annual report 2017/2018 - ecdcecdc.co.za/media/3848/ecdc-annual-report-ar-17-18-final.pdf · the...

Published by:

Eastern Cape Development Corporation

Ocean Terrace Park, Moore Street, Quigney, East London

PO Box 11197, Southernwood, 5231, South Africa

© Eastern Cape Development Corporation

PR 386/2018

ISBN: 978-0-621-46739-0

Title of Publication: Eastern Cape Development Corporation (ECDC)

Annual Report 2017/2018

For more information contact:

Marketing and Communications Department

Eastern Cape Development Corporation

T: +27 43 704 5600 | F: +27 43 704 5700

[email protected] | www.ecdc.co.za

contentstable of1 About the ECDC 05

2 Chairperson’s Foreword 11

3 ChiefExecutiveOfficer’sReport 15

4 FinancialReview 21

5 OperationalReview 27

6 Performance Against Predetermined Objectives 43

7 HumanResourcesReport 47

8 Corporate Governance 53

9 ReportoftheAuditor-General 63

10 Consolidated Annual Financial Statements 69

AidC Automotive Industry Development Centre

ARC Audit, Risk and Compliance

bRiCs Brazil, Russia, India, China, South Africa

dbsA Development Bank of Southern Africa

CdC Coega Development Corporation

dedeAT Department of Economic Development, Environmental Affairs and Tourism

diRCO Department of International Relations and Cooperation

dFi Development Finance Institution

dsbd Department of Small Business Development

dTi Department of Trade and Industry

eCdC Eastern Cape Development Corporation

eCTPA Eastern Cape Tourism and Parks Agency

eCRdA Eastern Cape Rural Development Agency

eRM Enterprise Risk Management

hR Human Resources

idZ Industrial Development Zone

iesbA International Ethics Standards Board for Accountants

iFRs International Financial Reporting Standards

isA International Standards on Auditing

iT Information Technology

lRed Local and Regional Economic Development

Ohs Occupational Health and Safety

MeC Member of the Executive Council

NdP National Development Plan

Peds Provincial Economic Development Strategy

PGdP Provincial Growth and Development Plan

PiC Public Investment Corporation

Pids Provincial Industrial Development Strategy

PFMA Public Finance Management Act

QMs Quality Management System

ROi Return on Investment

sAdC Southern African Development Community

sCM Supply Chain Management

sedA Small Enterprise Development Agency

sOe State-Owned Enterprise

sMMes Small, Medium and Micro Enterprises

sANCO South African National Civic Organisation

sAbs South African Bureau of Standards

slA Service Level Agreement

TeP Tourism Enterprise Partnership

TiA Technology Innovation Agency

TiKZN Trade and Investment KwaZulu-Natal

WesGRO Cape Town & Western Cape Tourism, Trade & Investment Promotion Agency

list of AbbReviATiONs

toURIsMSMME DEVELOPMENT FINANCING SUPPORT

In 2017/18, ECDC disbursed a Powerplus loan of R488 600 to Aligeo Guest House, a 4-star establishment in Sterkspruit. Aligeo is located in a town that is known for its cultural diversity which places the guest house in a good position for attracting business. It should be highlighted that Sterkspruit town acts as a catchment area frequented by consumers from surrounding towns such as Barkley East, Zastron and Lady Grey, as well as across the border from Lesotho.

High demand for accommodation has resulted in the guest house being mostly fully booked throughout year, which has resulted in the guest house having to refer business to other B&Bs.

The ECDC loan facility has assisted Aligeo to make much-needed extensions to its current building and to add four rooms to capture the high demand in the market which should result in an increase in its turnover. Aligeo Guest House currently employs six permanent workers and five casual or temporary workers.

Aligeo GUest HoUse

About theECDC 01

cAse stUDY

6 ANNUAL REPORT 2017/18

VisionTo be an innovative leader in promoting inclusive, sustainable economic growth and development.

MissionTo promote inclusive, sustainable socio-economic development through focused:• Provision of innovative enterprise development financial services; and• Leveraging of resources, through strategic alliances, investment and partnerships.

Corporate Values

Value Definition

I Integrity In all our dealings with all people, we are known for our spirit of honour, reliability and accuracy. This includes attendance, punctuality, reporting, customer satisfaction, development of new product ideas, excellence, unity cohesion and honesty.

P Professionalism We are defined by our positive, presentable demeanour and our quest for continuous improvement. This includes no conflicts of interest, collective decision making, bringing in new partnerships ideas and solutions.

A Accountability We are always ready to give truthful, accurate accounts of our use of company time, assets and opportunities. This includes mutual respect, honesty, reliability, compliance, meeting obligations towards ECDC, on-time action, proactive interventions and compliance with terms of engagements.

t Teamwork None of us are as productive as all of us when we complement each other to achieve a common goal. This involves keeping our promises, honesty, on-time action, ensuring a healthy relationship between entity and Shareholder, development of new products and creating an enabling environment.

I Innovation We reflect and embrace innovation in all we say, do and think. We also endeavour to develop new services and products.

c Customer centrism We place maximum value on the centrality of the customer in delivering on our mandate and we obey all principles of Batho Pele for redress and growth.

& coRPoRAte VALUes

vision, mission

sTATeMeNT OF iNTeNT

Driving the economy through entrepreneurs and innovation.

7ANNUAL REPORT 2017/18

Legislative MandateThe ECDC draws its mandate directly from the Eastern Cape Development Corporation Act (Act 2 of 1997) and is led by the economic development priorities of the provincial government, as detailed in the Provincial Growth and Development Plan (PGDP), Eastern Cape Provincial Industrial Development Strategy (PIDS) and recently published Provincial Economic Development Strategy (PEDS), as well as the policy statements and budget speech of the Member of the Executive Council (MEC) of Economic Development, Environment Affairs and Tourism (DEDEAT).

The eCdC ACT PReAMble sTATes ThAT The CORPORATiON Will:“plan, finance, co-ordinate, market, promote and implement development of the Province and its people in the fields of industry, commerce, agriculture, transport and finance”

Strategic Goals and Objectives In support of its Corporate Plan and strategy, the ECDC has set itself the following strategic goals:

GOAl 1: Stimulate economic activities through focused investment and development of vital economic sectors.GOAl 2: Efficient use of all resources to attain financial sustainability.

These goals are underpinned by strategic objectives and key performance indicators to ensure that we achieve our goals and, ultimately, our mandate.

Strategic Goals Strategic Measurable Objectives

GOAl 1: Stimulate economic activities through focused investment and development of vital economic sectors.

sTRATeGiC ObjeCTive 1.1Enhance the sustainability of entrepreneurs in priority sectors of the economy.

GOAl 2: Efficient use of resources to attain financial sustainability.

sTRATeGiC ObjeCTive 2.1Optimise return on investments.

sTRATeGiC ObjeCTive 2.2:Efficient use of resources of systems.

Core Business AreasTo be a development finance corporation for the stimulation of economic growth in the Eastern Cape, ECDC renders a variety of services related to the following operational areas:

• Development Finance and Business Support • Trade, Investment and Innovation• Properties• Strategic Projects• Support Services

PRoFILecompany


sub-committees•Governance&NominationCommittee,Chairperson

sub-committees•Funding&InvestmentCommittee,Chairperson•Governance&NominationsCommittee•Social&EthicsCommittee

sub-committees•HumanResources&Remuneration Committee, Chairperson•Audit,Risk&ComplianceCommittee•Social&EthicsCommittee

NHlANGANisODLADLACHAIRPERSON OFTHE BOARD

AppointedOctober 2014

lOyisOJiyADEPUTYCHAIRPERSONOF THE BOARD

AppointedOctober 2011

RetiredOctober 2017

NDzONDELELODLuLANECHIEF EXECUTIVEOFFICER

AppointedJanuary 2015

NANDisiWAHlA-MADiBACD (SA)AppointedSeptember 2014

DIRectoRsboard of

The Board continues to be the driving force behind ECDC.


sub-committees•Social&EthicsCommittee,Chairperson•HumanResources&Remuneration•Governance&NominationsCommittee

sub-committees•Social&EthicsCommittee,Chairperson•Funding&InvestmentCommittee•HumanResources&RemunerationCommittee

sub-committees•Funding&InvestmentCommittee,Chairperson•HumanResources&RemunerationCommittee

sub-committees•Audit,Risk&ComplianceCommittee•Social&EthicsCommittee

sub-committees•Audit,Risk&ComplianceCommittee•Funding&InvestmentCommittee

Board Member

MzuvukilEMAqEtukAAppointedNovember 2012

RetiredOctober 2017

siMpHiWETHOBElAAppointedOctober 2014

MAlusiDAMANEAppointedOctober 2014

PAMELABOSMANAppointedOctober 2014

ADVOCAtEMATHOBElAsisHuBAAppointedOctober 2014

BulElWANqADOLOAppointedNovember 2009

RetiredOctober 2017

02constRUctIon

SMME DEVELOPMENT FINANCING SUPPORT

Delevex 302 CC is a construction business owned by Koliswa Angel Skenjana and Lungile Skenjana. The business is registered as 7GB PE, 6CE PE, 6SQ PE by the Construction Industry Development Board.

Delevex 302 CC has been awarded a contract by Coega Development Corporation for the construction of Gabazi Junior School in Qumbu in the OR Tambo District Municipality. The project is valued at R42 932 106.36 and has a construction period of 10 months. The applicant has been granted a bridging finance facility of R8 586 421.27 by ECDC. The site was handed over on 18 January 2018 and the completion date is 18 October 2018.

There are 17 permanent and 40 temporary jobs that have been created by this project. Local labour is used for the project. There are also two interns who have been brought on board by the contractor. One is being paid by the Coega Development Corporation (specified for the project) and the other by the contractor.

Delevex 302 CC first became ECDC’s client in 2005 and has received ECDC bridging finance facilities on other projects ranging from R274 000 to R3.3 million. All previous facilities were serviced well and paid in full.

Develex constRUctIon

Chairperson’s Foreword

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Nhlanganiso dladlaCHAIRPERSON


The 2017/18 financial year has seen the eCdC continue to consolidate its capabilities and operations, in line with a stabilised trajectory which has resulted from the refocused strategy it embarked on in 2015/16. The entity has seen continued improvements in the manner in which its key divisions conduct their business.

The organisation has also seen positive developments and delivery on a number of important projects co-identified with the Shareholder, the Department of Economic Development, Environmental Affairs and Tourism (DEDEAT), as well as other institutional partners, both in- and outside of government. A number of exciting new initiatives have also been prepared which arecomingonstream.ThisAnnualReportcarriesmoredetailontheseinitiatives,whichareinvariousstagesofdevelopment.

While the Board welcomes the positive developments and improved performance of the organisation, these developments come with the inherent challenge of increased expectations from the public, whom ECDC serve, as well as from the public representatives to whom ECDC account. With regard to public expectations, the entity finds itself often frustrated by the limits of self-generated resources to fund deserving SMMEs and co-operative businesses, with fiscal constraints on the part of government also constraining available budgets to capitalise innovative projects by entrepreneurs. A comparison of the pasttwofinancialyearsrevealsthatwhileECDCmanagedtodisburseR168milliontofund268SMMEsintheEasternCapein2016/17,wecouldmanagenomorethanR98.2millionto163SMMEsin2017/18,despiteincreaseddemandforsupportfrom SMMEs. This level of funding, while not insignificant, should be boosted, especially in light of the commitments of the Provincial Economic Development Strategy and its reprioritised sectors, including agri-industry, sustainable energy, the ocean and maritime economy, the automotive industry, light industry and the tourism sector.

Financial constraints notwithstanding, the ECDC has continued to register impressive results in other support it provides toentrepreneursand investors,asseen inthe278SMMEsprovidedwithnon-financialbusinesssupport,20co-operativessupportedwithfunding,R349.3millionworthofforeignandlocaldirect investmentfacilitatedand81SMMEssupportedtosupplytheirproductsandservicestoforeignmarkets.TheworkoftheECDCresultedin1172jobsand948youthjobsbeingfacilitatedover thereportingperiod.Similarly,987 jobsweresaveddueto the interventionof theECDC-administeredJobsStimulus Fund to support companies in distress.

The ECDC will continue to reach out to institutional partners, including those outside of the Eastern Cape, to leverage additional support where our budgets fall short. The entity will also continue working on a number of creative strategies with the Shareholder to boost its resource capabilities, in order to provide more support to entrepreneurs across the province.

Moving forward, the Board would like to thank our political principals and the Shareholder Department for their continued support. In this regard, the Board is also particularly grateful for a seamless changing of the guard from a supportive erstwhile MEC,Hon.SakhumziSomyo,tothenewMEC,Hon.LubabaloOscarMabuyane,whoisequallycommittedtoensuringthattheECDC consolidates its capabilities to carry out its mandate of facilitating and supporting economic development in the Eastern Cape.WealsowouldliketothanktheDEDEATHeadofDepartment,BonganiGxilishe,andhisteamfortheirco-operationandsupport, as well as the advice, encouragement and due probity of the Portfolio Committee on Economic Development under theleadershipofHon.TonyDuba.Lastbutnotleast,theBoardwishestothanktheCEO,NdzondeleloBuhleDlulane,forhisleadership of the ECDC team, and the greater community of ECDC staff members for their noteworthy achievements in the face of a demanding and challenging operating environment.

FoReWoRDchairperson’s

Nhlanganiso Dladla chairperson of the Board

03MAnUFActURInG

EC JOBS STIMULUS FUND

RV Footwear is a Cut, Make & Trim (CMT) Leather Footwear Manufacturer which produces uppers for The Little Slipper Company, which supplies Woolworths. The Port Elizabeth-based company is owned by two women, Roxane Titus and Vida-Ann Smith. In 2017/18, RV Footwear received R1 160 000 from the EC Jobs Stimulus Fund, which saved 116 jobs.

RV FootWeAR

Chief Executive Officer’s Report

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Ndzondelelo dlulaneCEO


oFFIceR’s RePoRt

chief executive

The review of the 2017/18 financial year presents an apt opportunity for incisive and considered reflection of organisational performance over the last two years. This reflection and appraisal informed eCdC’s strategic positioning going into the review period arming the team with the requisite tools and instruments to effect the desired outcomes. Over the last two years, the Corporation has been concerned with the stabilisation of the entity to ensure that it is capacitated for effective mandate delivery. This stabilisation process also included the mitigation and management of critical risks which affect organisational performance.

In order to effect strategy, the Board impressed on the organisation the need to ensure that appropriate human capital is recruited to drive the strategy at executive management level specifically. I am therefore pleased that this crucial pillar of the strategy was achieved, which allowed for decisive and concerted leadership in the pursuit of ECDC’s organisational goals.

Iamequallydelightedthatsince2015/16ECDChasturnedthetideonitsauditoutcomesbyrecordingunqualifiedauditopinions, following challenges experienced in the preceding two years. In addition, preceding the strategy ECDC had incurred substantial reputational damage evident in the extent of negative media coverage related to the organisation. As a result, ECDC has placed special emphasis on the management of its brand which has seen improvement over the last two years.

I am pleased that the strategic outcomes have been substantially achieved. However, the Board emphasised tomanagement that the testament of ECDC’s strategy should rest on the positive and profitable performance of the core business environment as it entered the consolidation and development phase of its strategy.

To this end, ECDC is proud of the fact that it has maintained the stability of the management of its loan book, driven by an appreciationofloanrepaymentsasasourceoffundingfortheloanbook.Currently,loanrepaymentsareinexcessof80%,which assists ECDC in generating the requisite liquidity for further loan disbursements.

The property business has also recorded continued improvement on rental income on a year-on-year basis, which is one of the major sources of internal revenue generation. ECDC has started to take steps towards the refurbishment of its properties which have not been adequately maintained over time. I am therefore delighted that the Garden Court refurbishment project inMthathawillbecompletedbytheendofNovember2018,withtherefurbishmentofothercommercialpropertiesduetobegin during the next financial year.

Improvements in the industrial parks are continuing into thenewfinancial year. In 2017/18, ECDCbegan to implementsecurityupgrades in theVulindlelaandFort Jackson industrial parks inMthathaandEast London, respectively, andwillcontinuesecurityupgradesof theDimbaza IndustrialParkduring2018/19.ECDCwillalso leadthedevelopmentofnewindustrial park masterplans to assist in the attraction of investment into these industrial hubs.

Furthermore, ECDC is continuing its disposal of non-core assets such as its standalone residential properties. The proceeds from these sales are being used in the improvement of the retained industrial and commercial stock.

The last two years have also resulted in an emphasis on developing and maintaining high-value partnerships with various public-private organisations, aimed at improving the quality and competitiveness of ECDC SMMEs through non-financial support. In an effort to improve trade and foreign direct investment, ECDC has moved to grow intra-African trade. Subsequently, ECDC has concluded several co-operation agreements and business-to-business relations with other entities in sister countries such as Botswana, as a gateway to the SADC regional market and with Tunisia, as an entry point into the North African market.


However, ECDC continues to grapple with a significant capitalisation challenge which prevents the organisation frompursuing long-term, high-impact projects and development financing opportunities. Attempts are underway to address financial challenges as they affect performance. In this regard, shareholder support is required in the form of a fresh capital injection as the Corporation has optimised internal revenue generation efforts. Capitalisation lies at the epicentre of ECDC’s ability to implement its expansion strategy.

Operational PerformanceInformedbythesepracticalrealitiesanditsstrategicpositioning,ECDCtackledthe2017/18financialyearwiththeaimofmaintaining stability and putting in the work needed to support the consolidation and development phase of this strategy. As a starting point, ECDC kept an eye on its audit outcome which is crucial to the continued stabilisation of the organisation, as well as an improvement on internal revenue generation from the core business areas while keeping its operational costs in check. The development and capacitation of SMMEs was also a priority, as was the focus on increased trade with Africa andSouthAfrica’sBRICScounterparts.

While the base of the strategy is the development of long-term loans to strengthen the loan book, ECDC had to take a tactical decisiontodriveshort-termloansin2017/18inordertostabiliserevenue.Long-termloansrequiresignificantcapitalisationand ECDC is currently inadequately equipped to effectively service this sector of the market. Term loans are capital intensive and as such require shareholder capitalisation to achieve. During the period under review, ECDC also took a conscious decision to focus on loan repayments as a source of funding for the loan book. As such, I am pleased to announce that ECDC disbursedatotalofR98.3millionto163enterprises.LoanrepaymentsstoodatR120.8million.

From a loans perspective, ECDC continued to improve its due diligence and loan monitoring capabilities which has resulted inthemaintenanceofarepaymentrateofjustover80%.Theseloandisbursementsfacilitatedthecreationof1070jobsin2017/18.

During the year under review, the Imvaba Co-operative Fund disbursed R7 027 177.20 to 20 co-operatives. These co-operativessupportedatotalof123members,ofwhom70werewomenand27wereyouth.

Furthermore, theEasternCapeJobsStimulusFunddisbursedR9.8millionto11enterpriseswhich ledto987 jobsbeingsaved. These enterprises operate in the agro-processing, manufacturing, engineering and automotive sectors mainly.

ECDC also provides non-financial support which is aimed at improving the quality of the small business sector in the Eastern Cape. These support packages are designed to bolster competitiveness and to allow the entrepreneur to focus on core business.Duringtheperiodunderreview,atotalof278enterprises,including125women-and116youth-ownedbusinesses,were provided with integrated non-financial business support services.

A significant component of ECDC’s development apparatus is trade and investment promotion, as well as support for innovation projects which create jobs and improve economic activity. The development of trade and investor attraction also plays an important role in building a strong and sustainable small business sector.

In2017/18,ECDCfacilitatedthecreationof425jobsthroughitstrade,investmentandinnovationactivities.Ofthisnumber,208wereyouth jobs.Furthermore,135peoplereceivedcriticalsectordevelopmentskillstraining. Inaddition,ECDCalsofacilitatedinvestmentsintotheprovincetothevalueofR349million.In2017/18,ECDCsuccessfullyorganised15investmentand trade missions which were aimed at boosting trade and investment.

Part of ECDC’s activities is to support the burgeoning creative industries by providing a number of platforms aimed at improvingmarketaccessand revenuegeneration forenterprises in thissector. In2017/18,ECDCparticipated inninecreativeindustrytradeplatformsinwhich110SMMEsparticipated,resultinginR762799worthofsalesbeinggeneratedfrom these events.

DIsBURseD to 20 co-oPeRAtIVes tHRoUGH IMVABA co-oPeRAtIVe FUnD

ecDc totALDIsBURseMents

R98.3 million

to 163 enterprises

eAsteRn cAPe JoBs stIMULUs FUnD DIsBURsMents

R9.8 million to 11 enterprises

saving 987 jobs

R7million


NdzondeleloDlulanechief executive officer

ECDC also established a craft shop in Nahoon, East London to help craft enterprises market their products. The shop sells traditional Eastern Cape craft that is produced in the province. The shop has been approached by Tsogo Sun to exhibit products in theHemingways foyerandECDC is currently finalisingdiscussionsonbehalf of the shop.Thecraft shophousesproductsfrom98craftersfromacrosstheEasternCapeandgeneratedsalesworthR406000in2017/18.

During the review period ECDC persisted with the implementation of its property turnaround strategy to improve operational and functional performance. The strategy is premised on the optimisation of the value of the investment portfolio, the capitalisation of the investment portfolio through leveraging from the private sector as well as the positioning of the business to take advantage of growth opportunities. In this regard, ECDC collected R71million in its propertyportfolio due to improved occupancy rates driven by commercial and industrial properties.

In addition, the Corporation has commencedwith the refurbishment of its residential flats portfolio. R10million hasalready been committed to the programme with completion expected in the next four years. Furthermore, remodelling and expansionoftheexistingcommercialandofficeportfolioisduetostartinthe2018/19financialyearwiththeinvolvementof private sector investors primarily focused on the eastern part of the province.

Future OutlookMoving forward ECDC will continue to identify and implement the necessary strategies and actions to ensure that the Corporation is on a sustainable growth trajectory. A close eye will be kept on maintaining stability and consolidation while the organisation prepares for the expansion phase. In this regard, ECDC will continue to lobby the Shareholder for renewed capitalisation to ensure that it delivers a solid socio-economic dividend.

AppreciationFinally, I would like to express sincere gratitude to the Board of Directors of ECDC under the capable and resolute leadership of the chairperson, Nhlanganiso Dladla. The Corporation appreciates their tireless efforts in their oversight and strategic guidance and counsel. I also extend thanks to the Shareholder for its continued support, as well as to the ECDC team which continues to effect mandate delivery despite a challenging economic environment.

The ECDC will continue to identify and implement the necessary strategies and actions to ensure that the Corporation is on a sustainable growth trajectory

04MAnUFActURInG

IMVABA CO-OPERATIVE FUND

Litha Lethu Waste and Recycling Primary Co-operative in Cofimvaba received R433 497 from the Imvaba Co-operative Fund in 2017/18. The six-member co-operative collects and sorts waste such as solid waste, paper, glass and plastic. They bought a metal baler, glass crusher and plastic and paper balers. A total of 30 people are employed.

Litha Lethu WAste

FinancialReview

cAse stUDY


ReVIeWfinancial

The 2017/18 reporting period was a financially challenging year for the eCdC. The financial division was tasked with stabilising the entity’s liquidity position despite a declining fiscal allocation and increasing costs of doing business.

The division was also tasked with turning around the procurement non-compliance of the organisation which had led to irregularexpenditureofR17millioninthe2016/17financialyear.Inthemidstofthesechallenges,thedivisioncontinuesto provide a consistently high level of financial and operational support service to the organisation ensuring the delivery of the core business with the aim of achieving the development goals of the organisation. Furthermore, the office of the chief financial officer continues to focus on ensuring that a delicate balance between financial sustainability and the developmental mandate is achieved. In doing so, the ECDC is in constant interaction with the Shareholder for additional funding to capitalise its operations and to improve the liquidity position for continued support of the SMMEs in the province.

Corporate Sustainability Part of the ECDC financial division’s goals during the period under review was the improvement of organisational processes and systems and to stabilise the financial health of the institution. I am pleased to report that the organisation is on the path to financial stability, despite remaining in need of capital to ensure enduring sustainability. One of the measures of the financial health is the cost-to-income ratio which is near break-even point.

In essence, the improvement of the cost-to-income ratio should ensure financial sustainability; the focus on processes and systems improves efficiencies while sound governance improves the audit outcome and compliance with legal requirements.

There was also a significant focus on improving non-compliance to supply chain policies. I am pleased to report that this improvement has been achieved as indicated by the reduction of irregular expenditure incurred during the reporting period,comparedto2016/17,whichfurtherindicatesECDC’seffortstowardhavingafair,competitiveandcost-effectiveprocurement system.

The corporate finance unit also placed great emphasis on improving governance to ensure that the prior year’s unqualified opinion, as well as compliance with regulations and legal prescripts governing the use of public assets, were maintained. The preservation of an unqualified opinion is earmarked as the base for obtaining a clean audit in the future. An unqualified opinion has been attained in the current financial year.


Financial PositionECDC’sfinancialpositionremainsstronginthatitstotalgroupassetsexceedtotalgroupliabilitiesbyR1.5billion(Company:R1.4billion).Thedriverforthispositivebookvalueismainlyanincreaseinthevalueofinvestmentproperties.TheECDCbalance sheet is not reflective of its developmental goals in that the loan book value compared to investment properties value is disproportionate, considering ECDC’s role as a development financier. The fiscal consolidation programme of National Treasury and the financial distress experienced by national State-Owned Enterprises (SOEs) continue to stifle the ECDC’s attempts to get the necessary approvals for raising funding against the property portfolio. This paralysis hinders the entity’s ability to accelerate the implementation of its developmental mandate to a point where the entity’s ownliquiditypositionisputunderpressure.Forexample,thebalancesheetreflectsinvestmentpropertiesvaluedatR1.3billioncomparedtoonlyR65millionforloansandzerodebtfinancing.

Loans and investments should ideally make up a bigger portion of the balance sheet. Ideally, development financiers’ balance sheet should be weighted heavily towards a combination of an investment earning book and a loan book. ECDC’s state of affairs has necessitated that the entity formally request the Shareholder to resuscitate the conversation of recapitalising the loan book. This would augment the strategy of disposing non-core investment properties in order to improve cash availability for the developmental mandate. The disposal process is ongoing but has been hampered by administrative delays at municipal level with regard to the sub-division.

