, Supply Chain Management which administer the Contract Register/List as well as Finance Department. During the preparation of the Annual Financial Statements, finance was not aware that the entity has entered into contracts with the Service Providers and contracts are signed off. The value of the changes amounted to R 83 230 916.

• Amend the Annual Financial Statements to include commitments.

• Appoint the Supply Chain Manager to ensure compliance on contract management who will submit the updated contract Register on a monthly basis to finance division.

• Appoint the Chief Financial Officer to provide quality assurance on the Annual Financial Statements.

FM & SCM 28 February 2017

Incompleteness of payables and accruals at year end for both Townlands and Chantelle projects. During the audit of AOPO, the Auditor General (AG) realized that management reported achievement of 90% completion on detailed design for Townlands and 35% progress on installation of bulk services for Chantelle projects but the Annual Financial Statement were not aligned to progress on projects. The invoice on Townlands project was not captured since there was a dispute with the invoice and on Chantelle project the invoice was not received from the contractor. Management had to get the invoices from Suppliers and capture them on the Annual Financial Statement and these invoices impacted Trade Payables, Expenses and Assets under construction (PPE). The impact was as follows: Trade payables - R15 917 307 Assets under construction - R8,630,594 Expenditure - R7,286,713

• The AFS has been amended to capitalize assets under construction (PPE) and expenditures on Townlands and Chantelle projects

• In future, the reported performance on the Annual Performance report will be analysed to ensure that progress on projects is aligned to what has been captured on the AFS to avoid repeat finding

FM, Bookkeeper & PDM

28 February 2017

Same finding as above but with impact on PPE (assets under construction) Trade payables - R15 917 307 Assets under construction -R8,630,594 Expenditure - R7,286,713

• The AFS has been amended to capitalize assets under construction (PPE) and expenditures on Townlands and Chantelle projects

• In future, the reported performance on the Annual Performance report will be analysed to ensure that progress on projects is aligned to what has been captured on the AFS to avoid repeat finding.

FM, Bookkeeper & PDM

28 February 2017

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The cash flows from investing activities relating to property, plant and equipment additions included some of the supplier invoices that were not paid at year end but were recorded as paid invoices on the cash flow statement. This is due to the cash flow statement being prepared based on the information reflected on the Statement of Financial Position and Statement of Financial Performance at the end of June 2017 without going into detail on what has not being paid from trade payables. The adjustment decreased cash flow from investing activities by R 2,306,590 and increased cash paid to suppliers and employees by R2, 306,590.

• AFS will be amended to correct amounts paid from investing activities (PPE) on the cash flow

• In future, the cash flow statement will be reviewed on a monthly basis to ensure that at year-end the cash flow statement is accurate.

FM 31 January 2018

During the audit of supply chain management processes, it was noted that bid for Townlands projects was awarded to a supplier who does not meet the administrative evaluation criteria. The bid specification documents which were issued to all prospective bidders stated that the submission of certified audited financial documents for two (2) previous financial years is a compulsory administrative requirement for all bidders who submit bids. Upon the inspection of the winning supplier’s audited financial statement it was noted that the supplier submitted the audited financial statement documents on the 19th of December and this is the same date that the bid was awarded by the bid adjudication committee. This indicates that the financial statements were not submitted on the closing date of the bids and the bid evaluation committee did not have the winning supplier’s audited financial statements when the evaluation was conducted on the 14 October 2016 Furthermore, it was noted that on the bid evaluation documents the bid evaluators awarded 10 points to the winning bidder for the submission of the audited AFS under the administrative evaluation whereas the financial statements were not submitted. BEC recommended the bidder to the BAC on the basis that the bidder submitted financial statements that are reviewed and not audited. This was condoned on the understanding that by law, a Closed Corporation (CC) is not required to audit its financial statements. In the engagement with internal audit, they advised that the tender should be canceled and re-advertised. HCT further requested an alternative solution as the recommendation from Internal Audit would result in the company forfeiting capital grant funding allocated to them. Due to value of the contract to be awarded being high, it was advised that the highest scored bidder submits audited financial statements within 14 days of request, hence the submission of 19th December 2016. It should be noted that ALL Closed Corporation bidders who submitted reviewed financial were awarded 10points under administrative evaluation. The Pty (Ltd) was given the 10 points as well.

