tshwane economic development agency annual report 2013/14 · 2015-02-17 · teda annual report...
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TEDA Annual Report 2013/14 Page - 1 -
TSHWANE ECONOMIC DEVELOPMENT AGENCY
ANNUAL REPORT 2013/14
Sign Off: Acting CEO TEDA: Mr S D Mogaladi
Signature of Acting CEO:
Chairperson of TEDA BOARD: Mr Luthando Vutula
Signature of Chairperson: ……………………………...
SED/SEH/HOD Name: ……………………..………………………………
Signature of SED/SEH/HOD: ………..……………………………………
DCM Name: ………………………………………………………………….
Signature of DCM: …………………………………………………………
TEDA Annual Report 2013/14 Page - 2 -
Abbreviations and Acronyms:
AIDC Auto Industry Development Corporation
APC Audit and Performance Committee
CAPEX Capital Expenditure Budget
CEO Chief Executive Officer
CFO Chief Financial Officer
CM City Manager
CoT City of Tshwane
CSS Corporate and Shared Services
DCM Deputy City Manager
DED City’s Department of Economic Development
EM Executive Mayor
FINRISK Finance and Risk Committee
GDS Growth Development Strategy
ICC International Convention Centre
IDP Integrated Development Plan
IT Information Technology
KPA Key Performance Area
KPI Key Performance Indicator
MAYCO Mayoral Committee
MFMA Municipal Finance Management Act
MMC Member of the Mayoral Committee
MSA Municipal Systems Act
MTREF Medium Term Revenue and Expenditure Framework
OPCA Operation Clean Audit
OPEX Operating Expenditure Budget
REMCO Remuneration and Ethics Committee
SCM Supply Chain Management
SDBIP Service Delivery Budget Implementation Programme
SDA Service Delivery Agreement
SED Strategic Executive Director
SLA Service Level Agreement
TEDA Tshwane Economic Development Agency
TITIIC Tshwane International Trade Investment and Infrastructure Conference
ToR Terms of Reference
TEDA Annual Report 2013/14 Page - 3 -
Country of incorporation and domicile South Africa
Legal form of entity Private Company
Company registration number 2006/019396/07
Nature of business and principal activities Facilitate economic development in the Tshwane
areas
Controlling entity City of Tshwane Metropolitan Municipality
Board of Directors Mr L Vutula (Chairperson)
Ms RS Bahula- Ermias
Mr H Gouvelis
Ms LD Haskins
Ms CBB Mahlati (retired 10th March 2014)
Mr J Matsho
Mr CR Mpyane
Ms NM Ntsinde
Mr FK Sibanda
Ms N Singh
Mr JL Thubakgale
Mr MW Yates
Accounting Officer Mr S Mogaladi (Acting CEO)
Chief Financial Officer Ms MC Sebogodi
Physical Address 349 Witch- Hazel Avenue
Eco-origin Building, Block F
Highveld Ext. 70, Centurion
0057
Postal Address P. O. Box 11751
Zwartkops
0051
Auditors Auditor-General of South Africa
Bankers Standard Bank
TEDA Annual Report 2013/14 Page - 4 -
TABLE OF CONTENTS Page
Foreword by the Chairperson of the Board...................................................................................... 5
Executive summary……………………………………………………………………………………….. 6
CHAPTER 1
Foreword by Acting Chief Executive Officer………………………………………………….. 7
1.1 Vision and Mission………………………………………………………………………………… 7
1.2 Key strategic Objectives……………………………………………………………………… 8
1.3 Key Policy Developments…………………………………………………………………… 8
1.4 Key service delivery improvements……………………………………………………… 9
1.5 Report of the Auditor General …………………………………………………………… 11
CHAPTER 2
2.1 Corporate Governance……………………………………………………………………… 15
2.2 Legislative background prescribing the functions of the entity……………………….. 17
2.3 Functioning of the Board against the work-plan 2013/14………………………………. 17
2.4 Board Committees……………………………………………………….……………………… 17
2.5 Risk Management and Internal Controls…………………………………………………… 20
2.6 Supply chain Processes and Procedures………………………………………………… 22
CHAPTER 3
3.1 Service Delivery Performance………………………………………………………………….. 26
3.2 Performance Overview………………………………………………………………………… 26
CHAPTER 4
4.1 Human Capital Management……………………………………………………………… 34
4.2 Human Capital Policies………………………………………………………………………… 35
4.3 Human Resources Disclosures………………………………………………………………… 36
4.4 Competency levels of Finance and Supply Chain officials ........................................... 38
CHAPTER 5
5.1 Financial Assessment................................................................................................ 39
TEDA Annual Report 2013/14 Page - 5 -
CHAIRPERSON’S FOREWORD
TEDA initially had a Board that comprised of 12 members, however 1 board member resigned
during the year under review. Board committees have been increased to six to ensure more
focus and enhanced oversight on the operations of TEDA.
To regulate the relationship between the Shareholder (City of Tshwane) and TEDA, a Service
Delivery Agreement was signed at the beginning of the financial year. The Service Delivery
Agreement is supported by five year strategic plan and multiyear year business plan. TEDA
made strides in focusing on ensuring that it delivers on its mandate as set out in the SDA with its
shareholder. The Board put a concerted effort in providing the strategic direction and support
through a strategic planning session involving both the Board of Directors as well as
management. This provided the necessary clarity in terms of expectation by the shareholder
and the resultant obligations, roles and responsibilities of the Board and Executive
management.
It is critical that in the medium term TEDA identifies untapped areas within Tshwane area, on
which it can initiate and come up with projects that will create an impact in support of the
aims of Tshwane Vision 2055.
Key executive management positions were filled within the core business units in order to
further build capacity within TEDA and deliver on the expectations by the shareholder. The
long term plans are such that TEDA should create less dependency on the CoT funding and
should become a financially sustainable organisation.
TEDA Annual Report 2013/14 Page - 6 -
EXECUTIVE SUMMARY
TEDA is a municipal entity of the City of Tshwane which was created as a special purpose
vehicle that has to assist the CoT in employing strategies for economic growth and job
creation. TEDA’s performance in the 2013/14 financial year was guided by an approved
business plan. The performance of TEDA was measured on a monthly and quarterly basis
against its set objectives as captured in the approved business plan. However, due to the
delay in filling the core business posts, some of the key performance targets could not be met,
despite the performance improvement plan that TEDA developed in order to ensure that those
are met within the reporting period. The improvement plan however helped in partially
meeting some of these targets
TEDA ensured that at the beginning of the financial year, systems were put in place to have an
operational organization that will be able to carry out its mandate. Several policies within the
support function were drafted and approved. TEDA went through a challenging period with
limited funding and had to exercise cost saving measures and also reduce on spending by
going through a reprioritization exercise by identifying projects and activities that could no
longer be implemented in 2013/14 as initially planned.
Projects that TEDA undertook were those in conjunction with the City on a co-funding
arrangement as stipulated in the signed Service Level Agreement between TEDA and
Department of Economic Development in the City.
Institutional arrangements
TEDA is accountable to the MMC responsible for the Department of Economic Development
and City Planning, who provides political oversight on TEDA mandate. DED provides the
operational, financial and strategic support to TEDA in carrying out its mandate. The Board of
TEDA has a strategic oversight role on the TEDA’s mandate. The City of Tshwane, as the
shareholder, is represented at the Board sittings by the officials from the DED on an observer
status. The shareholder and the Board communicate on a regular basis and there is a set
Annual General Meetings where TEDA's performance is reviewed by the Shareholder.
TEDA Annual Report 2013/14 Page - 7 -
CHAPTER 1
FOREWORD OF THE CHIEF EXECUTIVE OFFICER
This report sets out the TEDA Budget and Performance Assessment for 2013/14 financial year
against its scorecard as approved in the Business Plan.
Performance Review
TEDA conducted a strategic planning session in the first quarter which culminated in the
development of a 5 year strategic plan.
TEDA went on a recruitment drive in the first quarter of the year with the aim of ensuring that
there is capacity to carry out TEDA's mandate. While the initial intention was to fill more posts,
the reality of limited funding prevented this from happening. Instead, certain priority posts were
identified as crucial and therefore had to be funded to also ensure that the resources are
spread equitably within TEDA operations especially in the core business units namely, Trade
and Investment and Programme and Project Management The year under review was more
focused on development and implementation of policies and procedures, building of systems
to comply with the MFMA and other important prescripts within the local government
environment.
For the future TEDA sought to ensure adequate staffing, however this needed to be preceded
by the review of its capacity alongside its strategic objectives hence the prioritization of the
Organisational Design toward ensuring the appropriate Human Capital model for the agency.
Alongside this initiative another priority was towards attaining the goal of sustainability through
the development of an institutional model that would identify different revenue streams
In the year under review, TEDA focused on identifying key strategic risks and the corresponding
mitigation action plans. However, due to the absence of dedicated risk officers within the
organisation and limited support at the time, the said management plans could not be
implemented
In 2012/13 TEDA‘s performance was not audited in terms of the predetermined objectives.
Save for the Business Plan whose KPI’s were not found to be in line with National Treasury
Framework for Performance Information. There were findings in the SCM processes for which
there was a need for improvement. Moving into the future TEDA sought to ensure the existence
of institutional policies including the tightening of control measures on an on-going basis.
Finance Review
The total budget allocated to TEDA for 2013/14 was R47,5 million and so far indications are
that 98% of the budget has been spent and with the tight controls implemented to prevent
over spending of the allocated budget, it is anticipated that the expenditure levels will be kept
within the budget in the mid-term period. There were major variances between the budget
allocated for employee costs and actual expenditure due to unfilled positions. However,
management developed a recruitment plan to ensure that TEDA is capacitated to deliver on
its mandate.
1.1 VISION
The Vision of the Tshwane Economic Development Agency SOC Limited is:
‘TEDA strives to be a leading African economic development agency’
TEDA Annual Report 2013/14 Page - 8 -
Mission
The mission of the Tshwane Economic Development Agency SOC Limited is:
‘To provide innovative investor solutions so as to attract and develop strategic industries
and businesses into the Capital City in order to strengthen and position South Africa in
the continent’
1.2 KEY STRATEGIC OBJECTIVES
TEDA key strategic objectives stated below were informed by its mandate aligned with Vision
2055, the City of Tshwane IDP 2011-16 and these provided the basis for the work done by TEDA
in the 2013/14 financial year. In order to realise the objectives, a number of key performance
indicators were identified in line with each objective and these were used as a measure of
performance throughout the year.
The Key Strategic Objectives of TEDA are:
1. To promote, facilitate and coordinate trade and investment in strategic
infrastructure to create value for the CoT.
2. To identify, design, develop and manage projects with strategic economic
and social benefits for the greater Tshwane community.
3. To develop and maintain Tshwane as a unique (sector specific) tourist
destination.
4. To develop and maintain a strategic immovable and property asset portfolio
for maximum return on investment.
5. To develop, facilitate and promote viable foreign and local investments into
City of Tshwane
6. To establish and build TEDA as a strong and effective organisation in the
context of good governance best practices
1.3 KEY POLICY DEVELOPMENTS
During 2013/14 TEDA undertook a process of conducting a strategic review of its organizational
structure and business processes towards aligning the 2013/14 Business Plan with the Service
Delivery Agreement. This resulted in a five year Strategic Plan which guided TEDA's operations
TEDA’s annual performance report depicts progress made in meeting its set targets at the
beginning of the financial year 2013/14. TEDA experienced a sluggish start at the beginning of
the financial year due to the fact that it was engaged with capacitating the core business
units and therefore some of the set targets were not met within the planned period. This
prompted TEDA management in the third quarter to draw up a performance improvement
plan in order to ensure that the targets are met by the end of the financial year. Although not
all the targets were met as intended, the plan yielded some results in certain instances.
While there were limited financial resources in the 2013/14 financial, TEDA had to give priority
to building capacity within the core business areas to ensure that in the next financial year
there is sufficient capacity to carry out and realise its mandate. TEDA generated some project
ideas in the latter part of 2013/14 with the aim of taking these through the business
development process in the 2014/15 financial year.
TEDA Annual Report 2013/14 Page - 9 -
1.4 KEY SERVICE DELIVERY IMPROVEMENTS AND 2012/13 AND 2013/14 TRENDS
During the 2012/13 financial year, TEDA as a new entity, appointed the Board of Directors, CEO
and CFO to start the operations of the company and lay foundation for a full and operational
organisation. During the 2013/14 financial year, the company adopted a management
structure and appointed key Executives in both core and support areas to enable
achievement of the set objectives. This allowed the Board to put more emphasis on exercising
its oversight role and fiduciary duties and leave the daily operations of the company to its
management complement.
The appointment of key Executive managers also assisted the Board to develop and adopt a
Business Plan and Five Year Strategy to drive the implementation of the company’s broader
mandate. Below are the highlights of the year under review:
Major Success and highlights of the year
o TEDA received an unqualified audit report.
o Critical corporate policies, guidelines and marketing strategies were approved within
this financial year.
o 98% of suppliers were paid within the 30 days turn-around time.
o The TEDA Corporate Identity manual was completed. The manual gives direction to the
logo and how it has to be applied. The new offices' look and feel application drew their
inspiration from the TEDA identity manual.
o The China Expo was the first international platform that TEDA participated in. TEDA was
part of the Department of Trade and Industry (DTI) delegation. TEDA visited three cities
Xiamen, Shanghai and Beijing. TEDA was introduced to the China top 500 businessmen
in Beijing. TEDA was also introduced to other agencies in South Africa and other parts of
China.
o The Africa Public Private Partnership Conference was a noteworthy platform to launch
TEDA to the African continent and international market. TEDA's branding was in posters
around Sandton, the publication of the conference, the programme and digital
platforms. The CEO of TEDA had the opportunity to make a 15 minute presentation on
Government and government agencies on PPPs. The CEOs of organisations like DBSA
the ministries of Nigeria, Uganda were able to interact with what TEDA does on its
exhibition stand and during other networking sessions available.
o Although TEDA had a limited budget allocation, it managed to fill the most critical posts
in the core business and ensure that the support functions are also capacitated
especially within finance and supply chain to conform to the segregation of duties as
required in that environment.
TEDA Annual Report 2013/14 Page - 10 -
o In order to avoid over spending TEDA ensured that there were strict controls put in
place through cost containment measures.
o TEDA made its mark on the JSE, Sawubona and Leadership magazines. The mandate of
TEDA and sectors of importance were exposed in these magazines.
o The TEDA website is up and running.
o The successful hosting of the inaugural SMME funding fair on 19 June 2014 attended by
approximately 300 participants
Challenges and mitigation controls
Table 1: Challenges and Mitigation Controls
CHALLENGES MITIGATION CONTROLS
Automatic rotation of suppliers Excel spreadsheet utilized while procuring an
automated system.
Challenges in tracking Identity numbers of service
providers that have been awarded contracts and
are in the employ of the state.
MBD declaration forms are utilised to minimize non-
compliance.
Expenditure and budget management Established budget management steering
committee
Adherence to supplier’s payment schedule
Ensured that all suppliers are paid within 30 working
days by paying on Thursdays.
Some of TEDA commitments for the year were
cancelled due to limited funding.
Only those commitments that are crucial were
prioritized to be funded.
Joint hosting of the TEDA website with the City of
Tshwane website resulting in delays in uploading
real time content.
TEDA is in a process of securing a service provider
to assist TEDA with migration of the website to a
separate environment.
TEDA Annual Report 2013/14 Page - 11 -
1.5 AUDITOR GENERAL REPORT
Table 2: Action Plan based on Auditor General’s report of 2012/13 Ref
Nr
Previous Status Current Status
Description
Detail
Action Plan
and/or Progress
Responsible
Dept & Process
Owner and
Implementation
Date
Follow-up
Audit Results
Audit
opinion
Management
comments and
Implementation
date
1 Policies not in
Place
Policies not in
Place
- Performance
management
policy not in
place
Code of
ethics not in
place
Asset
management
policy not in
place
- Fraud
prevention
plan not in
place
- Consultants
policy
- Human
resource
management
policy not in
place
Policies were
drafted waiting
for board
approval.