The cost of packaging development loans has historically been incurred by ECDC with minimal shareholder funding or capitalisation. ECDC therefore generates its own funds for financing SMMEs through repayments from previously financed SMMEs. The cost of packaging developmental finance remains high and further stresses ECDC’s cash position. The increased competition from national development finance institutions (DFIs) to finance SMMEs is starting to affect ECDC’s share of the market in the Eastern Cape. Discussions are ongoing with the shareholder for adequate capitalisation of the ECDC to deal with the huge costs of providing finance to SMMEs. The absence of capitalisation of the business financeoperationsinthepriorperiodshasledtoaportfoliodeclinefromR139millionin2014toR65millionduringtheyear under review. This is untenable considering the need to also finance the operating costs and at the same time reinvest the same funds into the growing number of SMMEs requiring funding.

AsofMarch31,2018,thetotalcashflowpositionofECDCwasR172million.Theliquiditypositionoftheentityisstrainedwithacurrentratio(excludingloanadvances)at0.94.Thisratioisaffectednegativelybythecontinuousincreaseintherentaldebtors’bookdrivenbythenon-paymentofrentalsbytenants.AsofMarch2018,theunpaidrentalbookstoodatR332millionfortheentireportfolioand98%ofthebalanceisimpaired.TheECDChasnointerest-bearingdebtandthe main liabilities are trade payables, deferred income, loans from group companies and a post-retirement medical aid benefit obligation.

INVESTMENTPROPERTY

PROPERTY, PLANT& EQUIPMENT

INVESTMENTS &LOANS INSUBSIDIARIES& ASSOCIATES

INVESTMENTS

LOANSADVANCES

TRADE & OTHER RECEIVABLES

CASH & CASHEQUIVALENTS

FiNANCiAl POsiTiON AsseTs FOR The lAsT 5 yeARs

2018

2017

2016

2015

2014

2018 R1 323 million R26 million R43 million R25 million R65 million R21 million R172 million



2015 R879 million R25 million R45 million R32 million R102 million R20 million R279 million

2014 R744 million R25 million R43 million R32 million R139 million R20 million R470 million


5 yeAR sOuRCes OF iNCOMe

RENTAL INCOME

INTEREST ON LOANS AND FEES

INTEREST ON RENTALS

GOVERNMENT GRANTS

OTHER INCOME

INVESTMENT INCOME

REVALUATION

2018

2017

2016

2015

2014

Financial PerformanceTheCorporation’sbottomlinehasdecreasedbyR38millionfromR51million in2017toR89millionduringthereviewperiod.ThisincreaseinprofitisdrivenprimarilybyagaininthevalueofinvestmentpropertiesofR142million,relativeto thepreviousfinancialyeargainofR111million.Theoperating lossbefore fairvaluegainsand investment revenueimprovedslightlybyR5millionfromR66millionin2017toR63millionin2018inthecontextofincreasingcostoflivingadjustment and slow growth in income earned.

IncomeTotalincome,excludingfairvaluegainsandinvestmentrevenue,hasdecreasedbyR6million(2%)fromR321millioninthepreviousyeartoR315millionintheperiodunderreview.Themostnoticeablevariancesinthesourcesofincomeisthe25%decreaseinotherincomewhichmainlycomprisesprojectmanagementfeeincome,coupledwitha32%decreaseininterestearnedonloans.Thiswas,however,mitigatedbya6%growthingovernmentsubsidy,a5%growthinrentalincomeanda9%growthinrentalinterest.ThedecreaseinotherincomeisduetoaR14milliondecreaseininfrastructureprojectmanagementfees,fromR56millionin2016/17toR42millionin2017/18.

2018 R78.4 million R15,7 million R29,4 million R150,1 million R42 million R10 million R141 million

2017 R74 million R22,1 million R27,0 million R141,9 million R56 million R11,2 million R111,3 million

2016 R75,2 million R26,2 million R22,5 million R153,5 million R25,3 million R10,9 million R171,8 million



13%

11% CASH & CASH EQUIVALENTS

5% RENTAL INCOME GROWTH


The turnover on average investment property has declined from 9.5% in 2014 to 6.3% in 2018.This ismainly due to the growth in the value of investment property coupled with a sluggish growth in lease rental renewals as a result of the run-down state of the properties, resulting in below-market rentals. The currentyearwasalsocharacterisedbya5%increaseinrentalincomecausedbyanimprovementinthevacancy rate in residential properties. The ECDC continues with the challenge of improving the efficiency of the investment properties portfolio in order to reverse the declining trend of this ratio. For this to happen, the entity requires capital to refurbish the properties. A strategic decision to partner with private sector investors through development leases is being implemented by the Properties Business Unit.

With regard to business finance provided to SMMEs by the ECDC, the lack of capitalisation to fund a sustainable portfolio with annuityrevenueshasseentheportfoliodeclinefromR139millionin2012toR65millionin2018.TheECDCbusinessfinanceoperations have improved as evidenced by the significant improvement in the impairment during the current financial year. Theimpairmentoftheportfoliointhecurrentyearamountedto14%oftheaveragevalueoftheportfolio(afterimpairment)and5%oftheaveragegrossvalueoftheportfolio.Thelastquarterofthefinancialyearsawacurtailmentofdisbursementsto term loans which negatively affected the portfolio balance.

ExpenditureAlthough operational expenditure is down by 3% compared to the previous financial year, efforts to further reduce thisexpenditureareongoing.ThetotaloperatingexpenditureincurredbyinvestmentpropertiesremainshighatR40million(rates,taxesandwater),withbuildingandsecurityservices,atR12million,makingupthemajorityofthecosts.Afacilitiesmanagementinitiative is in the process of being implemented to manage, reduce and recover property operating costs from tenants.

The ECDC implemented a financial recovery plan during the year under review in an attempt to arrest the entity’s key cost drivers. Cost cutting measures were implemented for the second half of the financial year, which have resulted in the cash position being stabilised.

Subsidiaries and AssociatesAll ECDC subsidiaries’ and associates’ balance sheets reflect a going concern position. Investment Properties were transferred from the two subsidiaries to the ECDC balance sheet during the year under review in preparation for the deregistering of the two subsidiaries.

Only three of the seven subsidiaries the Provincial Treasury instructed the ECDC to deregister have not yet been deregistered. ThethreesubsidiariesareTransidoSOCLtd,WindsorHotelSOCLtdandaSection21companywhichisnotasubsidiaryofECDC (Tourism Infrastructure Development Corporation). Transido SOC Ltd properties have been transferred to ECDC and theentitywasawaitingderegistrationatthetimeofthisreport.WindsorHotelSOCLtdisintheprocessoftransferringitsproperties to ECDC before deregistration is lodged.

TheECDCtransferredownershipofMagwaTeaEnterprisestotheDepartmentofRuralDevelopmentandAgrarianReformduring the current financial year.

Sivuyile BulubeActing chief Financial officer

05MAnUFActURInG

IMVABA CO-OPERATIVE FUND

Nyangambini Trading and Enterprise based in Mthatha received a R500 000 incentive to buy an embroidery machine and an industrial sewing machine. They make bedding for B&Bs and traditional wear. They have a total of five members.

Nyangambini tRADInG

OperationalReview

cAse stUDY


FInAncInGDuring the period under review, ECDC focused its energies on the provision of financial and non-financial support packages to the small business sector in direct response to provincial and national government priorities. The Eastern Cape economy is dominated largely by the spending patterns of government, resulting in business demand for financial and non-financial services from a developmental aspect being a response to the needs of government.

In addition, ECDC’s financial and non-financial support instruments are driven by a need to inject enthusiasm and vibrancy into the small business sector to stimulate economic growth and development, facilitate sustainable job creation and enable the participation of youth and women in the mainstream economy. The entity’s support instruments are therefore not only developmental but also transformative in approach and character.

While ECDC’s activities are informed by provincial and national government priorities, the Corporation is continuously seeking to strike a delicate balance between these priorities and the practical development demands of the Eastern Cape economy. For example, while the Eastern Cape strategic outlook, as outlined in the Provincial Economic Development Strategy, is geared toward prioritising key sectors such as agri-industry, sustainable energy, the ocean economy, automotive, light manufacturing and tourism, there is a significant demand for SMME financial and non-financial support in sectors such as construction, retail and services linked to government spending.

As such, while our collective energy is geared to respond to these priorities, there is an urgent need to ensure that our support apparatus is also relevant to current realities. This means while we ratchet up our support for priority sectors, ECDC must ensure that it undertakes a broad-based and eclectic approach which supports other sectors of the economy.

ECDC is already an active and willing participant in a plethora of public-private sector forums aimed at increasing its support of the small business sector in areas such as the ocean economy and sustainable energy. As such, the Corporation is identifying and investigating high-impact, long-term loans it can support in these sectors. The development of anchor enterprises in these priority sectors in the Eastern Cape should spur the growth of small businesses in the value chain which are ripe for ECDC support. For sustainability purposes, ECDC is still resolute in targeting support toward long-term loans for high-revenue injections and annuity. The strategy is to continue on this path, mindful of the fact that its fruits will onlyberealisedinthemediumtolongterm.However,long-termloansrequirefurthercapitalisationfromtheShareholderas these loans are capital intensive.

ECDC loan disbursements in 2017/18 reflect this reality. During the review period, the CorporationdisbursedatotalofR98.3millionto163enterprises.ConstructionloansaccountedforthebulkoftheloandisbursementsatR43.7millionor44%.Thebiasoftheseloandisbursementstowardtheconstructionsectoris informed by demand and the significant infrastructural backlogs which government is addressing through constructionandrelatedactivities.Thisfacilitatedthecreationof572jobsand498youthjobs.

ThiswasfollowedbysupporttotheservicessectorwhichaccountedforR34millionor35%oftheloandisbursements.Amajor component of the disbursements in this segment went to businesses which secured supply and delivery contracts with government. This support bridges the gap for SMMEs who do not possess adequate cash flow and a personal balance sheet to service their supply contracts. It is an important relief mechanism which is inclusive and designed to ensure that emerging entrepreneurs are not locked out of business opportunities due to a lack of capital.

Themanufacturing sector accounted for R14.5million or 15% of the disbursements, while R2.4million or 3%went toagriculture,R2.9millionor3%toretailandR486 000or1%tothehospitalitysector.

smmE development


loan disbursements per sector

In terms of geographic spread, the majority of disbursements went to the Nelson Mandela Bay Metropolitan Municipality (R27.5million),followedbyORTamboDistrict(R20.5million),BuffaloCityMetropolitanMunicipality(R15.4million),AlfredNzoDistrict(R13.2million),AmatholeDistrict(R9million),ChrisHaniDistrict(R6.1million),SarahBaartmanDistrict(R4million)andR2.2milliontoJoeGqabiDistrict.

Geographic spread of disbursements

Districts Loans Disbursed No. of SMMES supported % spreadAlfredNzo R13282791 10 6%Amathole R9082644 17 10%ChrisHani R6106176 69 42%JoeGqabi R2261505 5 3%Nelson Mandela Bay R27539984 17 10%ORTambo R20519364 4 2%Sarah Baartman R4025865 13 8%Buffalo City R15449966 28 17%TOTAl R98 268 293 163

Intermsofloandisbursementsperloanproduct,atotalofR49millionwenttoWorkflowloans,R24.7milliontoNexusloans,R22.5milliontoTermCaploansandR1.6milliontoPowerPlusloans.

loan disbursements per loan product

Products Rand value disbursed in 2017/18FY 2017/18 SMMEs

Nexus R24763260 133

PowerPlus R1681396 6

TermCap R22563024 12

Workflow R49260613 12

TOTAl R98 268 293 163

AGRiCulTuRe3%2480200

MANuFACTuRiNG15%14579875

CONsTRuCTiON44%43715252

ReTAil3%2985263

hOsPiTAliTy1%486368

seRviCes 9% 8419008

seRviCes (suPPly)26% 25602328 ecDc totAL LoAn

DIsBURseMents

R98.3 million

to 163 enterprises

youth-owned sMMes funded by eCdC

ALFRED NZOAMATHOLEBCMCHRIS HANIJOE GQABINMBOR TAMBO

• OftheR98.3milliondisbursedin2017/18,72%ofyouth-ownedSMMEsreceiveddevelopmentfundingworthR36million.

• Randvaluedisbursedtoyouth-ownedSMMEsisR36m(ofR98mtotal,whichis37%).

45%

8%

11%13%

8%

4%

11%


DevelopmentimpactoftheprovisionofsMMEdevelopmentfinance

A core outcome of the work ECDC does lies in the contribution it makes to facilitating job creation. This impacts the livelihoods of many Eastern Cape families and contributes to making South Africa a better place in which to work and live. ECDC’s impact in this regard has resulted in 572 jobs and 498 youth jobs being facilitated over the 2017/18 financial year through the provision of SMME development finance.

The jobs created per product is as follows:

Loan Product Jobs Youth Jobs

Nexus 247 181

Workflow 251 261

Termcap 58 40

Powerplus 16 16

Total 572 498

imvabaCo-operativeFundGovernment has placed strong emphasis on the development of a sustainable co-operative sector in the Eastern Cape. As a result, ECDC has been tasked by government to administer its Imvaba Co-operative Fund which provides grant funding to deserving co-operative enterprises in the Eastern Cape. While these enterprises largely operate in the agri-industry, others ply their trade in the manufacturing, retail and services sectors.

During the year under review, the Imvaba Co-operative Fund approved R7 027 177.20 to 20 co-operatives. These co-operativessupportedatotalof123members,ofwhom70werewomenand27wereyouth.

The Unit does the following when assessing a co-operative:a Atinquirystageapre-assessmentisdonebyinterviewingthemember/softheco-operativeaboutthefeasibilityoftheir

businessidea,theircommitmenttothebusiness,thecostofproduction,thesizeofthemarketandabouttheroleofgovernment in the priority sectors and their growth.

b The potential applicant is issued with the prescribed application form and the list of requirements in compliance with the rules of the fund.

c Upon receiving the fully completed application form with the required documentation, a due diligence and site visit is conducted. Internal credit checks are also done i.e. whether the co-operative or members have any other obligations to ECDC.

d The documents are analysed and a submission is made to the Imvaba Fund Approval Committee for consideration. Once all the governance issues are cleared funding is released based on the business and its maturity to accept funding.

Sector Business activityNo of members

Number of women members

Number of youth members

Local municipality

District municipality

1 Services/Tourism Accommodation and catering 6 6 1 Ntabankulu AlfredNzo

2 Manufacturing Bakery 12 8 0 Ntabankulu AlfredNzo

3 Manufacturing Furniture manufacturing 5 2 0 Buffalo City Buffalo City

4 Services Hiringoutfacilities 5 1 3 Buffalo City Buffalo City

5 Manufacturing Glass design and trophy manufacturing

5 5 0 Mnquma Amathole

6 Manufacturing Furniture manufacturing 5 3 0 Walter Sisulu JoeGqabi

7 Agriculture Maizeandvegetableproduction 5 5 0 Intsika Yethu ChrisHani

8 Manufacturing Textile and clothing manufacturing 5 4 0 Walter Sisulu JoeGqabi

9 Manufacturing Sewing 5 3 3 KSD ORTambo

10 Manufacturing Sewing 5 4 4 Ntabankulu AlfredNzo

11 Retail Tyre repair and retail services 5 3 0 Nelson Mandela Bay

Nelson Mandela Bay

12 Recycling Collecting and sorting solid waste 6 4 0 Intsika Yethu ChrisHani

Bakery Baking/Flourproducts 5 4 4 Amahlathi Amathole

14 Agriculture Tomato and vegetable production 10 3 2 BCM Buffalo City

15 Agriculture Vegetable production 5 2 0 BCM Buffalo City

16 Agriculture Crop and vegetable production 5 2 3 Elundini JoeGqabi

17 Agriculture Crop and vegetable production 5 3 3 Ntabankulu AlfredNzo

18 Agriculture Crop and vegetable production 6 2 4 Ngcobo ChrisHani

19 Agriculture Crop and vegetable production 5 2 0 Mnquma Amathole

20 Manufacturing Clothing production 5 4 0 Amahlathi Amathole


20 Co-operatives supported

R7.27 million disbursed

Geographic spread of disbursed co-operative grants

Alfred Nzo 5

ORTambo

1Amathole 4Buffalo City

4Nelson mandela1

sarah Baartman

Chris Hani 4

Joe Gqabi 3

Number of Co-Ops approved

2017/18FYDistrictMunicipality Spread

JoBsFAcILItAteD123

TheECJobsstimulusFundECDCcontinuesitssupportforcompaniesindistressthroughtheEasternCapeJobsStimulusFund,whichitadministersonbehalf of government. The fund is an important instrument for saving and creating jobs.

During the review period the entity disbursed R9.8 million to 11 enterprises in the agro-processing, manufacturing,engineeringandautomotivesectors,whichledto987jobsbeingsaved.

ECJOBSSTIMULUS

FuNDsUPPoRt FoR coMPAnIes In DIstRess

11 smmEs supported

R9.8 million disbursedJoBssAVeD987

Accumulated jobs facilitated (2017/18 Fy)

Sectors Location No. Enterprises Jobs Saved Funds GrantedManufacturing (Bricks) BCMM 1 68 R680 000

Manufacturing(Clothing&Textile) 4 587NMBM R1160000KWT R1270000KWT R3240000BCMM R200000

R5 870 000

Agro-processing(Maizemeal) ORTambo 1 45 R450 000

Automotive BCMM 1 10 R100 000

Engineering (Aircon repairs) BCMM 1 60 R600 000

Manufacturing (Fibreglass) BCMM 1 11 R110 000

Manufacturing (Forestry) 2 206

Stutterheim R1360000NMBM R700000

R2 060 000

Total disbursed 11 987 R9 870 000


The ECDC’s support instruments are therefore not developmental but also transformative in approach and character.

seRVIcesIMVABA CO-OPERATIVE FUND

East London-based NSJ Multipurpose Co-operative received a R464 000 incentive in 2017/18. They rent out event equip-ment to funeral undertakers and events managers. The co-operative has five members and at any given time they employ 10 to 12 people. The incentive was used to buy a stretch tent, mobile freezer, trailer, lawnmower, pegs and poles.

NsJ MULtIPURPose

cAse stUDY


ECDC’s SMME interventions are underpinned by an integrated support ethos which seeks to improve the preparedness and quality of enterprises in the Eastern Cape to compete on a global scale. While financial support tools are a central cog in the Corporation’s SMME support infrastructure, ECDC is acutely aware that this should be complemented by a qualitative array of apparatus which ensures the overall sustainability and viability of Eastern Cape enterprises.

As such, ECDC extends non-financial support in the form of business development services and incubation. These business development services range from pre-investment to post-investment support. Pre-investment support services include feasibility studies, due diligence and business plans. Post-investment support typically includes financial management training and mentorship, marketing support, quality management support as well as productivity improvement support.

In addition, ECDC also provides incubation support to SMMEs through supporting business incubators. Business incubation forms part of the enterprise development ecosystem, providing targeted business support services to early-stage SMMEs. Incubation programmes are critical in reducing business failure as they provide conducive environments through subsidising establishment costs for businesses. Furthermore, they target the root cause of early-stage business failure which includes lack of or poor business strategy, business experience and limited financial resources. The system minimises the failure of small businesses by cushioning them and making it easier and cheaper to do business as they enter the mainstream economy. For example, offices are provided to incubated businesses at cheaper rates as well as office infrastructure. Incubators also play a central role in facilitating access to markets for incubated businesses.

Duringthereviewperiod278enterprises, including125women-ownedand116youth-ownedbusinesseswereprovidedwith business development services.

Gender distribution Age distribution

These services were in the form of accreditation support, business mentorship, business plans, business valuation, feasibility studies, financial statements, human resource management support, intellectual property (patenting registration) and marketing, as well as training.

sUPPoRtsmmE non-financial

FEMALESMALES

ADULTSYOUTH

125 Women-owned

116 Youth-owned

enterprises provided with business development services

Non-financial support to youth-owned sMMes (2017/18)

ALFRED NZOBCMCHRIS HANINMBOR TAMBOSARAH BAARTMAN

116youth-ownedSMMEs(of278SMMEssupported,whichis42%).

39%

10%

33%

55%58%

45%42%

12%

3% 3%


Types of intervention

Geographic spread of non-financial support

In terms of geographic spread, 105 of the enterprises who benefitted from non-financial support are from the Buffalo City MetropolitanMunicipality,while72arefromNelsonMandelaBayMetropolitanMunicipality,32fromORTambo,32fromChrisHani,15fromSarahBaartman,sixfromJoeGqabiandfourfromAlfredNzo.

sector spread of interventions

In terms of sector spread, enterprises were supported in the following industries: accommodation, agriculture, agro-processing, automotive, construction, creative industries, education and training, food and beverages, hospitality, information and communication technology, manufacturing, mining, real estate, retail, services, tourism and transport.

ACCOMODATIONAGRICULTUREAGRO-PROCESSINGAUTOMOTIVECONSTRUCTIONCREATIVE INDUSTRIESEDUCATION & TRAININGFOOD & BEVERAGEHOSPITALITYINFORMATION COMMUNICATION TECHNOLOGYMANUFACTURINGMININGREAL ESTATERETAILSERVICESTOURISMTRANSPORT

ALFRED NZO DISTRICT MUNICIPALITYAMATHOLE DISTRICT MUNICIPALITYBUFFALO CITY METRO MUNICIPALITYCHRIS HANI DISTRICT MUNICIPALITYJOE GQABI DISTRICT MUNICIPALITYNELSON MANDELA BAY METRO MUNICIPALITYOR TAMBO DISTRICT MUNICIPALITYSARAH BAARTMAN DISTRICT MINICIPALITY

ACCREDITATION SUPPORTBUSINESS MENTORSHIPBUSINESS PLANBUSINESS VALUATIONFEASABILITY STUDYFINANCIAL STATEMENTSHUMAN RESOURCES MANAGEMENT SUPPORTINTELLECTUAL PROPERTY PATENTING REGISTRATIONMARKETING SUPPORTTRAINING AND BUSINESS MENTORSHIP

1%

1%

12%

21%

56%

7%

1%1%1%1%

2%1%2%1%3%

3%

1%

38%

12%

26%

48%

5%

4%

4%

6%

19%

7%

12%

5%4%


trainingAtotalof721peoplefrom445enterprisesreceivedtraininginvariousbusinessmanagementskills.Thetrainingprovidedincluded financial management, tendering, occupational health and safety, co-operative governance and customer care. Ofthe721individualstrained 389(54%)werewomenand216(30%)wereyouth.

GeOGRAPhiC sPReAd

Business SeminarsThirteen business seminars with different themes were held throughout the province, including an entrepreneurial series hosted in partnership with the Businesswomen’s Association and Nelson Mandela Bay Chamber of Business. Seminars tackledvarioustopicsrelatedtoaddressingbusinessneeds,withcloseto600individualsfrom356businesses,including363womenand236youthattending.

incubationsupportDuringthereviewperiod,ECDCprovidedR7.2millioninfinancialsupporttofourincubators:theEasternCapeInformationTechnology Initiative (ECITI), SEDA Construction Incubator, Buffalo City Aftermarket Automotive Incubator and the Furniture Technology Incubator.

ORTambo128

Buffalo City90

Nelson mandela101

sarah Baartman27

Chris Hani 96

Joe Gqabi 3

NuMbeR OF sMMes suPPORTed by disTRiCT MuNiCiPAliTy

totAL nUMBeR sUPPoRteD

445 smmEs

TOTAl

WOMAN

yOuTh

disAbled

721

389

216

2


A significant pillar of ECDC’s development mandate is the facilitation of meaningful investment and trade activities which are a central cog in a buoyant and energised provincial economy. The attraction of long-term and catalytic investments into the Eastern Cape is also crucial for the development of the province’s small business sector. As such, the Corporation is preoccupied with investment and trade promotion activities which position the province as a compelling and competitive business destination.

In broad terms, the Corporation’s activities are aimed at facilitating foreign and domestic direct investment into the Eastern Cape, promoting trade and increasing the value and number of exports from the province, stimulating growth in targeted sectors, promoting and financing sector-focussed innovation and positioning ECDC as an implementing agent for government’s economic development projects. Once an investment has been bedded down, ECDC provides aftercare support to investors. In 2017/18 ECDC facilitated the creation of 425 jobs through its trade, investment and innovationactivities.Ofthese,208wereyouthjobs.Furthermore,135peoplereceivedcriticalsectordevelopmentskillstraining.

ECDCperformsthis function inpartnershipwithstakeholderssuchastheCapeTown&WesternCapeTourism,Trade&InvestmentPromotionAgency(WESGRO),TradeandInvestmentKwaZulu-Natal(TIKZN),OfficeofthePremier,CoegaIDZ,EastLondonIDZ,theDepartmentofTradeandIndustry,municipalitiesandotherstate-ownedenterprises.

investorAttractionyouth jobs facilitated:

Sector Name of project Type of support Jobs facilitated Youth

1 Agro-processing Xashimba Abattoir Facilitation 17 17

2 Aquaculture DRDARBlueKarooCatch Facilitation 17 79

3 Mining Usiba Quarries Facilitation 8 13

4 Creative industries EC Craft Shop Facilitation 24 4

5 Creative industries Decorex Market access 2 3

6 Creative industries Grahamstown National Arts Festival Market access 14 21

7 Creative industries SARCDAChristmas Market access 2 2

8 Tourism Tina’s Bargain Centre Aftercare 75 10

9 Manufacturing Ikusasa Green Facilitation 17 8

10 Manufacturing BCM Automotive Incubator Facilitation 34 17

11 Creative industries JoburgArtFair Market access 0 3

12 Tourism Mini Flag Project Facilitation 7 10

13 Tourism TiffindellSkiResort Aftercare 105 0

14 Ocean economy Aegean Bunkering Marine Services Facilitation 10 0

15 Renewableenergy Innowind Aftercare 40 0

16 Aquaculture Wild Coast Abalone Aftercare 45 15

The ECDC performs its investment facilitation function mindful of the overall national political and economic climate which has a direct impact on investment decisions. During the review period, South Africa experienced major political uncertainty which resulted in a number of investment downgrades from rating agencies. This had an adverse effect on investor attraction activities.

However,ECDCcontinued its inspiredpursuitof its investmentpromotionobjectives.During the reportingperiod theentityfacilitatedinvestmentsintotheprovincetothevalueofR349millionandsuccessfullyorganised15investmentandtrade missions.