• Going forward, the bid specification document will be more specific about the requirement of audited financials

• The specification document will be signed off by all BSC members, signed off by the senior manager in SCM and appended to the minutes of BSC for the Accounting Officer to sign off

• SCM will no longer utilize the soft copy of the Bid Specification document in the finalization of the bid advertisement but will use the scanned copy to ensure that the final document is the one agreed to by the BSC and signed off by the Accounting Officer

• Drafting of the SOP for the approval process of the specifications document In progress. The first draft of SOP has been drafted and circulated to Senior Management for comments

ACEO & COO & 28 February 2017

During the audit of supply chain management, it was noted that the bid evaluation committee for Townlands projects did not have at least three persons with the technical knowledge of the bid when the functionality of the submitted bids was evaluated. Furthermore, the bid adjudication committee for the bid did not comprise a technical expert of the entity that being the property manager. Management was of the view that the BEC did comprise of 2 technical experts, Ms Obakeng Nyundu (Quantity Surveyor and Construction Project Management) and Mr Mfana Maluleke (Civil Engineer) as per the SCM policy. The BAC comprised of Ms Metse Mabeba (Town Planner) and Ms Nonto Memela (Town Planner & Executive Director

• Amend the SCM policy to align with the CIDB requirements for BEC composition of construction related tenders

• In future, all committees’ appointments will comply with the CIDB and SCM regulations In progress. The SCM policy is being revised to include CIDB requirements and is circulated to Management for comments.

ACEO & COO & 28 February 2017

391

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responsible for Social Housing in the City).

During the audit of the strategic objective 1 Property Development it was noted that the number of completed units disclosed by management is incorrect. During the physical verification of the Townlands project it was noted that there were no completed units as the project is still under construction. Management has incorrectly disclosed 49 completed foundations as the achieved target for the indicator however the unit of measurement for the indicator is completed units. Management disputed the finding. The reported actual is not a number of units built but of progress made on site, 49 foundations. There is no way the paragraph 6 reported actuals can be interpreted as units that are complete. Also in the next column, the target is reported as Not Achieved, meaning there are no units built

• The reported actual performance will be amended and reported as required by the AG as o units completed

• In future, responsible officials will sign declaration forms that the reported actual performance is relevant to the targeted performance.

ACEO & PDM 28 February 2017

During the audit of the strategic objective 1 Property Development it was noted that the detailed designs completed in Timberland disclosed by management is incorrect. The detailed designs have not yet been received by management as they are still with the engineers and thus it has been concluded that the risks and rewards of the detailed designs have not passed to management. The reported achieved 90% has been based on a narrative submitted by the engineers who cannot be supported by the actual design. Management has reported on progress made and has acknowledged in the very same report that the target was not achieved. Management has therefore not at all attempted to overstate its achievement.

• The reported actual performance will be amended and reported as required by the AG as o detailed design completed

• In future, responsible officials will sign declaration forms that the reported actual performance is relevant to the targeted performance.

ACEO & PDM 28 February 2017

During the audit of value added tax it was noted that the company has claimed VAT input on purchases that are to be used for exempt supplies. The company is in the process of building Townlands residential units and the units will be used exclusively for residential purposes, the company further has the Eloff building which is partly used for taxable and exempt supplies. The following are details of the buildings owned and used. Clarina has 160 units of which 158 are used for residential purposes and 2 for the caretaker, Silverkroon has 121, 120 used for residential and 1 for the caretaker and Eloff has 95 units, 90 used for residential units, 1 for the caretaker and the 4 used for taxable supplies. Based on our assessment four (4) units out of the total of 376 are used for commercial purposes, this equates to 1.06%, this translates to 98.94% exempt supplies. Furthermore no evidence could be obtained of the SARS approval of the apportionment rate that is used by management for VAT purposes as it was noted that the company has been claiming VAT input at an apportionment rate of 26.06%. The entity did not receive SARS approval on the apportionment rate. However, the apportionment rate was applied from June 2014 based on the audit finding from the Auditor General as the entity provides accommodation for both taxable and exempt supplies. While the entity was receiving more additional building from the City, management did not re-calculate percentage allowable for input vat purpose as per Section 17 paragraph 1(i) of the VAT Act and verify whether the apportionment rate is still applicable.