Human
resource
management
policy were
approved by
the board
CEO: TEDA Completed.
The policies
have been
implemented.
3 Strategic
Planning and
Performance
Management:
Strategic
Planning and
Performance
Management:
- The entity
did not have
multi-year
business plan
that is aligned
to the service
delivery
agreement
- Indicators
not specified
to measure
performance
TEDA has
implemented
an approved
2013/14
strategic plan
and business
plan with set
indicators that
are aligned to
the SDA.
CEO:TEDA The business
plan
provided was
not
complete,
targets are
not
measurable.
A request has
been
submitted to
meet with the
client in order
to address
the matter.
4 Deviation
from Supply
Chain
Management
Regulation
Only one
quotation
obtained for
awards
between R30
000 and R200
000
Awards
above R30
000 were not
advertised
TEDA has its
own supplier
database and
is process of
awarding both
contracts and
establishing
panel of
service
providers
- Compliance
checklist is
developed to
ensure
Compliance to
SCM process
- Prior to
participating in
CoT contract
CEO:TEDA The entity is
now
complying
with SCM
regulation.
- Three (3)
written
quotations
are
requested
from different
prospective
suppliers.
- TEDA has an
active
website
where
projects
above R30
TEDA Annual Report 2013/14 Page - 12 -
Ref
Nr
Previous Status Current Status
Description
Detail
Action Plan
and/or Progress
Responsible
Dept & Process
Owner and
Implementation
Date
Follow-up
Audit Results
Audit
opinion
Management
comments and
Implementation
date
TEDA will
evaluate
Compliance to
avoid
irregularities
- TEDA has
developed
website,
currently in the
implementation
process.
currently TEDA
is utilising notice
board
000 are
advertised.
- TEDA
complies with
SCM
processes for
awards
above R200
000
In the period under review TEDA received an Unqualified Audit Opinion. The current audit
outcome for the 2013/14 financial year is more on the compliance issues relating to
performance management and disclosure of information. This is a positive progression from the
previous audit results as there were repeat findings between the two years. This indicates the
effectiveness of the audit mitigation plan that was employed to address the audit matters.
Table 2A: Action Plan based on Auditor General’s report of 2013/14
NO AUDIT FINDINGS ACTION PLAN RESPONSIBLE
PERSON
TIME FRAME
1. Entity developed but
did not implement a
multi-year business
plan
The entity will refine
business planning in
line with National
Treasury Guidelines,
taking into
consideration
recommendations
from AG and
incorporate these on
the revised business
plan 2014/15
Senior Manager :
Strategy and
Performance
Immediate
2. Disclosure of
commitments
Quality assurance will
be done to enhance
the disclosure
commitment.
Integrated financial
management will be
introduced to minimise
manual data
management
Chief Financial
Officer
28 February 2015
3. Presentation and
disclosure of budget
information
Quality assurance will
be done to enhance
the presentation of
the Statement of
Comparison of Budget
and Actual
amount will be
amended to present
the budget in an easy
manner to follow that
is comparable and
consistent with the
Chief Financial
Officer
Immediate
TEDA Annual Report 2013/14 Page - 13 -
approved budget
4. Interest income
recorded in incorrect
period
Quality assurance will
be done to enhance
the presentation of
the Annual Financial
Statements
Chief Financial
Officer
Immediate
5. Non-compliance with
Section 99(2)(b) of
the MFMA relating to
payment of suppliers
Management
introduced the Age
analysis of payment to
service to monitor 30
days turnaround
period. All invoices are
inspected against the
quotation and the
purchase order to
ensure that correct
amounts are paid to
the service providers
within 30 days as per
MFMA.
Chief Financial
Officer
Immediate
6. Contingent liability
note incomplete
Management to
ensure that
confirmation on
contingent liabilities is
sought from the legal
advisor/attorney
before AFS
preparation.
Chief Financial
Officer
Immediate
7. Failure to completely
disclose all deviations
in the financial
statements
Management to
ensure that deviation
is sought for contracts
exceeding 12 months
where it is not feasible
to invite bid
Chief Financial
Officer
Immediate
8. Weakness in system
of internal control:
Operating
expenditure
Management to
ensure that processes
and systems
description are
regularly reviewed,
updated and
adhered to.
Chief Financial
Officer
Immediate
9. Payments not made
within 30 days
All purchase orders
where good and
services are delivered
to be inspected on
monthly basis to
ensure that
outstanding invoices
are tracked and thus
pay the service
provides within 30
days as per MFMA.
Furthermore, the entity
will procure an
Integrated Financial
System that will assist in
automating the
procure-to-pay
processes.
Chief Financial
Officer
28 February 2015
10. Incorrect points
awarded to
prospective bidder
Scores reviewed
accordingly.
Management will
conduct quality
Chief Financial
Officer
Immediate
TEDA Annual Report 2013/14 Page - 14 -
assurance on the
calculation of points
before a tender is
awarded
11. Reference check on
employees not
performed
MIE has been
contracted to
conduct background
checks on all new
employees.
Executive:
Corporate
Services
12. Disclosure of the
minimum
competency level in
the annual report
Quality assurance will
be done to enhance
the presentation of
the Annual report. The
annual report will be
amended
accordingly.
Senior Manager:
Strategy and
Performance
Immediate
13. SCM policy omitted
some of the aspects
of the SCM regulation
Management has
reviewed the entire
SCM policy to ensure
that it complies with all
applicable legislation.
Chief Financial
Officer
31 January 2015
14. Declaration of interest
was not obtained
from supplier
Paragraph 2.8 has
since been
completed
accordingly and there
is no conflict of interest
(#6). Management will
review the
completeness of bid
documentations.
Chief Financial
Officer
Immediate
15. Non-disclosure of
persons employed by
the state as required
by SCM regulation
Management will
ensure that there is
proper
communication
between SCM and
Finance especially
regarding information
that goes into the
financial statements.
Chief Financial
Officer
Immediate
16. Mid-Term Report for
2013/14 not submitted
to parent municipality
within the required
time
The Board work-plan
has been
synchronized with the
reporting dates of the
City.
Snr Manager
Strategy and
Performance
immediate
17. Indicators and targets
not well-defined /
specific
SMART principles have
been applied in
crafting the indicators
in the ensuing years as
well as the revised
business plan 2014/15.
Snr Manager
Strategy and
Performance
Immediate
18. Non-disclosure in
performance report of
measures to improve
performance
Corrective measures
will be implemented in
the mid-term report of
2014/15.
Snr Manager
Strategy and
Performance
19. Deficiencies noted on
the performance
report and approved
business plan
The entity will refine
business planning in
line with National
Treasury Guidelines,
taking into
consideration
recommendations
from AG and the
information will be
Snr Manager
Strategy and
Performance
Immediate
TEDA Annual Report 2013/14 Page - 15 -
reported accordingly
in the annual report.
20. Authorized bank
signatories not
updated timely
Bank signatories have
been updated and
timeous amendments
will be made in future
to avoid recurrence.
Chief Financial
Officer
Immediate
21. Tenant installation
costs not capitalised
and amortised
Key role player in the
AFS preparations will
be sent to GRAP
training. Furthermore,
the AFS preparation
timetable for the
subsequent financial
years will amended so
as to provide ample
time for the reviewers.
Chief Financial
Officer
Immediate
22. Income tax and
deferred tax
misstatements noted.
Chief Financial
Officer
Immediate
23. Competency
assessments for
prescribed officers
not performed
Competency
assessments will be
performed for all
prescribed officers in
2014/15
Executive:
Corporate
Services
2014/15
Quarter 4
24. AOPO- indicators not
well defined
Technical indicator
descriptions to be
drawn and included in
the adjusted business
plan to align with
objectives set.
Snr Manager
Strategy and
Performance
Immediate
25. AOPO-Key
performance not
specific
Technical indicator
descriptions to be
drawn and included in
the adjusted business
plan to align with
objectives set.
Snr Manager
Strategy and
Performance
Immediate
26. Invoices paid for not
addressed to TEDA
The finance unit will
design an invoice
minimum requirement
checklist to be
completed by the end
user departments to
be attached to the
invoice when
submitted to finance
Chief Financial
Officer
Immediate
27. Failure to follow the
bidding process for
contracts greater
than R200 000 or
longer than 12
months
Management will
ensure that all future
contracts of small
value are handled as
deviations as it is not
cost effective to invite
tender for small
amounts
Chief Financial
Officer
Immediate
TEDA Annual Report 2013/14 Page - 16 -
CHAPTER 2
2.1 CORPORATE GOVERNANCE
The Board of Directors of TEDA is committed to promoting a high ethical and performance
excellence culture within the company. The Board is devoted to ensuring the highest
standards of corporate governance compliance, corporate social responsibility, risk
management and prudent financial management.
The Board is responsible to the company’s shareholder, the City of Tshwane, for the
implementation of the shareholder compact and long term business strategy through oversight
on the management of the company’s operations in line with the company’s vision, i.e. TEDA
strives to be a leading African economic development agency.
The Board of Directors confirms that the company has, during the year under review; complied
with the King Code on Corporate Governance (King III), save in the following respect:
a) Board, Committee, individual and Chairperson appraisals were not performed due to lack
of sufficient funds for this purpose.
Composition of the Board of Directors
The Board of Directors consists of non-executive directors only as depicted in the table below.
Adv. CBB Mahlati resigned as a director in March 2014.
The Board of Directors of TEDA as stipulated in the King Code III and the Code of Conduct for
Directors referred to in section 93L of the Municipal Systems Act, 2000 as amended.
TEDA Annual Report 2013/14 Page - 17 -
Table 3: Board of Directors
NAME OF BOARD
MEMBER
CAPACITY:
EXECUTIVE / NON-
EXECUTIVE
RACE GENDER BOARD COMMITTEE MEMBERSHIP
L Vutula
(Chairperson)
Non-Executive African Male N/A
Bahula-Ermias, RS Non-Executive African Female Social and Ethics Committee,
Projects Committee
Gouvelis, H Non-Executive White Male Trade and Investments
Finance, Risk and Governance
Committee
Haskins, LD Non-Executive Coloured Female Trade and Investments Committee,
Risk and Governance Committee
Mahlati, CBB Non-Executive African Female Trade and Investments, Remunerations
Committee
Matsho, J Non-Executive African Male
Remunerations Committee,
Finance, Risk and Governance
Committee
Mpyane, CR Non-Executive African Male Projects Committee,
Remunerations Committee
Ntsinde, NM Non-Executive African Female
Projects Committee
Finance, Risk and Governance
Committee
Sibanda, FK Non-Executive African Male
Trade and Investments Committee
Projects Committee
Singh, N Non-Executive Indian Female Finance, Risk and Governance
Committee,
Social and Ethics Committee
Thubakgale, JL Non-Executive African Male Social and Ethics Committee,
Remunerations Committee
Yates, M Non-Executive White Male Projects Committee,
Trade and Investments Committee
TEDA Annual Report 2013/14 Page - 18 -
2.2 LEGISLATIVE BACKGROUND PRESCRIBING THE FUNCTIONS OF THE ENTITY
TEDA strives to comply with the Constitution of the Republic and the enabling general
legislative prescripts. In particular, TEDA is committed to comply with all its relevant applicable
legislation i.e. the Companies Act, Municipal Finance Management Act, Municipal Systems
Act, Broad Based Black Economic Empowerment Amendment Act, National Environmental
Management Act, Occupational Health and Safety Act, Labour Relations Act, Basic
Conditions of Employment Act, Employment Equity Act, Promotion of Access to Information
Act, the Skills Development Act and the regulations thereof.
TEDA has approved a Corporate Governance Policy Framework in April 2014. The policy
framework sets out, amongst other things, roles and responsibilities of the shareholder, Board
and management. As part of its Corporate Governance Policy Framework, TEDA also adopted
a Delegation of Authority Framework and Supply Chain Management Policy which reserves
certain powers and functions to the Board, management committees, CEO and individual
Executive Managers.
Furthermore, the Corporate Governance Policy Framework was developed in line with the King
Report on Corporate Governance, 2009 (King III). It also incorporates the Code of Conduct for
employees and directors, Fraud Prevention Policy, Conflict of Interests Policy and ICT
Governance Framework. TEDA adopted various Human Capital Policies in compliance with
labour market legislation.
2.3 FUNCTIONING OF THE BOARD AGAINST THE WORK PLAN 2012/13.
The Board approved an Annual Work Plan at the beginning of the financial year and
amended it later in the year after its review of Board Committee.
2.4 BOARD COMMITTEES
BOARD COMMITTEES
The Board established the following committees to strengthen its oversight role:
2.4.1 Projects Committee
The mandate of the committee is to advise the Board on the implementation of the projects
portfolio of TEDA. The committee uses the Projects Management Framework adopted by the
Board in order to perform its functions.
2.4.2 Trade and Investment Committee
The mandate of the committee is to advise the Board on CoT economic development
initiatives which include, but are not restricted to:
Trade and Investment Promotion, Facilitation and Aftercare
Implementing the CoT’s investment pipeline
Promotion of Export-Ready Companies
Development Facilitation which includes packaging and promoting investment
projects and nodal development e.g. the Implementation of the Inner City
Revitalisation Programmes.
TEDA Annual Report 2013/14 Page - 19 -
2.4.3 Remunerations Committee (REMCO)
The mandate of the committee is to advise the Board on the development and
implementation of the remuneration and recruitment policies of TEDA as well as other human
capital policies.
2.4.4 Finance, Risk and Governance Committee
The terms of reference of this committee include:
Ensuring the development of corporate governance, financial and organisational
performance policies of TEDA.
Monitoring TEDA’s compliance with laws and regulations and reporting to the Board
any incidents of non-compliance.
Ensure that TEDA’s fraud prevention policies are in place and implemented.
Ensure the development and management of a Risk Management Policy and plans.
2.4.5 Social and Ethics Committee
This statutory committee was established in terms of the Companies Regulations, 2011. Its terms
of reference include, amongst other things, monitoring the activities of the company on socio-
economic development matters and the company's standing with regard to:
The principles set out in the United Nations Global Compact Principles.
The OECD recommendations regarding corruption.
The Employment Equity Act, 1998.
The Broad-Based Black Economic Empowerment.
TEDA’s corporate social responsibility.
2.4.6 Directors Affairs Committee
The Committee’s purpose is to assist the Board with matters pertaining to:
Review and amendment of the structure and composition of Board Committees.
Ongoing review the performance of Board Committees.
Review of the Annual Work Plan of the Board.
Develop and recommend to the Board training development priorities for Directors,
individually and collectively, as well as Director Induction Programme.
There is no membership of the committee at this stage. The activities mentioned above are
currently the responsibilities of the Company Secretary in terms of facilitation and execution in
collaboration with the Shareholder’s Unit.
2.4.7 Audit and Performance Committee of the CoT and its Municipal Entities
The risk based audit function of TEDA is dependent on the shared resource provided by the
CoT through the Group Audit Committee and the Group Internal Audit Unit.