Asaresult,ECDCsecuredR14millionfromdtioverthreeyearstoestablishaOne-Stop-Shop(InvestorCentre)intheEasternCapeaspartofnationalgovernment’sInvestmentPromotionStrategy.ECDCalsosecuredanadditionalR50millionfromdtitoimplementthefirstphaseoftherevitalisationoftheDimbazaIndustrialPark.Thisshouldmarkthestartofthelong-awaitedimplementationoftheDimbazaEco-Industrialisationproject.

& InnoVAtIontrade, investment


In addition, the Magwa Enterprise Tea Pty Ltd. shareholding has been finally transferred to the Department of RuralDevelopmentandAgrarianReform.ECDCwillcontinuetosupportinvestorattractionfortheMagwaandMajolateaestates.

Duringtheperiodunderreview,ECDCarrangedfortheDepartmentofInternationalRelationsandCooperation(DIRCO)toprovide training in International Diplomacy to ECDC staff and other public officials in the Eastern Cape. The training took placeatECDC’sofficeson20March2018.

ECDCalsoparticipatedinaninvestorconferenceforMadagascarinPretoriaon14and15June2017.Theobjectiveoftheconference was to present the Eastern Cape as a destination for trade and investment. The delegation from Madagascar consisted of the President of Madagascar, five of his Ministers and a business delegation.

TheCorporationalsosuccessfullyhosted14businessmenfromTunisia,accompaniedbyboththeSouthAfricanandTunisianambassadors.Twobusiness linkages for distribution of virgin olive oil and yellowmaize have already been establishedbetween the Eastern Cape and Tunisia. A follow-up outward mission to Tunisia is under discussion.

TheAutomotiveIndustryDevelopmentCentre(AIDC)BoardwasstrengthenedandthemembersoftheAuditandRiskCommittee were appointed. The AIDC continues to provide support to the automotive sector on behalf of the ECDC as a shareholder.

investment missions undertaken:

Sector Country Type of mission

1 Agro-processing/Renewableenergy Switzerland Investment promotion

2 Property investment Germany Investment promotion

3 Multi-sectoral Spain&Portugal Investment promotion

4 Maritime/Oceanseconomy Greece Investment promotion

5 Maritime/Tourism Sweden/Norway Investment promotion

6 Multi-sectorial Nigeria/Senegal Investment/tradepromotion

trade PromotionSector Number of exporters supported Primary support provided

1 Multi-sectoral 80 Integrated export

2 Multi-sectoral 135 Critical skills training

3 Creative industries 110 Market access

Trade promotion activities are designed to provide market access to exporters, training to aspiring exporters and training support for the promotion of exports. A range of partnerships are in place to ensure that these activitiestakeplace.In2017/18ECDCprovidedintegratedexportsupportto81businesses.

For example, during this period ECDC successfully conducted a three-day course in Export Awareness Training in Mthatha and Komani in which representatives from 75 SMMEs were trained.

Two ExportAwareness seminarswere held in Port Elizabeth and East London on 27 and 28 July 2017, respectively, inpartnership with dti. The seminars were aimed at disseminating export information, informing companies on the processes to follow when registering as an exporter and sharing information on the available dti incentives for exporters.

ECDC also signed two Memorandums of Association with the Nelson Mandela and Buffalo City Metros to manage two export help desks which are already in operation.

During the review period, ECDC andWESGRO signed a cooperation agreement to strengthen the existing relationship.Through this relationship both parties are able to join each other’s missions, share information and jointly lobby dti on issues of common interest in order to enhance support for the small business sector.

A “Facilitating Exports to Africa” seminar was held on 5 December 2017, in partnership with dti, to introduce the African market as a destination for Eastern Cape exports.

Finally, in its endeavour to open trade links with different regions, ECDC has established trade linkages with North Africa (anchoringwithTunisia),EastAfrica(anchoringwithTanzania),WestAfrica(anchoringwithSenegal),SADC(anchoringwithBotswana) and the Middle East (anchoring with Kuwait).


Trade missions undertaken:

Sector Country Type of mission Number of SMMEs supported1 Multi-sectoral Nigeria Outward trade 5

2 Agribusiness Namibia Outward trade 3

3 Multi-sectoral Kenya&Tanzania Outward trade 10

4 Multi-sectoral Tunisia Inward trade None

5 Multi-sectoral Botswana Intra-Africa trade None

6 Agro-processing Kuwait Trade exploration None

7 ICT/Film/BPS United Kingdom Outward trade 12

RiskCapital,FundManagementandinnovationSector Name of project Type of support

1 Aquaculture Karoo Catch Operational support

2 Manufacturing Butterworth Factory: Filter Bags Filter bag prototype development

3 Agri-industry AngoraRabbits Pilotphasefunding&productdevelopment

4 ICT HlanganisaITSolutions TIA Innovation Fund

5 ICT AGRESAfricaEnergySolutions TIA Innovation Fund

6 Agri-industry Uitenhage Small Farmers Trust Project feasibility of a low-chilling apple plantation

7 Agri-industry AgriSolutions Project feasibility of a wine distillery

8 Agri-industry Mthatha Meat Market Businessplanning&supplycontracting

9 Mining Mount Coke Quarry Trafficimpactassessment&marketanalysis

10 Waste management HazardousWaste Feasibility study

To streamline its offering, ECDC consolidated its innovation and risk capital activities into a fund management and innovation programme. The programme’s main purpose is to find projects budgeted for by government, to implement those on behalf of others and levy management fees for ECDC. During the review period, ECDC finalised 10 development projects through its risk capital facility.

Already, ECDC has signed an SLA with the Shareholder, the Department of Economic Development, Environmental Affairs andTourism(DEDEAT),toimplementaR30millionrenewableenergyprojectfundedbytheEuropeanUnion(EU)toberolledoutin25schoolsintheChrisHaniandAmatholedistricts.

In2017/18ECDCfinalisedandsubmittedacloseoutreporttotheTechnologyInnovationAgency(TIA)afterhavingsuccessfullyimplemented the TIA Innovation Fund project. ECDC has already proposed Phase 2 of the project.

ECDC’s strategy going forward is to support projects that are directly related to the Provincial Economic Development Strategy (PEDS).

ECDC will be more focused, seek partnerships for funding and be more targeted in its selection of anchor projects that promote the targeted economic sectors.

CreativeindustriesCreative industries have the potential to contribute significantly to the economy by boosting gross domestic product (GDP), alleviating poverty, reducing inequality and reducing the high unemployment rate challenging South Africa and the Eastern Cape. It can also improve social cohesion and inclusion for SMMEs in both the rural and urban areas. ECDC intervenes in this sector in a very significant manner. It arranges a number of national and provincial trade platforms to provide access to markets for SMMEs in the industry, most of which are located in rural areas.

In 2017/18, ECDC participated in nine creative industry trade platforms aimed at improving the competitiveness of craftentrepreneurs.Atotalof110SMMEswereassistedtoparticipateintheseevents,wheretheygeneratedsalesworthR762799.

ECDCenjoysapartnershipwiththeDepartmentofSmallBusinessDevelopment(DSBD),worthR2.5millionperyear,tosupport the industry through market access, training and workshops to improve their products. ECDC also manages a fully-functional craft shop in Nahoon, East London which sells traditional Eastern Cape crafts produced in the province. Theshophousesproductsfrom98craftersfromacrosstheEasternCapeandgeneratedsalesworthR406 000in2017/18.Additionally, ithasbeenapproachedbyTsogoSun toexhibit someof itsproducts in theHemingways foyer.ECDC iscurrently finalising discussions in this regard on behalf of the shop.


& stRAteGIc PRoJects

property portfolio

ECDC’s property business unit assumes responsibility for the management and development of the Corporation’s substantial industrial, retail, light industrial, residential and SMME portfolio. As one of the owners of the largest property portfolio in the Eastern Cape, ECDC uses these assets to drive economic growth by using its properties as a platform and channel for trade and investment opportunities. The property portfolio is essentially an enabler and it plays a pivotal support role for the ECDC’s core business. As such, new investments facilitated by the Corporation’s trade, investment and innovation functions are often accommodated at one of ECDC’s industrial and commercial properties. This makes the property business unit an ideal trade and investment partner as it is able to provide an eclectic offering to both the investor and the SMME community.

While ECDC properties play a significant role in investor attraction activities, improved occupancy rates enable the Corporation to generate further revenue to support its core business activities. As such, the property business offers integrated property management services which include asset management, leasehold, project management and facilities management.

Through its leaseholds function, the property business unit generates income from rental and it is responsible for the marketing of the property portfolio, including vacant land. Asset management assumes responsibility for the long-term strategies and financial planning in order to optimise property asset values and to realise return and growth objectives. Facilities management is responsible for day-to-day repairs, planned maintenance, soft services, security and cleaning. Project management and engineering services is responsible for the implementation and delivery of infrastructure projects.

Highlights

Property turnaround Strategy Duringthe2017/18financialyear,theunitcontinuedwiththeconsideredimplementationofitsturnaroundstrategywhichwas designed to assist in improving both operational and functional performance. The strategy is premised on improving the entity’s financial performance, optimising the value of the investment portfolio, capitalising the investment portfolio through the private sector as well as positioning the business to take advantage of growth opportunities.

ECDC is pleased to report that, in response to these strategic imperatives, the portfolio has recorded a steady increase in revenue. In addition, the Corporation has begun the refurbishment of its residential portfolio and commercial portfolio.

Furthermore,theremodelingandexpansionoftheexistingcommercialandofficeportfolioisduetostartinthe2018/19financial year with investment from the private sector to the programme especially the retail and office portfolio.

Portfolio Overview The property portfolio consists of industrial, light industrial, retail, commercial, offices and SMME properties with a combined valueofR1.3billionwhichreflectsgrowthofR142millionfromthepreviousyear.

totAL IncoMe IncReAseD to

R81 million

ADDItIonAL PRoPeRtY tAken onto ReGIsteR

R42 million

FIRst PHAse secURItY UPGRADes to

FortJackson& Vulindela

APPRoVAL oF

Dimbaza master plan & security upgrades


Portfolio by sector

ThetotalmarketvalueofthepropertyportfoliogrewbyR140milliontoR1.3billionduringtheyearunderreview.Thevacancyrateonlettablepropertywasat20%howevertherewasa6%increaseincollectionsfromleasedpropertiesfromR68millionin2016/17toR72millionin2017/18.Billingsgrewby10%fromR108millionin2016/17toR119millionin2017/18.

It was identified that ECDC’s portfolio requires urgent recapitalisation due to its deteriorated physical state. The strategy has identified high-yielding assets for major remodeling and refurbishment and a programme encompassing residential stock was initiated utilising internal funding. The industrial portfolio also requires major recapitalisation due to an average age of45years.However,ECDCispleasedthatworkhascommencedonsecurityupgradesintheVulindlela,FortJacksonandDimbazaindustrialparks.

keyRisks

In line with both global and national trends the economic outlook for the Eastern Cape follows a subdued trajectory. AccordingtotheEasternCapeProvincialTreasurytheeconomyisexpectedtogrowby1%in2018.Thisiswellbelowatargetof5%whichisrequiredtoachievesignificantjobcreation,asoutlinedintheNationalDevelopmentPlan(NDP)and the Provincial Growth Development Plan. Slow growth signals a steeper trajectory ahead in terms of addressing poverty, unemployment, inequality and other pressing socio-economic challenges facing the Eastern Cape. The prevailing poor economic environment and sluggish growth rate places pressure on the portfolio, creating risks such as increased business failure, leading to high vacancy levels, increased rental defaults, leading to high bad debt levels and increased pressure on rentals, leading to lower yields.

ECDC’s management will continue to monitor these risks and will devise and implement strategies to mitigate them.

ProspectsECDC’s turnaround strategy will continue to be implemented with a key focus on:• Growingrevenueto10%;• Reducingpropertyoperationalexpenditure;• Reducingpropertyvacanciesbyleasinganadditional20hectares;• Aggressively collecting arrears to reduce bad debts; • Improving the value of the portfolio and optimising yields; • Completing the refurbishment projects; and • Obtaining funding for the recapitalisation programme.

Lookingahead,the2018/2019financialyearhasthepotentialtofurtherconsolidatethesoundperformanceachievedtodate, provided economic conditions do not deteriorate further.

COMMERCIAL BUILDINGINDUSTRIALVACANT LANDUNKNOWNRESIDENTIAL

35%

32%

9%18%

6%


RentalCollections2008-2018Rentalcollectionoverthedecadehasshownimprovementandhaskeptupwithinflation.Howevertherentalstockneedsrefurbishment to improve income generation.

Developmentimpactofstrategicinfrastructureprojects

A core outcome of the work of the Strategic Projects Unit in the ECDC involves the provision of social infrastructure to assist in relieving the backlog. The spending on these projects involves not only professionals but also facilitates the creation of jobs before, during and after infrastructure projects are realised. ECDC’s impact in this regard has resulted in 171jobsand231youthjobsbeingfacilitatedoverthe2017/18financialyear.

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

71 752 70

69 949 97

69 549 97

60 949 81

59 519 42

54 258 98

50 043 37

49 475 67

49 103 17

47 931 86

50 074 78

ECDC is pleased that work has commenced on security upgrades in the Vuluindlela, Fort Jackson and Dimbaza industrial parks.


toURIsMPROPERTY PORTFOLIO

In the last quarter of the review period ECDC began a R71 million refurbishment of one of its flagship properties, the Mthatha Garden Court. The upgrades began in November 2017 and are due for completion in December 2018. Built in 1976, the 117-room Tsogo Sun-managed Mthatha Garden Court last received a facelift in 1988.

The upgrades should ensure that the Garden Court competes favourably in attracting new business, retaining the current customer base and in growing revenue, especially with new competition in the area such as the newly-built Mayfair Hotel and the recently upgraded Savoy Hotel. To date the upgrades have created 123 jobs.

The much-needed renovations include the reconfiguration of the 117 bedrooms and bathrooms to maximise space efficiency and to provide modern finishes, upgrades to public areas, including passages, steps, conference facilities, bathrooms and porte cochere (coach doors), as well as the upgrade of external works where necessary. Included in the upgrades are improvements to the restaurant, lounge and bar interiors.

Garden Court MtHAtHA

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06AGRo-PRocessInG

SMME NON-FINANCIAL SUPPORT

In 2017/18, ECDC assisted Pondoland Brands with marketing material such as road signage, building signage, branded flags, brochures and truck branding. The business, which is youth-owned, was established in 2011 and it currently employs 53 people. Its operations began in eMangquzu village in Flagstaff but has since moved to the Flagstaff CBD. Pondoland Brands is an agro-value chain that entails the procurement of raw materials and processing it into finished products such as sifted maize meal (known as umgubo wesintu), crushed yellow maize and whole yellow maize.

Pondoland BRAnDs

Performance Against

PredeterminedObjectives

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PReDeteRMIneDoBJectIVes

performance against

introduction

ECDC is tasked with the economic development of the Eastern Cape as captured in the Eastern Cape Development Corporation Act, 1997 (Act No. 2 of 1997) (ECDC Act) and policy direction of government. In order to deliver on this mandateECDCset itselfpredeterminedobjectives in its2017/18CorporatePlan.Thereafter,aServiceLevelAgreementand Shareholders Compact was prepared upon which funds were transferred to ECDC to deliver the targets envisioned hereunder. Midway through the financial year ECDC experienced adverse environmental and operating challenges which resultedinanapplicationbeinglodgedwiththeShareholdertoreviewsomeofthetargets.However,thiswasnotapproved.

Goal 1: Stimulate Economic Activity

Strategic Objective 1.1: Enhance the sustainability of entrepreneurs in priority sectors of the economy

KPI noKey performance area

Key performance indicator

Annual target

Annual performance

Target vs actual (%) Comment

1.1 SMME development finance support

Randvalueofloansdisbursed

R121million

R98.3million -19% Availability of capital to fund high-value, long-term loans reduced disbursements and consecutively the number of SMMEs funded over the financial year

1.2 SMME development finance support

Number of SMMEs received development finance

300 163 -46%

1.3 SMME non-financial support

Number of SMMEs assisted with non-financial support services

300 278 -7% Availability of budget allocation reduced the numbers of SMMEs supported

1.4 Imvaba co-operatives Number of co-operatives supported with finance

20 20 0% Target achieved

1.5 Incubation programmes

Number of business incubation programmes supported

6 4 -33% Cost of supporting six incubators was underestimated and under-budgeted, reducing support

1.6 Local&foreigndirectinvestments

Randvalueofinvestmentsfacilitated

R570million

R349.4million -39% Economic climate, investment downgrades affecting local and foreign investments and low business confidence contributed to lower investment generation

1.7 Number of development projects facilitated

Number of development projects facilitated

10 10 0% Target achieved

1.8 Integrated export support

NumberofSMMEs/local entrepreneurs provided with integrated export support

65 81 25% Exporters development programme was officially launched adding more exporters

1.9 Critical skills training Number of people trained (sector development and strategic initiative)

100 135 35% There was an over-subscription to training programmes, especially since they are open to all businesses and advertised widely


PReDeteRMIneDoBJectIVes

KPI noKey performance area


Annual target

Annual performance


1.10 Jobsfacilitation Number of jobs facilitated

1840 1172 -36% Lower loan funding disbursed and reduced local and foreign direct investment generation in the province resulted in lower job creation.

1.10.1 Jobsfacilitation Number of youth jobs facilitated

900 948 5% Target achieved.

1.11 Jobssaved Number of jobs saved through the intervention of the jobs fund

1000 987 -1% Applicants to the fund were approved to receive assistance. However,disbursementsaresubject to due diligence which was delayed.

1.12 Socio-economic infrastructure development

Number of socio-economic infrastructure development projects under implementation

4 4 0% Target achieved.

Goal2:Efficientuseofresourcestoattainfinancialsustainability

Strategic Objective 2.1: Optimise return on investments

KPI no.

Key performance area


Annual target

AnnualPerformance


2.1.1 Property disposal Randvalueofproperties disposed

R67million

R8003550 -88% Outstanding sub-divisions, affordability of tenants and dismissal of the disposal agent resulted in lower sales.

2.1.2 Rentalincome Randvalueofrentalincome collected

R110million

R71752704 -35% Collections have improved. However,theconditionofproperties and delinquent tenants contributed to lower collections.

2.1.3 Growth of the unit by securing projects

Value of projects secured

R213million

R250734420 18% Projections for infrastructure projects were made based oncommitments.However,additional allocations and projects were added.

Strategic Objective 2.2: Efficient use of resources and systems

KPI no.

Key performance area


Annual target

AnnualPerformance


2.2.1 Cost optimisation Cost-to-income ratio (excluding impairment)

1:1 1:1.07 -7% Revenueactualswerebelowtarget resulting in lower income than expenditure.

07toURIsM

SMME NON-FINANCIAL SUPPORT

Limakatso is a boutique B&B, conferencing and entertainment centre situated in Dukatolhe Location in Aliwal North. It is owned and managed by a young black woman, Mamello Likobo. The business operates in the tourism sector and employs over 25 local people. Limakatso was assisted by ECDC through the Sustainable Competitive and Responsible Enterprise programme, which offers training on Module 1 (Workplace Corporation and Responsible Tourism) and Module 5 (Occupational Health and Safety). Likobo also received mentorship over a period of time, which has had a meaningful impact on the growth of the business. As a result of training and mentorship received, the business is able to save over R 4 000 per month on electricity and food. It is also able to earn extra income by selling some of its waste as a direct initiative towards responsible tourism and has adopted a management system that assists with overall efficiency. Operating in the tourism sector, Limakatso specialises in providing hospitality, conferencing and accommodation services.

Limakatso BoUtIQUe B&B

HumanResourcesReport

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RePoRthuman resoucesThepurposeoftheHumanResourcesfunctionistoprovideECDCwithintegratedhumancapitalsolutionswithapassionfor quality and customer service excellence. It is also to ensure organisational development, transformation and innovation through the promotion of good governance. These objectives will be achieved through partnerships with business and managing available resources to meet current and future business needs. In order to deliver on its strategy as well as to provide superior service to customers, it is important for ECDC to create a cadre of competent and motivated employees infused with execution-based values.

Performance ManagementPerformance reviews are one piece of the talent management puzzle. In order to build an empowered and skilledworkforce, ECDC does more than auditing employee achievements. During the period under review, ECDC offered ongoing support and improvement to staff to enhance the performance culture while closely monitoring the embedment ofperformance.Thereviewedperformancecontractsforeachemployeewasinalignmentwiththe2018/19CorporatePlan. During theperiodunderreview,theHumanResourcesDepartmentalsoembarkedonperformancemanagementtraining for junior, middle and senior managers. This included sessions on management of poor performance based on national legislation and ECDC policies.

talent ManagementHumanResourcessupportedtheimplementationofECDC’smandatebyensuringthattherightskillsweresourcedinthe right places within the organisation. Internal human resource polices were also taken into consideration to increase employees’ effectiveness in their work. This included embedding the performance management policy and ensuring that employees’ wellbeing was given high priority in the organisation. Continuous engagement with employee representatives was also prioritised which maintained stakeholder relationships.

staffprofileasat31March2018eCdC staff turnover

Permanent employeesAT The sTART OF The PeRiOd

Permanent employeesAT The eNd OF The PeRiOd

185

10

11

5

2

2

2

0

recruitment

34contract employees

resignations

retirements

deaths

medical boarding

dismissals

expired contracts

sTAFF TuRNOveR RATe 7.3%•Management(Grades16-25) 0%•Bargaining Unit (Grades 2-15) 7.3%

TOTAl sTAFF esTAblishMeNT 203•Less Actual positions filled 151•Vacant positions 52Vacancy rate 25.62%

TOTAl MANPOWeR PlAN 177Less Actual positions filled 151Vacant positions 26VacancyRate 14.69%

151TOTALPERMANENTEMPLOYEESENDOFMARCH2018

163


Duringtheperiodunderreview,ECDC’sworkforcecomprised151employees.Thevacancyrateisat14.69%,basedonthebudgetednumberofpositionsof177whichisaboveECDC’sannualtargetvacancyrateof12%.ThisisduetorecruitmentbeingonholdaspartofthecurrentFinancialRecoveryPlanthatcommencedfromthemid-thirdquarterofthefinancialyear.Staffturnoveris7.3%whichislowerthanthenationalnormof10%turnoverrate.

Strategic Projects

Staff Turnover Actual

Employees as at the start of the period 13

Add:Recruitment 13

Less:Resignations 2

Deaths 0

Dismissals 0

Retirements 0

Expiry of contracts 21

TOTALasat31March2018 3

TOTALSTAFFESTABLISHMENT 26

Less Actual Positions filled in staff establishment 3

Vacant Positions 23

Vacancy rate 88.46%

The information above reflects a high vacancy rate in the Strategic Projects office, due to the number of projects that are currently being implemented by this office. The strategy is to recruit as more personnel when there are more projects coming into ECDC so that skills complement the projects lowering the cost of employees ECDC is accountable for.

ECDC Employment Equity targetsThe key intent of employment equity within the ECDC is to ensure that there is equitable consideration of all groupings within the population, taking into account the demographic character of the Eastern Cape. A comparison of the ECDC’s employment equity components is performed on a regular basis. The new Employment Equity and Skills Development Committee continued to review its current Employment Equity Plan for recommendations for target setting and implementation within the recruitment process. A new plan will be implemented to address the identified gaps as measured against the employment equity targets of the Eastern Cape’s economically active population profile. As a guiding principle to the strategy, the following reflect the ECDC targets, which will be reported on an annual basis.

Occupational Levels

Male FemaleForeign

NationalsTotalA C I W A C I W MALE FEMALE

PROVINCIALEAP 43.2% 5.9% 0.1% 3.0% 39.8% 5.5% 0.1% 2.4% 0 0 100%GRANDTOTAL 50 3 3 7 83 1 0 4 0 0 151ECDC 33.11% 1.99% 1.99% 4.64% 54.97% 0.66% 0 2.65% 0 0 100%Variance 10.09% 3.92% -1.89% -1.64% -15.17% 4.84% 0.1% -0.25% 0 0 0

Source: Statistics South Africa (December 2016)

The key intent of employment equity within the ECDC is to ensure that there is equitable consideration of all groupings within the population


Occupational categories

Male FemaleTotalAfrican Coloured Indian White African Coloured Indian White

UNSKILLED(GRADE2-6)Target 1 0 0 0 6 0 0 0 7Actual 1 0 0 0 6 0 0 0 7Variance 0 0 0 0 0 0 0 0 0%Variance 0 0 0 0 0% 0 0 0 0%SEMI-SKILLED(GRADE7-11)Target 22 2 0 1 40 1 1 1 68Actual 9 0 0 0 41 0 0 0 50Variance 9 2 0 1 -1 0 1 1 13%Variance 41% 100% 0 100% -2.5% 0% 100% 100% 19%SKILLEDSUPERVISION(GRADE12-16)Target 36 3 1 6 35 2 1 4 88Actual 27 2 0 4 27 1 0 3 64Variance 8 2 1 2 5 1 1 1 21%Variance 22% 67% 0 33% 14% 50% 100% 25% 24%SENIORTOPMANAGEMENT(GRADE17-19)Target 18 1 3 4 11 1 1 1 40Actual 10 1 3 3 5 0 0 1 23Variance 5 0 1 2 3 1 1 0 13%Variance 28% 0 33% 50% 27% 100% 100% 0% 33%TOPMANAGEMENT(GRADE20-25)Target 4 0 0 1 3 0 0 0 8Actual 3 0 0 0 4 0 0 0 7Variance 1 0 0 1 -1 0 0 0 1%Variance 25% 0% 0% 100% -33% 0 0 0 12.5%TOTALTarget 77 6 4 11 92 4 3 6 203Actual 50 3 3 7 83 1 0 4 151Variance 27 3 1 4 9 3 3 2 52%Variance 35% 50% 25% 36% 10% 75% 100% 33% 25.6%Target Employees with disabilities

1 0 0 0 1 0 0 0 2

Grand Total (Establishment)

77 6 4 11 92 4 3 6 203

Interns 9 0 0 0 21 0 0 0 30

ECDC Employment Equity by Employment Categories

Occupational/Equity Categories

Occupational categories(and grade)

Male FemaleTotalAfrican Coloured Indian White African Coloured Indian White

Top management (20-25) 3 0 0 0 4 0 0 0 7Senior management (17-19) 10 1 3 3 5 0 0 1 23Skilledsupervision(12-16) 27 2 0 4 27 1 0 3 64Semi-skilled (7-11) 9 0 0 0 41 0 0 0 50Unskilled(2-6) 1 0 0 0 6 0 0 0 7TOTALPERMANENT 50 3 3 7 83 1 0 4 151TOTALTEMPORARY 14 0 0 0 19 1 0 0 34

Employees with disabilities 0 0 0 0 0 0 0 0 0TOTAl eMPlOyees 64 3 3 7 102 2 0 4 185


Training as at 31 March 2018

No Training ProgrammeGender

TotalMale Female

1 Complete Export Administration Course 1 1

2 UCT IT Management Course 1 1

3 Talent Economist Programme 1 14 Global Development Finance Conference 1 15 AuditingGovernance,Ethics&RiskManagement 1 16 African Ports Evaluation Conference 1 17 SAICA 1 18 IFRSUpdateSeminar 1 19 EasternCapeManufacturingIndaba&ExhibitionShowcase 1 1

10 Complete Export Administration 2 211 New Management Programme 2 212 ProfessionalDevelopmentProgrammeinPublicRelationsPractice 1 113 TheAnnualSAPOAInternationalConvention&PropertyExhibition 1 1 214 Data Analysis 1 115 Administering System Centre Configuration Manager 1 116 InfrastructureProcurement&DeliveryManagement 1 117 2017NOCLARSeminar 1 1 218 Balanced Scorecard Certification 1 119 Symposium IT Expo 1 120 GettingAcquaintedwithRoadConstruction&MaintenanceWorkshop 1 121 Border Kei Conference 2 2

TOTAl 9 17 26TOTAl eXPeNdiTuRe R798,250

08constRUctIon

INCUBATION SUPPORT

ECDC provided R1.9 million to the SEDA Construction Incubator in 2017/18 to support the operations of its East London branch. The incubator supported 41 enterprises in the construction sector, created 270 jobs and generated R136 million in turnover. All 41 businesses are 100% black-owned, with 39% women-owned and 37% youth-owned.

sEDA constRUctIon IncUBAtoR

Corporate Governance

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statementofResponsibilitiesAndApproval External auditors are engaged to express an independent opinion on the Annual Financial Statements. The Annual Financial StatementsoftheCorporationarepreparedinaccordancewithInternationalFinanceReportingandarebasedonappropriateaccounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The directors place considerable importance on maintaining a strong control environment. To this end the directors set standards for internal control aimed at reducing the risk of error or loss in a cost-effective manner. These standards include proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. During the year under review such controls were monitored as far as reasonably possible throughout the Corporation and all employees were required to maintain high ethical standards in ensuring the Corporation’s business is conducted in a manner that is above reproach in all reasonable circumstances. The risk management focus is on identifying, assessing, managing and monitoring all known forms of risk across the Corporation. While it is acknowledged that operating risk cannot be fully eliminated, the Corporation endeavours to minimise it by ensuring that appropriate infrastructures, controls, systems and ethical behaviour are applied within predetermined procedures and constraints.