• Management will reverse the input VAT claimed from July 2017 at an apportionment rate in the November 2017 books since 98.94% of the supplies is exempt and report this to SARS Completed

• Management has started engagements with SARS on the correct treatment of input VAT based on the apportionment rate. In progress

FM & Bookkeeper 31 January 2018

During the audit of VAT it was noted based on the reconciliations performed, input VAT is not claimed from

• In future, when VAT return 401 reflects amount due to the

FM & Bookkeeper 31 January 2018

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SARS and management carries over the debit balance month to month. This is incorrect because a category A vendor the entity must do returns every two months and make payments or claims to or from SARS with no closing balance carried forward. Management disagree with the finding that the input VAT is not being claimed since the VAT returns 401 reflects input vat claimed and output vat due to SARS. The challenge with SARS is when the return reflects an amount due to entities; they call for VAT assessment and audit which takes longer to conclude hence the balance being carried over to the following month. However, management acknowledges that the output VAT owed to SARS should have being paid during the cycle of two months instead of being offset with what SARS owes to the entity.

entity, the output VAT due to SARS will be paid and be cleared from the reconciliation and the amount owed by SARS will not be carried over to the following vat period cycle.

9 CONCLUSION AND RECOMMENDATIONS

Housing Company Tshwane’s 2017/18 performance outlook is encouraging, provided the Shareholder (City of Tshwane), fully commits itself to the funding of catalytic projects, namely Townlands, Timberland and Sunnyside in the subsequent quarters of this financial year. Making the City of Tshwane a “livable city” remains the most relevant goal for the HCT. The high demand for decent rental accommodation is a powerful driver for the aggressive growth path which HCT is embarking on to provide affordable, well-located and sustainable social/rental solutions. HCT’s performance has improved during quarter 3 of the current financial in comparison to the same period in the previous financial year. The HCT will embark on achieving 80% of its targets within the next quarters of this current financial year. A disciplined workforce and a candid and straightforward performance management system will be instrumental to the attainment of the ambitious goals enunciated above.

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ANNEXURES

ANNEXURE A: ENTITY’S BUSINESS PLAN REPORT

Department

Departmental Focus Area

Key performance indicator

Project Name Annual Target Q2 Target Q2 Actual

Comments Work done / Reasons for non-performance

Mitigation plan Evidence Required

Property Development


Number of new units developed

Townlands

200 completed

units

30 completed

units

Not achieved


There are 4 subcontractors currently appointed to assisting the main contractor to accelerate.

Timberland

Detailed design

100%

completed

Detailed

design 50%

completed Detailed design 90% completed


A recovery plan to appoint an 8GB subcontractor to assist with the acceleration programme is underway.

Chantelle

X39

Installation of

bulk services

completed

Site

establishment

and trenching

Not achieved



Sunnyside Erf

708 & 709

Project

Procurement

Strategy

concluded

Procurement

strategy

developed

Not achieved


Request for funding had been submitted to the City for the commencement of infrastructure bulk upgrade

394

20 | P a g e

Department






Property Management

Acquisition of the

viable brownfields

rental stocks from

the CoT

Number of rental units

transferred from CoT to

HCT

Capital Park D – 42 units Capital Park S – 27 units Oosmoot – 60 units Claremont – 50 units Danville D – 57 units Danville S – 30 units

Self-sufficient Elderly Rental stock units transferred


266 Rental stock were transferred from CoT to The HCT in the first quarter which also includes the 60 units targeted for quarter 2

Target was achieved N/A Transfer letter

Deliver services by

developing and

managing

affordable rental

housing in the City

of Tshwane.


increased

Eloff

96% 96% 97.47% Target was achieved N/A Occupancy listing

Clarina


Silwerkroon


Turnaround in

resolving tenant

maintenance

requests increased

80 % of the tenant

maintenance requests

are resolved within

agreed turnaround time.

Eloff, Clarina &

Silwerkroon

75%

78% 89.86% Target was achieved N/A Complaints/Maintenance requests and register

Turnaround in

resolving tenant

complaints

increased

90% of the tenant

complaints are resolved

within agreed turnaround

time.

Eloff, Clarina &

Silwerkroon

80% 86% 0 No complaints were received for Q2

N/A Complaints/Maintenance requests and register

395

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Department






Finance & SCM)

Revitalise Urban

growth/dismantling

poverty and

inequality

Development of BEE &

SMME’s

31%

35% 116.19% Target was achieved N/A Finance Report

Stabilise service

delivery through

the development

and

implementation

Integrated

Affordable Rental

Housing Strategy

Manage budget

processes of the entity in

accordance with

regulatory frameworks

Budget

management

90% 50% 47.29% There was a delay in appointing the professional team and the utilization of the HHS panel of contractors.