TEDA Annual Report 2013/14 Page - 20 -
DIRECTOR’S MEETING ATTENDANCE
During the year under review directors’ attendance was as follows:
Table 4: TEDA Board of Directors meetings
Table 5: Board Committee Meetings NAME OF BOARD
MEMBER
FINANCE AND
RISK
FINANCE,
RISK AND
GOVERNACE
REMCO TRADE AND
INVESTMENT
PROJECTS
COMMITTEE
SOCIAL
AND
ETHICS
Mr L Vutula
(Chairperson)
Adv CBB Mahlati 7 n/a 6
Mr CR Mpyane 8 7
Mr FK Sibanda 3 0 5
Mr H Gouvelis 2 1 9 1
Mr J Matsho 1 10 7
Adv JL
Thubakgale
5 8 1
Adv LD Haskins 4 1 0 8
Mr MW Yates 3 1 9
Mrs N Singh 5 1 3 0
Ms NM Ntsinde 4 1 9
Mrs RS Bahula-
Ermias
5 7 1
NAME OF BOARD MEMBER TOTAL NO OF MEETINGS
HELD
TOTAL NO OF MEETINGS
ATTENDED
Mr L Vutula (Chairperson) 18 18
Adv CBB Mahlati 18 12
Mr CR Mpyane 18 16
Mr FK Sibanda 18 14
Mr H Gouvelis 18 17
Mr J Matsho 18 18
Adv JL Thubakgale 18 16
Adv LD Haskins 18 12
Mr MW Yates 18 18
Mrs N Singh 18 14
Ms NM Ntsinde 18 17
Mrs RS Bahula-Ermias 18 15
TEDA Annual Report 2013/14 Page - 21 -
2.5 RISK MANAGEMENT AND INTERNAL CONTROLS
RISK MANAGEMENT AND INTERNAL CONTROLS
2.5.1 TEDA’s risk management strategy
TEDA has adopted Enterprise Risk Management (ERM) Strategy and Policy of City of Tshwane.
The Strategy lays out guiding principles for the management of risk on an ERM basis. This
strategy comprises the totality of all the structures, policies, strategies and procedures within
TEDA that deal with risk management at various levels
2.5.2 Provision of TEDAs risk management plan
Table 6: TEDA’s strategic risk register
STRATEGIC OBJECTIVE RISKS CURRENT CONTROLS MANAGEMENT ACTION
To establish and build
TEDA as a strong and
effective organisation
in the context of good
governance best
practices
Lack of critical
skills
1. Business processes have
been developed and
currently being
implemented.
1. To conduct skills audit
2. To develop organisational
development processes
To establish and build
TEDA as a strong and
effective organisation
in the context of good
governance best
practices
Lack of financial
sustainability
model
1.Continuous monitoring on
the budget and
performance
1. Develop and implement
financial sustainability plan
To promote, facilitate
and coordinate trade
and investment in
strategic infrastructure
to create value for
CoT
Failure to attract
investors
No control 1. Investment assessment
framework to be developed
2. Develop investment
promotion strategy
Task owner:
3. To package investment
incentives
Task owner:
4. Employ additional
capacity
To promote, facilitate
and coordinate trade
and investment in
strategic infrastructure
to create value for
CoT
Failure to
facilitate and
assist investors
1. Linking investors to
strategic alliances on a
project by project basis
2. High level analysis of
investor requirements in
Tshwane
1. Conduct market research
on investor environment
through
2. Continuous development
investor after-care
programme
To facilitate
implementation of
agreements signed
between CoT and
stakeholders
Inadequate
stakeholder
engagement
1. Communication policy in
place to deal with the
stakeholder engagement
1. To develop and implement
a stakeholder engagement
strategy
To identify, design,
develop and manage
projects with strategic
economic and social
benefits for the
greater Tshwane
Incorrect
assessment of
projects
1. Project Assessment model
developed and currently
being implemented
1. Develop procedure
manual
2. Conduct training on
appropriate model
3. Review the assessment
TEDA Annual Report 2013/14 Page - 22 -
STRATEGIC OBJECTIVE RISKS CURRENT CONTROLS MANAGEMENT ACTION
community model to introduce flexibility
and appropriateness
To establish and build
TEDA as a strong and
effective organisation
in the context of good
governance best
practices
Poor
implementation
of governance
processes
1. Companies Act, MFMA,
PFMA, Approved policies
and procedures of TEDA
2. Training conducted on
policies and procedures
and induction programmes
1. Revise and finalise
organisational design
process
2. Ensure policies and
procedures are in place for
key business processes
2.5.3 Risk management assessment processes followed
TEDA adopted the Public Sector Risk Management Framework from National Treasury and the
King III report on Corporate Governance to ensure that risk management processes within
TEDA are streamlined to best practices as indicated on the Enterprise Risk Management policy
for CoT and its Entities.
An assessment and review of the risks TEDA faces is undertaken annually. This process strives to
achieve the identification of the critical risks the Entity may face to enable it to formulate
appropriate risk strategies and action plans to mitigate and address these risks where
necessary.
To ensure TEDA’s future sustainability, we have looked at risks facing the Entity across our major
risk categories, these being Strategic risk, Financial risk, Operational risk, Governance risk and
Information Technology risk.
TEDA management owns the responsibility to ensure that risk management strategy and policy
is implemented. They do this by taking active responsibility in the risk management process. TEDA’s risk management, internal audit and the Audit Committee functioning
The Board has delegated the responsibility of creation and monitoring of risk management to
the Risk Committee and for reviewing the effectiveness of the internal controls to the Audit and
Performance Committee. These Committee uses information drawn from a number of different
sources to carry out this review:
Internal Audit provides objective assurance – their annual work plan is developed in
conjunction with management and focuses on key risks and key internal controls. In the light of
Internal Audit’s recommendations, management develops and implements corrective action
plans, which are tracked to completion by Internal Audit at City of Tshwane and the results
reported to executive management, Audit and Performance Committee and the Board;
Managers are responsible for the identification and effective management of all risks in their
areas of responsibility, and how they will mitigate risk through enhancement of the internal
control measures applied in their respective area of operations. Further objective assurance is
provided by the external auditors and other external specialists.
TEDA Annual Report 2013/14 Page - 23 -
2.6 ENTITY’S SUPPLY CHAIN PROCESSES AND PROCEDURES
Supply Chain Management is an integral part of financial management and its role is to render
support service in terms of goods and professional services to Tshwane Economic
Development Agency. Goods and services are procured in a system that is fair, equitable,
transparent, competitive and cost effective. It is always ascertained that the procurement
system operates within a framework that promotes and protects (HDI’s) Historically
Disadvantaged Individuals and also provides categories of BEE preference in allocating
contracts.
Supply Chain Management is divided into 5 elements (phases) which are summarised below:
Demand Management: Demand Management deals with the identification of need for goods
and services, ensuring that requirements are linked to budget, conducting stakeholder
analysis, drafting of specifications or terms of reference, determining Preferential Procurement
Strategies, determining the evaluation criteria, determining the lead and delivery times,
estimate the cost of goods and services, obtain necessary approvals for the acquisition of
goods and services. In this phase, the end user plays the biggest role with the assistance of the
Procurement unit. A Specification Committee is appointed, comprised of the end user and
SCM members and any other role player to facilitate this process.
Acquisition Management: This is the second phase of SCM. At this phase, a decision on how to
approach the market is made. The total cost of ownership is determined. Bid documents are
compiled. Bids are invited, evaluated and contracts are signed. This phase is executed by the
Procurement unit with some assistance from the end user and other role players. A Bid
Evaluation Committee is appointed, comprised of the end user and SCM members and any
other role player to facilitate this process. A Tender Committee known as Bid Adjudication
Committee is also appointed to evaluate the adjudicated contracts.
Logistics Management: This is the third phase that elaborates on the requisitioning of goods
from store (Inventory Management). It deals with items which are kept from store for issuing to
end users on request. Such items are kept in store due to the repetitive or frequent requirement
which makes it impractical to invite price quotations for each request. Orders are placed from
suppliers that are registered onto the Supplier Data Base System in order to solicit the above
goods unless a contract has been entered into. The process of placing orders, receiving and
dispatching falls within this ambit.
Disposal Management: This is a phase where unserviceable, redundant or obsolete movable
items are dealt away with. A Disposal committee is appointed to recommend the proper
disposal strategy.
All the above elements are conducted in accordance with the delegated powers/ authority.
Supply Chain Performance: This is the final phase. This is where projects are monitored at their
completion. The SCM process is monitored whether the desired objectives and goals are
achieved.
Asset Management: SCM is also responsible for the effective, efficient, economic and
transparent use, management, safeguarding and maintenance of assets. Various types of
forms are utilised to ensure proper control while relocating and or moving assets around. Assets
must be physically assessed annually so as to determine their useful live. This is accomplished
through inspecting the physical condition of the assets.
TEDA Annual Report 2013/14 Page - 24 -
2.6.1 Supply chain management capacity within TEDA
Currently, SCM is comprised of the following three (3) permanent staff members and one
temp.
DESIGNATION RESPONSIBILITY
Senior Manager: SCM Supply Chain Performance and Policy Development
Manager: SCM Tender Administration
Supply Chain Practitioner Price Quotation
Temp Asset and Inventory Management
2.6.2 TEDA procurement in line with the provisions of the MFMA
Identification and prioritization of need by end user
Confirm availability of funds (Budget)
Analyze the market to be utilized and research specifications
Determine whether to go out on tender or Price quotation.
Draft Terms of Reference (Specification committee minutes, Code of Conduct,
Attendance Register, Minutes or Memo)
Special conditions (if applicable)
Prepare bid documents
Publication on relevant media.
Briefing session (if relevant)
Issue and receipt register
Short listing of bidders on minimum requirements of the bid
Memorandum to the end-user and comments from the end user.
Presentations (if necessary) (Evaluation committee minutes, Code of Conduct,
Attendance Register, Minutes or Memo
Evaluation (Price) 80/20 below 1 million and 90/10 above 1million
Functionality and BEE evaluation
Vetting of service providers (National Treasury, SARS and CIPRO and various entities)
Recommendations (BAC) (Bid Adjudication committee minutes, Code of Conduct,
Attendance Register, Minutes or Memo
Approval and award (Accounting officer)
Probity check whenever necessary
Confirmation letter to SARS and Cipro if above 10 million (NIPP)
Advertise results on website
Conduct due diligence
The Supply chain management policy approval in line with the Municipal Finance
Management Act No. 56 of 2003.
All SCM policies are approved by the relevant Board, through REMCO. Before approval is
granted or the policy is adopted, it is ensured that the policy is aligned to all relevant legislative
framework like the SCM Directive for Municipal Accounting officers, Municipal Acts, Municipal
Supply Chain Model etc.
TEDA Annual Report 2013/14 Page - 25 -
Table 7: SCM Challenges and Remedial Actions
Challenges Resolutions
Deciding on the procurement strategy to be
embarked on, whether least coast selection, quality
based selection, individual appointment of
consultant, Single source selection etc.
Evaluate the type of service or commodity in
consultation with the end user, frequency of the
need, availability of budget, the urgency of the
service, technicality of the service and the
scarcity of the service.
Negotiating rates for prices to be paid for goods
and services especially professional services like
legal services where it is difficult to estimate the
number of hours.
This position takes into account budget constraints
and quality requirements and bases decisions on
these factors.
Deciding on Preferential procurement strategies to
be taken and evaluation criteria to be used for
various projects.
The above involves market analysis, black
economic empowerment and analysing the need
to either go out on tender or satisfy needs through
the supplier’s data base system.
The following deviations were motivated accordingly and approved:
Table 8: Deviations
DEVIATION
NO
SERVICE PROVIDER AMOUNT REASON FOR DEVIATION
1 African Public Private Partnership R351 327.79 Single Source Selection for a
Conference
2 Ningiza Horner R1 million Legal opinion for the Accounting
officer
3 EMS (SAITEX) R194 431.78 Single source selection
Table 9: TEDA’s supply chain committees and functions
SUPPLY CHAIN
MANAGEMENT
COMMITTEES:
COMMITTEE
GUIDELINES FUNCTIONS
AND
PURPOSE
OF THE
COMMITTEE
NO OF
MEETINGS
PLANNED
ACTUAL REASONS
FOR
DEVIATION
INTERVENTION/
ACTION TAKEN
Bid
Specification
Committee
Regulation
27 of the
Municipal
SCM Act
Compile
Specification
and Terms of
Reference
8 5 Budget
constraints
Reprioritisation of
both Budget and
Projects
Bid Evaluation
Committee
Regulation
28 of the
Municipal
SCM Act
Evaluation of
bidder’s
ability to
execute the
contract in
accordance
with set
standards
and criteria
8 5 Budget
constraints
Reprioritisation of
both Budget and
Projects
Bid
Adjudication
Committee
Regulation
29 of the
Municipal
SCM Act
Considers
the report of
the
evaluation
committee,
depending
on
delegated
powers,
either
8 5 Budget
constraints
Reprioritisation of
both Budget and
Projects
TEDA Annual Report 2013/14 Page - 26 -
approve or
recommend
to the
Accounting
officer.
TEDA Annual Report 2013/14 Page - 27 -
Table 10: TEDA bid Adjudication Committee Structure and non-compliance with the requirements
SUPPLY CHAIN
MANAGEMENT
PROCUREMENT
THRESHOLD AND
DELEGATIONS
(TABLE 10) VALUE
OF PURCHASE
PROCUREMENT METHOD AND
REQUIREMENTS
DELEGATED
AUTHORITY
OVERSIGHT ROLE PROCUREMENT
REQUIREMENTS
DEVIATIONS
REASONS INTERVENTION/ ACTION
TAKEN
0 to R2,000 Petty Cash CFO CFO N/A N/A N/A
R2 0001 to R10 000 3 ( three) Quotations CEO CEO N/A N/A N/A
R10,000 to R30 000 3 ( three) formal Written price
quotation
CEO CEO N/A N/A N/A
R30 001 to R200
000
3 ( three) formal written quotations CEO CEO Non-advertisement on
website
Website was on
developmental
stage
Website developed
and functional
Tenders above
R200 000 to R10
million and long
term contracts
A competitive bidding process :
Advertising the tender for a
period of 30 days in the
newspaper and Government
tender bulletin.
Advertising of the tender in
newspapers;
Allocate in accordance with the
preferential points system
Bid
adjudication
Committee
CEO 1. 5th Africa Public
Private Partnership
Conference
2. Procurement of
legal services on
appointment of
Ningiza Horner
3. EME (SAITEX)
Single Source
Selection
Conference
The legal opinion
required had to
do with the
Accounting
officer
Single Source
Selection
Deviation motivated
and approved
Deviation motivated
and approved
Deviation motivated
and approved
Tenders above R10
million
A competitive bidding process :
Advertising the tender for at least
30 days in newspapers;
Allocate in accordance with the
preferential points system
CEO TEDA BOARD N/A N/A N/A
TEDA Annual Report 2013/14 Page - 28 -
CHAPTER 3
3.1 SERVICE DELIVERY PERFORMANCE
TEDA entered into a Service Delivery Agreement with CoT and the agreement is subject to annual review by the City. The SDA was used as a basis for the
development of the TEDA business plan of 2014/15
3.2 PERFORMANCE OVERVIEW -
Table 11a: TEDA Contribution to the SDBIP 2013/14
STRATEGIC OBJECTIVE KEY PERFORMANCE INDICATOR 2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED OR NOT
ACHIEVED
Promote shared economic
growth and job creation
Nr of new income earning
opportunities facilitated (TEDA) 1000 80 920
Promote shared economic
growth and job creation
Number of SMMEs and
entrepreneurs supported
(TEDA) 500 271 229
*TEDA facilitated the Porsche Investment into the City to the value of R120 million against an annual target of R1 billion.
Table 11b: TEDA Performance Scorecards for 2013/14
STRATEGIC OBJECTIVE KEY PERFORMANCE
INDICATOR
2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED
OR NOT ACHIEVED
CORRECTIVE MEASURES
2. Promote shared
economic growth and
job creation
Develop Economic
Strategy that factors
CoT and Conventional
Economic Drivers
Develop and
implement Economic
Strategy that factors
CoT and Conventional
Economic Drivers
Export Development and
Promotion Implementation
Plan & Investment Outlook
have been finalized.