The directors are of the opinion that the system of internal controls provides reasonable assurance that the financial records may be relied upon for the preparation of Annual Financial Statements. Any system of internal control can, however, provide only reasonable, and not absolute, assurance against material misstatement or loss.

ResPonsIBILItYstatement of

Nhlanganiso Dladla chairperson of the Board




introduction

ECDCendorsestheCodeofCorporatePracticesandConductascontainedintheKingReportsonCorporateGovernanceandaffirms its commitment to comply in all material respects with the principles incorporated in these reports. The Corporation further subscribes to the corporate governance principles set out in the Public Finance Management Act (the PFMA).

ECDC is furthercommitted togoodcorporatecitizenshipandorganisational integrity in the runningof itsaffairs.Thiscommitment provides the Shareholder, customers and stakeholders with the comfort that the ECDC’s affairs are being managed in an ethical and disciplined manner. ECDC’s philosophy is founded on principles of service delivery, trust, integrity, transparency, accessibility, redress and ethics.

Corporate Governance Framework The Board continued to implement the Corporate Governance Framework, which consolidates the corporate governance procedures, practices and rules applied by the Corporation. These are in line with best practice guidelines as contained in theKingReportsonCorporateGovernanceandothergoodgovernanceprescriptsandguidelines.

ConflictofinterestsThe Corporation’s values are entrenched through an approved Code of Ethics (Code) which guides employee behaviour in all internal and external stakeholder relations. In instances where a non-executive director has any direct or indirect personal orprivatebusinessinterest,he/shemustwithdrawfromtheproceedingswhenthematterisconsideredbytheBoardorany of its committees, unless the Board or any of its committees determine that a member’s interest in the matter is trivial or irrelevant.

The Corporation requires all employees to sign declaration of interest forms on an annual basis prior to the commencement of the financial year. The annual declaration of interests register for the Board is noted at the beginning of the financial year or when a revised declaration of interest is submitted to the Company Secretary.

Company Secretarial FunctionThe Company Secretary is responsible for:• Ensuring that Board procedures are followed and reviewed regularly and that applicable rules and regulations for the

conduct of the affairs of the Board are complied with;• Guiding Board members on how to properly discharge their responsibilities in the best interests of the organisation;• Keeping abreast of, and informing, the Board of current and new developments regarding corporate governance thinking

and practice; and• Maintaining statutory records in accordance with legal requirements.

The Board has access to the services and advice of the Company Secretary. In addition to various functions, the Company Secretary provides individual non-executive directors and the Board with guidance on duties, responsibilities and powers, and the impact of regulatory developments. The Board has empowered the Company Secretary with responsibility for advising the Board, through the Chairman, on all governance matters. The Company Secretary acts as the primary point of contact between the Board and the Corporation. The Company Secretary is qualified to perform their duties in accordance with the applicable legislation and is considered by the Board to be fit and proper for the position.

Board CompositionThe Member of the Executive Council responsible for the Department of Economic Development, Environmental Affairs and TourismappointstheBoardofDirectorsintermsofSection7(3)oftheEasternCapeDevelopmentCorporationAct,1997(ActNo.2of1997(ECDCAct)).TheECDCActprovidesthatthereshallnotbelessthanfiveandnotmorethan18directors.Asat31March2018,theBoardcomprisessixdirectorsofwhomthemajority(six),arenon-executive,includingtheChairman.The Chairman and the Chief Executive’s roles and responsibilities are separate.

GoVeRnAncecorporate


BoardinductionandinformationThe Company Secretary is tasked with assisting the Board with the induction of new non-executive directors and directors’ orientation. A formal induction programme introduces non-executive directors to the Corporation’s business environment, risk management, regulatory environment, governance framework, sustainability issues and fiduciary duties. Non-executive directors are regularly kept abreast of relevant Corporation matters and regulatory developments.

Board and Committee Membership and Meeting Attendance The Board has delegated some of its responsibilities to committees in accordance with the approved delegation of authority. Each committee acts within the ambit of clearly defined terms of reference approved by the Board. These mandates are periodically reviewed and updated to address the recommendations of King IV and the requirements of the PFMA, including Protocol on Corporate Governance in the Public Sector.

The Board has five committees to assist it in discharging its role and responsibilities, namely:• Audit,RiskandComplianceCommittee• HumanResourcesandRemunerationCommittee• Funding and Investment Committee• Social and Ethics Committee • Governance and Nominations Committee

Appropriate committee structures have been established in line with legislative requirements and business imperatives. These committees continue to operate appropriately and assist the Corporation with comprehensive control improvement and sound governance.

Audit, Risk & Compliance

HR & REMCO Funding & Investment

Social & Ethics Governance & Nomination

N Dladla (Chairperson) X

LJiya(DeputyChairperson) X X X

B Nqadolo X X

M Maqetuka X X XRNicholls* XN Madiba X X XP Bosman X X XS Thobela X X XM Sishuba X X XM Damane X X XCommittee structure Changed 20 October 2017N Dladla (Chairperson) X X

N Madiba(Deputy Chairperson)

X X X

S Thobela X X XM Damane X X X XM Sishuba X XRNicholls* X X

* External Audit Committee Member, appointed Audit, Risk & Compliance Chairperson on 12 August 2017


Board and Committee Meeting AttendanceBoard

appointment and

retirement date

Board:12

Audit, Risk & Compliance:

11

HR & REMCO:

8

Funding & Investment:

8

Social & Ethics:

4

Governance & Nomination:

5 AD-HOC

LJiya 19/10/201106/10/2017

8 5 2 4 10

M Maqetuka 08/11/201206/10/2017

7 4 2 4 11

B Nqadolo 03/11/200906/10/2017

8 5 0

N Dladla 01/10/2014 12 1 3 1 5 57

S Thobela 15/09/2014 10 8 8 2 1 18

M Sishuba 01/10/2014 12 9 3 1 4 9

N Madiba 15/09/2014 12 11 8 1 2 5 22

P Bosman 01/10/2014 9 7 2 1 3

M Damane 15/09/2014 12 8 8 4 1 18

RNicholls 03/11/2009 1 11 5

**External Audit Committee Member

Delegation of AuthorityThe Board has delegated to the Chief Executive the day today running of the business within the approved Delegation of Authority Framework. The Delegation of Authority Framework applies to all employees of the Corporation.

MattersReservedforBoardDecision• Approving the strategy, Corporate Plan, annual budgets and any subsequent material changes in strategic direction.• Approving Annual Financial Statements, as well as the declaration of dividends;• Approving any significant changes in accounting policies or practices.• RecommendingtheacquisitionordisposalofasignificantshareholdingintheCorporationfortheShareholder’s

approval.• RecommendingtheacquisitionordisposalofasignificantassetfortheShareholder’sapproval.• Entering into a Compact with the Shareholder.• Approving terms and conditions of the Corporation’s rights issues, public officers, capital issues or issues of convertible

securities, including shares or convertible securities issued for acquisitions.• RecommendingtheapprovalofanyordinaryorspecialresolutionsinrespectoftheCorporationtotheShareholder.• Appointments and changes in the composition of Board committees, as the Board may elect from time to time.• Effectinganychangesindirectors’feesandbenefits,asrecommendedbytheHumanResourcesandRemuneration

Committee and approved by the Shareholder.


MandateThisreportisprovidedbytheAuditRiskandCompliance(ARC)Committeeinrespectofthe2017/18financialyear of the Eastern Cape Development Corporation (ECDC). The committee’s function is guided by a detailed charter which is informed by the relevant governance prescript and aligned to the business.

PurposeThepurposeof theAuditRiskandComplianceCommittee is toassist theBoard indischarging itsdutiesrelating to thesafeguarding of assets, the operation of adequate systems, control and reporting processes and the preparation of accurate reporting and financial statements in compliance with the applicable legal requirements and accounting standards.

OverviewWearepleasedtopresentourreportforthefinancialyearended31March2018.Ourauditedresultswereunqualifiedwithmatters of emphasis.

Audit,RiskandComplianceCommitteeMembersandAttendanceTheAudit, Risk and Compliance Committee consists of themembers listed below. As per its terms of reference, thecommitteeisrequiredtomeetatleastfour(4)timesayear.Duringtheyearunderreview,eleven(11)meetingswereheld.

Name of Member

19 Apr 2017

22 May 2017

23 May 2017

29 May 2017

19 Jul 2017

27 Jul 2017

21 Aug 2017

17 Oct 2017

30 Oct 2017

18 Jan 2018

16 Feb 2018

P. Bosman p p p p p p pN. Madiba p p p p p p pM. Sishuba p p p p p p pB. Nqadolo p p p p p p pR.Nicholls p p p p p p pCommittee structure Changed on 20 October 2017

R.Nicholls p p p pN. Madiba p p p pM. Sishuba o p p pp Present o Absent with apology

coMPLIAnce MAnAGeMent coMMIttee

audit, risk &


Audit,RiskandComplianceCommittee’sRoleandResponsibilities

TheAudit,RiskandComplianceCommittee isacommitteeof theBoardandhasdischarged its responsibilitiesas theyrelate to thegroup’saccounting, internalauditing, internalcontrolandfinancial reportingpractices. TheAudit,RiskandCompliance Committee has formal terms of reference, has regulated its affairs in compliance with these terms of reference and has discharged its responsibilities contained therein.

EffectivenessofinternalControlsDuringthereviewperiodvariousreportsoftheInternalAuditor,aswellastheAuditReportontheAnnualFinancialStatementsand Management Letter of the Auditor General, indicated that the Corporation’s system of internal control has shortcomings. TheAudit,RiskandComplianceCommitteehasnotedtheseandbasedontheoutcomeofsuchreviewsandtheinformationprovided by management, the committee is of the opinion that the internal controls of the entity were effective throughout the year under review, resulting in much-improved financial and performance reporting.

The committee noted that supply chain management controls have improved, resulting in irregular expenditure reducing fromR17millionintheprioryeartounderR1millioninthecurrentreportingyear.

MonthlyandQuarterlyperformanceinformationTheAudit,RiskandComplianceCommittee isof theviewthat thecontentandqualityofmonthlyandquarterlyreportsprepared and issued by the Corporation during the year under review has been above standard. The committee notes the continued improvement from the previous year.

internalAuditTheAudit,RiskandComplianceCommitteereviewedtheactivitiesof the internalaudit functionandhasconcludedthefollowing:• The internal audit function is effective, with no unjustified restrictions or limitations. • The internal audit reports were reviewed at quarterly meetings, including its annual work programme, co-ordination with

the external auditors, the reports of significant investigations and the responses of management to issues raised therein.

In respect of the co-ordination of assurance activities, theAudit, Risk and Compliance Committee reviewed the plansand work outputs of the external and internal auditors and concluded that these were adequate to address all significant financialrisksfacingthebusiness.TheHeadofInternalAudithasdirectaccesstotheAudit,RiskandComplianceCommitteeChairpersonandothermembers.TheAudit,RiskandComplianceCommitteeisalsoresponsiblefortheassessmentoftheperformanceoftheHeadofInternalAudit,andtheinternalauditfunction.

Legal and ComplianceIn respect of legal and regulatory requirements, to the extent that they may have an impact on the Annual Financial Statements,the Audit,RiskandComplianceCommittee:• ReviewedtheCorporation’sinternallegalteamandtheadequacyandeffectivenessoftheCorporation’sproceduresto

ensure compliance with legal and regulatory responsibilities.

TheAudit,RiskandComplianceCommitteenotedthatitsrecommendationfromthepreviousfinancialyeartobuildcapacityin the areas of legal and compliance was not implemented. Notwithstanding this, there has been substantial compliance with its legal, regulatory or other responsibilities. The use of outsource legal providers where needed was efficiently mandated and managed.

RiskManagementandinformationTechnologyRegardingriskmanagementandinformationtechnology,theAudit,RiskandComplianceCommittee,insofarasrelevanttoits functions:• Reviewedthepoliciesonriskassessmentandriskmanagement,includingITrisksastheypertaintofinancialreporting

and the going concern assessment, and found them to be adequate.• Considered and reviewed the findings and recommendations of the Internal Audit.• Monitored and evaluated significant IT investments, delivery of services, IT governance and the management of IT.

InternalAuditperformeda reviewonRiskManagement for theyearunderassessmentand found the systemof internalcontrolstobepartiallyeffective.InternalAuditassessedtheriskmanagementprocessestobeatLevel3ofthematuritymodel.


External AuditorsTheAuditor-Generalactedasexternalauditorsthroughouttheyear.TheAudit,RiskandComplianceCommitteereviewedthe external auditors’ scope and work plan to ensure that key risk areas of the business were being addressed during the audit process.

Evaluation of Annual Financial StatementsTheAudit,RiskandComplianceCommitteehas:• ReviewedanddiscussedwiththeAuditor-GeneralandtheAccountingAuthoritytheauditedAnnualFinancialStatements

tobeincludedintheAnnualReport;• ReviewedtheAuditor-General’sauditreport,themanagementletterandmanagementresponsesthereto;and• Reviewedthesignificantadjustmentsresultingfromtheaudit.

The Audit, Risk and Compliance Committee notes the conclusions of the Auditor-General on the Annual FinancialStatements. The committee is of the opinion that the audited financial statements be accepted and be read together withthereportoftheAuditor-GeneralandtheDirectors’Report.TheAudit,RiskandComplianceCommitteeagreesthatthe adoption of the going concern premise is appropriate in preparing the Annual Financial Statements, this despite the shortage of working capital to meet the development needs of the province.

RGNichollschairperson of the Audit, Risk and compliance committee


RePoRtdirectors’

The board of directors are pleased to present their report and the audited Annual Financial statements for the year ended 31 March 2018. The Corporation is established by the eastern Cape development Corporation Act, 1997 (Act No. 2 of 1997) (eCdC Act). it is listed in schedule 3 d of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (the PFMA) as a Provincial Government business enterprise.

Shareholding

The Eastern Cape Provincial Government is the sole shareholder, represented by the Member of the Executive Council for the Department of Economic Development, Environmental Affairs and Tourism.

DirectorsThe composition of the Board, together with a summary curricula vitae for each director, is set out in the Corporate GovernanceReport.

Accounting PoliciesTheaccountingpoliciesusedinthepreparationoftheAnnualFinancialStatementsfortheyearended31March2018are inaccordancewith InternationalFinancialReportingStandards(IFRS)andconsistentwiththoseappliedduringtheprevious year.

CriticalJudgmentsandEstimationsMadeinApplyingtheAccountingPoliciesJudgementsmadebymanagementandsupportedbytheBoardintheapplicationofIFRSthathaveasignificantimpactonthe Annual Financial Statements are disclosed in the accounting policies.

AuthorisedandissuedshareCapitalTheauthorisedsharecapitaloftheCorporationremainedunchangedatR1billionworthofordinaryshares.TheCorporationissuedR427 589 674millionworthofordinarysharestotheEasternCapeProvincialGovernment(DepartmentofEconomicDevelopment,EnvironmentalAffairsandTourism).Theissuedsharecapitalismadeupof213 794 837million“A”sharesofR1eachand213 794 837million“B”sharesofR1each.

Divisions,subsidiariesandAssociateCompaniesA detailed list of subsidiaries and associate companies are contained in the supplementary information to the Annual Financial Statements.


DividendsNo dividends were declared or paid to shareholders during the year.

Judicialproceedings The Annual Financial Statements include a best estimate of expected settlement costs for judicial proceedings entered into by ECDC, as either defendant or plaintiff, where the outcome can be assessed with reasonable certainty. These estimates take into account the legal opinions obtained for the Corporation and the group. The contingent liabilities of the group have been disclosed in note 37oftheAnnualFinancialStatements.

postBalancesheetEventsReviewThere are no post balance sheet events relating to the year under review.

Going ConcernHavingreviewedtheCorporation’scashflowforecast for theyear to31March2018and, in the lightof this reviewandcurrent financial position, the Directors are satisfied that the Corporation has, or has access to, adequate resources to continue its operational existence for the future.

ExecutiveRemunerationECDCcontinuestoregarditsemployeesasthemostvaluedassetofthebusinessandtheHumanResourcesstrategy,whichremainsoneof thepillarsof theECDCstrategy,provides the framework foraddressingHRchallenges.TheHRstrategyremains focused on providing the right skills in the right place at the right time to support delivery of business objectives.

ECDC recognises that remuneration is a business issue, not purely a human resources issue, as it has a direct impact on operational expenditure, organisational culture, employee behaviour and ultimately the financial sustainability of the Corporation. As such the Corporation’s approach to reward is consistent with its objectives and strategic value drivers. Accordingly, the objective of the ECDC remuneration philosophy is to:a Increase productivity by ensuring that individuals and teams are recognised and rewarded for sustained superior

performance, whilst managing the total cost of employment;b Compete effectively in the labour market and to recruit and retain high-calibre staff;c Establish reward as a strategic driver of performance, to encourage and promote continuous improvement both at a

personal, corporate and unit level;d Attract, motivate and retain skilled personnel to enable the Corporation to retain a competitive edge over its competitors;

ande Align pay to performance.

Directors’ FeesThe following fees were paid to the directors for Board, sub-committee and ad-hoc attendance during the financial year under review:

Board

Audit, Risk &

Compliance Committee

Social & Ethics

Committee

Human Resources &

Remuneration Committee

Funding & Investment Committee

Governance & Nominations

Committee Ad-hoc TOTAL

Dladla 158250.00 5 275.00 5 275.00 - 15 825.00 39 562.50 303 314.50 527 502.00

Jiya 84400.00 - 10 550.00 - 39 562.50 21 100.00 52 750.00 208 362.50

Maqetuka 55387.50 - 15 825.00 21 100.00 - 21 100.00 60 659.50 174 072.00

Damane 94950.00 - 26 375.00 42 200.00 42 200.00 5 275.00 94 950.00 305 950.00

Madiba 105 500.00 58 025.00 10 550.00 63 300.00 5 275.00 26 375.00 118030.90 387055.90

Thobela 79 125.00 10 550.00 42 200.00 50 112.50 5 275.00 98 062.50 285 325.00

Sishuba 94 950.00 47 475.00 15 825.00 15 825.00 5 275.00 - 50 062.50 229 412.50

Bosman 71 212.50 68 575.00 - - 10 550.00 5 275.00 15 825.00 171 437.50

Nicholls 7 912.50 100 225.00 - - - 10 550.00 26 375.00 145 062.50

Nqadolo - - - - - - - -

09MAnUFActURInG

INCUBATION SUPPORT

ECDC provided in-kind support to Furntech in Mthatha by making a factory owned by the Corporation available at a reduced cost. The incubator supports businesses involved in furniture manufacturing, with incubated enterprises received financial mentorship through the Mthatha regional office. All the beneficiaries are 100% black-owned.

Furntech IncUBAtoR

Report of theAuditor-General

cAse stUDY


Report of the Auditor-General to Eastern Cape Provincial Legislature on Eastern Cape Development CorporationReport on the audit of the consolidated and separate financial statements

Opinion1 I have audited the consolidated and separate financial statements of the Eastern Cape Development Corporation

anditssubsidiariessetoutonpages71to126, which comprise the consolidated and separate statement of financial positionasat31March2018,theconsolidatedand separate statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, as well as the notes to the consolidated and separate financial statements, including a summary of significant accounting policies.

2 In my opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of the Eastern Cape Development Corporationasat31March2018,and its financial performance and cash flows for the year then ended in accordance with the International Financial ReportingStandardsandthe requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Eastern Cape Development Corporation Act, 1997 (Act No. 2 of 1997).

Basis for Opinion3 I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under

those standards are further described in the Auditor-General’s responsibilities for the audit of the consolidated and separate financial statements section of this Auditor’s Report.

4 I am independent of the entity in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) and the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA Code.

5 I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Emphasis of Matters6 I draw attention to the matters below. My opinion is not modified in respect of these matters.

Restatement of Corresponding Figures7 Asdisclosedinnote40tothefinancialstatements, the corresponding figures for previous balance sheet date were

restated as a result of an error in the financial statements of the entity at,andfortheyearended,31March2018.

Irregular Expenditure8 Asdisclosedinnote41tothefinancialstatements, the entity incurred irregular expenditure of R935000(2016-17:

R17,042million)duetonon-compliance with the supply chain management policy and the PFMA.

Material Losses9 As disclosed in note 25 to the financial statements, material losses of R57,1million were incurred as a result of

impairment losses on trade receivables and loans advanced.

AUDItoR-GeneRALreport of the


Responsibilities of accounting authority for the financial statements10 The accounting authority is responsible for the preparation and fair presentation of the consolidated and separate

financial statements in accordance with International Financial Reporting Standards and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) and for such internal control as the accounting authority determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

11 In preparing the consolidated and separate financial statements, the accounting authority is responsible for assessing the Eastern Cape Development Corporation’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the accounting authority either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.

Auditor-General’s responsibilities for the audit of the consolidated and separate financial statements12 My objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements

as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonableassuranceis a high level of assurance but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

13 A furtherdescriptionofmy responsibilities for the audit of the consolidated and separate financial statements is included in the annexure to this Auditor’s Report.

Report on the Audit of the Annual Performance Reportintroduction and scope

14 Inaccordance withthePublicAuditActofSouthAfrica,2004(ActNo. 25of2004)(PAA)and the general notice issued in terms thereof, I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected strategic goals presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

15 My procedures address the reported performance information, which must be based on the approved performance planning documents of the entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

16 Ievaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected strategic goals presented in the annual performance report of the entity for the year ended31March2018:

Strategic GoalsPages in the annual performance report

Goal 1: Stimulate economic activities through focused investment and development of vital economic sectors 44-45

Goal 2: Efficient use of resources to attain financial sustainability 44-45

17 I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

18 I did not raise any material findings on the usefulness and reliability of the reported performance information for the following strategic goals:

Goal 1: Stimulate economic activities through focused investment and development of vital economic sectors Goal 2: Efficient use of resources to attain financial sustainability


Other matter

19 I draw attention to the matter below.

Achievement of planned targets

20 Refertotheannualperformance reportonpages44to45forinformationontheachievement of planned targets for the year.

Report on the audit of compliance with legislationintroduction and scope

21 In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility to report material findings on the compliance of the entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

22 The material findings on compliance with specific matters in key legislations are as follows:

expenditure Management

23 EffectivestepswerenottakentopreventirregularexpenditureamountingtoR935000as disclosedinnote40totheAnnual Financial Statements, as required by section 51(1)(b)(ii) of the PFMA. The majority of the irregular expenditure was caused by the minimum number of quotations which were not obtained as prescribed by the entity’s supply chain management policy.

Other information

24 The accounting authority is responsible for the other information. The other information comprises the information includedintheAnnualReport,whichincludesthechairperson of the Board’s foreword, Chief Executive Officer’s report, Chief Financial Officer’s report, operational review report and human resources report. The other information does not include the consolidated andseparatefinancialstatements,theAuditor’sReportandthoseselected strategic goals presented in the annual performance report that have been specifically reported in this auditor’s report.

25 My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.

26 Inconnectionwithmyaudit,myresponsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements and the selected strategic goals presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated.

27 If, based on the work I have performed, I conclude that there is a material misstatement in this other information; I am required to report that fact.

28 IdidnotfindanymaterialinconsistenciesbetweentheotherinformationandtheconsolidatedandseparatefinancialstatementsandtheselectedstrategicgoalpresentedintheAnnualPerformanceReportthatIhaveanointed.

internal control deficiencies

29 I considered internal control relevant to my audit of the consolidated and separate financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance on it. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on compliance with legislation included in this report.