Appointment of the professional team and the contractor has been concluded. Contractual documents are planned to be completed by the 12th January 2018 and site handover will follow immediately after.

Stabilize processes

to ensure increase

in rental revenue.

Rental revenue collected

as a percentage of

amount billed

Eloff 90% 6% 6.42% Target was achieved N/A Billing and collection Report

Silwerkroon 90% 6% 7.24 Target was achieved N/A Billing and collection

Report

Stabilize processes

to ensure increase

in levies.

Clarina 22% 8% -13.28% Tenants at Clarina have not gone through HCT’s vetting process as tenant allocations are done


Billing and collection

Report

396

22 | P a g e

Department






by the City, some of the tenants are unemployed, some depend on social grants

Stabilise service

delivery through

the development

and

implementation

Integrated

Affordable Rental

Housing Strategy

Entity asset liquidity maintained to an acceptable leve

Liquidity ratio

of 1:1

Liquidity ratio

of 1:1


Target was achieved N/A Finance Report

Governance

Promote effective

and efficient

management of

HCT and Social

Housing portfolio

Internal Governance

Structures and Processes

reviewed and approved

Policy review and

approval i.e. Supply

Chain, Delegations of

Authority, Human

Resources, Marketing &

Communication,

Management , Financial

and Internal control

Entity annual strategic review and approval.

N/A N/A N/A N/A N/A

397

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ANNEXURE B: STATEMENT OF FINANCIAL POSITION AND FINANCIAL PERORMANCE


Description

2016/17 Current Year

2017/18

Audited Outcome Original Budget

Monthly actual Year-TD actual Year-TD budget YTD variance YTD variance Full Year Forecast

R thousands %

Revenue By Source

Rental of facilities and equipment 5,478 10,176 712 4,255 5,086 (830) -16.3% 10,176

Interest earned - external investments – 25 1 7 12 (6) -46.0% 25

Interest earned - outstanding debtors 136 106 12 71 52 18 35.1% 106

Transfers and subsidies 30,629 31,275 2,866 11,004 15,476 (4,472) -28.9% 31,275

Other revenue 209 87 10 59 43 16 37.4% 87


Total Revenue (excluding capital transfers and contributions) 36,452 41,669 3,601 15,396 20,670 (5,274) -25.5% 41,669

Expenditure By Type

Employee related costs 8,004 14,594 566 3,512 6,521 (3,009) -46.1% 14,594

Remuneration of Directors 1,325 1,377 55 324 586 (263) -44.8% 1,377

Debt impairment 729 – – – – – –

Depreciation & asset impairment 215 324 224 447 154 293 189.6% 324

Finance charges 285 240 21 126 126 (0) 0.0% 240

Other materials – 1,452 103 382 686 (304) -44.3% 1,452

Contracted services 8,888 11,191 (6,870) (4,808) 5,571 (10,380) -186.3% 11,191

Other expenditure 5,344 9,046 286 1,812 4,874 (3,062) -62.8% 9,046

Total Expenditure 24,790 38,224 (5,615) 1,795 18,519 (16,724) -90.3% 38,224

Surplus/(Deficit) 11,662 3,445 9,216 13,600 2,150 11,450 532.5% 3,445

Transfers and subsidies - capital (monetary allocations) (National / Provincial and District) 26,824 110,626 20,905 57,149 61,252 (4,103)

-6.7%

110,626 Transfers and subsidies - capital (monetary

allocations) (National / Provincial Departmental Agencies, Households, Non-profit Institutions, Private Enterprises, Public Corporatons, Higher Educational Institutions) – – – – – –

–

Transfers and subsidies - capital (in-kind - all) – – – – – – –

Surplus/(Deficit) before taxation 38,486 114,072 30,122 70,749 63,403 7,347 11.6% 114,072

Taxation – – – – – – –

Surplus/(Deficit) for the year 38,486 114,072 30,122 70,749 63,403 7,347 114,072

398

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Housing Company Tshwane - Table F4 Monthly Budget Statement - Financial Position - M06 December