Achieved
2. Promote shared
economic growth and
job creation
Concluded research
and developed
feasibility studies
Develop and
Implement Inner City
Revitalization and
EPWP Programme
Development
TEDA is working closely with
the Tsosoloso Programme,
DED, Road and Transport,
City Planning to execute
identified projects, and
develop business cases for
newly identified projects.
EPWP capacity will be
assigned to identified
projects.
Not achieved TEDA is working very closely with
the Tsosoloso Programme, DED,
Roads and Transport, City
Planning, to execute identified
projects, and develop business
cases for newly identified
projects. EPWP capacity will be
assigned to identified projects
2. Promote shared
economic growth and
Improved trade,
investment and tourism
Improved trade,
investment and tourism
One Tshwane Company
managed to establish a
Achieved
TEDA Annual Report 2013/14 Page - 29 -
STRATEGIC OBJECTIVE KEY PERFORMANCE
INDICATOR
2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED
OR NOT ACHIEVED
CORRECTIVE MEASURES
job creation coordination and
management
coordination and
management
Exhibitions and Events
Management Strategic
Land Consolidation
and Integration
business partnership with
Indian company as a result
of TEDA facilitation of
Tshwane companies’
participation in the Indian
business delegation.
Received follow up requests
regarding further
information on TITIIC from
South African Embassies and
Economic Representatives
abroad.
Identified and held
meetings with key
stakeholders after Tshwane
Business Forum
Attended DTI Integrated
National Export Strategy
Stakeholders workshop
2. Promote shared
economic growth and
job creation
Identified and
promoted Tshwane
trade and investment
areas and aftercare
4 Identified and
promoted Tshwane
trade areas and
aftercare
Investor visitation
programme commenced in
2 trade areas. Visited AIDC
in Automotive Supplier Park
in Roslyn and Ford-SA in
Silverton and provided after
care to Ford SA.
Reference Document Plan
on Export Development and
Promotion Implementation
has been submitted.
Position Paper on Tshwane
Exporters Awards has been
finalised
Not achieved After care will be conducted in
the new financial year.
TEDA Annual Report 2013/14 Page - 30 -
STRATEGIC OBJECTIVE KEY PERFORMANCE
INDICATOR
2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED
OR NOT ACHIEVED
CORRECTIVE MEASURES
Investment outlook study
has been submitted and
TEDA official formed part of
the consultants’ team which
engaged with various
stakeholders including large
foreign enterprises in
Tshwane. The study will be
used to effect appropriate
aftercare programme
2. Promote shared
economic growth and
job creation
Properly facilitated and
hosted local, regional
and global events and
activities.
Properly facilitated
and hosted local,
regional and global
events and activities
China Expo – Participated in
the CIFIT Expo mission in
partnership with the DTI to
promote TITIIC in China
Africa Public Private
Partnership – Teda brand
exposure to international
market on the on the 3- 5
December
Participated in the Pan
African Parliament 10th year
celebration Exhibition.
Brand exposure in the NTI
(National Tooling Initiative
Programme)
Exhibition in Mining Indaba
in Cape Town.
Hosted the TEDA Funding
Fair
Participated in the SAITEX
Exhibition
Achieved
6. Financial
Sustainability
Mobilized funds, CoT,
National / Provincial,
10% Mobilized funds as
per the funding from
Not achieved Funding model will be developed
and implemented before the end
TEDA Annual Report 2013/14 Page - 31 -
STRATEGIC OBJECTIVE KEY PERFORMANCE
INDICATOR
2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED
OR NOT ACHIEVED
CORRECTIVE MEASURES
Private sector , Donors COT and as per the
strategic Plan
of the financial year.
5.Promote Governance
and Active Citizenry
Consolidated strategic
thrust and reporting
100% Compliance
reporting (Strategy and
Budget)
100% - reports submitted
within the stipulated
timeframes.
Not Achieved TEDA will synchronize the
reporting dates to CoT and that
of the Board meetings
5.Promote Governance
and Active Citizenry
Management and
coordination of the
various components
within the organization.
Effective functioning of
TEDA across all Sections
Critical policies
implemented, basic
operating systems
implemented, critical posts
filled, performance
agreements signed by
Executives.
Achieved
5.Promote Governance
and Active Citizenry
TEDA Board and
management
compliance as per
applicable legislation
Effective functioning of
the Board and
committee
Meeting documents
prepared and circulated.
Minutes of meetings finalized
and action lists circulated.
Corporate Governance
Policy Framework
developed and approved.
Terms of Reference of Board
committees reviewed.
MoI approved by Council.
Register of interest updated.
Statutory returns and notices
filed with CIPC
Achieved
5.Promote Governance
and Active Citizenry
Compliant TEDA
policies and regulations
100 % Compliance to
policies and regulations
Most approved policies
implemented and complied
with.
Not Achieved Monitoring compliance with
policies and regulations
5.Promote Governance
and Active Citizenry
Adequate auditing
services and audit
committee tasks
Appointment of the
Internal audit capacity
and effective
functioning of Audit
committee
TEDA makes use of a co-
sharing arrangement with
CoT
Achieved
TEDA Annual Report 2013/14 Page - 32 -
STRATEGIC OBJECTIVE KEY PERFORMANCE
INDICATOR
2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED
OR NOT ACHIEVED
CORRECTIVE MEASURES
5.Promote Governance
and Active Citizenry
Strategy, mitigation,
action and generic
items , identified fraud,
corruption and theft
and Corrective Models
Risk register developed Risk register developed. Achieved
2. Promote shared
Economic Growth and
job creation
Analysis: local
economics; property
market, investment
trends, and sustainable
interventions.
Report of Analysis with
proposed actions on
local economics;
property market,
Investment trends, and
sustainable
interventions.
Final Export Development
and Promotion Plan
submitted
Final Investment Outlook
submitted
Achieved
2. Promote shared
Economic Growth and
job creation
Secured FDI’s for
purpose of improved
Tshwane economic
development
4 Secured FDIs for
purpose of improved
Tshwane
Investment by Porche S.A
worth R120 million
Not achieved TEDA will review investor
attraction strategies.
2. Promote shared
Economic Growth and
job creation
Project Plan and
Implementation Model
supported by
Stakeholders including
the COT
Project Plan and
Implementation Model
supported by
Stakeholders including
the COT
TEDA adopted several COT
projects via its Project
Management Framework.
According to the TEDA/DED
SLA, TEDA provides financial
support to the projects while
DED remains technical
partner to the stakeholders.
Joint reporting is done by
TEDA and DED on each
project
Achieved
6. Financial
Sustainability
Effective capital and
investment
management and
TEDA sustainability
100% Compliance in
reporting Budget
Reports
100 Achieved
5.Promote Governance
and Active Citizenry
Effective and compliant
supply chain
management and
reporting
100% Compliant SCM
will relevant prescripts
100 Not Achieved Continuous monitoring of the
policy implementation.
5.Promote Governance
and Active Citizenry
Effective human
resources management
92% Fully Capacitated
TEDA and all legislative
prescripts developed
and monitored
All critical policies
developed and
implemented.
Not Achieved Appointment of an Expert on
development of Organizational
design.
TEDA Annual Report 2013/14 Page - 33 -
STRATEGIC OBJECTIVE KEY PERFORMANCE
INDICATOR
2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED
OR NOT ACHIEVED
CORRECTIVE MEASURES
5.Promote sound
Governance and
Active Citizenry
Budget aligned
Operational Plans,
Business Plan
compliance
Budget aligned
Operational Plans ,
Business Plans 100%
compliance with
relevant prescripts
Budget aligned plans
implemented and prescripts
were adhered to.
Achieved
5. Promote sound
Governance and
Active Citizenry
Develop relations with
the city budget section.
100% implement
integrated Financial
systems
Relations with the City
Budget section have been
maintained
Achieved
5. Promote sound
Governance and
Active Citizenry
Comply with City
Budget Instrument
100% Implement
Integrated Financial
System-
Due to prioritization of funds,
a fully integrated financial
system has not been
implemented
Not achieved The integrated financial system
will be implemented in the
2014/15 financial year.
6.Improve Financial
Sustainability
Effective and
Compliant TEDA
Funding Mobilization for
Other Projects
Effective and
Compliant TEDA
Funding Mobilization for
Other Projects
Model for income
generation not yet
developed
Not achieved TEDA mobilization plan to be
developed and implemented
before the end of quarter 4
2.Promote shared
economic growth and
job creation
Revitalization and
Maintenance of
Designated Property
Portfolio
Revitalization and
Maintenance of
Designated Property
Portfolio
Unit not yet in operation and
work will be carried out in
14/15 financial year.
Not achieved TEDA will set up an asset
management unit that will deal
with this KPI and discussions are
underway to establish the unit
and build capacity to deliver on
the KPI.
5. Promote sound
Governance and
Active Citizenry
Best case scenario ICT
connectivity
Fully Integrated ICT
System
ICT Governance Framework
has been approved, ICT
Terms of Reference and
Internet Usage has been
approved.
Not achieved ICT governance framework is in
the process of being developed.
TEDA will be having a draft
framework by end of march 2014.
5. Promote sound
Governance and
Active Citizenry
Best internal and
external
communications
processes, systems and
management
Best internal and
external
communications
processes, systems and
management
Development of the
Communication and
Marketing strategy.
Development of the Media
policy.
Compiled 4 media releases
on APPP, TEDA Profile, SMME
Funding Fair and TITIIC.
Placing of articles in JHB
Achieved
TEDA Annual Report 2013/14 Page - 34 -
STRATEGIC OBJECTIVE KEY PERFORMANCE
INDICATOR
2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED
OR NOT ACHIEVED
CORRECTIVE MEASURES
stock exchange publication,
Frontier Market Network,
Sawubona Magazine,
Leadership Magazine, SME
online publication.
Arranging media interviews
on Tshwane FM and Power
FM with Focus on SMME
Funding Fair.
Coverage received from
Sowetan on the Funding
Fair, CNBCA for APPP, Power
FM and Tshwane Radio.
Launching of the TEDA
website and regularly
updating it.
Receiving brand exposure
on Frontier Market Network
and successfully received 6
investments leads.
Launch of the electronic
newsletter.
Interacted and joined the
State Owned Entities
Communication Forum.
Securing a domain name for
TITIIC website and
developing Terms of
Reference for the
development of TITIIC
Website.
Streamlining internal
Communication by
establishing one point of
TEDA Annual Report 2013/14 Page - 35 -
STRATEGIC OBJECTIVE KEY PERFORMANCE
INDICATOR
2013/14 TARGET ANNUAL PERFORMANCE
ACHIEVED
TARGET ACHIEVED
OR NOT ACHIEVED
CORRECTIVE MEASURES
dissemination of
organizational information.
Printing, layout design and
editing of the Annual report
for 2012/13 financial year
TEDA Annual Report 2013/14 Page - 36 -
CHAPTER 4
4.1 HUMAN CAPITAL MANAGEMENT
TEDA Organogram and staff component
During the financial year 2013/14 financial year, the company managed to attract skills across
the business. The staff component of TEDA is currently at 37 with two (2) being contract
workers. The organization has six executives, two (2) males and four (4) females. There was only
one (1) resignation.
Table 12: EEA report on (Female positions, people with disabilities
JOB LEVELS BLACK
(A/C/I)
WHITE FOREIGN
NATIONALS
GENDER GRAND
M F M F M F M F Total
Executives 2 4 0 0 0 0 2 4 6
Senior
Management
6 5 0 0 0 0 6 5 11
Middle
Management
2 5 0 0 0 0 2 5 7
Operational 3 2 0 0 0 0 3 2 5
Support 0 5 0 0 0 0 0 5 5
Total Permanent 13 21 0 0 0 0 13 21 34
Temps & Interns 1 2 0 0 0 0 1 2 3
Grand Total 14 23 0 0 0 0 14 23 37
There is a significant number of female representation (23) in comparison with a total of 14
males. Currently women occupy 66 % of executive roles in TEDA.
Furthermore 63% of the total staff head count is represented by black females whereas 38 % of
positions are occupied by black males.
TEDA Annual Report 2013/14 Page - 37 -
Table 13: No of approved positions filled and vacant
4.2 HUMAN CAPITAL POLICIES
Priority for this financial year was the development of human resources policies to ensure an
effective management of human capital. Fourteen (14) relevant management policies have
been approved to bring synergy between employee value proposition and the organisations’
people management philosophy as well as legislative prescripts. Process and Systems have
been developed to ensure proper work flow. Staff complement of TEDA increased to 37 within
a short space of time.
BUSINESS UNITS
2013/14 APPROVED POSTS AS
PER THE STRUCTURE
NO. OF FILLED
POSTS
VACANT POSTS
Office of the CEO
10
3
7
Company Secretary
3
3
-
CFO
11
8
3
Corporate Services
13
9
4
Asset Management
6
-
6
Trade and Investment
5
4
1
Projects Portfolio
7
4
3
Marketing and
Communications
7
6
1
Total
62
37
25
TEDA Annual Report 2013/14 Page - 38 -
4.3 DISCLOSURES
Human Resources Disclosures concerning TEDA
Table 14: Human Resources Head Count per UNIT 2012/13 2013/14 CHALLE
NGES
INTERVENTION
/ACTION TO
BE TAKEN UNITS NO
.
OF
PO
STS
NO
.
OF
FILL
ED
PO
STS
NO. OF
VACA
NCIES
VACA
NCIES
%
UNITS NO
.
OF
PO
STS
NO
.
OF
FILL
ED
PO
STS
NO. OF
VACA
NCIES
VACA
NCIES
%
Chief
Executiv
e Officer
17 3 14 82 Chief
Executiv
e Officer
13 6 7 54 Post to be
filled in
2014/15
Chief
Financia
l Officer
18 1 17 94 Chief
Financia
l Officer
11 8 3 28
Corpora
te Affairs
9 0 9 100 Corpora
te Affairs
13 9 4 31
Strategi
c
Partners
hips
7 0 7 100 Strategi
c
Partners
hips
100
Asset
Manage
ment
9 0 9 100 Asset
Manage
ment
6 - 6 100
Projects
Officer
9 0 9 100 Projects
Officer
7 4 3 43
Trade
and
Investm
ent
5 0 5 100 Trade
and
Investm
ent
5 4 1 20
Tourism
and
Marketin
g
9 0 9 100 Tourism
and
Marketin
g
7 6 1 15
Legal
services
9 0 9 100 Legal
services
TOTAL 92 4 88 96 62 37 25 40
There is a significant number of female representation (23) in comparison with a total of 14 males.
Currently women occupy 66 % of executive roles in TEDA.
Furthermore 63% of the total staff head count is represented by black females whereas 38 % of positions
are occupied by black males.
TEDA Annual Report 2013/14 Page - 39 -
TRAINING AND DEVELOPMENT
Table 15: Training MANAG
EMENT
TYPE
OF
TRAI
NING
2012/13 2013/14
GEN
DER
EMPL
OYEES
IN
POST
AS 30
JUNE
2012/
13
LEARNE
RSHIPS
SKILLS
PROGR
AMMES
&
OTHER
SHORT
COURSE
S
OTHE
R
FOR
MS
OF
TRAI
NING
TO
TAL
GEN
DER
EMPL
OYEES
IN
POST
AS 30
JUNE
2013/
14
LEARNE
RSHIPS
SKILLS
PROGR
AMMES
&
OTHER
SHORT
COURSE
S
OTHE
R
FOR
MS
OF
TRAI
NING
TO
TAL
REM
ARKS
Offici
als
F Y n/a 2 2 4
MANAGEMENT OF LEAVE
Table 16: Leave Records
TYPES
OF
LEAVE
2012/13 2013/14 DAYS
TOTAL
SICK
LEAVE
ON SPECIAL
AND SICK
LEAVE
(MEDICAL
CERTIFICATE
PROVIDED,
DEATH
CERTIFICATE
AND STUDY
LEAVE INFO)
DAYS DESCRIPTION TOTAL
SICK
LEAVE
ON SPECIAL AND
SICK LEAVE
(MEDICAL
CERTIFICATE
PROVIDED, DEATH
CERTIFICATE AND
STUDY LEAVE INFO)
Annual
leave
6 Documents
were provided
to HR
6 Annual
Leave
- - 274
Special
(study)
Leave
- Documents
were provided
to HR
2 Sick Leave 128 Documents were
provided to HR
128
Special
(study)leave
- Documents were
provided to HR
47
Unused
rows
Family
Responsibility
Leave
- Documents were
provided to HR
8
Unpaid
Leave
- 8
In 2012/13 only 6 and 2 days of annual and study leave days were utilized respectively. There
was an active sick leave utilization of 128 days in 2013/14.