30 The leadership and management of the entity have demonstrated an effective leadership culture through their directives, actions and timeous implementation of consequence management where deviations from the entity’s code of conduct and policies have been identified.However,theissueofnon-compliance with laws and regulations remains an area of concern. Oversight and accountability need to be strengthened for the entity to achieve a better audit outcome.

31 Theentityhasmadesignificantstridesinreducingirregularexpenditure;however, it is a recurring concern for the entity. Proactive monitoring needs to be put in place to detect and respond to potential deviations from SCM prescripts so that irregular expenditure can be prevented, where possible, before it is incurred.

32 Althoughriskmanagement activities took place within the entity and the necessary policies and procedures have been formulated and documented, non-compliance with SCM prescripts was not adequately addressed. This had an impact on the effectiveness of internal audit and the audit committee.


Other reports

33 I draw attention to the following engagements conducted by various parties that had, or could have, an impact on the matters reported in the entity’s financial statements, reported performance information, compliance with applicable legislation and other related matters. These reports did not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation.

34 An independent consultant was investigating an allegation of possible supply chain management irregularities on the entity’s procurement processes, at the request of the entity. The outcome of the investigation is expected by 27 August 2018.

East London31 July 2018


AnnexureAuditor-General’sResponsibilityfortheAudit

1 As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout my audit of the consolidated and separate financial statements, and the procedures performed on reported performance information for selected strategic goals and on the entity’s compliance with respect to the selected subject matters.

Financial statements

2 In addition to my responsibility for the audit of the consolidated and separate financial statements as described in this Auditor’sReport,I also:

• Identify and assess the risks of material misstatement of the consolidated and separate financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

• Obtain anunderstanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control;

• Evaluatethe appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the accounting authority;

• Conclude on theappropriateness of the accounting authority’s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Eastern Cape Development Corporation and its subsidiaries’ ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my Auditor’sReporttotherelated disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of this Auditor’s Report. However,future events or conditions may cause an entity to cease continuing as a going concern;

• Evaluatetheoverallpresentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation; and

• Obtainsufficientappropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. I am responsible for the direction, supervision and performance of the group audit. I remain solely responsible for my audit opinion.

Communication with those charged with governance

3 I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4 I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and, where applicable, related safeguards.

10AGRo-PRocessInG

TRADE, INVESTMENT AND INNOVATION SUPPORT

In 2017/18 ECDC provided support to Lathitha Wines, an internationally recognised wine brand which is currently operating from the Western Cape. The intention is to move the brand to the Eastern Cape and link it with tourism. ECDC is funding the development of the business plan, feasibility study and licence to trade the brand in Ghana.

Lathitha WInes

ConsolidatedAnnual

Financial Statements

cAse stUDY


The ECDC’s main business is to provide financial and non-financial support to small, medium and micro enterprises.

GeneralinformationCountry of incorporation and domicile South Africa

Legal form Government Business Enterprise

Registeredoffice OceanTerracePark Moore Street Quigney East London

Nature of business and principal activities The ECDC is a provincial Development Finance Institution. Its main business is to provide financial and non-financial support to small, medium and micro enterprises.

Postal address PO Box 11197 Southernwood East London 5213

Holdingcompany DepartmentofEconomicDevelopment,EnvironmentalAffairs and Tourism

Auditors Office of the Auditor-General Chartered Accountants (SA) RegisteredAuditor


index

72Statement of Financial Position

73 Statement of Profit or Loss and Other Comprehensive Income 74 Statement of Changes in Equity

76 Statement of Cash Flows

77 Accounting Policies

89 Notes to the Consolidated Annual Financial Statements

TheconsolidatedAnnualFinancialStatementssetoutonpages75to124,whichhavebeenpreparedonthegoingconcernbasis,wereapprovedbytheBoardofDirectorson31July2018andweresignedonitsbehalfby:




Consolidated Annual Financial statements for the year ended 31 March 2018

Statement of Financial Position as at 31 March 2018Group Company

Figures in Rand thousand Note(s) 2018 2017 2016 2018 2017 2016

AssetsNon-Current AssetsProperty, plant and equipment 2 52 205 52653 58706 26158 26169 22 522Investment property 3 1377581 1237236 1131893 1322924 1166429 1066343Intangible assets 4 204 354 577 158 307 475Investments in subsidiaries 5 - - - 23011 23011 23012Investments in associates 6 31109 29736 26798 - - -Loans to group companies 7 - - - 19686 27288 24939Investments 8 28927 28079 35252 25 199 25 072 31954Operating lease asset - 344 613 - - -Deferred tax 19 307 - - - - -Loans advanced 9 38359 47083 45731 38359 47083 45663

1 528 692 1 395 485 1 299 570 1 455 495 1 315 359 1 214 908Current AssetsInventory 10 - - 2033 - - -Trade and other receivables 11 23460 57080 40153 21 012 55 217 35409Current tax receivable - - 85 - - -Loans advanced 9 26832 32911 36987 26832 32911 36880Cash and cash equivalents 12 197404 182557 270735 171740 155417 247000

247 696 272 548 349 993 219 584 243 545 319 289Non-current assets held for sale 13 - 13839 8985 - 4315 8985Total Assets 1 776 388 1 681 872 1 658 548 1 675 079 1 563 219 1 543 182

equity and liabilitiesequityequity Attributable to equityholders of ParentShare capital 14 427590 427590 427590 427590 427590 427590Reserves 15 403554 403554 409739 404754 404754 409739Retainedincome 689106 618341 562456 549308 459943 404319

1 520 250 1449485 1399785 1381652 1292287 1241648Non-controlling interest 1258 1 195 1114 - - -

1 521 508 1 450 680 1 400 899 1 381 652 1 292 287 1 241 648

liabilitiesNon-Current liabilitiesLoans from group companies 7 - - - 52569 59 751 57913Finance lease liabilities 16 88 - 11 - - -Operating lease liability 3 6 15 - - -Retirementbenefitobligation 17 34347 31565 29923 34347 31565 29923Deferred income 18 269 806 379 - - -Deferred tax 19 - 5 22 - - -

34 707 32 382 30 350 86 916 91 316 87 836

Current liabilitiesTrade and other payables 20 79924 86934 89987 75994 85283 89054Interest bearing borrowings 21 - - 235 - - 235Finance lease liabilities 16 24 11 530 - - 508Operating lease liability 11 13 68 - - -Deferred income 18 140136 106329 136413 130517 94333 123901Current tax payable 78 66 66 - - -

220 173 193 353 227 299 206 511 179 616 213 698Liabilities of disposal groups 13 - 5457 - - - -Total liabilities 254 880 231 192 257 649 293 427 270 932 301 534Total equity and liabilities 1 776 388 1 681 872 1 658 548 1 675 079 1 563 219 1 543 182

CONsOlidATed ANNuAl FiNANCiAl sTATeMeNTs



statementofprofitorlossandOtherComprehensiveincome

as at 31 March 2018Group Company

Figures in Rand thousand Note(s) 2018 2017 2018 2017

Continuing operationsRevenue 22 135645 138198 123566 123477Other operating income 23 27464 55238 41964 56084Government grants 24 168289 156643 150148 141864Operating expenses (404770) (417228) (378279) (387914)Operating loss 25 (73 372) (67 149) (62 601) (66 489)Investment revenue 26 9203 10539 10139 11243Fair value adjustments 137399 112745 141828 110986Income from equity accounted investments 1374 2938 - -Finance costs 27 (8) (128) - (116)Profit before taxation 74 596 58 945 89 366 55 624Taxation 28 300 16 - -Profit from continuing operations 74 896 58 961 89 366 55 624

discontinued operationsLoss from discontinued operations 13 - (3524) - -Profit for the year 74 896 55 437 89 366 55 624

Other comprehensive income:Available-for-sale financial assets adjustments - (7 000) - (7 000)Gains on property revaluation - 815 - 2 015Other comprehensive loss for the year net of taxation 29 - (6185) - (4985)Total comprehensive income for the year 74 896 49 252 89 366 50 639

Attributable to:Owners of the parent:Profit for the year from continuing operations 74833 58880 89366 55624Loss for the year from discontinuing operations - (3524) - -Profit for the year attributable to owners of the parent 74 833 55 356 89 366 55 624

Non-controlling interest:Profit for the year from continuing operations 63 81 - -

Total comprehensive income attributable to:Owners of the parent 74833 49171 89366 50639Non-controlling interest 63 81 - -

74 896 49 252 89 366 50 639

Other comprehensive income:Available-for-sale financial assets adjustments - - - (801)Effects of cash flow hedges - - (801) -Gains (losses) on property revaluation - 815 - 2 015Other comprehensive income for the year net of taxation 29 - 815 (801) 1 214




Statement of Changes in Equity as at 31 March 2018

Figures in Rand thousand Share capitalRevaluation

reserve

Fair valueadjustment

assets-available-for-sale reserve Other NDR Total reserves

Retainedincome

Totalattributable to equity holdersof the group /

companyNon-controlling

interest Total equity

GroupOpening balance as previously reported 427590 2794 22680 384265 409739 535769 1373098 1114 1374212AdjustmentsPrioryearadjustments(note40) - - - - - 26687 26687 - 26687

balance at 01 April 2016 as restated 427 590 2 794 22 680 384 265 409 739 562 456 1 399 785 1 114 1 400 899Profit for the year - - - - - 55356 55356 81 55437Fairvaluegainstransferred/Profitor(Loss) - 815 (7 000) - (6185) - (6185) - (6185)Total comprehensive income for the year - 815 (7 000) - (6 185) 55 356 49 171 81 49 252ECMA discontinued operations - - - - - 126 126 - 126USICO discontinued operations - - - - - 403 403 - 403Total contributions by and distributions to owners of company recognised directly in equity - - - - - 529 529 - 529

Opening balance as previously reported Adjustments 427590 3609 15680 384265 403554 583135 1414279 1 195 1415474Priorperioderrors(refertonote40) - - - - - 35205 35205 - 35205

balance at 01 April 2017 as restated 427 590 3 609 15 680 384 265 403 554 618 340 1 449 484 1 195 1 450 679Profit for the year - - - - - 74833 74833 63 74896Fairvaluegains/Profitor(Loss) - - - - - - - - -Total comprehensive income for the year - - - - - 74 833 74 833 63 74 896Magwa Enterprise Tea (Pty) Ltd disposed - - - - - (4067) (4067) - (4067)Total contributions by and distributions to owners of company recognised directly in equity - - - - - (4 067) (4 067) - (4 067)

balance at 31 March 2018 427 590 3 609 15 680 384 265 403 554 689 106 1 520 250 1 258 1 521 508CompanyOpening balance as previously reported 427590 2794 22680 384265 409739 377591 1214920 - 1214920AdjustmentsPrioryearadjustments(refertoNote40) - - - - - 26728 26728 - 26728

balance at 01 April 2016 as restated 427 590 2 794 22 680 384 265 409 739 404 319 1 241 648 - 1 241 648Profit for the year - - - - - 55624 55624 - 55624Fairvaluegainstransferred/Profitor(Loss) - 2 015 (7 000) - (4985) - (4985) - (4985)Total comprehensive income for the year - 2 015 (7 000) - (4 985) 55 624 50 639 - 50 639Opening balance as previously reported Adjustments 427590 4809 15680 384265 404754 424737 1257081 - 1257081Prioryearadjustments(refertonote40) - - - - - 35205 35205 - 35205

balance at 01 April 2017 as restated 427 590 4 809 15 680 384 265 404 754 459 942 1 292 286 - 1 292 286Profit for the year - - - - - 89366 89366 - 89366Total comprehensive income for the year - - - - - 89 366 89 366 - 89 366

balance at 31 March 2018 427 590 4 809 15 680 384 265 404 754 549 308 1 381 652 - 1 381 652Note(s) 14 15 15 29



CONsOlidATed ANNuAl FiNANCiAl sTATeMeNTs FOR The yeAR eNded 31 MARCh 2018

Statement Of Cash Flows as at 31 March 2018Group Company

Figures in Rand thousand Note(s) 2018 2017 2018 2017

Cash flows from operating activitiesCash used in operations 34 (13884) (112469) (25343) (120 279)Interest income 8164 9 797 6551 8348Dividend received 1038 742 947 624Finance costs

35(8) (128) - (116)

Tax refunded - 85 - -Net cash used in operating activities (4 690) (101 973) (17 845) (111 423)

Cash flows from investing activitiesPurchase of property, plant and equipment 2 (2 099) (1691) (1 722) (809)Sale of property, plant and equipment 2 27 13 - 2Purchase of investment property 3 (9 050) (3706) - -Sale of investment property 3 8127 13549 8127 16175Purchase of intangible assets 4 (114) (83) (25) (17)Loans advanced to group companies - (5169) - (5680)Repaymentofloansfromgroupcompanies - - 5243 -Loans disbursed (98268) (163037) (98268) (163037)Loans collected 120813 174017 120813 173949Net cash generated from investing activities 19 436 13 893 34 168 20 583

Cash flows from financing activitiesProceeds from interest bearing borrowings 101 - - -Repaymentofinterestbearingborrowings - (235) - (235)Finance lease payments - (530) - (508)Net cash flows of discontinued operations - 688 - -Net cash from (used) in financing activities 101 (77) - (743)

Total cash movement for the year 14 847 (88 157) 16 323 (91 583)Cash and cash equivalents at the beginning of the year 182557 270735 155417 247000DecouplingofMAGWA/OCEANWISE - (21) - -

Cash and cash equivalents at the end of the year 12 197 404 182 557 171 740 155 417




Accounting Policies

1. Presentation of Consolidated Annual Financial StatementsThe consolidated Annual Financial Statements of the Eastern Cape Development Corporation have been prepared in accordancewithInternationalFinancialReportingStandards(IFRS)asprescribedbytheAccountingStandardsBoardandin the manner required by the Public Finance Management Act (Act No. 1 of 1999, as amended) and the Eastern Cape Development Corporation Act. The consolidated Annual Financial Statements have been prepared on the historical cost basis as modified by the revaluations of certain land and buildings, investment properties, available for sale financial assets and financial assets and financial liabilities at fair value through profit or loss.

The preparation of consolidated Annual Financial Statements in conformity with South African Statements of Generally Accepted Accounting Practice requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated Annual Financial Statementsaredisclosedinnote1.14.

The consolidated Annual Financial Statements have been prepared in the Corporation’s functional currency, the South AfricanRand.

These accounting policies are consistent with the previous financial year.

underlying assumptions

The consolidated Annual Financial Statements are prepared on the going concern basis, which assumes that the Corporation will continue in operation for the foreseeable future. The consolidated Annual Financial Statements are prepared using accrual accounting whereby the effects of transactions and other events are recognised when they occur rather than when the cash is received or paid. The owners of the group or others do not have the power to amend the audited financial statements after they have been published.

Assets and liabilities and income and expenses are not offset unless specifically permitted by an accounting standard. Financial assets and financial liabilities are offset and the net amount reported only when a current legally enforceable right to set off the amounts exists and the intention is either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Changes in accounting policies are accounted for in accordance with the transitional provisions in the applicable standard. If no such guidance is given, they are applied retrospectively unless it is impracticable to do so, in which case the change is applied prospectively. Changes in accounting estimates are recognised in profit or loss in the period they occur. Prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are applied prospectively.

Recognition of assets and liabilities

An asset, being a resource controlled by the Corporation as a result of a past event from which future economic benefits are expected to flow, is recognised when it is probable that the future economic benefits associated with it will flow to the Group and its cost or fair value can be measured reliably. A liability, being a present obligation of the Group arising from a past event the settlement of which is expected to result in an outflow of resources embodying economic resources from the Group, is recognised when it is probable that future economic benefits associated with it will flow from the Group and its cost or fair value can be measured reliably.

derecognition of assets and liabilities

Financial assets or parts thereof are derecognised, i.e. removed from the balance sheet, when the contractual rights to receive the cash flows have been transferred or have expired or if substantially all the risks and rewards of ownership have passed. Where substantially all the risks and rewards of ownership have not been transferred or retained, the financial assets arederecognisediftheyarenolongercontrolledbytheGroup.However,ifcontrolisretained,financialassetsarerecognisedonly to the extent of the Group’s continuing involvement in those assets.

All other assets are derecognised on disposal or when no future economic benefits are expected to flow to the Group from their use or disposal. Financial liabilities are derecognised when the relevant obligation has either been discharged or cancelled or has expired.

Post-balance sheet events

RecognisedamountsintheconsolidatedAnnualFinancialStatementsareadjustedtoreflecteventsarisingafterthebalancesheet date that provide evidence of conditions that existed at the balance sheet date. Events after the balance sheet date that are indicative of conditions that arose after the balance sheet date are dealt with by way of a note.

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1.1 Investment propertyInvestment property is held for long-term rental yields or for capital appreciation or both and comprises properties not occupiedbytheGroup.HotelbuildingsheldbytheGroupareclassifiedasinvestmentpropertyasthegroupisnotinvolvedinthe hotel operations. Investment properties are initially measured at cost, including transaction costs, and are subsequently stated at fair value determined by an independent sworn appraiser, every third year. Management reviews these valuations for reasonability and adjustments are made where it is deemed to be necessary.

Fair value

Subsequent to initial measurement investment property is measured at fair value. Fair value gains and losses are recognised in the profit or loss for the period.

1.2 Property, plant and equipmentThe cost of an item of property, plant and equipment is recognised as an asset when:• it is probable that future economic benefits associated with the item will flow to the Corporation; and• the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses except for land and buildings which is carried at fair value, determined by a sworn appraiser, every third year. Subsequent to initial measurement, land and buildings are carried at fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount.

The revaluation surplus in equity related to a specific item of property, plant and equipment is transferred directly to retained earnings when the asset is derecognised.

Property, plant and equipment are depreciated over their expected useful lives.

The useful lives of items of property, plant and equipment have been assessed as follows:item Average useful lifeLand IndefiniteBuildings and infrastructure 25 - 50 yearsFinance lease asset 3-5yearsPlant and machinery 4-20yearsFurniture and fixtures 6-10yearsMotor vehicles 4-5yearsOffice equipment 4-6yearsIT equipment 3yearsComputer software 2-3yearsLeasehold improvements 5 - 20 yearsOther Property, plant and equipment 5-6years

The useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

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1.3 Investments in subsidiariesSubsidiaries are entities, including unincorporated partnerships and companies without a share capital, that are controlled by the Group. Control exists where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Consolidated Annual Financial statements

The consolidated Annual Financial Statements incorporate the assets, liabilities, income, expenses and cash flows of the Corporation and its subsidiaries. The results of the subsidiaries acquired or disposed during the year are included from the date of acquisition or up to the date of disposal. Inter-company transactions and balances are eliminated on consolidation.

Corporation Annual Financial statements

In the Corporation’s separate Annual Financial Statements, investments in subsidiaries are carried at cost less any accumulated impairment.

The cost of an investment in a subsidiary is the aggregate of:• the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by

the Corporation; plus• any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably.

1.4 Investments in associatesAssociates are entities, including unincorporated partnerships and companies without a share capital, over which the Group exercises significant influence.

Consolidated Annual Financial statements

An investment in an associate is accounted for using the equity method, except when the asset is classified as held-for-sale inaccordancewith IFRS5:Non-currentassetsheldforsaleanddiscontinuedoperations.Undertheequitymethod,theinvestment is initially recognised at cost and the carrying amount is increased or decreased to recognise the group’s share of the profits or losses of the investee after acquisition date. The use of the equity method is discontinued from the date the group ceases to have significant influence over an associate.

Any impairment losses are deducted from the carrying amount of the investment in associate.

Distributions received from the associate reduce the carrying amount of the investment.

Profits and losses resulting from transactions with associates are recognised only to the extent of unrelated investors’ interests in the associate.

The excess of cost of acquisition over the group’s interest in the net fair value of an associate’s identifiable assets, liabilities and contingent liabilities is accounted for as goodwill, and is included in the carrying amount of the associate.

The excess of the group’s share of the net fair value of an associate’s identifiable assets, liabilities and contingent liabilities over the cost is excluded from the carrying amount of the investment and is instead included as income in the period in which the investment is acquired.

Corporation Annual Financial statements

Associate companies are those companies in which the Corporation holds a long-term equity interest and over which it exercises a significant influence over its financial and operating policies, other than investments in companies acquired to protect advances or as a conduit for advances.

The investments in associate companies are initially recorded at cost. Subsequent to initial recognition, the investment in the associate is carried at fair value as an available for sale financial asset in accordance with the accounting policy on financial assets. If fair value cannot be measured reliably, the investment is carried at cost. An appropriate provision is made where there is considered to be a permanent diminution in the value of the investment.

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1.5 Impairment of assetsAn impairment loss on an asset or cash-generating unit is the amount by which the carrying amount, i.e. the amount recognised on the balance sheet after deducting any accumulated depreciation and accumulated impairment losses, exceeds its recoverable amount. The recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use. Value in use is the present value of future cash flows expected to be derived from an asset or cash-generating unit.

At each reporting date the carrying amount of the tangible and intangible assets are assessed to determine whether there is any indication that those assets may have suffered an impairment loss. If any such indication exists, the recoverable amount of the cash-generating unit to which the asset belongs is estimated. Value in use is estimated taking into account future cash flows, forecast market conditions and the expected useful lives of the assets.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amountisreducedtothehigherofitsrecoverableamountandzero.Impairmentlossesarerecognisedinprofitorloss.Theloss is first allocated to reduce the carrying amount of goodwill and then to the other assets of the cash-generating unit.

Subsequent to the recognition of an impairment loss, the depreciation or amortisation charge for the asset is adjusted to allocate its remaining carrying value, less any residual value, over its remaining useful life.

If an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, limited to the carrying amount that would have been recognised had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised in profit or loss. Impairments to goodwill are not reversed in subsequent accounting periods.

1.6 Financial instrumentsClassification

The group classifies financial assets and financial liabilities into the following categories:• Financial assets at fair value through profit or loss - designated• Held-to-maturityinvestment• Loans and receivables• Available-for-sale financial assets

Classificationdependsonthepurposeforwhichthefinancialinstrumentswereobtained/incurredandtakesplaceatinitialrecognition. Classification is re-assessed on an annual basis, except financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category.

initial recognition and measurement

Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments.

The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available for sale financial assets.

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.

Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss.

subsequent measurement

Financial instruments at fair value through profit or loss are subsequently measured at fair value, with gains and losses arising from changes in fair value being included in profit or loss for the period.

Net gains or losses on the financial instruments at fair value through profit or loss include interest.

Dividend income is recognised in profit or loss as part of other income when the group’s right to receive payment is established.

Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses.

Held-to-maturity investments are subsequently measured at amortised cost, using the effective interest method, lessaccumulated impairment losses.

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Available for sale financial assets are subsequently measured at fair value. This excludes equity investments for which a fair value is not determinable, which are measured at cost less accumulated impairment losses.

Gains and losses arising from changes in fair value are recognised directly in equity until the asset is disposed of or determined to be impaired. Interest on available for sale financial assets calculated using the effective interest method is recognised in profit or loss as part of other income. Dividends received on available for sale equity instruments are recognised in profit or loss as part of other income when the group’s right to receive payment is established.

Commitments

Loansapprovedandnotyetdisbursedaredisclosedascommitmentsinnote35.

impairment of financial assets

At each statement of financial position date the group assesses all financial assets, other than those at fair value through profit or loss, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.

For amounts due to the group, significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default of payments are all considered indicators of impairment.

Impairment losses are recognised in profit or loss, except for available-for-sale equity investments.

Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date that the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.

Reversalsofimpairmentlossesarerecognisedinprofitorlossexceptforequityinvestmentsclassifiedasavailableforsale.

Impairment losses are also not subsequently reversed for available-for-sale equity investments which are held at cost because fair value was not determinable.

loans to (from) group companies

These include loans to and from holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs.

Loans to group companies are classified as loans and receivables.

Loans from group companies are classified as financial liabilities measured at amortised cost.

investments

All investments are initially recognised at cost. After initial recognition, investments are measured at their fair values, without any deduction for transaction costs that may be incurred on sale or disposal.

Unlisted investments are stated at cost, less amounts written off to give recognition to a permanent decline in value, and profits and losses are recognised on realisation. The classification as investment is determined by the intention to keep the investment on a long-term basis.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that thedebtorwillenterbankruptcyorfinancial reorganisation,anddefaultordelinquency inpayments (more than30days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in the income statement.

Trade and other receivables are classified as loans and receivables.

Trade and other payables

Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

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Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value.

bank overdraft and borrowings

Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs.

derivatives

Derivative financial instruments, which are not designated as hedging instruments, consisting of foreign exchange contracts and interest rate swaps, are initially measured at fair value on the contract date, and are re-measured to fair value at subsequent reporting dates.

Derivatives embedded in other financial instruments or other non-financial host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contract and the host contract is not carried at fair value with unrealised gains or losses reported in profit or loss.

Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.

Derivatives are classified as financial assets at fair value through profit or loss - held for trading.

1.7 Share capital and equityOrdinary share capital, preference share capital or any financial instrument issued by the group is classified as equity when:• Payment of cash, in the form of a dividend or redemption, is at the discretion of the group;• The instrument does not provide for the exchange of financial instruments under conditions that are potentially

unfavourable to the group;• Settlement in the group’s own equity instruments is for a fixed number of equity instruments at a fixed price; and• The instrument represents a residual interest in the assets of the group after deducting all of its liabilities.

The group’s ordinary share capital is classified as equity.

Consideration paid or received for equity instruments is recognized directly in equity. Equity instruments are initiallymeasured at the proceeds received less incremental directly attributable issue costs. No gain is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s equity instruments.

When the group issues a compound instrument, i.e. an instrument that contains both a liability and equity component, the equity component is initially measured at the residual amount after deducting from the fair value of the compound instrument the amount separately determined for the liability component. Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components of the instrument in proportion to the allocation of proceeds.

Distributions to holders of equity instruments are recognised as dividends within equity in the period in which they are payable. Dividends for the year that are declared after the balance sheet date are disclosed in the notes.

1.8 Government grants and deferred incomeGovernment includes government agencies and similar bodies whether local, national or international. Government assistance is action by government designed to provide an economic benefit specific to an entity or range of entities qualifying under certain criteria. A government grant is assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from normal trading transactions of the entity.