Vote Description

2016/17 Current Year 2017/18

Audited Outcome Original Budget Year-TD actual Full Year Forecast

R thousands

ASSETS

Current assets

Cash 39,397 11,892 16,735 11,892

Consumer debtors 127 241 166 241

Other debtors 53,338 167 19,422 167

Current portion of long-term receivables – –

Total current assets 92,861 12,300 36,322 12,300

Non-current assets

Investment property 13,500 13,500 13,500

Property, plant and equipment 45,761 194,943 113,786 194,943

Intangible 11 5 8 5

Other non-current assets – –

Total non- current assets 59,272 208,448 113,794 208,448

TOTAL ASSETS 152,133 220,748 150,116 220,748

LIABILITIES

Current liabilities

Bank overdraft – –

Borrowing 315 315 158 315

Consumer deposits 553 527 595 527

Trade and other payables 77,072 953 4,995 953

Provisions 335 577 400 577

Total current liabilities 78,275 2,372 6,147 2,372

Non- current liabilities

Borrowing 1,542 1,227 1,542 1,227

Provisions – –

Total non- current liabilities 1,542 1,227 1,542 1,227

TOTAL LIABILITIES 79,817 3,599 7,689 3,599

NET ASSETS 72,316 217,149 142,427 217,149

COMMUNITY WEALTH/EQUITY

399

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Accumulated Surplus/(Deficit) 67,702 212,536 128,790 212,536

Reserves – 9,023 –

Share capital 4,614 4,614 4,614 4,614

TOTAL COMMUNITY WEALTH/EQUITY 72,316 217,149 142,427 217,149

400

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Housing Company Tshwane - Table F5 Monthly Budget Statement - Cash Flows - M06 December

Description


2017/18

Audited Outcome Original Budget

Monthly actual Year-TD actual Year-TD budget YTD variance YTD variance Full Year Forecast

R thousands %

CASH FLOW FROM OPERATING ACTIVITIES

Receipts

Property rates 5,827 8,008 623 4,022 4,107 (85) -2.1% 8,008

Other revenue – 87 – – 45 (45) -100.0% 87

Government - operating 44,891 31,275 – 10,425 15,638 (5,213) -33.3% 31,275

Government - capital 35,634 110,626 40,885 40,885 55,313 (14,428) -26.1% 110,626

Interest 18 131 1 7 65 (59) -89.7% 131

Payments

Suppliers and employees (46,996) (24,225) (6,038) (25,422) (12,374) (13,048) 105.4% (24,225)

Finance charges (285) (240) (41) (126) (126) 0 0.0% (240)

NET CASH FROM/(USED) OPERATING ACTIVITIES 39,089 125,662 35,430 29,790 62,666 (6,781) -10.8% 125,662

CASH FLOWS FROM INVESTING ACTIVITIES

Receipts

Payments

Capital assets (18,390) (122,175) (31,267) (56,944) (61,252) 4,308 -7.0% (122,175)

NET CASH FROM/(USED) INVESTING ACTIVITIES (18,390) (122,175) (31,267) (56,944) (61,252) (4,308) 7.0% (122,175)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts

Short term loans – – – – – – –

Payments

Repayment of borrowing (316) (315) (53) (158) – (158) #DIV/0! (315)

NET CASH FROM/(USED) FINANCING ACTIVITIES (316) (315) (53) (158) – 158 #DIV/0! (315)

NET INCREASE/ (DECREASE) IN CASH HELD 20,383 3,172 4,110 (27,312) 1,414 (28,726) -2031.3% 3,172

Cash/cash equivalents at the year begin: 14,164 14,164 12,624 230,613 – 230,613 #DIV/0! 14,164

Cash/cash equivalents at the year end: 34,547 17,336 16,735 203,301 1,414 201,887 14275.7% 17,336

401

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Housing Company Tshwane - Supporting Table F8a Entity capital expenditure on new assets by asset class - M06 December

Description


2017/18

Audited Outcome

Original Budget Monthly actual Year-TD actual Year-TD budget YTD variance YTD variance Full Year Forecast

R thousands %

Capital expenditure on new assets by Asset Class/Sub-class

Other assets – 121,825 29,958 57,338 61,077 3,738 6.1% 121,825

Operational Buildings – 580 – 189 291 101 34.8% 580

Municipal Offices 580 – 189 291 101 34.8% 580

Housing – 121,245 29,958 57,149 60,786 3,637 6.0% 121,245

Staff Housing – – – – – –

Social Housing 121,245 29,958 57,149 60,786 3,637 6.0% 121,245

Capital Spares – – – – – –

Computer Equipment 16 100 – – 50 50 100.0% 100

Computer Equipment 16 100 – – 50 50 100.0% 100

Furniture and Office Equipment 50 250 – – 125 125 100.0% 250

Furniture and Office Equipment 50 250 – – 125 125 100.0% 250

Total Capital Expenditure on new assets 67 122,175 29,958 57,338 61,252 3,914 6.4% 122,175