Study leave reported an increase in utilization of 47 days in comparison with 2 days utilized in
2012/13. Only 8 days of both unpaid and family responsibility leave were used in 2013/14
TEDA Annual Report 2013/14 Page - 40 -
Table 17: Human Resources Gender and Race
INDICATOR BASELINE 2012/13
TARGET
2012/13
ACTUAL
2013/14
TARGET
2013/14
ACTUAL
COMMENTS
African staff % of
total staff
0 n/a 100% 100% 60% TEDA is currently
undergoing an
Organisationl Design
exercise that will inform
the structure and related
targets
Female staff as % of
total staff
0 n/a 66% 75% 62%
African Female
managers % of
senior management
0 n/a 33% 75% 46%
4.4 COMPETENCY LEVELS OF FINANCE AND SUPPLY CHAIN OFFICIALS
Table 18: Progress report on financial competency development
Financial Competency Development: Progress report Description A.
Total number of
officials employed
by Municipality
(Regulation
14(4)(a) and (c)
Consolidated:
Competency
assessments
completed for A
(Regulation
14(4)(b) and (d)
Consolidated:
Total number of
officials whose
performance
agreements
comply with
Regulation 16
(Regulation
14(4)(f)
Consolidated:
Total number of
officials that meet
prescribed
competency
levels (Regulation
14(4)(e)
Financial officials 4 0 4 0
Accounting officer 0 0 0 0
Chief financial
officer
1 0 1 0
Senior manager 1 0 1 0
Any other financial
officers
2 0 2 0
Supply Chain
Management
officials
3 0 3 0
Head of Supply
Chain
Management unit
0 0 0 0
Supply Chain
Management
senior manager
1 0 1 0
Any other Supply
Chain
Management
officials
2 0 2 0
TOTAL 7 0 7 0
TEDA Annual Report 2013/14 Page - 41 -
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd
(Registration number: 2006/019396/07)
ANNUAL FINANCIAL STATEMENTS For the year ended 30 June 2014
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Table of Contents
TEDA Annual Report 2013/14 Page - 42 -
Contents Page
General Information 41
Accounting Officer‘s Responsibilities and Approval 42 Directors Report
43
Report of the Audit Committee 48 Report of the Independent Auditors – Auditor General 49 Statement of Financial Position 50 Statement of Financial Performance 51 Statement of Changes in Net Assets 52 Cash Flow Statement 53 Statement of Comparison of Budget and Actual Amounts
54-55
Accounting Policies 56-72 Notes to the Annual Financial Statements 73-89
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting Officer’s Responsibilities and Approval
TEDA Annual Report 2013/14 Page - 43 -
The accounting officer is required by the Municipal Finance Management Act (Act 56 of 2003) (MFMA) and the Companies Act of South Africa, to maintain adequate accounting records and is responsible for the content and integrity of the Annual financial statements and related financial information included in this report. It is the responsibility of the accounting officer to ensure that the Annual financial statements fairly present the state of affairs of the municipal entity as at the end of the financial year and the results of its operations and cash flows for the year then ended. The external auditors are engaged to express an independent opinion on the Annual financial statements and was given unrestricted access to all financial records and related data. The Annual financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practices (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The Annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The accounting officer acknowledges that he is ultimately responsible for the system of internal financial control established by the municipal entity and places considerable importance on maintaining a strong control environment. To enable the accounting officer to meet these responsibilities, the accounting officer sets standards for internal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the municipal entity and all employees are required to maintain the highest ethical standards in ensuring the municipal entity‘s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the municipal entity is on identifying, assessing, managing and monitoring all known forms of risk across the municipal entity. While operating risk cannot be fully eliminated, the municipal entity endeavors to minimize it by ensuring that appropriate infrastructure, controls, systems and ethical behavior are applied and managed within predetermined procedures and constraints. The accounting officer is of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the Annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or deficit. The accounting officer has reviewed the municipal entity‘s cash flow forecast for the year to 30 June 2015 and, in the light of this review and the current financial position, acknowledges that the municipal entity will have to secure access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the municipal entity's Annual financial statements. The Annual financial statements have been audited by the municipal entity's external auditors in accordance with the Companies Act, 2008 (Act No 71 of 2008) and their report is presented on pages ___ to ___. The Annual financial statements set out on pages _____ to _____ which have been prepared on the going concern basis, were approved by the board directors, and accounting officer on ___________________ and signed by: __________________________ Accounting Officer
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Director’s Report
TEDA Annual Report 2013/14 Page - 44 -
2.5.3 Incorporation
The company was incorporated in South Africa on 23 June 2006 and obtained its certificate to commence business on the same day.
2.5.4 Review of activities
2.5.5 Main business and operations
TEDA was established in June 2006 by the City of Tshwane (CoT) with the main purpose of investment attraction into the City and therefore addressing inequality, unemployment and poverty. TEDA developed six strategic objectives in the 2013/14 financial year flowing from its mandate. The core business of TEDA is made up of Trade and Investment and Project Management Portfolio, with Marketing and Communications unit as a hybrid between support and core business. There is a strong element of business development within the core operations which will be incorporated in the future under one of the units to create a complete value chain. TEDA recognises the City of Tshwane in its capacity as shareholder, as the main stakeholder among the other government and private sector institutions which it has to partner with in executing its mandate. TEDA has formed some strategic partnerships in the year under review with some critical stakeholders for instance, the National Department of Trade and Industry (DTI), the Gauteng Growth and Development Agency (GGDA), SA Chamber of Commerce, SA Embassies abroad and Embassies of Foreign countries in South Africa, SA Economic Attaches‘ in Foreign countries, other local and International Trade and Investment Agencies.
2.5.6 Important policy decisions and strategic issues facing the entity
TEDA being in its second year of operation is still faced with the challenge of making itself a visible and known brand. The Agency is still striving towards making an impact within the City of Tshwane in the economic development milieu. There is a need for a concerted effort by TEDA to focus on implementation of projects and initiatives that will contribute towards the achievement of the Tshwane Vision 2055. While the CoT funding to TEDA is gradually being tapered down in the medium term period, there are plans to access alternative sources of funding and develop income generating initiatives for future TEDA sustainability. One of the strategic issues facing TEDA is making strategic choices underpinned by guiding philosophical standpoints. For example choices between the agency being the direct provider of services or playing a facilitation role, working in collaboration with partners and other providers or being in competition with them and choosing between many or few offerings with low and high impact respectively against the backdrop of available resources.
2.5.7 Comment on significant events that have taken place during the year
In the year under review TEDA has added more human capacity across its support and core units, however the core units still need more capacity in order to achieve TEDA‘s business scorecard for the ensuing years. TEDA hosted a funding fair in the latter part of the financial year targeted at small, medium and medium enterprises (SMME‘s) and the event attracted approximately 300 participants from a arrange of SMME‘s. This was done in conjunction with other government funding agencies for information dissemination on the support and access to funding opportunities that are available for SMME‘s. TEDA took part in the China Expo as delegates under the National Department of Trade and Industry. This presented the Agency with an opportunity to market itself among international stakeholders operating within the similar arena of economic development. TEDA also co-sponsored and facilitated the Africa Public Private Partnership event with the aim of exposing TEDA to the African and international markets.
2.5.8 Comment on major projects undertaken or completed during the year
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Director’s Report
TEDA Annual Report 2013/14 Page - 45 -
TEDA implemented co-funded projects with the City of Tshwane as per the Service Level Agreement entered into between the two parties. TEDA met its funding obligations for these projects and reported on them accordingly. These were:
National Tooling Institute Programme (NTIP) – the tooling academy has absorbed 79
learners in the 2013/14 financial year. These learners are in a programme which will
ensure that they are employed within the manufacturing industry;
Hammanskraal Stalls- Some of these stall are complete whilst others are still under
construction with completion anticipated in early 2014/15 financial year.
Automotive Industry Development Centre (AIDC) . TEDA’s contribution was towards
funding of the setting up of the Project Management Office (PMO).
Refurbishment of the Mamelodi rondavels within the proposed cultural precinct.
One of the important projects managed by TEDA is the Tshwane International Trade and Investment Conference (TITIIC) aimed at promoting the City as an investment destination. This project is scheduled for launch in May 2015.
2.5.9 Information on predetermined objectives
Six strategic objectives were developed in line with the TEDA mandate. Annual and quarterly targets were set as milestones to achieve the objectives. These were duly reported on, on a monthly, quarterly and mid- term basis to the Board as well as the City of Tshwane. TEDA had challenges in meeting its set targets in the 2013/14 financial year due to the limited resources, both human and financial. However, a performance improvement plan was developed towards ensuring that some targets were adequately met through the limited means available. Notably targets on the SMME support improved in the last quarter of 2013/14 due to the inaugural Funding Fair hosted by TEDA. A portfolio of evidence was also created for each quarter performance reports to substantiate the achieved milestones. The detailed report on how well TEDA did on the key performance indicators and targets is contained in the chapter 3 of the annual performance report.
2.5.10 Policies Approved by the Board
A total of 14 institutional policies were approved in the year under review. Additional policies are being developed to ensure that TEDA subscribes fully to imperatives such as ―triple bottom line‖ reporting in terms of Corporate Governance frameworks.
2.5.11 Staffing
In the year under review TEDA made strides in appointing Executives in all business and support units. For the ensuing years the agency will have full human resource capacity comprising suitable qualified staff to enable TEDA to deliver on its mandate. This is in light of the Organisational Design exercise which has started and which will not only advise on the appropriate structure for TEDA in line with its strategy but also define the Human Capital model for TEDA in line with the envisaged new status of a larger entity.
2.5.12 Going concern
Tshwane Economic Development Agency has an accumulated surplus of R5 million. The annual financial statements have been prepared on a going concern basis as the directors have no reason to believe that the entity will not be a going concern in the foreseeable future. The entity is wholly owned by the City of Tshwane and the municipality has no intention to liquidate the entity.
2.5.13 Subsequent events
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Director’s Report
TEDA Annual Report 2013/14 Page - 46 -
The directors are not privy to any matter or circumstance arising since the end of the financial year that can significantly affect the financial results.
2.5.14 Value Added Tax
The entity was not registered as a VAT vendor at the end of the reporting date. However it is registered for VAT effective from 1
st July 2014.
2.5.15 Share capital and equity
There were no changes in the authorised or issued share capital of the entity during the year under review.
2.5.16 Directors’ personal financial interest
The Directors have declared that they do not have any personal interests in the contracts entered into by the entity.
2.5.17 Directors
The Directors of the entity during the year under review and to the date of this report are as follows: Name Nationality Changes
South African Mr L Vutula (Chairperson) South African Ms RS Bahula- Ermias South African
Mr H Gouvelis South African
Ms LD Haskins South African Ms CBB Mahlati South African Retired on the 10
th March 2014
Ms J Matsho South African
Mr CR Mpyane South African
Ms NM Ntsinde South African
Mr FK Sibanda South African
Ms N Singh South African
Mr JL Thubakgale South African
Mr MW Yates South African
2.5.18 Corporate Governance
The Directors are committed to promoting a high ethical and performance excellence culture within the company and to ensuring the highest standards of corporate governance compliance, corporate social responsibility, risk management and prudent financial management. The Board is responsible to the company‘s shareholder, the City of Tshwane, for the implementation of the shareholder compact and long term business strategy through oversight on the management of the company‘s operations in line with the company‘s vision, i.e. TEDA strives to be a leading African economic development agency.
The Board of Directors confirms that the company has, during the year under review, complied with the King Code on Corporate Governance (King III).
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Director’s Report
TEDA Annual Report 2013/14 Page - 47 -
Board appraisals were not performed due to lack of sufficient funds for this purpose.
The salient features of the entity‘s adoption of King III are outlined below:
2.5.19 Board of directors
The Board:
Retains oversight control over the entity, its plans and strategy;
Acknowledges its responsibilities as to strategy, compliance with internal policies, laws
and regulations, effective risk management and performance measurement,
transparency and effective communication both internally and externally by the entity.
Is of a unitary structure comprising 11 non-executive directors all of whom are
independent non-executive directors as defined in the code.
2.5.20 Director Development
The entity has during the year under review provided corporate governance training to its Directors.
2.5.21 Board Committees
The Board has delegated certain functions to the following well-structured committees. All board members with the exception of the chairperson serve in more than one committee. (Detail relating to the frequency of meetings and attendance of committees is contained in the performance report)
2.5.22 Finance and Risk Committee
The committee comprises eight non-executive directors. The committee exercise oversight role on finance and risk related matters.
2.5.23 Projects Committee
The committee comprises six non-executive directors. The committee exercise oversight role on the planning and execution the projects that are in line with the entity‘s business plan. It also monitors the performance and spending progress of the projects.
2.5.24 Remuneration Committee
This committee comprises eight non-executive directors. The committee exercise oversight role on human resources and remuneration matters affecting the entity.
2.5.25 Social and Ethics Committee
The committee was established in terms of section 43 of the Companies Regulations, 2011 and has four members. This committee exercises its responsibilities in terms of subsection (5) of the Regulations.
2.5.26 Chairperson and Chief Executive
The chairperson is a non-executive and independent director (as defined by the King Code).
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Director’s Report
TEDA Annual Report 2013/14 Page - 48 -
The roles of Chairperson and Chief Executive Officer (CEO) are separate. The collective responsibilities of management vest in the CEO and as such the CEO bears the ultimate responsibility for all day to day management functions. The TEDA Board delegates responsibilities to management through the CEO, who in turn sub-delegates to Executives reporting to him.
2.5.27 Company Secretary
The Company Secretary was appointed with effect from 01 August 2013 and performs the functions as required in terms of section 88 of the Companies Act, 2008.
2.5.28 Audit Committee
The Audit Committee function is performed by the group audit and performance committee established by the City of Tshwane for all its municipal entities.
2.5.29 Risk Management
The entity has performed risk assessment and compiled a risk register for 2013/14.