When the conditions attaching to government grants have been met and the grants have been received, they are recognised in profit or loss on a systematic basis over the periods necessary to match them with the related costs. When they are for expenses or losses already incurred, they are recognised in profit or loss immediately. The unrecognised portion of project spend at the balance sheet date is presented as deferred income. No value is recognised for other government assistance

Government grants are recognised when there is reasonable assurance that:• the group will comply with the conditions attaching to them; and• the grants will be received.

Government grants are recognised as income over the periods necessary to match them with the related costs that they are intended to compensate.

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A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable.

Government grants related to assets, including non- monetary grants at fair value, are presented in the statement of financial position by setting up the grant as deferred income.

1.9 ProvisionsProvisions are recognised when:• the group has a present obligation as a result of a past event;• it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and• a reliable estimate can be made of the obligation.

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision.

Provisions are not recognised for future operating losses.

When the Group has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.

Contingentassetsandcontingentliabilitiesarenotrecognised.Contingenciesaredisclosedinnote28.

1.10 RevenueRevenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableandrepresentstheamountsreceivableforgoods, services and operating lease income provided in the normal course of business, net of value added tax.

Interest is recognised, in profit or loss, using the effective interest rate method.

Operating lease income is recognised as income on a straight-line basis over the lease term or another systematic basis, if more representative of the time pattern of the user’s benefit.

Dividends are recognised, in profit or loss, when the Group’s right to receive payment has been established.

1.11 Employee benefitsshort-term employee benefits

Employee benefits cost include all forms of consideration given in exchange for services rendered by employees. The cost of providing employee benefits is recognised in profit or loss in the period they are earned by employees. The cost of short-term employee benefits is recognised in the period in which the service is rendered and is not discounted.

The expected cost of short-term accumulating compensated absences is recognised as an expense as the employees render service that increases their entitlement or, in the case of non-accumulating absences, when the absences occur. The expected cost of performance bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Post-employment benefit obligations

The cost of providing defined benefits is determined using the projected unit credit method. Valuations are conducted annually. The amount recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses.

defined contribution plans

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined contribution plans where the group’s obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan.

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defined benefit plans

For defined benefit plans the cost of providing the benefits is determined using the projected unit credit method.

Actuarial valuations are conducted on an annual basis by independent actuaries separately for each plan.

Consideration is given to any event that could impact the funds up to the end of the reporting period where the interim valuation is performed at an earlier date.

Past service costs are recognised immediately to the extent that the benefits are already vested and are otherwise amortised on a straight line basis over the average period until the amended benefits become vested.

To the extent that, at the beginning of the financial year, any cumulative unrecognised actuarial gain or loss exceeds ten percent of the greater of the present value of the projected benefit obligation and the fair value of the plan assets (the corridor), that portion is recognised in profit or loss over the expected average remaining service lives of participating employees. Actuarial gains or losses within the corridor are not recognised.

Actuarial gains and losses are recognised in the year in which they arise, in other comprehensive income.

Gains or losses on the curtailment or settlement of a defined benefit plan is recognised when the group is demonstrably committed to curtailment or settlement.

When it is virtually certain that another party will reimburse some or all of the expenditure required to settle a defined benefit obligation, the right to reimbursement is recognised as a separate asset. The asset is measured at fair value. In all other respects, the asset is treated in the same way as plan assets. In profit or loss, the expense relating to a defined benefit plan is presented as the net of the amount recognised for a reimbursement.

The amount recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service costs and reduces by the fair value of plan assets.

Any asset is limited to unrecognised actuarial losses and past service costs, plus the present value of available refunds and reduction in future contributions to the plan.

1.12 LeasesA lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Finance leases – lessee

Finance leases are recognised as assets and liabilities in the balance sheet at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is the company’s incremental borrowing rate.

The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance of the liability.

Operating leases - lessor

Operating lease income is recognised as an income 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 the leased asset and recognised as an expense over the lease term on the same basis as the lease income.

Income for leases is disclosed under revenue in the income statement.

Operating leases – lessee

Rentalspayableunderoperatingleasesarerecognisedinprofitorlossonastraight-linebasisoverthetermoftherelevantlease, or another basis if more representative of the time pattern of the Group’s benefit. Any contingent rents are expensed in the period they are incurred.

Minimumleasepaymentsdueinthenext12monthstofiveyearsaredisclosedascommitmentsinnote36.

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1.13 TaxCurrent tax

The charge for current tax is based on the results for the year as adjusted for income that is exempt and expenses that are not deductible using tax rates that are applicable to the taxable income.

deferred tax

A deferred tax asset is the amount of income taxes recoverable in future periods in respect of deductible temporary differences, the carry forward of unused tax losses and the carry forward of unused tax credits.

A deferred tax asset is only recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised, unless specifically exempt. It is measured at the tax rates that have been enacted or substantially enacted at the statement of financial position and is not discounted.

A deferred tax liability is recognised for taxable temporary differences, unless specifically exempt, at the tax rates that have been enacted or substantially enacted at the statement of financial position date and is not discounted. A deferred tax liability is the amount of income taxes payable in future periods in respect of taxable temporary differences. Temporary differences are differences between the carrying amount of an asset or liability and its tax base.

Deferred tax arising on investments in subsidiaries, associates and joint ventures is recognised except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred tax asset is recognised for the carry forward of unused tax losses and unused STC credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused STC credits can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the statement of financial position date.

1.14 Key assumptions concerning the future and key sources of estimationThe consolidated Annual Financial Statements are prepared in accordance with and comply with International Financial ReportingStandards (IFRS)and its interpretationsadoptedby theAccountingPracticesBoard. In thepreparationof theconsolidated Annual Financial Statements the Corporation has assumed certain key sources of estimation in recording various assets and liabilities, as set out below.

Credit impairment of loans and advances

The Group adopted an incurred-loss approach to impairment in accordance with accounting policy 1.5. Impairment losses are incurred only if there is objective evidence of impairment as a result of one or more past events that has occurred since initial recognition. This necessitates the establishment of ‘impairment triggers’ on the occurrence of which an impairment loss may be recognised.

Credit impairment is based on discounted estimated future cashflows on an asset or group of assets, where such objective evidence of impairment exists. The discount rates used to calculate the recoverable amount exclude consideration of any anticipated future credit losses.

Thegrouphascreatedaportfolioprovisionforincurredbutnotreported(IBNR)losses.ThepurposeoftheIBNRprovisionis to allow for latent losses on a portfolio of loans and advances that have not yet been individually evidenced. Generally, a period of time will elapse between the occurrence of an impairment event and objective evidence of the impairment becomingevident,whichisknownasthe‘emergenceperiod’.TheIBNRprovisionisbasedontheprobabilitythatloansthatare ostensibly performing at the calculation date are impaired, and objective evidence of that impairment becomes evident during the emergence period.

The implementation of these principles is at a corporation level and will be specific to the nature of their individual loan portfolios and the loan loss data available to the lending division.

Provisions, contingent liabilities and contingent assets

Provisions

Provisions are recognised when:• TheCorporationhasapresentlegalorconstructiveobligationasaresultofpastevents.• Itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation.• Areliableestimateoftheobligationcanbemade.

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Provisions are measured at the present value of expenditure expected to be required to settle the obligation using pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. Provisions are not recognised for future operating losses. The increase in the provision due to passage of time is recognised as interest expense.

Contingent liabilities

Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the occurence or non-occurence of one or more uncertain future events not wholly within the control of the Group. The group, in the ordinary course of business, enters into transactions that expose the group to tax, legal and business risks. Contingent liabilities are not recognised in the Statement of Financial Position but are disclosed in the notes to achieve fair presentation. Refertonote36.

Contingent assets

Contingent assets are disclosed where an inflow of economic benefits is probable. When the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate. Refer to note 36 for furtherinformation on contingent assets.

Fair value of investment Properties

Forvaluationmethodologiesutilisedtofairvalueinvestmentproperties.Refertonote2.

unlisted investment valuations

The valuation of unlisted investments is based on the discounted free cash flows of the investments taking into account the projected future activities of the entity. These values are established either by independent valuers or management and are reviewed by the Development Investment Committee.

1.15 Interest bearing borrowing and borrowing costsInterest bearing borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows:• Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any temporary

investment of those borrowings.• Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of

obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred.

The capitalisation of borrowing costs commences when:• expenditures for the asset have occurred;• borrowing costs have been incurred, and• activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended during extended periods in which active development is interrupted.

Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

1.16 Intangible assetsComputer software

Acquired computer software licences are capitalised on the basis of costs incurred to acquire and bring to use the specific software. The cost of minor software and licences are recognised in the Statement of Financial Performance as an expense when incurred.

subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in the Statement of Financial Performance as an expense when incurred.

ACCOuNTiNG POliCies


Amortisation

Amortisation is charged to the Statement of Financial Performance on a straight - line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for sale.

The estimated useful lives are as follows:item useful lifeComputer software, other 1 - 5 years

1.17 InventoriesInventories are measured at the lower of cost and net realisable value.

Inventories are measured at the lower of cost and net realisable value on the first-in-first-out basis.

1.18 Non-current assets held for saleNon- current assets are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets held for sale (or disposal group) are measured at the lower of its carrying amount and fair value less costs to sell.

A non -current asset is not depreciated (or amortised) while it is classified as held for sale, or while it is part of a disposal group classified as held for sale.

1.19 Fruitless and wasteful expenditureFruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised.

All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of comprehensive income in the year that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.

1.20 Irregular expenditureIrregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, includinga) PFMA, orb) any provincial legislation providing for procurement procedures in that provincial government.

NationalTreasurypracticenoteno.4of2008/2009whichwasissuedintermsofsections76(1)to76(4)ofthePFMArequiresthefollowing(effectivefrom1April2008):

Irregular expenditure that was incurred and identified during the current financial and which was condoned before year endand/orbeforefinalisationofthefinancialstatementsmustalsoberecordedappropriatelyintheirregularexpenditureregister. In such an instance, no further action is also required with the exception of updating the note to the financial statements.

Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being awaited at year end must be recorded in the irregular expenditure register. No further action is required with the exception of updating the note to the financial statements. Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned.

Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accounting authority may write off the amount and disclose such in the relevant note to the financial statements. The irregular expenditure register must also be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto must remain against the relevant expenditure item, be disclosed as such in the note to the financial statements and updated accordingly in the irregular expenditure register.

ACCOuNTiNG POliCies


Irregular expenditure is expenditure that is contrary to the Act or is in contravention of the economic entity’s supply chain management policy. Irregular expenditure excludes unauthorised expenditure. Irregular expenditure is accounted for as expenditure in the Statement of Financial Performance and where recovered, it is subsequently accounted for as revenue in the Statement of Financial Performance.

1.21 Related partiesThe ECDC operates in an economic environment together with other entities directly or indirectly owned by the Eastern Cape government. Only parties within the provincial sphere of government will be considered to be related parties.

Key management is defined as individuals with the authority and responsibility for planning, directing and controlling the activities of the entity. All individuals from the level of executive management up to the Board of Directors are regarded as key management per the definition of the standard.

OtherrelatedpartytransactionsarealsodisclosedintermsoftherequirementsofIAS24.

ACCOuNTiNG POliCies



Notes to the Consolidated Annual Financial Statements

2. property,plantandequipment

Group

2018 2017Cost

/ValuationAccumulateddepreciation

Carrying value

Cost /Valuation

Accumulateddepreciation

Carrying value

Land 4465 - 4465 4465 - 4465Buildings and infrastructure 58703 (13668) 45035 58703 (13045) 45658Finance lease asset 1653 (1545) 108 1603 (1596) 7Plant and machinery 201 (48) 153 835 (251) 584Furniture and fixtures 3293 (2783) 510 3315 (2624) 691Motor vehicles 184 (184) - 184 (184) -Office equipment 2240 (1244) 996 1106 (773) 333IT equipment 10817 (9966) 851 10805 (9996) 809Other property, plant and equipment 1864 (1 777) 87 2082 (1976) 106

Total 83 420 (31 215) 52 205 83 098 (30 445) 52 653

2016

GroupCost

/ValuationAccumulateddepreciation

Carrying value

Land 4465 - 4465Buildings and infrastructure 55188 (12438) 42750Finance lease asset 1603 (1073) 530Plant and machinery 11543 (4281) 7262Furniture and fixtures 3490 (2462) 1028Motor vehicles 2 552 (1141) 1411Office equipment 734 (603) 131IT equipment 10767 (9918) 849

Other property, plant and equipment 2301 (2 021) 280Total 92 643 (33 937) 58 706

NOTes TO The CONsOlidATed ANNuAl FiNANCiAl sTATeMeNTs


Company 2018Cost /

ValuationAccumulateddepreciation Carrying value

Land 3265 - 3265Buildings and infrastructure 31183 (10619) 20564Leasehold property 1523 (1523) -Furniture and fixtures 3113 (2641) 472Motor vehicles 184 (184) -Office equipment 1958 (979) 979IT equipment 10302 (9 511) 791

Other property, plant and equipment 1864 (1 777) 87

Total 53 392 (27 234) 26 158

Company 2017Cost /


Land 3265 - 3265Buildings and infrastructure 31183 (9996) 21187Leasehold property 1523 (1523) -Furniture and fixtures 3014 (2421) 593Motor vehicles 184 (184) -Office equipment 1 029 (632) 397IT equipment 10 129 (9402) 727

Other property, plant and equipment 1766 (1766) -

Total 52 093 (25 924) 26 169

Company 2016Cost /


Land 3265 - 3265Buildings and infrastructure 26468 (9389) 17 079Leasehold property 1523 (1016) 507Furniture and fixtures 2984 (2206) 778Motor vehicles 184 (184) -Office equipment 655 (542) 113IT equipment 9854 (9076) 778

Other property, plant and equipment 1766 (1764) 2

Total 46 699 (24 177) 22 522



Reconciliation of property, plant and equipmentGroup - 2018

Openingbalance Additions Disposals

Other changes,

movements Depreciation TotalLand 4465 - - - - 4465Buildings and infrastructure 45658 - - - (623) 45035Finance lease asset 7 130 (4) (1) (24) 108Plant and machinery 584 175 (319) - (287) 153Furniture and fixtures 691 105 (22) 5 (269) 510Office equipment 333 986 - 59 (382) 996IT equipment 809 605 (30) 10 (543) 851Other property, plant and equipment

106 98 (11) (83) (23) 87

52 653 2 099 (386) (10) (2 151) 52 205


Openingbalance Additions Disposals Revaluations

Other changes,

movements Depreciation TotalLand 4465 - - - - - 4465Buildings and infrastructure 42750 2 700 - 815 - (607) 45658Finance lease asset 530 - - - - (523) 7Plant and machinery 7262 644 - - (7 127) (195) 584Furniture and fixtures 1028 45 - - (112) (270) 691Motor vehicles 1411 - - - (1411) - -Office equipment 131 461 (2) - (58) (199) 333IT equipment 849 518 (8) - (18) (532) 809Other property, plant and equipment

280 23 - - (184) (13) 106

58 706 4 391 (10) 815 (8 910) (2 339) 52 653



Classified as

held for sale Transfers Revaluations

Other changes,

movements Depreciation TotalLand 4315 - - - - 150 - - 4465Buildings and infrastructure

48943 - - - (4300) - (802) (1 091) 42750

Finance lease asset

1054 - - - - - - (524) 530

Plant and machinery

22491 147 - (14575) - - - (801) 7262

Furniture and fixtures

908 386 - (17) - - - (249) 1028

Motor vehicles 1615 - - (12) - - - (192) 1411Office equipment 138 50 - (8) - - - (49) 131IT equipment 684 703 (21) (15) - - - (502) 849Leasehold improvements

13777 - - (13777) - - - - -

Other property, plant and equipment

503 11 - (162) - - - (72) 280

94 428 1 297 (21) (28 566) (4 300) 150 (802) (3 480) 58 706



Reconciliation of property, plant and equipment Company - 2018

Openingbalance Additions

Other changes,

movements Depreciation TotalLand 3265 - - - 3265Buildings and infrastructure 21187 - - (623) 20564Furniture and fixtures 593 99 - (220) 472Office equipment 397 969 (21) (366) 979IT equipment 727 556 13 (505) 791Other property, plant and equipment - 98 - (11) 87

26 169 1 722 (8) (1 725) 26 158


Openingbalance Additions Disposals Revaluations

Other changes,

movements Depreciation TotalLand 3265 - - - - - 3265Buildings and infrastructure 17 079 2 700 - 2 015 - (607) 21187Leasehold property 507 - - - - (507) -Furniture and fixtures 778 30 - - - (215) 593Office equipment 113 366 (2) - 22 (102) 397IT equipment 778 413 (7) - (22) (435) 727

Other property, plant and equipment 2 - - - - (2) -22 522 3 509 (9) 2 015 - (1 868) 26 169



Other changes,

movements Depreciation TotalLand 3265 - - - - 3265Buildings and infrastructure 18972 - - (802) (1 091) 17 079Leasehold property 1 015 - - - (508) 507Furniture and fixtures 702 265 - - (189) 778Office equipment 97 50 - - (34) 113IT equipment 405 704 (15) - (316) 778

Other property, plant and equipment 5 - - - (3) 224 461 1 019 (15) (802) (2 141) 22 522

Property, plant and equipment encumbered as security

Registerscontainingdetailsoffinanceleaseassetsandproperty,plantandequipment,includingdetailsofanyencumbrances,are kept at the registered offices of the companies concerned. There are no restrictions on the title to the property, plant and equipment.Thefollowingassetshavebeenencumberedassecurityforthesecuredlong-termborrowings16&21:

2 018 2 017 2 016 - - -

Finance lease asset 108 7 23 - - -

Revaluations

The group’s land and buildings are stated at revalued amounts, being the fair value at the date of revaluation, less any subsequentaccumulateddepreciationandaccumulatedimpairmentlosses.Revaluationsareperformedevery3yearsandin intervening years if the carrying amount of the land and buildings differs materially from their fair value.

Thefairvaluemeasurementsasof31March2018areperformedbyindependentvaluersnotrelatedtothegroupwhohavethe appropriate qualifications and experience in the fair value measurement of properties in the relevant locations.

2018 2017 2016 2018 2017 2016

Office Buildings 12652 21 772 24764 12065 9 729 14523

12 652 21 772 24 764 12 065 9 729 14 523



3. investmentproperty

Group

2018 2017Cost /

ValuationAccumulateddepreciation

Carrying value

Cost /Valuation


Carrying value

Investment property 1377581 - 1377581 1237236 - 1237236

Group

2016Cost /


Carrying value

Investment property 1131893 - 1131893

Company

2018 2017Cost /


Carrying value

Cost /Valuation


Carrying value

Investment property 1322924 - 1322924 1166429 - 1166429

Company

2016Cost /


Carrying value

Investment property 1066343 - 1066343

Reconciliation of investment property Group - 2018

Openingbalance Additions Disposals Transfers

Fair valueadjustments Total

Investment property 1237236 9 050 (7063) 1680 136678 1377581


Openingbalance Additions Disposals Transfers


Investment property 1131893 3706 (13339) 1940 113036 1237236


Openingbalance Disposals

Classified as

held for sale Transfers


Investment property 929461 (9196) (4741) 4300 212069 1131893

Reconciliation of investment property Company - 2018

Openingbalance Disposals Transfers

Other changes,

movementsFair value

adjustments TotalInvestment property 1166429 (7063) 1680 20 050 141828 1322924


Openingbalance Disposals Transfers


Investment property 1066343 (12840) 1940 110986 1166429


Openingbalance Disposals

Classified as

held for sale


Investment property 874361 (9196) (4741) 205 919 1066343

The Corporation undertook a process of ensuring the completeness of investment properties in the register. This process identifiedpropertieswithafairvalueofR41,996millionthatwerenotintheregister.Theimpactofthisprocessresultedinachange in Fair value adjustments for the previous years as disclosed in the reconciliation note above.

AfurtherportfolioofInvestmentpropertiesworthR15,052millionhasbeenidentifiedasbeingregisteredinthenameoftheECDC.However,managementhasdeemeditprudenttoinvestigatethesepropertiestoconfirmcontroloverthem.Thesehavebeendisclosedascontingentassetsinnote36.

InvestmentpropertiesworthR20,050millionthatwerepreviouslyownedbyTransido(SOC)LtdandTDCPropertyInvestments(SOC) Ltd have been transferred to the ECDC. This is included in “other changes” in the note above.



These properties are situated throughout the Eastern Cape, with the majority concentrated in the areas in and surrounding King SabataDalindyebo,Mnquma,BuffaloCity andChrisHanimunicipalities.The portfolio consistsmainly of industrial,residentialandcommercialproperties.Registerswithdetailsofeachpropertyareavailableforinspectionbyshareholdersor their duly authorised representatives at the registered office of the Corporation.

Amounts recognised in profit and loss for the year

Rentalincomefrominvestmentproperty (86534) (83424) (78420) (74349)Direct operating expenses from rental generating property 41812 51 171 41812 51 171Direct operating expenses from non-rental generating property 24255 30485 16454 24255

(20 467) (1 768) (20 154) 1 077

4.intangibleassets

Group

2018 2017Cost /

ValuationAccumulatedamortisation

Carrying value

Cost /Valuation

Accumulatedamortisation

Carrying value

Computer software 4356 (4152) 204 4438 (4084) 354

Group

2016Cost /


Carrying value

Computer software 4695 (4118) 577

Company

2018 2017Cost /


Carrying value

Cost /Valuation

Accumulatedamortisation

Carrying value

Computer software 4274 (4116) 158 4248 (3941) 307

Company

2016Cost /


Carrying value

Computer software 4231 (3756) 475

Reconciliation of intangible assetsGroup - 2018


Amortisationand impairment Total

Computer software 354 114 (264) 204

Reconciliation of intangible assetsGroup - 2017


Other changes,

movementsAmortisation

and impairment TotalComputer software 577 83 (340) 340 (306) 354

Reconciliation of intangible assets Group - 2016


Other changes,

movementsAmortisation

and impairment TotalComputer software 318 537 (13) (265) 577

Reconciliation of intangible assets Company - 2018

Openingbalance Additions Amortisation Total










5.interestsinsubsidiariesincludingconsolidatedstructuredentitiesThe following table lists the entities which are controlled by the Group, either directly or indirectly through subsidiaries.

Carryingamount 2018

Carryingamount 2017

Carryingamount 2016

Various subsidiaries listed in note 7 24341 24341 24342Impairment of investment in subsidiaries (1330) (1330) (1330)

23011 23011 23012

6.investmentsinassociatesThegroupholdsa49.95% (2017:49.95%) interest inMthathaHotel (Pty) Ltd,ofwhich9.95% isheldby theCorporation.MthathaHotel(Pty)LtdistheoperatingcompanyoftheMthathaHolidayInn,whosebusinessisconductedinabuildingowned by Transdev (SOC) Ltd, a wholly-owned subsidiary of the ECDC.

Group

Name of company

%ownership

interest2018

%ownership

interest2017

%ownership

interest2016

Carryingamount

2018

Carryingamount

2017

Carryingamount

2016MthathaHotel(Pty)Ltd Transkei Share

Investment CompanySOC Ltd

40.00% 40.00% 40.00% 24722 23623 21 270

MthathaHotel(Pty)Ltd Eastern CapeDevelopmentCorporation

9.95% 9.95% 9.95% 6387 6113 5528

31 109 29 736 26 798

Summarised financial information of material associates

Summarised Statement of Profit or Loss and Other Comprehensive Income

2018 2017 2016Revenue 40751 46354 43795

Other income and expenses (38003) (40500) (38003)Profit for the period 2748 5854 5 792

Summarised Statement of Financial Position

2018 2017 2016AssetsNon-current 9877 10137 10355Current 57838 56269 50442Total Assets 67 715 66 406 60 797

liabilitiesNon-current 1306 1289 1334Current 4516 5 972 6172Total liabilities 5 822 7 261 7 506

Total net assets 61 893 59 145 53 291

ASSOCIATES NOT EQUITY ACCOUNTED FOR

TheEasternCapeDevelopmentCorporation(ECDC)holds42%inWorthytrade93(Pty)Ltd,whichwasgranteda loanbyECDC to invest in a new venture. Worthytrade could not source adequate capital to commence with operations, therefore the company never commenced with trading.



7.loansto(from)groupcompanies-subsidiariesWindsor hotel (sOC) limited - - - 734 742 919The loan is interest free and has no fixed terms of repaymentAidC development Centreeastern Cape (sOC) limited

- - - 2 000 2 000 2 000

The loan is interest-free and has no fixed terms of repaymentMagwa enterprise Tea (Pty) ltd - 5585 - - 5585 5584The loan is interest-free and has no fixed terms of repaymentOceanwise (Pty) ltd - - 13762 - - 13762Theloanisrepayableat8.25%overaperiodofsevenyearsanddetails of security are contained in the loan agreementCentre for investment and Marketing in the eastern Cape (CiMeC) - - - 18952 17874 15372The loan is interest-free and has no fixed terms of repaymentTransido (sOC) limited - - - - 78160 78137The loan is interest-free and has no fixed terms of repaymentTranskei share investment (sOC) limited - - - (15584) (15608) (15635)The loan is interest-free and has no fixed terms of repaymentTdC Property investments (sOC) limited - - - - (1931) (1861)Transdev Properties (sOC) limited - - - (36985) (42212) (40417)The loan is interest-free and has no fixed terms of repayment

- 5585 13762 (30883) 44610 57861Impairment of loans to subsidiaries - (5585) (13762) (2 000) (77073) (90835)

- - - (32 883) (32 463) (32 974)

The shareholding in Magwa Enterprise Tea (Pty) Ltd has been transferred to the Eastern Cape Department of RuralDevelopmentandAgrarianReform,witheffect from01April2017.The loantoMagwaEnterpriseTea (Pty)Ltdhasbeenwritten off.

The Eastern Cape Provincial Planning and Treasury instructed the Eastern Cape Development Corporation to deregister some of its subsidiaries and associate entities. Transido SOC Limited, being one of these is in the process of deregistration, as such the loan to Transido SOC Limited has been written off and the related impairment provision has been reversed.

AssOCiATes

Worthytrade 93 (Pty) lTd 4333 4333 4333 4333 4333 4333The loan is interest free and has no fixed terms of repayment

4333 4333 4333 4333 4333 4333Impairment of loans to associates (4333) (4333) (4333) (4333) (4333) (4333)

- - - - - -

TheEasternCapeDevelopmentCorporation(ECDC)holds42%inWorthytrade93(Pty)Ltd,whichwasgranteda loanbyECDC to invest in a new venture. Worthytrade could not source adequate capital to commence with operations, therefore the company never commenced with trading.