402

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ANNEXURE C: RISK REGISTER

No Strategic and Business Objectives

Date Risk Identified

Risk Description

Root Cause Consequence

Imp

act

Lik

eli

ho

od

Inh

ere

nt

Ris

k

Existing Control

Perceived Control effectiveness

Resi

du

al

Ris

k

Management Action plan

1

Provide new Social

Housing units on a

sustainable basis

19-Jul-17 Inability to provide social housing units and affordable housing units

1. Delays in obtaining approved plans and designs from the relevant authorities. 2. Inadequate funding. 3. Lack of Capacity in Supply Chain 4. Poor contract management 5. Appointment of incompetent service providers’ i.e. professional team, main contractors 6.Lack of community consultation and buying.

1. Non accreditation from Social Housing Regulatory Authority (SHRA). 2. Poor service delivery. 3. Reputational damage.

Severe/Catastrophic 5 Almost Certain

5 Critical 25

1. Property development policy. 50% 2.Funding secured for 200 units for 2017/18 financial year. 90% 3. SLA with developers. 4. Secondment of senior SCM official. 5. Contract management policy 10% 6. Conditional accreditation on level 2 has been granted by SHRA. 7. Supply Chain Policy 50% 8. Service Delivery Agreement with CoT.

Satisfactory 0.50 High 13

1. Continues meeting with relevant department when required. 2. Request more funding 2.Development of 300 hundred social housing units 3. Appointment SCM manager 4. Development of templates for contract management and enforce the conditions on the contract with the contractor. 5. Develop a stakeholder management policy 6. Review SCM policy to identify all gaps and enhance the process within SCM

403

29 | P a g e



Risk Description


Imp

act

Lik

eli

ho

od

Inh

ere

nt

Ris

k

Existing Control


Resi

du

al

Ris

k


2

Promote effective and

efficient management of HCT and

Social Housing Portfolio

19-Jul-17 Lack of critical skills within the organisation

1. Imbalanced composition of the skills mix within the organisation 2. Uncertainty on the future of the entity

1. Adverse audit opinions. 2. Loss of accreditation from SHRA. 3. Closure of the entity


5 Critical 25

1. Secondments from key official from COT 2. Approved organisational structure 3. Extension of the board and advertisement of the new board.

Satisfactory 0.50 High 12.5

1.Amend the recruitment and selection policy 2. To conduct skill audit 3. Implementation of the works kills plans and personal development plans. 4. Appointment of CEO, CFO, Manager SCM, Marketing and Communication officer, clerks of works and accountant.

3 19-Jul-17 Lack of maintenance of the stock

1. Insufficient resources (budget, tools of trade, e.g.) 2. Turnaround time within SCM 3. Insufficient skills to deal with reactive maintenance

1. Loss of tenants 2. Building losing value 3. Loss of accreditation 4. Inhabitable buildings

Severe/Catastrophic 5 Unlikely 2 Medium 10

1 Maintenance Policy in place 2. Maintenance Team 3. Maintenance Plan and budget

Very good 0.10 Low 1

1. Appointment of Housing Supervisor X1 2. Request extra budget for planned maintenance. 3. Training of general workers and housing supervisors 4. To develop SoPs

4

Strive for Financial

sustainability by 2019

19-Jul-17 Inadequate levies and rental revenue.

1. Poor levies collection by HCT because of low levies payment rate by Clarina residents. 2. Indigent tenants transferred with the CoT

1. Over-reliance on CoT Operational Grant. 2. Inability to execute the mandate


5 Critical 25

1. Rent Collection Policy. 2. Arrears Management Policy. 3. Rental Housing Tribunal.


1. Stricter credit control and stringent levies arrears management processes to be followed. 2. Eviction of tenants who refuse to pay levies.

404

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Risk Description


Imp

act

Lik

eli

ho

od

Inh

ere

nt

Ris

k

Existing Control


Resi

du

al

Ris

k


stock

5 19-Jul-17 Insufficient housing stock on hand

1. Delay in construction of Social housing projects in order to increase number of Greenfields units. 2. Delay in transfer of rental stock from CoT to HCT in order to increase number of brownfields units.