2.5.30 Internal Audit
The entity utilised the shared service provided by the City of Tshwane‘s group internal audit unit to perform internal audit functions. 10. Holding entity
The entity is wholly owned by the City of Tshwane Metropolitan Municipality. 11. Auditors
The Auditor-General of South Africa will continue in office in accordance with section 90 of the Companies Act of South Africa and section 92 of the Municipal Finance Management Act. 12. Dividends
No dividends were declared for the year under review. _________________ L. Vutula Chairperson: Board of Directors
______________ Date
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Report of Audit Committee
TEDA Annual Report 2013/14 Page - 49 -
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Report of the Independent Auditor – Auditor General
TEDA Annual Report 2013/14 Page - 50 -
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Financial Position
TEDA Annual Report 2013/14 Page - 51 -
Restated
Notes
2014 (R)
2013 (R)
ASSETS
Current assets 7,637,871 18,067,102
Cash and Cash Equivalents 4 5,152,789 15,837,370
Other Receivables 5 255,350 -
Prepayments 6.1 2,229,732 2,229,732
Non-Current Assets 9,934,891 1,873,210
Property, Plant and Equipment 7 9,756,622 1,834,475
Intangible Assets 8 178,269 21,039
Deferred Taxation 9 - 17,696
Total assets 17,572,762 19,940,312
LIABILITIES
Current Liabilities 9,342,888 17,184,818
Trade and other Payable 10 3,809,736 1,423,308 Loan from shareholder 11 - 588,482 Unspent Grant 12 2,461,277 14,036,837 Taxation 23 3,071,875 1,136,191
Non-Current Liabilities 465,451 -
Operating lease 13 455,751 - Deferred Taxation 9 9,700 -
Total liabilities 9,808,339 17,184,818
Net Assets 7,764,423 2,755,494
Shareholders‘ equity 14 1,000 1,000 Accumulated surplus 7,763,423 2,754,494
Net Assets 7,764,423 2,755,494
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Financial Performance
TEDA Annual Report 2013/14 Page - 52 -
Restated
Notes 2014 2013
(R) (R) Revenue
Exchange transactions 15.1
Interest earned 176,095 26,046
Other operating income 4,250 -
Non-exchange revenue 15.2
Grant revenue recognised 59,075,560 10,963,164
Total Revenue 59,255,905 10,989,210
Expenses
Employees costs 16 (19,452,372) (1,718,695)
Remuneration of Board Members 17 (3,397,149) (1,953,900)
Depreciation and amortisation expense 18 (1,895,453) (12,218)
General Expenses 19 (11,404,005) (2,784,013)
Projects 20 (13,425,376) -
Marketing, Trade and Investment 21 (2,646,887) (525,758)
Loss on assets written off 22 (62,655) -
Total Expenditure (52,283,897) (6,994,584)
Profit before net finance cost 6,972,008 3,994,626
Net Finance Cost - -
Profit before taxation 6,972,008 3,994,626
Taxation 23 (1,963,079) (1,118,495)
Profit for the year 5,008,929 2,876,131
Attributable to:
Net Asset holders of the Entity 5,008,929 2,876,131
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Changes in Net Assets
TEDA Annual Report 2013/14 Page - 53 -
Note Share capital and equity
Accumulated Surplus/(Deficit) Total net assets
(R) (R)
Opening balance as reported at 01July 2012
1,000 (121,637) (120,637)
Changes in net assets
Restated surplus for the year 26
-
2,876,131
2,876,131
Total changes
-
2,876,131
2,876,131
Balance at 01 July 2013 as restated
1,000 2,754,494 2,755,494
Changes in net assets
Surplus for the year
- 5,008,929
5,008,929
Total changes
-
5,008,929
5,008,929
Balance as at 30 June 2014
1,000 7,763,423
7,764,423
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Cash Flow Statement
TEDA Annual Report 2013/14 Page - 54 -
Note 2014 2013
(R) (R)
Cash flows from operating activities
Receipts 47,661,431 25,026,046
Transfers and Subsidies 47,500,000 25,000,000
Interest income received 157,181 26,046
Receipts from sale of tender documents 4,250 -
Payments (47,720,048) (7,526,299)
Compensation of Employees and Board Fees (22,411,471) (2,213,043)
Goods and Services (25,308,577) (5,313,256)
Net cash Generated from operating activities 24 (58,617) 17,499,747
Net cash outflows from operating activities
(58,617) 17,499,747
Cash flows from investing activities
(10,037,481) (1,760,265)
Purchase of Motor Vehicles - (1,067,708)
Purchase of Office Equipment (576,800) (357,064)
Purchase of Computer Equipment (1,304,086) (311,561)
Purchase of Office Furniture and Fixtures (7,968,717) (2,797)
Purchase of Intangible Assets (187,878) (21,135)
Cash flows from financing activities (588,482) 97,888
Loan received from shareholders - 97,888
Loan repayment to the shareholders (588,482) -
Net Increase (Decrease) in cash and cash equivalents
(10,684,581) 15,837,370
Cash and cash equivalents at the beginning of the year
15,837,370 -
Cash and cash equivalents at the end of the year 25 5,152,789 15,837,370
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Comparison of Budget and Actual Amounts Budget prepared on cash basis of accounting
TEDA Annual Report 2013/14 Page - 55 -
Original Budget
Roll-over
Adjustments
and Vireme
nt
Final budget
Actual amounts on
comparable basis
Difference
between final budget
and actual
Percentage Spen
d
Refer Note
Revenue
Revenue from Non-exchange transactions
15.1
City of Tshwane- Transfers and rollover funds
47,500,0
00
14,036,
836
61,536,
836
47,500,
000
14,036,
836 77%
Revenue from exchange transactions
15.2
Interest Income - -
-
157,181
(157,18
1)
Other receipts and Operating Income (Tender Documents Sales)
- -
- 38,160
(38,160)
Total Revenue
47,500,000
14,036,
836
61,536,
836
47,695,
341
13,841,
495 78%
Expenditure
Employee costs
(24,000,000)
(1,483,
972)
6,443,4
72
(19,040,500)
(18,476,899)
(563,60
1) 97%
Remuneration of Board Members
(1,500,000)
(100)
(2,443,473)
(3,943,473)
(3,934,573)
(8,900)
100%
17
General Expenses and Marketing, Trade and Investment
(13,450,0
00)
(6,941,
771)
(100,00
0)
(20,491,871)
(19,160,280)
(1,331,
591) 94%
19 and
21
Projects Expenditure
(8,550,000)
(5,610,
993)
(14,160,993)
(12,882,794)
(1,278,
199) 91% 20
Operating Expenditure
(47,500,000)
(14,036,836)
(57,636,836)
(54,454,546)
(3,182,
290)
Capital Budget - - (3,900,
000)
(3,900,
000)
(3,925,
376) 25,376 101% 27
Total Expenditure
(47,500,000)
(14,036,836)
- (61,536,837)
(58,379,922)
(3,156,
914) 95%
(Deficit)/Surplus for the year - - - - (10,684,581)
10,684,
581
Actual Amount on Comparable Basis as presented in the Budget and Actual Comparative Statement
- - - - (10,684,581)
10,684,
581
Reconciliation (Basis Difference)
Loss on assets written off (62,655
)
Taxation
(1,963,
079)
Depreciation and Amortisation of Intangible Assets
(1,895,
453)
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Comparison of Budget and Actual Amounts Budget prepared on cash basis of accounting
TEDA Annual Report 2013/14 Page - 56 -
Operating Lease Liability
(455,75
1)
Movement in receivables
255,35
0
Statement of Comparison of Budget and Actual Amounts (Continues)
Movement in trade and other payables
(2,386,
426)
Movement in Unspent Grant
11,575,
560
Fixed and Intangible Assets
10,037,482
Loan repayment to Shareholder (CoT)
588,482
Actual Amount in the Statement of Financial Performance
6,972,0
08
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 57 -
The principal accounting policies applied in the preparation of these Annual Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
1. Basis of Preparation
1.1 Statement of Compliance
The Annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board and Municipal Financial Management Act No 56 of 2003. Those relevant to TEDA are listed below;
Standard number Standard Description Effective Date
GRAP1 (as revised 2012) Presentation of Financial Statements 01 April 2013
GRAP2 (as revised 2012) Cash Flow Statements 01 April 2013
GRAP3 (as revised 2012) Accounting policies, changes in accounting estimates and errors
01 April 2013
GRAP9 (as revised 2012) Revenue from exchange transactions 01 April 2013
GRAP13 (as revised 2012) Leases 01 April 2013
GRAP14 (as revised 2012) Events after the reporting date 01 April 2013
GRAP17 (as revised 2012) Property, plant and equipment 01 April 2013
GRAP19 (as revised 2012) Provisions, contingent liabilities and contingent assets 01 April 2013
GRAP20 (as revised 2012) Related parties 01 April 2013
GRAP21 (as revised 2012) Impairment of non-cash generating assets 01 April 2013
GRAP23 (as revised 2012) Revenue from non-exchange transactions 01 April 2013
GRAP24 (as revised 2012) Presentation of budget information in the Financial Statements
01 April 2013
GRAP25 (as revised 2012) Employee benefits 01 April 2013
GRAP31 (as revised 2012) Intangible assets 01 April 2013
GRAP104 (as revised 2012) Financial Instruments 01 April 2013
IAS12 (as revised in 1998) Income Taxes 01 April 2013
1.2 Basis of Measurement, Functionality and presentation currency
These Annual financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention unless specified otherwise. They are presented in South African Rand, which is the entity‘s functional currency.
1.3 Significant judgements and sources of estimation uncertainty
In preparing the Annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the Annual financial statements and related disclosures. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Annual financial statements are disclosed below.
1.3.1 Trade receivables and/or loans and receivables
The entity assesses its trade receivables and loans and receivables for impairment at each statement of financial position date. In determining whether an impairment loss should be recorded in the statement of financial performance, the entity makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The entity assesses its trade receivables and loans and receivables for impairment at the end of each reporting period.
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 58 -
In determining whether an impairment loss should be recorded in surplus or deficit, the entity makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. Each receivable is reviewed individually at year end.
1.3.2 Property, plant and equipment
The entity‘s management determines the estimated useful lives and residual values of property, plant and equipment. These assessments are made on an Annual basis and use historical evidence and current economic factors to estimate the values. Administrative computer equipment, office furniture and equipment, exhibits and motor vehicles are not componentised. These assets do not have significant parts that are considered to have an estimated useful life different to the estimated useful life of the asset as a whole.
1.3.3 Fair value estimation
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the entity for similar financial instruments. The carrying amount of cash and cash equivalents, trade and other receivables and trade and other payables approximated their fair values due to the short-term maturities of these assets and liabilities.
1.3.4 Impairment testing
The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. If the recoverable amount is less than the carrying amount, an impairment loss should be recognised in the statement of financial performance.
1.3.5 Provisions
Provisions were raised and management determined an estimate based on the information available. Additional disclosures of these estimates of provisions are included in note 10.1.
1.3.6 Taxation
Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The entity recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The entity recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the entity to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the entity to realise the net deferred tax assets recorded at the statement of financial position date could be impacted. Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. The entity establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company‘s domicile. As the Company assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognised. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable surplus will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable surplus together with future tax planning strategies.
1.3.7 Effective interest rate
The entity used the prime interest rate to discount future cash flows.
1.3.8 Allowance for doubtful debts
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 59 -
On debtors an impairment loss is recognised in surplus and deficit when there is objective evidence that it is impaired. The impairment is measured as the difference between the debtors carrying amount and the present value of estimated future cash flows discounted at the effective interest rate, computed at initial recognition.
1.4 Property, plant and equipment
Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period.
The cost of an item of property, plant and equipment is recognised as an asset when:
it is probable that future economic benefits or service potential associated with the item will flow to the entity; and
the cost of the item can be measured reliably.
Property, plant and equipment were initially measured at cost.
The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost.
Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at date of acquisition.
The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories.
Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management.
Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses.
Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Average useful life
Computer equipment 3 years Furniture and Fixtures 5 – 16 years Motor Vehicle 5 years Office equipment 5 – 8 years
The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset.
Items of entity are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset.
The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. The gain or loss arising from the de-recognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. Gains shall not be classified as revenue.
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 60 -
Assets which the agency holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are not accounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the entity.
1.5 Intangible assets
An asset is identified as an intangible asset when it:
is capable of being separated or divided from an entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, assets or liability; or
arises from contractual rights or other legal rights, regardless whether those rights are transferable or separate from TEDA or from other rights and obligations.
An intangible asset is recognised when:
it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the TEDA; and
the cost or fair value of the asset can be measured reliably.
Intangible assets are initially recognised at cost.
An intangible asset acquired through a non-exchange transaction, the cost shall be its fair value as at the date of acquisition.
Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.
An intangible asset arising from development (or from the development phase of an internal project) is recognised when:
it is technically feasible to complete the asset so that it will be available for use or sale.
there is an intention to complete and use or sell it.
there is an ability to use or sell it.
it will generate probable future economic benefits or service potential.
there are available technical, financial and other resources to complete the development and to use or sell the asset.
the expenditure attributable to the asset during its development can be measured reliably.
Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.
The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.
Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.
Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.
Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:
Item Useful life
Computer software 3 years
Intangible assets are derecognised: when no future economic benefits or service potential are expected from its use or disposal. The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It is recognised in surplus or deficit when the asset is derecognised.
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 61 -
1.6 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity.
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibles.
A financial asset is:
cash;
a residual interest of another entity; or
a contractual right to:
receive cash or another financial asset from another entity; or
exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.
A financial liability is any liability that is a contractual obligation to:
deliver cash or another financial asset to another entity; or
exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity.
Financial instruments at fair value comprise financial assets or financial liabilities that are instruments held for trading. A financial instrument is held for trading if:
it is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or
on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short term profit-taking;
non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at fair value at initial recognition; and
financial instruments that do not meet the definition of financial instruments at amortised cost or financial instruments at cost.
Classification
The entity has the following types of financial assets (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:
Class Category
Cash and cash equivalent Financial asset measured at amortised cost Receivable from exchange transactions Financial asset measured at amortised cost
The entity has the following types of financial liabilities (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:
Class Category
Payables from Exchange transaction Financial liability measured at amortised cost
Initial recognition
The entity recognises a financial asset or a financial liability in its statement of financial position when the entity becomes a party to the contractual provisions of the instrument.
Transaction costs are recognised as part of the cost of the instrument. Subsequent to initial recognition these instruments are measured as set out above.
1.6.1 Financial Risk Management
Overview
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 62 -
The entity has exposure to the following risks from its use of financial instruments: • Credit risk; • Liquidity risk; and • Interest rate risk. This note presents information about the entity‘s exposure to each of the above risks, the entity‘s objectives, policies and processes for measuring and managing risk, and the entity‘s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the entity‘s risk management framework. The entity‘s risk management policies are established to identify and analyse the risks faced by the entity, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the ent ity‘s activities. The entity aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Credit risk
Credit risk is the risk of financial loss to the TEDA if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the TEDA‘s receivables from customers. Potential concentrations of credit risk consist mainly of cash and cash equivalents. Deposits
TEDA limits its counterparty exposures from its money market investment operations by only dealing with well-established financial institutions of high quality credit standing as approved by the National Treasury.
The credit qualities of counterparties are also reviewed on a continuous basis by the National Treasury.
Liquidity risk
Liquidity risk is the risk that TEDA will not be able to meet its financial obligations as they fall due. The entity‘s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the entity‘s reputation. The entity receives government grants every year based on budget requirements. Interest rate risk
TEDA has adopted a policy of ensuring that the entity‘s income and operating cash flows are substantially independent of changes in market interest rates, due to the underlying nature of the business. TEDA has no interest bearing assets or liabilities. Accordingly the entity‘s income and expenses are substantially independent of changes in markets rates of interest. As a result, changes in the market rate of interest have a negligible impact on the financial performance of the entity. Capital management
TEDA has developed systems and internal controls that are sufficient and effective in maintaining efficient levels of both components of working capital, current assets and current liabilities. The working capital management ensures that TEDA has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.
1.7 Employee benefits Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the entity has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 63 -
Post-employment benefits: Defined contribution plans
Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.
Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined contribution plans where the entities obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan. A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit in surplus or deficit when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund Post-employment benefits: Defined benefit plans
These post-employment benefit plans other than defined contribution plans. Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and sometimes its employees, into an entity, or fund, that is legally separate from the reporting entity and from which the employee benefits are paid. The payment of funded benefits when they fall due depends not only on the financial position and the investment performance of the fund but also on an entity‗s ability (and willingness) to make good any shortfall in the fund‗s assets. Therefore, the entity is, in substance, underwriting the actuarial and investment risks associated with the plan. TEDA does not participate in any defined benefit plan as at 30 June 2014.