Non-current assets - - - 19686 27288 24939Non-current liabilities - - - (52569) (59 751) (57913)

- - - (32 883) (32 463) (32 974)



8. investmentsAt fair value through profit or loss - designatedListed shares 3728 3007 3298 - - -

Available for saleUnlisted shares 16500 16500 23500 16500 16500 23500

held to maturityFixed term Investments 48902 48902 48902 48902 48902 48902Other financial assets 21206 21 079 20961 21206 21 079 20961

70108 69981 69863 70108 69981 69863Heldtomaturity(impairments) (61409) (61409) (61409) (61409) (61409) (61409)

8 699 8 572 8 454 8 699 8 572 8 454Total investments 28 927 28 079 35 252 25 199 25 072 31 954

Non-current assetsDesignated as at FV through 3728 3007 3298 - - -profit (loss) (FV through income)Available-for-sale 16500 16500 23500 16500 16500 23500Heldtomaturity 8699 8572 8454 8699 8572 8454

28 927 28 079 35 252 25 199 25 072 31 954

Fair value hierarchy of financial assets at fair value through profit or loss

For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of the inputs used to make the measurements.

level 1Listed shares 3728 3007 3298 - - -

Cash and cash equivalents 197404 182557 270735 171740 155417 247000201 132 185 564 274 033 171 740 155 417 247 000

level 3Investment securities 8699 8572 8454 8699 8572 8454Loans and receivables 88651 137418 123484 86203 135211 117 952Investments in subsidiaries - - - 23011 23011 23012Investments in associates 31109 29736 26798 - - -

128 459 175 726 158 736 117 913 166 794 149 418



Reconciliation of financial assets at fair value through profit or loss measured at level 3 - Group - 2018

Openingbalance

Gains (losses)in profit or

loss

Advances,rentals andCollections Issues

Closingbalance

Investment securities 8572 127 - - 8699Loans and receivables 137418 (51 759) 2 992 - 88651Investments in associates 29736 1374 - (1) 31109

175 726 (50 258) 2 992 (1) 128 459


Openingbalance


loss

Advances,rentals andCollections

Closingbalance

Investment securities 8454 118 - 8572Loans and receivables 123484 (51064) 64998 137418Investments in associates 26798 2938 - 29736

158 736 (48 008) 64 998 175 726


Openingbalance


loss


Disposal of asubsidiary

Closingbalance

Investment securities 8357 97 - - 8454Loans and receivables 127821 33750 (36858) (1 229) 123484Investments in associates 23919 2879 - - 26798

160 097 36 726 (36 858) (1 229) 158 736

Reconciliation of financial assets at fair value through profit or loss measured at level 3 - Company - 2018

Openingbalance


loss


Closingbalance

Investment securities 8572 127 - 8699Loans and receivables 135211 (57189) 8181 86203Investments in subsidiaries 23011 - - 23011

166 794 (57 062) 8 181 117 913


Openingbalance


loss


Closingbalance

Investment securities 8454 118 - 8572Loans and receivables 117 952 (51 009) 68268 135211Investments in subsidiaries 23012 (1) - 23011

149 418 (50 892) 68 268 166 794


Openingbalance


loss


Closingbalance

Investment securities 8357 97 - 8454Loans and receivables 122 022 (22 522) 18452 117 952Investments in subsidiaries 23012 - - 23012

153 391 (22 425) 18 452 149 418

Fair value hierarchy of available-for-sale financial assets

For financial assets recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of the inputs used to make the measurements.

level 3Unlisted shares 16500 16500 23500 16500 16500 23500



Reconciliation of available-for-sale financial assets measured at level 3 - Group - 2018

Openingbalance

Closingbalance

Investment securities 16500 16500

Reconciliation of available-for-sale financial assets measured at level 3 - Group - 2017

Openingbalance

Gains (losses)in other

comprehensiveincome

Closingbalance

Investment securities 23500 (7 000) 16500

Reconciliation of available-for-sale financial assets measured at level 3 - Group - 2016Openingbalance

Closingbalance


Reconciliation of available-for-sale financial assets measured at level 3 - Company - 2018Openingbalance

Closingbalance


Reconciliation of available-for-sale financial assets measured at level 3 - Company - 2017

Openingbalance

Gains (losses)in other

comprehensiveincome

Closingbalance

Investment in securities 23500 (7 000) 16500

Reconciliation of available-for-sale financial assets measured at level 3 - Company - 2016Openingbalance

Closingbalance

Investment in securities 23500 23500

The group has not reclassified any financial assets from cost or amortised cost to fair value, or from fair value to cost or amortised cost during the current or prior year.



9. Loans advancedloans advanced 242001 246661 303318 242001 246661 303143Impairment allowance (176810) (166667) (220600) (176810) (166667) (220600)

65 191 79 994 82 718 65 191 79 994 82 543loans advancedNon-current assets 38359 47083 45731 38359 47083 45663Current assets 26832 32911 36987 26832 32911 36880

65 191 79 994 82 718 65 191 79 994 82 543

Loans advanced are impaired in the event that the client has not paid three consecutive installments. Loans advanced are impaired based on the value of the collateral that is available as guided by the Loans Impairment Policy. The collateral is usually in the form of Personal Sureties, Mortgage Bonds, General and Special Notarial Bonds, Cession of Progress payments, Cession over loan accounts, shares, business rights and any other factors depending on the loan product and items that are being financed.

10. inventoryFinished goods - - 2033 - - -

11. trade and other receivablesTrade receivables 7246 7359 10583 5876 5891 6854Prepayments 70 19 1 107 - - 1030Deposits 37 30 62 - - -VAT 701 66 10 159 - - 10040Other receivable 15406 49606 18242 15136 49326 17485

23 460 57 080 40 153 21 012 55 217 35 409Trade receivablesGross receivables 335025 285943 249295 331743 284326 245091Impairment (327779) (278584) (238712) (325867) (278435) (238237)

7 246 7 359 10 583 5 876 5 891 6 854

12. Cash and cash equivalentsCash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. Cash and cash equivalents include cash on hand, bank deposits, investments in money market instruments and comprise:

Cash on hand 7 11 13 4 5 7Bank balances 41616 48038 62217 34620 33943 50626Short-term deposits 155781 134508 208505 137116 121469 196367

197 404 182 557 270 735 171 740 155 417 247 000



13. Discontinued operations or disposal groups or non-current assetsheld for saleThesharesinMagwaEnterpriseTea(Pty)LtdhavebeentransferredtotheEasternCapeDepartmentofRuralDevelopmentandAgrarianReform,witheffect from01April2017.TheCorporationhasdecidedtodiscontinue itsoperations in (statecompany or details). The assets and liabilities of the disposal group are set out below.

The Eastern Cape Marketing Authority and Mthatha Small Industries Complex have been deregistered, as such they were not includedintheGroupfiguresforthe2016/17financialyear.

statement of Comprehensive income

Revenue - - 1666 - - -Other income - 12637 144 - - -Finance costs - - (2778) - - -Operating expenses - (16275) (33299) - - -Investment revenue - 114 - - - -Net loss before tax - (3524) (34267) - - -Net loss after tax - (3524) (34267) - - -Fair value adjustments - - (8952) - - -Loss on biological assets and agricultural produce - - (10477) - - -

- (3 524) (53 696) - - -Non-current assets held for saleInvestment property - 4315 8985 - 4315 8985Magwa total assets - 9524 - - - -

- 13 839 8 985 - 4 315 8 985statement of Financial PositionProperty, plant and equipment - 7 959 2 101 - - -Biological assets - - 2739 - - -Share capital - - (10 000) - - -Cash and cash equivalents - 710 271 - - -Reserves - - (17409) - - -Accumulated loss - (4067) 103709 - - -Loans from shareholders: non- - (5385) (27018) - - -currentInterest bearing borrowings - - (44688) - - -Trade and other receivables - 855 478 - - -Finance lease obligation: current - - (4) - - -Inventory - - 510 - - -Trade and other payables - (72) (10689) - - -

- - - - - -liabilities of disposal groupsMagwa total liabilities - 5457 - - - -

Reconciliation of movementOpening balance 13839 8985 4245 4315 8985 4245Disposals (2635) (2730) - (2635) (2730) -Transfers (to) from Investment (1680) (1940) 4740 (1680) (1940) 4740propertiesMagwa net assets (9524) 9524 - - - -

- 13 839 8 985 - 4 315 8 985



14. Share capitalGroup Company

Figures in Rand thousand 2018 2017 2016 2018 2017 2016

Authorised50 billion Ordinary Type A shares of 1 cent each 500 000 500 000 500 000 500 000 500 000 500 00050 billion Ordinary Type B shares of 1 cent each 500 000 500 000 500 000 500 000 500 000 500 000

1 000 000 1 000 000 1 000 000 1 000 000 1 000 000 1 000 000

All shares issued are not transferable otherwise than by an Act of the Eastern Cape Provincial Parliament. The shares held by the State shall entitle it to a majority vote. No shares were issued during the year.

issued“A” shares of 1 cent each 213795 213795 213795 213795 213795 213795“B” shares of 1 cent each 213795 213795 213795 213795 213795 213795

427 590 427 590 427 590 427 590 427 590 427 590issuedReportedasat01April2017 427 590 427 590 427 590 427 590 427 590 427 590

15. ReservesPRe-iNCORPORATiON ReseRves

Pre-incorporation reserves represent the net book value of asset and liabilities transferred from previous corporations, adjusted for any changes in the value of these assets due to information which has been established during the current and prior years that refer to the value of assets taken over.

PROPeRTy, PlANT ANd eQuiPMeNT RevAluATiON ReseRve

These reserves relate to all fair value adjustments on office buildings that are directly recognised in equity.

FAiR vAlue AdjusTMeNT AvAilAble-FOR-sAle-AsseTs ReseRve

Fair value reserves comprise all fair value adjustments that are recognised directly in equity and / or transferred fromretained earnings. This represents an estimated fair value of the Corporation’s interest in Singisi Forest Products (Pty) Ltd.

Pre-incorporation reserve 384265 384265 384265 384265 384265 384265Property, plant and equipment 3609 3609 2794 4809 4809 2794(PPE) revaluation reserveFair value adjustment on available-for-sale reserve 15680 15680 22680 15680 15680 22680

403 554 403 554 409 739 404 754 404 754 409 739



16. Finance lease liabilitiesGroup Company

Figures in Rand thousand 2018 2017 2016 2018 2017 2016

Minimum lease payments due- within one year 31 12 601 - - 573- in second to fifth year inclusive 99 - 11 - - -

130 12 612 - - 573less: future finance charges (18) (1) (71) - - (65)Present value of minimumlease payments

112 11 541 - - 508

Present value of minimumlease payments due- within one year 24 11 530 - - 508- in second to fifth year inclusive 88 - 11 - - -

112 11 541 - - 508Non-current liabilities 88 - 11 - - -Current liabilities 24 11 530 - - 508

112 11 541 - - 508

It is group policy to lease certain equipment under finance leases.

Theaverageleasetermisthreeyearsandtheaverageeffectiveborrowingratewas6%(2017:19%;2016:25%)

Thegroup’sobligationsunderfinanceleasesaresecuredbythelessor’schargeovertheleasedassets.Refernote2.

17.RetirementbenefitobligationThe Company operates a medical aid defined benefit plan which provides post-employment medical benefits. The medical scheme provides retired employees with medical benefits. In terms of the plan, the Company is liable to the employees for specific payments on retirement for these benefits. The liabilities of these plans are reflected in the statement of financial position. The ECDC does not have specific assets set aside to prefund this liability.

Balance at beginning of the period (31565) (29923) (27 210) (31565) (29923) (27 210)Current service cost (1513) (1 501) (1237) (1513) (1 501) (1237)Interest (2862) (2808) (2293) (2862) (2808) (2293)Contributions 1073 618 518 1073 618 518Actuarial gains (losses) 520 2049 299 520 2049 299

(34 347) (31 565) (29 923) (34 347) (31 565) (29 923)

Changes in present valueOpening balance (31565) (29923) (27 210) (31565) (29923) (27 210)Contributions by members 1073 618 518 1073 618 518Net expense recognised in profit or loss (3855) (2260) (3231) (3855) (2260) (3231)

(34 347) (31 565) (29 923) (34 347) (31 565) (29 923)

Net expense recognised in the income statementCurrent service cost (1513) (1 501) (1237) (1513) (1 501) (1237)Interest (2862) (2808) (2293) (2862) (2808) (2293)Actuarial gains (losses) 520 2049 299 520 2049 299

(3 855) (2 260) (3 231) (3 855) (2 260) (3 231)



Figures in Rand thousandGroup Company

2018 2017 2016 2018 2017 2016

Healthcarecostinflation 7.26% 7.69% 8.47% 7.26% 7.69% 8.47%Discount rate used 8.79% 9.18% 9.49% 8.79% 9.18% 9.49%Present value of accrued liabilityActive members 22891 22183 21285 22891 22183 21285CAWMs liability 11456 9382 8638 11456 9382 8638

34 347 31 565 29 923 34 347 31 565 29 923expected future expenditureService cost 1536 1513 1 501 1536 1513 1 501Interest cost 2967 2862 2808 2967 2862 2808

4 503 4 375 4 309 4 503 4 375 4 309

effect of 1% change in assumed medical cost trend rates

It is the policy of the Corporation to provide retirement medical benefits to all its employees. Based on the actuarial valuation performedat31March2018assumptionsusedinthesensitivityanalysisareonepercentagevariationin:• Healthcarecostinflation• Mortality• Resignationrate

1%INCREASEeffectoncurrentservicecost&interestcost 788 804 675 788 804 675

1%INCREASEeffect on accumulated benefit obligation 5139 4924 4907 5139 4924 4907

1%DECREASEeffectoncurrentservicecost&interestcost (637) (646) (543) (637) (646) (543)

1%DECREASEeffect on accumulated benefit obligation (4251) (4072) (4022) (4251) (4072) (4022)

Mortality RatePre-expected retirement mortality SAB85-90 SAB85-90 SAB85-90 SAB85-90

(Light)-3 (Light)-3 (Light)-3 (Light)-3Post-expected retirement mortality PA(90) - 1 PA(90) - 1 PA(90) - 1 PA(90) - 1Retirementage 60years 60years 60years 60years

SAB85-90(Light)-3-ThisisatablethatreflectsthemortalityexperienceinSouthAfricarateddownbythreeyearsforfemales.PA(90)-1 -refers to standard actuarial mortality tables for current and prospective pensioners rated down by one year.

Five-year forecast 2018 2019 2020 2021 2022 2023Post retirement 31565 34347 37619 41220 45185 49551obligation at startInterest cost 2862 2967 3250 3563 3907 4286Service cost 1513 1536 1671 1818 1978 2 151Expected benefit payments (1073) (1231) (1320) (1416) (1 519) (1629)Actuarialgains/losses (520) - - - - -Post retirement obligation at end 34347 37619 41220 45185 49551 54359

18. Deferred incomeNon-current liabilities 269 806 379 - - -Current liabilities 140136 106329 136413 130517 94333 123901

140 405 107 135 136 792 130 517 94 333 123 901Analysis per group companyEastern Cape DevelopmentCorporation 130517 94333 123901 130517 94333 123901Automotive Industry 9888 12802 12891 - - -Development Centre - - - - - -

140 405 107 135 136 792 130 517 94 333 123 901

Government grants are deferred to the extent that they are un-spent. The Eastern Cape Development Corporation is responsible for the implementation of various projects on behalf of other government entities. Funds that have been receivedfortheseprojectsbutnotyetspentasat31Marchareclassifiedasdeferredincome.Therewerenounfulfilledconditions relating to the conditional government grants at year end.



19. Deferred tax and deferred tax liability


2018 2017 2016 2018 2017 2016

The deferred tax assets and the deferred tax liability relate to income tax in the same jurisdiction, and the law allows net settlement. Therefore, they have been offset in the statement of financial position as follows:

deferred tax asset / (liability) 307 (5) (22) - - -

Reconciliationofdeferredtaxasset/(liability)At beginning of year (5) (22) (16) - - -Reductionduetoratechange - - 11 - - -Increases in tax loss available for set off against future taxable income

(207) - - - - -

Taxable/(deductible)temporarydifferencemovement on property, plant and equipment

(40) - - - - -

Taxable/(deductible)temporarydifferences 109 17 (17) - - -Recognitionofprioryearunrecogniseddeferredtax asset

450 - - - - -

307 (5) (22) - - -

Recognition of deferred tax asset

In the prior and current year the company has realised a profit and the budget for the following financial year indicates the expectation of realising a profit, therefore the company is anticipating to utilise the deferred tax asset in the near future.

20. trade and other payablesTrade payables 323 1466 2960 306 1308 2760Amounts received in advance - - 4 - - -VAT 1 001 3194 25 742 2986 -Government funds 5108 6102 3448 5108 6102 3448Accrued leave pay 8501 7806 7260 8307 7602 7 117Accrued bonus 3908 2573 1335 3064 1 955 1335Other payables 61083 65793 74955 58467 65330 74394

79 924 86 934 89 987 75 994 85 283 89 054

21. interestbearingborrowingsheld at amortised cost

Development Bank of Southern Africa - - 235 - - 235

- - - - - -

- - 235 - - 235

Current liabilitiesAt amortisation cost - 235 - - 235



22. Revenue2018 2017 2018 2017

Renderingofservices 6999 9615 3034 3969Interest received on loans 12940 18177 12940 18177Rentalincome 86534 83324 78420 74249Interest on rent 29415 27082 29415 27082Settlement discount allowed (243) - (243) -

135 645 138 198 123 566 123 477

23. Other operating incomeAdministration and management fees received 22673 44968 23939 46330Commissions received 67 529 32 23Bad debts recovered 1865 6571 1865 6571Profit on disposal of assets - 615 - 605Sundry income 2859 2 555 16128 2 555

27 464 55 238 41 964 56 084

24. Government grantsUnconditional grants 120 709 122468 114284 114921Conditional grants released 47580 34175 35864 26943

168 289 156 643 150 148 141 864

25. Operatingprofit(loss)Operating loss for the year is stated after charging (crediting) the following, amongst others:

Group CompanyFigures in Rand thousand 2018 2017 2018 2017

Auditor’s remuneration - externalAudit fees 3991 3096 3770 2885employee costsSalaries, wages, bonuses and other benefits 156266 144175 142040 131324Directors expenses 2256 2696 2076 2605Long term service award 8 5 - -Retirementbenefitplans:definedcontributionexpense (1593) (2667) (1593) (2667)Total employee costs 156 937 144 209 142 523 131 262leasesOperating lease charges 5 250 5314 4367 4324Premises 1 017 375 1 017 359Equipment 6267 5689 5384 4683depreciation and amortisation 2 151 2338 1 725 1868Depreciation of property, plant and equipment 264 306 174 185Amortisation of intangible assets 2 415 2 644 1 899 2 053impairment lossesLoans advanced 10143 24264 10143 24264Trade and other receivables 47201 25403 47046 25403Loans advanced write off - 63414 - 63414Loans advanced impairment reversal - (63414) - (63414)Loans to group companies write off - - 75123 18931Loans to group companies impairment reversal (5585) - (75123) (18931)Loans to group companies impairment - - - 5169

51 759 49 667 57 189 54 836

In compliance with the Eastern Cape Provincial Treasury and Planning instruction to integrate subsidiaries into the ECDC, assetswithacombinedvalueofR20.05million,ownedbyTransidoSOCLtdandTDCPropertyInvestmentsSOCLtdhavebeen transferred to the ECDC. The ECDC has then agreed to write - off and release the subsidiaries from further indebtedness in the form of loans.



expenses by nature

The expenditure relating employee benefits, depreciation, amortisation and impairment, operating leases and other operating expenses are analysed by nature as follows:


2018 2017 2018 2017

Employee costs 156937 144209 142523 131262Operating lease charges 6267 5689 5384 4683Depreciation, amortisation and impairment 54174 52311 59088 56889Other expenses 185461 214617 169713 195073

402839 416826 376708 387907

26.investmentrevenuedividend income

From investments in financial assets measured at fair value through profit or loss:Listed investments - Local 91 742 - 624From investments in financial assets classified as available for sale:Unlisted investments - Local 947 - 947 -Total dividend income 1 038 742 947 624

interest revenueFrom investments in financial assets:Bank and other cash 8164 9 797 6551 8348Current accountsIntercompany loans interest - - 2641 2 271Total interest income 8 164 9 797 9 192 10 619Total investment income 9 202 10 539 10 139 11 243

27.FinancecostsNon-current borrowings 8 6 - -Bank overdraft - - - -Tax authorities - 6 - -Interest paid - 116 - 116Total finance costs 8 128 - 116

28. taxation


2018 2017 2018 2017

Major components of the tax (income) expenseCurrentLocal income tax - recognised in current tax for prior periods 12 - - -

deferredDeferred tax (312) (16) - -

(300) (16) - -Reconciliation between accounting profit and tax expenseAccounting profit 74596 58945 89366 55624Taxattheapplicabletaxrateof28%(2017:28%) 150 148 - -Tax effect of adjustments on taxable incomeArising from previously unrecognised tax loss (450) - - -Unrecognised deferred tax asset utilised - (164) - -

(300) (16) - -



29. Other comprehensive incomeComponents of other comprehensive income - Group - 2017 Gross Tax Netitems that will not be reclassified to profit (loss)

Movements on revaluationGains (losses) on property revaluation 815 - 815

Available-for-sale financial assets adjustmentsGains (losses) arising during the year (7 000) - (7 000)Total (6 185) - (6 185)

Components of other comprehensive income - Company - 2017

items that will not be reclassified to profit (loss)

Movements on revaluationGains (losses) on property revaluation 2 015 - 2 015

Available-for-sale financial assets adjustmentsGains (losses) arising during the year (7 000) - (7 000)Total (4 985) - (4 985)



30. Financial assets by categoryThe accounting policies for financial instruments have been applied to the line items below:

Group - 2018

Loans andreceivables

Fair valuethrough profit

or loss -designated

Held tomaturity

investmentsAvailable-for-

sale TotalInvestments - 3728 8699 16500 28927Loans advanced 65191 - - - 65191Investments in associates - 31109 - - 31109Trade and other receivables 23460 - - - 23460Cash and cash equivalents - 197404 - - 197404

88 651 232 241 8 699 16 500 346 091

Group - 2017



or loss -designated

Held tomaturity


sale TotalInvestments - 3007 8572 16500 28079Loans advanced 79994 - - - 79994Investments in associates - 29736 - - 29736Trade and other receivables 57080 - - - 57080Cash and cash equivalents - 182557 - - 182557

137 074 215 300 8 572 16 500 377 446

Group - 2016



or loss -designated

Held tomaturity


sale TotalInvestments - 3298 8454 23500 35252Loans advanced 82718 - - - 82718Investments in associates - 26798 - - 26798Trade and other receivable 40153 - - - 40153Cash and cash equivalents - 270735 - - 270735

122 871 300 831 8 454 23 500 455 656

Company - 2018



or loss -designated

Held tomaturity


sale TotalInvestments - - 8699 16500 25 199Loans advanced 65191 - - - 65191Loans to group companies 19686 - - - 19686Trade and other receivables 21 012 - - - 21 012Investments in subsidiaries - 23011 - - 23011Cash and cash equivalents - 171740 - - 171740

105 889 194 751 8 699 16 500 325 839



Company - 2017



or loss -designated

Held tomaturity


sale TotalInvestments - - 8572 16500 25 072Loans advanced 79994 - - - 79994Loans to group companies 27288 - - - 27288Investments in subsidiaries - 23011 - - 23011Trade and other receivables 55 217 - - - 55 217

Cash and cash equivalents - 155417 - - 155417162 499 178 428 8 572 16 500 365 999

Company - 2016



or loss -designated

Held tomaturity


sale TotalInvestments - - 8454 23500 31954Loans advanced 82543 - - - 82543Loans to group companies 24939 - - - 24939Trade and other receivables 35409 - - - 35409Investments in subsidiaries - 23012 - - 23012Cash and cash equivalents - 247000 - - 247000

142 891 270 012 8 454 23 500 444 857



31. Financial liabilities by categoryThe accounting policies for financial instruments have been applied to the line items below:

Group - 2018Financial liabilities at

amortised cost TotalTrade and other payables 79924 79924Finance lease obligation 112 112Operating lease liabilities 14 14

80 050 80 050


amortised cost TotalTrade and other payables 86934 86934Finance lease obligation 11 11Operating lease liabilities 19 19

86 964 86 964


amortised cost TotalInterest bearing borrowings 235 235Trade and other payables 89987 89987Finance lease obligation 541 541Operating lease liabilities 83 83

90 846 90 846

Company - 2018Financial liabilities at

amortised cost TotalTrade and other payables 75994 75994Loans from group companies 52569 52569

128 563 128 563


amortised cost TotalTrade and other payables 85283 85283Loans from group companies 59 751 59 751

145 034 145 034


amortised cost TotalInterest bearing borrowings 235 235Trade and other payables 89054 89054Loans from group companies 57913 57913Finance lease obligation 508 508

147 710 147 710



32. Depreciation,amortisationandimpairmentlosses


2018 2017 2018 2017

depreciationProperty, plant and equipment 2 151 2338 1 725 1868

AmortisationIntangible assets 264 306 174 185

Total depreciation, amortisation and impairmentDepreciation 2 151 2338 1 725 1868Amortisation 264 306 174 185

2 415 2 644 1 899 2 053

33. Othernon-operatinggains(losses)Fair value gains (losses)Investment property 136678 113036 141828 110986Financial instruments at fair value through profit or loss:Listed investments 721 (291) - -

137 399 112 745 141 828 110 986

34. Cash used in operationsProfit before taxation 74596 58945 89366 55624Adjustments for:Depreciationofproperty,plant&equipment 2 151 2339 1 725 1868 (Profit) or loss on sale of investment properties 1 571 (210) 1 571 (605)(Profit)orlossonsaleofproperty,plant&equipment - (3) - 7Income from equity accounted investments (1374) (2938) - -Dividends (1038) (742) (947) (624)Interest income (21104) (27974) (19491) (26525)Finance costs 8 128 - 116Fair value adjustments (137399) (112745) (141828) (110986)Amortisation of intangible assets 264 306 174 185Impairments 51728 59785 (17934) 54470Loans written off - 366 75123 366Movements in retirement benefit assets and liabilities 2782 1642 2782 1642Gains on scrappings, disposals and settlements of assets and liabilities 360 - - -Portion of prior year deferred income not released to incomeTrade and other receivables (12689) (58747) (42779) (62478)Trade and other payables (7 010) (3053) (9289) (3771)Deferred income 33270 (29568) 36184 (29568)

(13 884) (112 469) (25 343) (120 279)



35. tax refunded (paid)


2018 2017 2018 2017

Balance at beginning of the year (66) 19 - -Closing balance (12) - - -Prior year under-provision 78 66 - -

- 85 - -

36. Commitments: Authorised capital expenditureAuthorised capital expenditure

Already contracted for but not provided for•Projectfundsordersnotyetpaid 81608 86325 81608 86325Operating leases – as lessee (expense)Minimum lease payments due- within one year 4903 3735 4131 3517- in second to fifth year inclusive 11876 223 11695 146

16 779 3 958 15 826 3 663

Operating lease payments represent rentals payable by the group for certain of its office properties. Leases are negotiated for an average term of seven years and rentals are fixed for an average of three years. No contingent rent is payable.