1. Non-achievement of breakeven point. 2. Inability to execute the mandate


5 Critical 25

1. Council Resolution for transfer of rental stock from CoT 2. Signed contracts and SLA with contractors and professional teams for the development of housing stock


1. Acceleration of bulk installation and construction of 100 units in Townlands. 2. Acceleration of detailed designs of 574 units social housing project in Timberland. 3. Installation of internal and bulk services of 1074 units social housing project in Chantelle Extension 39.

6

Promote sound

governance

19-Jul-17 Lack of IT governance

1. HCT has not been responsible for IT Governance as required by Chapter 5 of King III. 2. IT function not catered for in the structure

1. Noncompliance to relevant Regulations, Acts and Codes of 2. Adverse audit opinion


5 Critical 25

1. Quarterly ICT Governance report. 2. Quarterly Compliance Checklist.

Weak 0.70 High 18

1. Request secondment of IT personnel 2. Review the structure to include IT

405

Initiator Msizi Myeza (3330) MAYORAL COMMITTEE:

OFFICE OF THE CITY MANAGER MID-YEAR BUDGET AND PERFORMANCE ASSESSMENT REPORT IN TERMS OF SECTION 88 OF THE MUNICIPAL FINANCE MANAGEMENT ACT, 2003 FOR HOUSING COMPANY TSHWANE (HCT) (JULY TO DECEMBER 2017)

1. PURPOSE

The purpose of this report is to present the Mid-Year Budget and Performance Assessment of the Housing Company Tshwane (HCT) in terms of Section 88 of the Municipal Finance Management Act, 2003 (MFMA) for 2016/17 financial year, being July to December 2017. The mid-year and performance assessment reports of HCT for this period is attached as Annexures A and B. Please note that the quarter 2 performance report for the period October 2017 to December 2017 is included herewith as Annexure B.

2. STRATEGIC PILLARS

2.1 A CITY THAT CARES FOR RESIDENTS AND PROMOTES INCLUSIVITY

2.2 A CITY THAT IS OPEN, HONEST AND RESPONSIVE

3. BACKGROUND

The Shareholder Operations Unit is concerned with reviewing, monitoring and “overseeing” the affairs, practices, activities, behaviour and conduct of municipal-owned entities (MOEs) to ensure the City of Tshwane that the business of MOEs is being conducted in a manner expected in accordance with commercial legislative and other prescribed or agreed conventions.

The unit is poised to assist the institution and its MOEs to comply with applicable legislation by providing regular advice and reports on compliance and recommending remedial action where required. The Division regulates the functions of MOEs and co-ordinates these with prevailing political imperatives, whilst ensuring alignment with departmental SDBIPs.

In terms of Section 88 of Municipal Finance Management Act, 2003, the accounting officer of the municipal entity must by the 20 January each year:

1. Assess the performance of the entity during the first half of the financial year,taking into account the monthly statements referred to Section 87 for the firsthalf of the financial year, the targets set in the service delivery, business plan

ANNEXURE I 406

or other agreement with the entity’s parent municipality; and the entity’s annual report for the past year, and progress in resolving problems identified in the annual report; and

2. Submit such report to the board of directors of the entity and to the parent municipality of the entity.

3. A report referred to in subsection (1) must be made public.

Therefore in compliance to the above-mentioned legislation, HCT was requested to submit their Mid-Year Budget and Performance Report to the City of Tshwane on the 4 January 2018, in order to comply with the internal process of the Mayoral Cluster System. The documents received are attached to this report as Annexures A, B and C.

4. DISCUSSION

OVERALL BUSINESS PERFORMANCE HCT has received approval on both the Restructuring Capital Grant (RCG) from the SHRA and Institutional Provincial Subsidy from the province for the construction of 1200 social housing units and the construction of Townlands Project is in process. Chantelle x39 internal infrastructure installation is near completion. The tribunal has ruled in favour of HCT as the Timberlands town planning objections have been set aside, as a result the detail design implementation process has been moved to 2018/19 financial year. During the period under review the City has transferred 284 Self Sufficient Elderly units to HCT for management with a view of enhancing the property portfolio. HCT successfully received the SHRA Conditional Accreditation Status until March 2019 as well as SHRA funding. The entity’s performance has improved as compared to the last financial year period.

PERFORMANCE AGAINST SDBIP AND THE SCORECARD HCT has seventeen (17) annual KPIs in terms of its scorecard, eleven (11) KPIs have been achieved against the target of sixteen (16) for the period of six months under review, i.e. from July to December 2017. The other five (5) targets are set to be achieved during quarter 3 and 4.