Medical benefits
The entity provides medical benefits for its employees through defined contribution plans. The entity has no further
payment once contributions have been paid. The contributions are recognised as employee benefit expenses in
profit or loss in the periods during which the services are rendered by the employees.
Bonus plans
The entity recognises a provision for bonuses where contractually obliged or where there is a past practice that has
created a constructive obligation as a result of services received from the employee and the obligation can be
measured reliably.
Leave entitlement
Employee entitlements to Annual leave are recognised when they accrue. An accrual is raised for the estimated liability for Annual leave as a result of services rendered by employees up to the reporting date. The related expense is recognised as employee benefit expenses in profit or loss.
1.8 Income tax
Current tax assets and liabilities
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the Statement of Financial Position date. Deferred tax assets and liabilities
A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting surplus nor taxable profit (tax loss). A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable surplus will be available against which the deductible temporary difference can be utilised. A deferred tax
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 64 -
asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting surplus nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable surplus will be available against which the unused tax. Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except:
When the deferred tax liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting surplus nor taxable surplus or deficit
In respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, when the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable surplus will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax deficit can be utilised, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting surplus nor taxable surplus or loss. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable surplus will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable surplus will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
1.9 Provisions and Contingencies
Provisions are recognised when the entity has a present obligation as a result of a past event, for which it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the obligation. All the provisions of the entity are short-term in nature and measured at present value of the expenditures expected to be required to settle the obligation.
Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement does not exceed the amount of the provision.
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
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Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the obligation.
Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognised as an interest expense.
A provision is used only for expenditures for which the provision was originally recognised. Provisions are not recognised for future operating deficits.
If an entity has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and measured as a provision.
A constructive obligation to restructure arises only when an entity:
has a detailed formal plan for the restructuring, identifying at least: the activity/operating unit or part of a activity/operating unit concerned; the principal locations affected; the location, function, and approximate number of employees who will be compensated for services
being terminated; the expenditures that will be undertaken; and when the plan will be implemented; and
has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.
A restructuring provision includes only the direct expenditures arising from the restructuring, which are those that are both:
necessarily entailed by the restructuring; and
not associated with the on-going activities of the entity
No obligation arises as a consequence of the sale or transfer of an operation until the entity is committed to the sale or transfer, that is, there is a binding agreement.
Contingent assets and contingent liabilities are not recognised but disclosed in the financial statements.
1.10 Revenue
1.10.1 Revenue from exchange transactions
Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners.
An exchange transaction is one in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm‘s length transaction.
1.10.1 Revenue from exchange transactions (Continues)
Measurement
Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.
Rendering of services
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
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1.10.2 Revenue from non-exchange transactions
Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.
Recognition
An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow. As the entity satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction.
Measurement
Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the entity.
When, as a result of a non-exchange transaction, the entity recognises an asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue.
The transfer from City of Tshwane Metropolitan Municipality is recognised when it is probable that future economic benefits will flow to TEDA and when the amount can be measured reliably. A transfer is recognised as revenue to the extent that there is no further obligation arising from the receipt of transfer payment.
Conditions on transferred assets are stipulations that specify that the future economic benefits or service potential embodied in the asset is required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor.
1.11 Finance Income
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in the Statement of Financial Performance, using the effective interest method.
1.12 Unauthorised, Irregular, Fruitless and wasteful expenditure
Unauthorised expenditure is treated as a current asset in the statement of financial position until such expenditure is recovered from a third party or funded from future revenue.
satisfied:
• the amount of revenue can be measured reliably; • it is probable that the economic benefits or service potential associated with the transaction will flow to
the entity; • the stage of completion of the transaction at the reporting date can be measured reliably; and • the costs incurred for the transaction and the costs to complete the transaction can be measured
reliably.
When services are performed by an indeterminate number of acts over a specified time frame, revenue is recognised on a straight line basis over the specified time frame unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.
Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of completion is determined by total services to be performed.
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Accounting policies to Annual Financial Statements _____________________________________________________________________
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Irregular expenditure means expenditure, other than unauthorised expenditure, incurred in contravention of or not in accordance with a requirement of any applicable legislation, including the Municipal Finance Management Act, the State Tender Board Act, or any regulations made in terms of this act, or any provincial legislation providing for procurement procedures in that provincial government.
Irregular expenditure is treated as expenditure in the Statement of financial performance after approval per the departmental delegations.
Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned
Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. Fruitless and wasteful expenditure must be recovered from the responsible official (a debtor account should be raised), or the vote if the responsible official cannot be determined. It is treated as current assets in the statement of financial position until such expenditure is recovered from the responsible official or funded from future revenue.
1.13 Related parties
The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the national sphere of government are considered to be related parties.
Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions.
Close members of the family of a person are considered to be those family members who may be expected to influence, or be influenced by, management in their dealings with the entity.
Only transactions with related parties not at arm‘s length or not in the ordinary course of business are disclosed.
1.14 Key management personnel
The key management of TEDA refers to the Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Executive Directors.
1.15 Prior year errors
Prior year errors are omissions from, and misstatements in, an entity‘s financial statements for one or more prior periods arising from failure to use or the misuse of reliable information that was available when the financial statements for that period were issued, and could have been reasonably expected to be taken into account in those financial statements. All prior year errors are corrected retrospectively to the earliest period practicable. Comparative amounts for prior years in which the error occurred are restated.
1.16 Commitments
Commitments are legal obligations to undertake in a given way, at a given time in the future. Usually commitments refer to the requirement for parties to a futures contract to make or receive delivery of the underlying commodities on the expiration date of the contract or through a valid purchase order.
1.17 Budget information
Budget information in accordance with GRAP 1 and 24, has been provided in a separate disclosure note to these Annual financial statements. General purpose financial reporting by TEDA shall provide information on whether resources were obtained and used in accordance with the legally adopted budget.
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 68 -
The Annual financial statements and the budget are on a different basis of accounting therefore a comparison with the budgeted amounts for the reporting period have been included in the Statement of comparison of budget and actual amounts.
1.18 Comparative figures
Prior year comparatives
When the presentation or classification of items in the Annual financial statements is amended, prior period comparative amounts are also reclassified and restated, unless such comparative reclassification and / or restatement is not required by a Standard of GRAP.
The nature and reason for such reclassifications and restatements are also disclosed.
Where material accounting errors, which relate to prior periods, have been identified in the current year, the correction is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly.
Where there has been a change in accounting policy in the current year, the adjustment is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly.
The presentation and classification of items in the current year is consistent with prior periods.
1.19 Offset
Where a legally enforceable right of offset exists for recognised financial assets and financial liabilities, and there is, an intention to settle the liability and realise the asset simultaneously, or to settle on a net basis, all related financial effects are offset.
1.20 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.
Operating leases - lessee
All leases that TEDA enters into as a lessee, and where the lessor retains substantially all the risks and rewards of ownership of the underlying asset, are classified as operating leases. Payments made under operating leases are charged against revenue on a straight-line basis over the term of the lease.
2. New standards and interpretations
2.1 Approves Standards and interpretations issued, but not yet effective
Standard number Standard name Effective date (if applicable)
GRAP 18 Segment Reporting No effective date
GRAP 20 Related Party Disclosures final – Original No effective date
GRAP 82 Service Concession arrangements No effective date
GRAP 105 Transfer of Functions Between Entities Under Common Control – Original No effective date
GRAP 106 Transfer of Functions Between Entities Not Under Common Control – Original No effective date
GRAP 107 Mergers – Original No effective date
GRAP 108 Statutory receivables No effective date
GRAP 18 Segment Reporting:
The standard requires the identification and aggregation of the operating segments of the entity into reportable
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
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segments. For each of the reportable segments identified details of the financial performance and financial position will be disclosed. The precise impact of this on the financial statements of the entity is still being assessed but it is expected that this will only result in additional disclosures without affecting the underlying accounting. This standard does not yet have an effective date. GRAP 20 Related Party Disclosures final – Original:
This Standard requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in the consolidated and separate financial statements of the reporting entity in accordance with the Standard of GRAP on Consolidated and Separate Financial Statements. This Standard also applies to individual financial statements.
Related party transactions and outstanding balances within an economic entity are to be disclosed in an entity‘s financial statements. Intra-group related party transactions and outstanding balances are eliminated in the preparation of the consolidated financial statements of the economic entity. The entity has early adopted the standard and its disclosure requirements, which prompt the entity to make separate disclosures about the major classes of transactions with management that they have undertaken, refer to Note 16 and 17 of the Annual financial statements. GRAP 32 Service Concession arrangements – Original:
A service concession arrangement is a contractual arrangement between a grantor and an operator in which: (a) the operator uses the service concession asset to provide a mandated function on behalf of the grantor for a specified period of time; and (b) the operator is compensated for its services over the period of the service concession arrangement. A service concession asset is an asset used to provide a mandated function in a service concession arrangement that: (a) is provided by the operator which: (i) the operator constructs, develops, or acquires from a third party; or (ii) is an existing asset of the operator; or (b) is provided by the grantor which: (i) is an existing asset of the grantor; or (ii) is an upgrade to an existing asset of the grantor. Recognition and measurement of a service concession asset
The grantor shall recognise an asset provided by the operator and an upgrade to an existing asset of the grantor as a service concession asset if: (a) the grantor controls or regulates what services the operator must provide with the asset, to whom it must provide them, and at what price; and (b) the grantor controls—through ownership, beneficial entitlement or otherwise—any significant residual interest in the asset at the end of the term of the arrangement. The grantor shall initially measure the service concession asset at fair value. Where the grantor recognises a service concession asset in accordance with paragraph .07 (or paragraph .08 for a whole-of-life asset), the grantor shall also recognise a liability. The grantor shall not recognise a liability when an existing asset of the grantor is reclassified as a service concession asset in accordance with paragraph .10, except in circumstances where additional consideration is provided by the operator, as noted in paragraph.13. The entity has not yet adopted the standard and there should be no impact on the annual financial statements as no concession arrangements has taken place. GRAP 105 Transfer of Functions Between Entities Under Common Control - Original:
The standard refers to a transaction or event in which an acquirer can be identified, and that occurs between entities under common control. A transfer of functions between entities under common control is a reorganisation and/or reallocation of functions between entities that are ultimately controlled by the same entity before and after a transfer of functions, and that control is not transitory. For a transaction or event to occur between entities under common control, the transaction or event needs to be
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
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undertaken between entities within the same sphere of government or between entities that are part of the same economic entity. Entities that are ultimately controlled by the same entity before and after the transfer of functions are within the same economic entity. The extent of non-controlling interests in each of the entities that are involved in a transfer of functions before and after the transfer of functions is not relevant in determining whether the transaction or event involves entities under common control.
Recognition and measurement Accounting by the acquirer Para.35 As of the transfer date, the acquirer shall recognise the purchase consideration paid (if any) to the
transferor and all the assets acquired and liabilities assumed in a transfer of functions. The assets acquired and liabilities assumed shall be measured at their carrying amounts.
Accounting by the transferor Para.51 As of the transfer date, the transferor shall derecognise from its financial statements, all the assets
transferred and liabilities relinquished in a transfer of functions at their carrying amounts.
The entity has not yet adopted the standard and there should be no impact on the annual financial statements as no transfer of functions has taken place. GRAP 106 Transfer of Functions Between Entities Not Under Common Control - Original:
A transfer of functions undertaken between entities not under common control could involve an acquisition or transfer of another entity or the acquisition or transfer of part of another entity. Para.20 This Standard defines a transfer of functions as the reorganisation and/or there-allocation of functions between entities by transferring functions between entities or into another entity. The transfer of functions must be undertaken between entities not under common control. An acquirer might obtain control of an acquire in a variety of ways, for example:
(a) by transferring cash, cash equivalents or other assets (including net assets that constitute a function); (b) by incurring liabilities; (c) by exchanging residual interests; (d) by providing more than one type of consideration; or (e) without transferring consideration, including through a binding arrangement.
Para.21 A transfer of functions between entities not under common control may be structured in a variety of ways, which include but are not limited to:
(a) one or more functions become controlled entities of an acquirer or the net assets of one or more functions are legally acquired or transferred by the acquirer; or (b) one entity transfers its net assets, or its owners transfer their residual interests, to another entity or its owners.
The impact of this on the annual financial statements of the entity is not significant since the entity has not been a party to transfer of functions between entities not under common control. GRAP 107 Mergers – Original
The standard refers to a transaction or event for where no acquirer can be identified. A merger is the establishment of a new combined entity in which none of the former entities obtains control over any other and no acquirer can be identified. Determining whether an acquirer can be identified includes a consideration of, amongst other things, which of the combining entities initiated the transaction or event, the relative size of the combining entities, as well as whether the assets or revenue of one of the entities involved in the transaction or event significantly exceed those of the other entities. A merger can either involve the combination of two or more entities in which one of the combining entities continues to become the new reporting entity, or a new reporting entity is established from the combining entities. The concept of control and a function is not relevant in a transaction or event that meets the definition of a merger. The impact of this on the annual financial statements of the entity is not significant since the entity has not been a party to any merger. GRAP 108 Statutory Receivables – Original
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
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Statutory receivables are receivables that: (a) arise from legislation, supporting regulations, or similar means; and (b) require settlement by another entity in cash or another financial asset. The transaction amount (for purposes of this Standard) for a statutory receivable means the amount specified in, or calculated, levied or charged in accordance with, legislation, supporting regulations, or similar means. Measurement
An entity shall initially measure statutory receivables at their transaction amount. The statutory receivables shall be measured initially in accordance with the relevant Standard of GRAP. The amount determined on initial measurement in accordance with another Standard of GRAP is the same as the transaction amount described in this Standard. Recognition
An entity shall recognise statutory receivables as follows: (a) if the transaction is an exchange transaction, using the Standard of GRAP on Revenue from Exchange Transactions; (b) if the transaction is a non-exchange transaction, using the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers); or (c) if the transaction is not within the scope of the Standards of GRAP listed in (a) or (b) or another Standard of GRAP, the receivable is recognised when the definition of an asset is met and, when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity and the transaction amount can be measured reliably. The impact of this on the annual financial statements of the entity will not be significant once the standard is effective.
3 Financial Risk Management
Information about TEDA‘s exposure to risks, its objectives, policies and processes for measuring and managing
such risks are disclosed in the Accounting policies. The quantitative disclosure is provided in this note.
3.1 Credit Risk
Exposure to credit risk
Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The entity only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit
risk at the reporting date was:
2014 2013
(R) (R)
Trade and Other Receivables 255,350 - Cash and cash Equivalents 5,152,789 15,837,370
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Accounting policies to Annual Financial Statements _____________________________________________________________________
TEDA Annual Report 2013/14 Page - 72 -
5,408,139 15,837,370
At 30 June 2014, TEDA did not consider there to be any significant concentration of credit risk that had not been
adequately provided for.
No security is held against Cash and Cash Equivalents.
3.3 Liquidity Risk
The entity‘s risk to liquidity is a result of the funds available to cover future commitments. The entity manages liquidity risk through an on-going review of future commitments.
2014
Trade and Other
Payables
Less than 1 year 3,809,736
Between 1 and 2 years -
3,809,736
2013
Trade and Other Payables
Less than 1 year 1,423,308
Between 1 and 2 years -
1,423,308
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Notes to Annual Financial Statements
TEDA Annual Report 2013/14 Page - 73 -
2014 2013
4 Cash and Cash Equivalents (R) (R)
Cash and cash equivalents consist of the following:
Cash on hand 436 2,965
Cash at bank* 5,152,353 15,834,405
5,152,789 15,837,370
*The entity has a current and salaries bank accounts with Standard Bank which is used to meet the entities obligations. Bank Statement balances Cashbook balances
2014 2013 2014 2013
Primary Account - 410791830 3,426,693 15,834,405 3,427,129 15,837,370
Salaries Account - 011057491 1,725,660 - 1,725,660 -
5,152,353 15,834,405 5,152,789 15,837,370
5 Account Receivables
SARS (PAYE credit)* 202,069 -
Board Members 34,094 -
Employees 273 -
Interest Income accrued 18,914 -
255,350 -
*The SARS credit emanates from over payment of PAYE and the receivable from board members relates to overpayments to board members.