Operating leases – as lessor (income)Minimum lease payments due- within one year 6441 36349 6441 36349- in second to fifth year inclusive 17408 39797 17408 39797- later than five years 22704 24814 22704 24814

46 553 100 960 46 553 100 960



37.Contingent assets and liabilitiesContingent assets

TheGrouphascontingentassetsofR15052million(2017:Rnil)

The Corporation undertook a process of ensuring the completeness of investment properties in the register. Investment propertiesworthR15052millionhavebeenidentifiedasbeingregisteredinthenameoftheECDC.However,managementhas deemed it prudent to investigate these properties to confirm control over them.

Contingent liabilities

TheGrouphasexposuretolitigationofR17.6million(2017:R14.7million)againstit,astabulatedbelow.

Matters under consideration:

2018eAsTeRN CAPe develOPMeNT CORPORATiON

1 Claim for services rendered - industrial development Association (isdA) Approximatepotentialliability:R2,188,482,80 Status of matter: ThesummonswasissuedtoECDCon06February2018.Intentiontodefendthematterhassincebeenservedandfiled

on06March2018.

2 Claim for payment of damages – Nenga lodge Approximatepotentialliability:R2169850 Status of matter: ThesummonswasissuedtoECDCon09June2017.Intentiontodefendthematterhassincebeenservedandfiledon

23June2017.

3 Claim for damages - Madodebhunga Nkubungu Approximateliability:R371855 Status of matter: The matter is pending.

4 Claim for payment damages - Rem development (Pty) ltd t/a Phambili Property developments and four Others Approximateliability:R3122109Statusofthematter: Status of matter: The matter is pending.

5. Claim for damages - Tabile jodwana Approximateliability:R5890 Status of matter: The matter held in abeyance.

6. Claim for replacement of property - butterworth bakery CC Approximateliability:R5512975 Status of matter: The matter held in abeyance.

7. Claim for wrongful eviction and damages - Mbona business Trust Approximateliability:R377037 Status of matter: The matter is still pending.

8. Claim for payment of damages - Telesure Group Approximateliability:R2565006 Status of the matter: The matter is still pending.

9. Claim for services rendered - elityeni / Conrite jv Approximateliability:R1255647 Status of the matter: ThesummonswasissuedtoECDCon22February2018.Intentiontodefendthematterhassincebeenservedandfiled

on12March2018.



2017eAsTeRN CAPe develOPMeNT CORPORATiON

1. Claim for payment of damages Approximatepotentialliability:R2171044 Status of matter:

2. Claim for cancellation of lease – 171 Cape Road Trust Approximatepotentialliability:R561088 Status of matter: Thematterwasarguedon12May2016.Judgmenthasbeenreserved.

3. Claim for damages - Madodebhunga Nkubungu Approximateliability:R371855 Status of the matter: SummonsissuedagainstECDCon4thApril2014.ThisclaimisfordamagestoapropertyallegedlycausedbytheECDC

appointed Sheriff during an execution of an eviction order.

4. Claim for damages - Tabile jobodwana Approximateliability:R5890 Status of matter: SummonsissuedagainstECDCon9thofSeptember2014.Thematterispending.

5. Claim for replacement of property - butterworth bakery CC Approximateliability:R5512975 Status of matter: This matter emanates from alleged damage and theft of property during an execution of an eviction order. Summons

issuedagainsttheECDCon18November2014.Thematterispending.

6. Claim for wrongful eviction and damages - Mbona business Trust Approximateliability:R377037 Status of matter: This matter emanates from alleged wrongful eviction and damages suffered during an execution of an eviction order.

The matter is pending.

7. Claim for damages - Telesure Group Approximateliability:R2565006 Status of matter: Summons have been issued against the ECDC and Notice of Intention to Defend has been served and filed on 15 April

2015. The matter is pending.

8. Claim for payment of damages - Rem development (Pty) ltd and four Others Approximateliability:R3122109 Status of matter: The matter is pending.



38. RelatedpartiesRelationships shareholder Department of Economic Development and

Environmental Affairs and Tourism (DEDEAT)Key management and other senior managers Eastern Cape Development Corporation

TRozani(Head:DevelopmentFinanceandBusinessSupportPMfingwana(Head:PropertiesandActingHead:StrategicProjects)N Ngewu (Executive: Office of the Chief Executive Officer)SSentwa(ChiefFinancialOfficer)-resignedon31August2017N Dlulane (Chief Executive Officer)

S Bulube (Acting Chief Financial Officer - started 1 September 2017)

TShenxane(Head:Trade,InvestmentandInnovation)

N Ngqubekile (Executive: Corporate Services)M Mpikashe (Executive Manager: Legal and Compliance)B Melitafa (Executive: Strategic Projects)


2018 2017 2018 2017

Related party balances

loan accounts - Owing (to) by related partiesBorder Copiers (Pty) Ltd - - 5 591 4232Cross-MedHealthCare(Pty)Ltd - - 3503 3503Ndlambe Natural Industrial Products (Pty) Ltd - - 5873 5477Automotive Industry Development Centre Eastern Cape (AIDC) - - 2 000 2 000

Amounts included in Trade and other receivable regarding related partiesNon - Executive Director - - 30 -

Related party transactions

subsidiaries and associatesInterest from subsidiaries - - 2641 2 271Government grants paid to Automotive Industry - - 13717 11605Development Centre (AIDC)Rentpaidtosubsidiaries - - 2855 2930

interest received from related partiesBorder Copiers (Pty) Ltd - - 543 492Ndlambe Natural Industrial Products (Pty) Ltd - - 395 445Oceanwise (Pty) Ltd - - - 1499

Operational expenditure paid on behalf ofEastern Cape Information Technology Initiative - - 2825 4278

Management fees receivedMayibuye Transport Corporation - - 347 329

Rent received from related partiesEastern Cape Appropriate Technology Unit - - 50 29Eastern Cape Liquor Board - - 715 425Eastern Cape Provincial Arts and Culture - - 231 231



39. Directors’andprescribedofficer’semoluments-Non-executive

NON-eXeCuTive

2018

Director’s fees Total2434 2434

2017

Director’s fees Total3094 3094

diReCTORs eMOluMeNTs

2018

BoardSub-

committees Ad hoc TotalMr N Dladla (Chairperson) 158250 65937 303315 527 502MrLJiya(DeputyChairperson)-retiredon06October2017 84400 71213 52 750 208363MrMMaqetuka-retiredon06October2017 55387 58025 60660 174072Mr M Damane 94950 116050 94950 305950Ms N Siwahla-Madiba 105 500 163525 118031 387056Mr S Thobela 79 125 108137 98063 285325Advocate M Sishuba 94950 84400 50063 229413Ms P Bosman 71213 84400 15825 171438MrRNicholls(ExternalAuditCommitteemember) 7913 110 775 26375 145063

751 688 669 926 820 032 2 434 182

2017

BoardSub-

committees Ad hoc TotalMr N Dladla (Chairperson) 137150 36925 412075 586150

MrLJiya(DeputyChairperson-retiredon06October2017 110 775 134513 116675 361963

MrMMaqetuka-retiredon06October2017 68575 84400 158875 311850 Mr M Damane 84400 131875 159 500 375775Ms N Siwahla-Madiba 84400 116050 195800 396250Mr S Thobela 68575 126600 174700 369875Advocate M Sishuba 76487 100 225 106125 282837Ms P Bosman 68575 137150 148325 354050MrRNicholls(ExternalAuditCommitteemember) - 55387 - 55387

698 937 923 125 1 472 075 3 094 137



Compensation to eCdC executive Management

2018

Earnings

Contribution toMedical Aid &

Pension TotalMr N Dlulane (CEO) 2427564 284674 2712238Mrs N Ngewu (Executive: Office of the CEO) 1727926 223183 1 951 109MrSSentwa(CFO-resigned31August2017) 787760 73465 861225Mrs N Ngqubekile (Executive: Corporate Services) 1483612 158823 1642435Mr M Mpikashe (Executive: Legal and Compliance) 1424261 188229 1612490MsPMfingwana(Head:Properties) 1213484 113652 1327136MsTRozani(Head:DevelopmentFinanceandBusinessSupport) 1413148 127573 1540721MrTShenxane(Head:Trade,InvestmentandInnovation) 1436795 103926 1540721MrBMelitafa(Executive:StrategicProjects-resigned30September2017) 808014 89001 897015

12 722 564 1 362 526 14 085 090

2017Emoluments Other benefits* Total

Mr N Dlulane (CEO) 2392053 307309 2699362Mrs N Ngewu (Exceutive: Office of the CEO) 1885017 230899 2115916Mr S Sentwa (CFO) 1912286 184424 2096710Mr B Melitafa (Executive: Strategic Projects) 1552139 188493 1740632Mr M Lindie (Chief Economist) 1231250 133910 1365160MsTRozani(Head:DevelopmentFinanceandBusinessSupport)-started1September2016)

817071 79 721 896792

MrMMpikashe(Executive:LegalandCompliance)-started03January2017 365247 50 595 415842MrsNNgqubekile(Executive:CorporateServices)-started03January2017 395393 42708 438101MrTShenxane(Head:Trade,InvestmentandInnovation)-started06January2017

343098 29807 372905

10 893 554 1 247 866 12 141 420

40. Prior period errorsThefinancialstatementshavebeenpreparedinaccordancewiththeInternationalFinancialReportingStandards(IFRS)onabasis consistent with the prior year. Where adjustments were done in the current Annual Financial Statements, management considered the impact on the opening balances of the earliest comparative figures and these were adjusted accordingly.

The corresponding financial statements notes have accordingly been adjusted for the items below.

eAsTeRN CAPe develOPMeNT CORPORATiONinvestment properties

Investment properties were overstated due to a fair value adjustment of certain properties that was not recorded as well as a property that was transferred in March 2017.

Further, Investmentpropertieswereunderstatedin2016and2017financialyearsduetopropertiesthatwerenotintheregister. These errors have been corrected retrospectively. The impact of the correction on previously reported figures is tabulated below.

Trade and other receivables and operating expenses

In the previous years, the operating expenses included wasteful expenditure that has subsequently been recorded as recoverable from the official concerned. This error has been corrected retrospectively. The impact of the correction on previously reported figures is tabulated below.

Operating expenditure was overstated due to input VAT, which is included in Trade and other receivables, that was not claimed. The impact of the correction on previously reported figures is tabulated below.

Trade and other payableswere understated due to invoices relating to 2016/17 financial year thatwere submitted forpaymentduring2017/18financialyear.Theimpactofthecorrectiononpreviouslyreportedfiguresistabulatedbelow.

Interest earned on a bank account was incorrectly recorded against operating expenditure instead of a fund that is included in Trade and other payable. The impact of the correction on previously reported figures is tabulated below.



loans advanced

Loans advanced were overstated due to interest raised on a loan that was settled. The impact of the correction on previously reported figures is tabulated below.

Revenue and other income

Due to the error narrated above on loans advanced, revenue and other income were incorrectly recorded. The impact of the correction on previously reported figures is tabulated below.

Fair value adjustments

The fair value adjustments were overstated due to valuations that were not updated for certain properties.

Further,fairvalueadjustmentswereundervaluedin2016and2017financialyearsduetopropertiesthatwerenotintheregister. These errors have been corrected retrospectively. The impact of the correction on previously reported figures is tabulated below.

statement of changes in equity, cashflow statement and notes to the financial statements

To the extent that the above adjustments affect the cashflow statement and notes to the financial statements, such corrections have been affected in the previous period.

EFFECTOFADJUSTMENTSTOACCOUNTBALANCESARETABULATEDBELOW:

Trade and other receivables 2017 2016 2017 2016Balance as previously reported 57 050 38852 55187 34050Adjustment 30 1359 30 1359Subsidiary (AIDC) - (58) - -As Adjusted 57 080 40 153 55 217 35 409Trade and other payablesBalance as previously reported 85947 72402 84296 71470Adjustment 987 17584 987 17584Roundingdifference - 1 - -As adjusted 86 934 89 987 85 283 89 054loans advancedBalance as previously reported 47144 45731 47144 45663Adjustment (61) - (61) -As adjusted 47 083 45 731 47 083 45 663Retained incomeBalance as previously reported 583135 535769 424737 377591Adjustment 35205 26728 35205 26728Subsidiary (AIDC) - (41) - -Roundingdifference 1 - 1 -As adjusted 618 341 562 456 459 943 404 319RevenueAs previously reported 138272 - 123551 -Adjustment (74) - (74) -As adjusted 138 198 - 123 477 -Other incomeAs previously reported 55 192 - 56038 -Adjustment 46 - 46 -As adjusted 55 238 - 56 084 -Operating expensesAs previously reported (415878) - (386564) -Adjustment (1350) - (1350) -As adjusted (417 228) - (387 914) -investment propertiesAs previously reported 1 201 012 1097747 1130205 1032197Adjustment 36224 34146 36224 34146As adjusted 1 237 236 1 131 893 1 166 429 1 066 343Fair value adjustmentsAs previously reported 110307 - 108548 -Adjustment 2438 - 2438 -As adjusted 112 745 - 110 986 -



2017 2016 2017 2016As previously disclosed - 60006 - 23821Adjustment - (1 299) - (1 299)Rounding - (1) - -As adjusted - 58 706 - 22 522ReservesAs previously reported - 410540 - 410540Adjustment - (801) - (801)As adjusted - 409 739 - 409 739Retirement benefit obligationAs previously reported - 35691 - 35691Adjustment - (5768) - (5768)As adjusted - 29 923 - 29 923deferred taxAs previously reported - - - -Subsidiary (AIDC) - 22 - -

- 22 - -deferred incomeAs previously reported - 139991 - 127438Adjustment - (3537) - (3537)Subsidiary (AIDC) - (41) - -

- 136 413 - 123 901

41. irregularexpenditureTheEasternCapeDevelopmentCorporation(ECDC)incurredcumulativeirregularexpendituretotallingR935,739thousand(2017:R17,042million)duetonon-compliancewiththeSupplyChainManagementPolicyandthePFMA.Thisexpenditurehas been recorded in the relevant accounts.

2 018 2 017 2 018 2 017Opening balance 914 8075 914 8075Current year irregular expenditure 935 17042 935 17042Condoned by the Board (935) (24203) (935) (24203)Closing balance 914 914 914 914



42. Riskmanagement

Introduction

TheessentialfunctionofriskmanagementistoidentifymeasureandmonitortheriskprofileofECDC.Riskmanagementunderscores the fact that the survival of an organisation depends heavily on its capabilities to anticipate and prepare for the changes rather than waiting for the change and react to it.

Enterprise risk management (ERM)ECDC recognises that risk management and internal controls are key elements of good corporate governance and legislation. ECDChasadoptedanintegratedEnterpriseRiskManagement(ERM)PolicyFramework,notonlytoensurecompliancewiththePFMAandTreasuryRegulations,butalsotoensuresignificantrisksandrelatedincidentsareidentified,documented,managed, monitored and reported in a consistent and structured manner across ECDC.

Effective management of risk will provide an essential contribution towards the achievement of ECDC’s strategic and operational goals and objectives.

Risk Appetite

The Board of Directors has approved a risk appetite and tolerance framework which forms the basis of the extent to which ECDC tolerates risks as described by performance indicators, operational parameters and process controls to increase shareholders value.

Risktolerancelevelsassistsmanagementtomakebetterinformedbusinessdecisions,focusonrisksthatexceedstheriskappetite and to develop a culture where management is aware of the risks taken.

The key risks have been classified according to the five broad risk categories namely, Strategic, Financial, Operational, Compliance and Information Technology Governance

Risk Management Governance structure

The Board is responsible for ensuring that ECDC implements effective risk management policies and processes. On the adviceoftheAudit,RiskandComplianceCommittee,theBoardwillensureeffectiveoversightofriskmanagementwithinECDC. The CEO is responsible for the implementation of the approved risk policies within ECDC. Management has established a risk management function to design deliberate and targeted programmes to respond to the pertinent risks and ensure that these are appropriately managed.

strategic Risk

Strategic risks include the failure of ECDC to fulfil on its development role in terms of shareholders expectation, macro-economic conditions, reputational risks and the availability of capital.

ECDC manages strategic risks by the annual review of the risk appetite and tolerance framework, establishing whether risks should be accepted, mitigated or avoided, prioritising risk identification, evaluating the efficiency of risk policies, procedures, practices and controls applied within ECDC on a day to day basis and by determining and reviewing of the maximum mandate levels for the various committees and staff who approves credit and assets liability decisions.

Financial Risk

Financial risks include credit, interest and market risk. These risks try to minimise losses which may result due to ECDC’s own funding structure and as a result of its external investment and financing activities

Credit risk is the potential that a borrower or counter party fails to meet their obligations as per agreed terms. Credit risk is inherent to the business of lending funds and rental collections and is closely linked to market risk variables. Credit risk is a dominant risk within ECDC as the providing of loans, equity capital and rental accommodation is the core business of ECDC.

Credit risk consists of two components namely the quantity of risk measured as outstanding accounts receivable balances at the date of default and the quality of risk measured as the severity of loss defined by both the probability of default as reduced by the recoveries that could be made in the event of default.

ECDC’s approach to credit risk management is to:1. Establish exposure ceilings (limits) in certain categories of loans within a certain amount range;2. Perform due diligence and investment screening on all new loan and rental applications to establish if the applications

meetthebasiccriteriaforfunding/occupation;3. Operateamulti-tiercreditapprovingauthoritybasedontheloanamount;4. Testtheuseofariskratingmodelforsmallandmediumbusinessesforimplementationduring2013;5. Price loans according to the severity of perceived credit risk;6. Maximiseportfoliomanagementwhichemanatesfromthenecessitytooptimisebenefitsassociatedwithdiversification

and to reduce the impact of concentration of exposures to a certain individual, sector or industry;7. Provide a loan review mechanism to identify loans with credit weaknesses and determine the adequacy of loan

impairment provisions, adherence to lending policies and procedures and to propose mitigation actions where weaknesses in systems and procedures have been established; and

8. Regularlyreporttomanagementontherisksidentified.



Financial: Market Risk

MarketRiskisdefinedasthepossibilityoflosstoECDCcausedbythechangesinmarketvariablesofbothonandoffbalancesheet positions which will be adversely affected by movements in interest rate markets.

Financial: interest Rate Risk

Interest rate risk is the potential negative impact on Net Interest Income and it refers to the vulnerability of ECDC’s financial condition to the movement in interest rates. Changes in interest rates affects earnings, value of assets, liability off-balance sheet items and cash flow.

The objective of interest rate risk management is to maintain earnings, improve the capability and ability to absorb potential loss and to ensure the adequacy of the compensation received for the risk taken and effect risk return trade-off.

ECDC and the group are exposed to interest rate risk arising mainly from exposure to the Investment in Development Loans.

The cash resources of the group are invested mainly with large money market funds and South African banks. Development investments are also made in line with Board policy and would be less profitable as interest rates drop. At year end, financial instruments exposed to interest rate risk were interest-bearing borrowings, held to maturity investments and loans advanced.

Liquidity risk is defined as the risk of failure to meet all financial obligations on a timely basis, without incurring above normal costs. This risks specifically arises from the inability to honour obligations with respect to commitments to borrowers, lenders and investors and operational expenditure.

The ECDC Investment Policy governs the liquidity requirements per investment type. Liquidity is held primarily in the form of money market instruments such as call deposits and bonds. The monthly management of the required liquidity levels is reported to Executive Management on a monthly basis.

Operational Risk

Operational risks, though defined as any risk that is not categorised as market or credit risk, is the risk of loss arising from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk but excludes systemic and reputational risk.

In order to mitigate the above, an operational risk framework and risks registers have been developed per business unit to ensure that operational risks are consistently and comprehensively identified, assessed, mitigated, controlled, monitored and reported by each Business Unit Manager.

Operational risk is also mitigated through:• The performance of regular internal audits• BusinessContinuityanddisasterrecoveryplanswhicharebeingmanagedthroughVMWAREvirtualizationplatform• Recruitmentpolicies• Insurance through public liability and insurance of fixed assets• Commitment of employees to a code of conduct that encourages integrity, professionalism, accountability and teamwork• Performing fraud awareness training and the availability of a fraud reporting hotline

Compliance Risk

ECDC is regulated through the Eastern Cape Development Corporation Act 2 of 1997 as amended. ECDC is accountable to its sole Shareholder the Department of Economic Development, Environmental Affairs and Tourism

A Shareholder’s compact entered into between the parties manages the performance as well as ECDC capital management. ECDCisnotrequiredtoholdanycapitalintermsoftheBankAct94of1990andmaygearupto100%oftheavailablecapital.

information Technology Risk

Technology is core to ECDC’s business. Technology governance is vital to striking the right balance between holding on to our technology lead and managing our costs. It is also fully integrated into our strategic and business processes. All IT decisions are benchmarked against best practice and according to COBIT standards where applicable.

IT risk is managed by keeping up to date with the latest advances in technology and in terms of an approved IT Charter which aligns the IT strategy and business needs to delivering value, managing performance, caters for security management, information management and business continuity management. This Charter is further strengthened by an Information Security, Internet and E-mail Policy which governs all access to information. Disaster recovery has been identified as having the highest impact on ECDC business operations and is being managed.



liquidity Risk exposureAs at 31 March 2018

Assets

On demandand less

thanone month

1 to 12months

More than 12

months TotalInvestments - - 25 199 25 199Trade and other receivables - 21 012 - 21 012Loans advanced - 26832 38359 65191Cash and cash equivalents 171740 - - 171740

171 740 47 844 63 558 283 142liabilitiesTrade and other payables - 75994 - 75994liquidity gap 171 740 (28 150) 63 558 207 148

As at 31 March 2017Assets - - - -Investments - - 25 072 25 072Trade and other receivables - 55 217 - 55 217Loans advanced - 32911 47083 79994Cash and cash equivalents 155417 - - 155417

155 417 88 128 72 155 315 700liabilitiesTrade and other payables - 85283 - 85283Liquidity gap 155 417 2 845 72 155 230 417

interest Rate Risk

The Group’s exposure to interest rate risk arises from primarily the following:• Investment in development loans.• Investment of surplus operational cash.

The interest rate risk is managed in terms of the Board approved investment and development investment policies. The Group monitors and ensures that the interest rate risk profiles are in line with limits and benchmarks stipulated in the policy.

The cash resources of the group are invested mainly with large money market funds and South African banks.

Development investments are also made in line with Board policy and would be less profitable as interest rates drop.

Variable rate instruments 2018 2017 2016 2018 2017 2016Financial assets 346091 377446 455656 325839 365999 444857Financial liabilities (80050) (86964) (90846) (128563) (145034) (147710)

266 041 290 482 364 810 197 276 220 965 297 147

Cashflow sensitivity analysis for variable rate instrumentsProfit or loss on sensitivity 2018 2017 2016 2018 2017 2016Financial assets 3460 3774 4556 3258 3660 4448Financial liabilities (800) (869) (908) (1285) (1450) (1477)

2660 2 905 3648 1973 2 210 2 971

An increase of 100 basis points in interest rates at reporting date, calculated on the closing balances and using simple interest for 12 months, would have increased profit by the amount show above. A decrease of 100 basis points would have had equal but opposite effect to the amounts shown above. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for prior years.



Credit Risk

The carrying amount of the assets as at the balance sheet date best represents the maximum exposure to credit risk.

The maximum exposure to credit risk as at reporting date was:

2018 2017 2016 2018 2017 2016Loans advanced 65191 79994 82718 65191 79994 82543Tradeandotherreceivables* 23460 57080 40153 21 012 55 217 35409Investments 28927 28079 35252 25 199 25 072 31954Investments in associate 31109 29736 26798 - - -Cash and cash equivalents 197404 182557 270735 171740 155417 247000Maximum exposure 346 091 377 446 455 656 283 142 315 700 396 906

* Excludes prepayments and VAT receivables.

Asat31March2018,theGrouphadLoanadvancesandTradereceivablesofR575833(Company:R573744)whichwereimpaired and provided for.

The ageing of these classes are as follows:Group 30 days 60 days >90 days TotalLoans advanced - - 242001 242001Trade receivables - - 335025 335025

- - 577 026 577 026

Company 30 days 60 days >90 days TotalLoans advanced - - 242001 242001Trade receivables - - 331743 331743

- - 573 744 573 744

43. Fruitless and wasteful expenditure


2018 2017 2018 2017

Identified during the year - 30 - 30Claimedfromresponsibleofficial(includedintrade&otherreceivables) - (30) - (30)

- - - -

The wasteful expenditure tabulated above relates to additional audit fees that were unnecessarily incurred.


HEADOFFiCEeCdC houseOcean Terrace Park, Moore StreetQuigney, East LondonPO Box 11197, Southernwood, 5213T: +27 (0) 43 704 5600 | F: +27 (0) 43 704 5700

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PORT eliZAbeTh35A 3rd Avenue, Newton ParkPO Box 1331, Port Elizabeth, 6000Tel: +27 (0) 41 373 8260 | Fax: +27 (0) 41 374 4447

buTTeRWORTh24 High StreetPO Box 117, Butterworth, 4960T: +27 (0) 47 401 2700 | F: +27 (0) 47 491 0443

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sATElliTEOFFiCEs

AliWAl NORThDEDEAT OFFICES, 27 Queens Terrace, Aliwal North, 9750P O Box 198, Aliwal North, 9750T: +27 (0) 51 633 3007

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