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Summary of Business Plan Targets

Mid-Year Targets

Annual Targets

Targets 16 17

No. of Targets achieved

11 11

No. of Targets not achieved

5 6

FINANCIAL PERFORMANCE REVENUE Entity recorded total revenue of R15, 3 million for the period under review, of which R11 million is the subsidy from the City; Rental of facilities pf R4, 2 million; interest earned R71 000 and other income of R59 000.

EXPENDITURE Total expenditure for the period under review is R1, 7 million against the budgeted of R18, 5 million. Attributable to the expenditure is mainly on remuneration of board members of R1, 4 million; employee related costs of R3, 5 million; contracted services of R4, 8 million; other expenditure of R1, 8 million. The under expenditure is as a result of senior vacant posts, decrease in the number of board members as well as the Townlands Project that was put on hold. It should be noted, however, that the under expenditure by the entity is the concern as it affects service delivery. SOLVENCY

Total assets for the quarter under revenue was recorded at R113, 7 million and the total liabilities are R7, 6 million. The entity is able to meet its long-term obligations as its total assets exceeds its total liabilities by R106, 6 million. LIQUIDITY The entity’s current assets for the quarter under review are R36, 3 million and the current liabilities are R6, 1 million. HCT is able to meet its short-term liabilities as its current assets exceed its current liabilities by R30, 2 million.

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GOVERNANCE ISSUES HCT obtained an unqualified audit opinion for the financial period 2016/17. During the period under review the Board approved a turnaround strategy of the entity.

City is in the final process of appointing a new Board. The term of current board has been extended on a month to month basis not exceeding a period of 3 months, i.e. from 01 January 2018.

ICT GOVERNANCE HCT participates at CoT Group ICT Steering Committee and there are no matters reported for the period under review. COMPLIANCE WITH LEGISLATION

The Auditor General raised fifteen (15) findings for the 2016/17 financial period, two (2) are repeat findings and five (5) were resolved. Management has to ensure that it implements the agreed action plans and the Board should monitor the process to avoid repeat findings in the coming audit. HUMAN RESOURCES GOVERNANCE During the period under review HCT has commenced with the recruitment of CEO and CFO with a view to stabilise the entity as these positions are vacant.

5. COMMENNT OF THE STAKEHOLDER DEPARTMENT

5.1 COMMENTS OF THE CHIEF FINANCIAL OFFICER

5.2 COMMENCE OF THE GROUP HEAD: ECONOMIC DEVELOPMENT AND SPATIAL PLANNING

5.3 COMMENTS OF THE GROUP LEGAL COUNSEL

None

6 IMPLICATIONS 6.3 HUMAN RESOURCES

The report does not have any human resource related implications for the CoT.

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6.4 FINANCES

The report does not have any direct financial implications for the CoT. 6.5 CONSTITUTIONAL AND LEGAL FACTORS

This report is in accordance with the legislative provisions and processes stipulated in the Local Government: Municipal Finance Management Act, 56 of 2003 as amended. Municipal Systems Act, Act 32 of 2000 as amended as well as the relevant National Treasury Regulations and Circulars.

6.6 COMMUNICATION

The communication implications for the CoT are dealt with in the report. 6.7 PREVIOUS COUNCIL OR MAYORAL COMMITTEE RESOLUTIONS

None 7 CONCLUSION Section 88 of the MFMA requires entities to submit mid-year budget and

performance assessment reports to the Shareholder (City) by the 20th of January every year and these reports must be approved by the board, mayoral committee and council before made public. Non-compliance to this section could result to an audit finding by the Auditor General, hence these reports must be tabled during the January reporting cycle.

ANNEXURES: A. HCT Mid-Year Report 2017-18.pdf B. HCT Quarter 2 Performance Report 2017-18.pdf

RECOMMENDED: That it be recommended to the Mayoral Committee: 1. The assessment of HCT as detailed in the report and the Annexures be accepted

as a reflection of the performance of HCT for the mid-year of 2017/18 financial year in respect of its approved budget and IDP scorecard in accordance with provisions of Local Government; Municipal Systems Act, 2000 and the Local Government: Municipal Finance Management Act, 2003.

2. That the mid-year budget and performance assessment report of HCT for the 2017/18 financial year attached to the report as Annexures A and B be noted.

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3. That the mid-year assessment as detailed in this report and Annexures be made public in accordance with the provisions of section 21A of the Local Government: Municipal Systems Act, 2000.

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