6 Prepayment
6.1 Prepaid 2,229,732 2,229,732
2,229,732 2,229,732
Prepaid expenses relates to funds paid in advance to CSIR to secure a venue for hosting Tshwane International Trade and Infrastructure Investment Conference (TITIIC) to be held in May 2015 and was previously reported that the conference will take place in May 2014 which was postponed to May 2015.
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Notes to Annual Financial Statements
TEDA Annual Report 2013/14 Page - 74 -
7 Property, Plant and Equipment
7.1 Reconciliation of Carrying Value
2014
2013
Cost
Accumulated
Depreciation & Impairm
ent
Carrying Value
Cost Accumulated Depreciation & Impairment
Carrying Value
Motor Vehicles 1,067,708
(217,377) 850,331
1,067,708 (3,835) 1,063,873
Office Equipment 933,862 (75,993) 857,869
357,064 (2,699) 354,365
Computer Equipment 1,650,260
(311,594) 1,338,666
419,028 (5,561) 413,467
Furniture & Fixtures 7,971,488
(1,261,732) 6,709,756 2,797 (27) 2,770
Total 11,623,31
8 (1,866,6
96) 9,756,622
1,846,597 (12,122) 1,834,475
7.2 Reconciliation of Property, Plant and Equipment – 2013
Carrying Value
Opening Balance
Additions
Disposal
Transfers
Depreciation
Impairment
Revaluation
Prior Year Errors
Carrying Value
Closing Balance
Motor Vehicles
1,067,7
08 (3,835) 1,063,873
Office Equipment
357,06
4 (2,699) 354,365
Computer Equipment
419,02
8 (5,561) 413,467
Furniture & Fixtures
2,797 (27) 2,770
Total
1,846,597
(12,122) 1,834,475
7.3 Reconciliation of Property, Plant and Equipment – 2014
Carrying Value
Opening Balance
Additions
Disposal
Transfers
Depreciation
Impairment
Revaluation
Prior Year Errors
Carrying Value
Closing Balance
Motor Vehicles
1,063,873 - (213,542) 850,331
Office Equipment
354,365 576,80
0 (73,296) 857,869
Computer Equipment
413,467 1,304,0
90 (62,65
5) (316,236) 1,338,666
Furniture & Fixtures
2,770 7,968,7
18
(1,261,732)
6,709,756
Total 1,834,475 9,849,6
08 (62,65
5)
(1,864,806)
9,756,622
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Notes to Annual Financial Statements
TEDA Annual Report 2013/14 Page - 75 -
Change in accounting estimates
During the year ended 30 June 2014, TEDA reviewed the useful lives of its assets. The following classes of assets were reviewed; Useful lives before change Useful lives after change
Furniture and Fixtures 5 years 5 -16 years Office Equipment 5 years 5 - 8 years The overall net effect of the change is a reduction in the depreciation charge of R99 550.
8 Intangible Assets
8.1 Reconciliation of Carrying Value
2014 2013
Cost
Accumulated Amortisation &
Impairment
Carrying Value
Cost
Accumulated Amortisation &
Impairment
Carrying Value
Computer Software
209,013
(30,744) 178,269 21,135
(96) 21,039
Total 209,013
(30,744) 178,269
21,135
(96) 21,039
8.2 Reconciliation of Intangible Assets – 2013
Carrying
Value Openi
ng Balan
ce
Additions
Disposals
Transfers
Amortisation
Impairment
Revaluation
Internally
Developed
Carrying Value
Closing Balance
Computer Software
- 21,135 (96) 21,039
Total - 21,135 (96) 21,039
8.2 Reconciliation of Intangible Assets – 2014
TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014
Notes to Annual Financial Statements
TEDA Annual Report 2013/14 Page - 76 -
Carrying
Value Openi
ng Balan
ce
Additions
Disposals
Transfers
Amortisation
Impairment
Revaluation
Internally
Developed
Carrying Value
Closing Balance
Computer Software
21,039 187,87
7
- - (30,647) - - - 178,269
Total 21,039 187,87
7 - - (30,647) - - 178,269
*Impairment test was performed by management on all of its assets including intangible assets using the following impairment indicators;
a. Inspection of any physical damage, b. Disposal plans, c. Performance of the assets and d. Changes in technological environment.
As a result of the impairment test TEDA management could not find any asset/s that warrants being impaired since most of the assets are fairly new and no damage was discovered during the asset verification process and also no significant technological changes were identified which have an adverse effect on computer equipment and other assets sensitive to technological changes.
TEDA Annual Report 2013/14 Page - 77 -
9 Deferred taxation
2014 2013
(R) (R)
Deferred taxation balances are presented in the statement of financial position as follows:
- Deferred tax asset - 17,696
- Deferred tax liability
9,700 -
9,700 17,696
Temporary differences
Property, equipment and intangible assets (402,925) (14,971)
Provision - leave pay 265,615 32,667
Unspent grant 689,157 3,930,314
Section 24C allowance (689,157) (3,930,314)
Straight lining of lease 127,610 -
(9,700) 17,696
Movement in deferred taxation
Balance at the beginning of the year 17,696 -
Property, equipment and intangible assets (387,954) (14,971)
Provision - leave pay 232,948 32,667
Unspent grant (3,241,157) 3,930,314
Section 24C allowance 3,241,157 (3,930,314)
Straight lining of lease 127,610 -
(9,700) 17,696
10 Trade and Other Payables from Exchange Transactions
Trade creditors*
1,848,111 175,600
Board fees Accrual 227,534 92,043
Employee Contributions Accrual 161,463 3,259
Payable: SARS 624,002 1,035,739
Leave Pay Accrual^ 10.1 948,626 116,667
Total creditors
3,809,736 1,423,308
*Other creditors of R26,374 disclosed in prior year are reclassified under Trade Creditors to achieve fair presentation of balances.
^Leave pay accrual has been reclassified under Trade and Other Payables.
10.1 Employee benefit liability Provision for leave entitlement 948,626 116,667
Total Provisions 948,626 116,667
Reconciliation of Movement in Employee benefit liability
Opening Balance 116,667 -
Provisions for Leave entitlement raised 1,612,386 116,667
Leave entitlement used (780,427) -
Closing Balance 948,626 116,667
TEDA Annual Report 2013/14 Page - 78 -
2014 2013
(R) (R)
11 Loan from shareholders
Opening Balance 588,482 49,640
Payments made by CoT on behalf of TEDA - 538,842
Loan repayment (588,482) -
Closing Balance - 588,482
12 Unspent Grant
Transfers from City of Tshwane 47,500,000 25,000,000
Movements during the year
Balance at the beginning of the year 14,036,837 -
Income recognised during the year (59,075,560) (10,963,163)
(2,461,277) 14,036,837
The Unspent Grant is a transfer from the CoT to enable the entity to achieve its strategic objective as per the Service Delivery Agreement.
13 Operating lease liability
Operating lease smoothing effect 455,751 -
455,751 -
Operating lease liability is from the rental of offices used by TEDA situated at: 349 Witch-Hazel Avenue; Eco-origin Building; Block F; Highveld Extension 70; Centurion for the period of three years starting from 1st of November 2013. It is caused by the escalation on rental payable at every anniversary date.
14 Share Capital and equity
Authorised 1,000 ordinary shares of R1 each 1,000 1,000
Issued - -
Ordinary 1,000 ordinary shares of R1 each 1,000 1,000
15 Revenue
15.1 Revenue from exchange transactions Interest Earned
Bank: Current Account
176,095 26,046
Other Operating Income
Sale of Tender Documents 4,250 -
Total
180,345 26,046
15.2 Revenue from non-exchange transactions
Grant revenue recognised 59,075,560 10,963,164
Total 59,075,560 10,963,164
16 Employee Related Costs
2014 2013
(R) (R)
TEDA Annual Report 2013/14 Page - 79 -
Basic Salary/Wages costs
17,672,289 1,557,798
Contributions for UIF,SDL, pension fund, group risk and medical aid
948,124 44,230
Movement in leave provision 831,959 116,667
Employee Related Costs
19,452,372 1,718,695
2014 2013
(R) (R)
Employees Employees
Average number of employees 39 09
Included in the employee costs are the following key management personnel: 16.1 Remuneration of the Chief Executive Officer as at 31 April 2014
Basic Salary
1,720,367 810,031
Contributions to UIF,SDL, Group Risk, Medical and Pension Fund
169,160 32,379
Total
1,889,527 842,410
16.2 Remuneration of the Chief Financial Officer
Basic Salary
1,185,552 399,405 Contributions to UIF,SDL, Group Risk, Medical and Pension Fund
36,018 5,190
Total
1,221,570 404,595
16.3 Remuneration of other senior managers
Basic Salary
4,379,072 - Contributions to UIF,SDL, Group Risk, Medical and Pension Fund
234,311 -
Total
4,613,383 -
17 Remuneration of Board Members
L Vutula (Chairperson) 288,504 217,348
RS Bahula- Ermias 278,569 319,696
H Gouvelis 290,024 171,632
LD Haskins 183,954 225,476
CBB Mahlati (Retired March 2014) 215,581 151,944
J Matsho 385,853 184,568
CR Mpyane 323,447 349,852
NM Ntsinde 287,298 286,632
FK Sibanda 252,790 11,688
N Singh 240,406 11,688
JL Thubakgale 340,204 11,688
MW Yates 310,519 11,688
Total Board Members' Remuneration 3,397,149 1,953 900
18 Depreciation and Amortisation Expense
Motor Vehicles
213,542 3,835
Office Equipment
73,296 2,699
TEDA Annual Report 2013/14 Page - 80 -
Computer Equipment
316,236 5,561
Furniture & Fittings
1,261,732 27
Intangible Assets
30,647 96
Total Depreciation and Amortisation
1,895,453 12,218
19 General Expenses
2014 2013
(R) (R)
Included in general expenses are the following:-
Advertising 765,318 776,518
Audit Fees 175,813 -
Bank charges 31,232 14,676
Catering 132,415 33,990
Communication Expenses 131,304 3,270
Conferences and delegations 186,935 753,265
Consulting fees (including legal expenses)* 2,894,852 817,199
Insurance 78,700 927
IT Expenses 678,982 -
Licence fees – vehicles - 1,140
Printing and stationery 384,379 119,870
Rental of Offices and storage 5,086,739 -
Travel and subsistence 272,368 205,293
Utilities 217,909 -
Other 367,059 57,865
11,404,005 2,784,013
*Expenditure of R525,758 incurred under consulting fees in 2013 has been reclassified to Marketing, Trade and Investment. Provision for leave pay of R116,667 under general expenses in 2013 has been reclassified to employee cost. General expenses totaling R642,425 has been reclassifies as previously mentioned.
19.1 Fruitless and wasteful expenditure
Included above under other expenses is interest incurred amounting to R38,990 from SARS for late submission of PAYE,SDL and UIF, which was due to the delay in registering for PAYE,SDL and UIF.
Interest charges 38,990 -
38,990
20 Projects
National Tooling project 1,326,672 - TITIIC 680,776 - Stalls 4,700,000 - Special projects 4,117,928 - AIDC project 2,600,000 -
13,425,376 -
21 Marketing, Trade and Investment
Local & International Exhibitions 127,638 -
Trade Conferences & Missions 877,205 -
Research & Development - Marketing 955,762 -
TEDA Annual Report 2013/14 Page - 81 -
Public Relations 45,363 -
Marketing Production* 640,919 525,758
2,646,887 525,758
*During 2013/14 financial year the entity incurred expenses amounting to R525,758 that was reported under consulting expenses and it has since been reclassified under marketing production item.
2014 2013
22 Loss on assets written off (R) (R)
Proceeds - -
Less : Carrying amount of assets written off 62,655 -
62,655 -
Computer equipment to the carrying value of R62,655 has been stolen.
23 Taxation
Normal tax 1,935,684 1,136,191
- Current year 1,935,684 1,136,191
- STC - -
- Over provision - Prior year - -
Deferred tax 27,395 (17,696)
- Current year 27,395 (17,696)
- Rate change - -
- Under provision - prior year - -
1,963,079 1,118,495
23.1 Taxation liability movement Opening balance 1,136,191 1,136,191 Current year 1,935,684 -
Closing balance 3,071,875 1,136,191
Reconciliation of the tax expense Tax in Note @ 28% 1,963,079 1,118,495 Profit before tax 6,972,008 3,994,626 Tax as a % of income before tax 28.16% 28.00% Reconciliation between applicable tax rate and average
effective tax rate
Tax effect on permanent differences 28% 28% Tax effect on non-deductible expenses 0.16% 0%
28.16% 0%
No provisional taxation has been paid.
24 Net cash flow generated by operating
activities
TEDA Annual Report 2013/14 Page - 82 -
Net surplus (Deficit) as per Statement of Comprehensive income 5,008,929 2,876,131 Adjusted for items separately disclosed
Taxation 1,963,079 1,118,495 Loss on assets written off 22 62,655 - Adjusted for non-cash items: Depreciation and Amortisation of Intangible Assets 18 1,895,453 12,218 Movement in Operating Lease Liability 13 455,751 -
Net cash flow generated by operations before movements in
working capital 9,385,867 4,006,844
Movements in working capital 2014 2013
(R) (R)
(Increase) in prepaid expense - (2,229,732) (Increase) in receivables (255,350) - Increase in trade and other payables 2,386,426 1,685,799 Increase (Decrease) in deferred income (11,575,560) 14,036,836
Cash flow generated by operations (58,617) 17,499,747
25 Cash and cash equivalents
Cash and cash equivalents included in the cash flow statement comprise the following;
Cash on hand
436
2,965
Cash as per bank balances 5,152,353 15,834,405
5,152,789 15,837,370
26 Prior Year Errors
Adjustments amounting to R 2,025,222 were processed against Opening Retained Earnings. These adjustments emanated from the carrying amount of property, plant and equipment purchased and prepayment erroneously not deducted from the unspent grant balance as per GRAP 23, taxation expense and deferred tax amount that were incorrect. The impact of the adjustments is as follows:
Effect on statement of financial performance
Revenue
Increase in revenue realised from non-exchange transactions (3,968,580)
Increase in taxation expense 1,943,358
Net effect onSurplus(deficit) for the period (2,025,222)
Effect on statement of financial position
Non-current Asset
Decrease in deferred tax asset (818,736)
Current liability
Decrease in Unspent Grant liability 3,968,580
Increase in Taxation liability (1,136,191)
Non-current Liability
Decrease in deferred tax liability 11,569
Net effect on retained earnings 2,025,222
TEDA Annual Report 2013/14 Page - 83 -
26.1 The impact of the above changes in the restated 2013 balances is as follows:
2013 as previously
Stated Change After Change
Statement of Financial Position effect
Non-current Asset
Deferred tax 836,433 (818,737) 17,696
Current liability
Deferred income liability (18,005,416) 3,968,580 (14,036,836)
Non-current Liability
Deferred tax liability (11,569) 11,569 -
Statement of Financial Performance effect
Revenue
Transfers from City of Tshwane (6,994,584) (3,968,580) (10,963,164)
Taxation 824,863 (1,943,358) (1,118,495)
26.1 Reclassification of Items The following Items are reclassified in order achieve fair presentation of balances. The reclassified items are listed below as follows;
2013 2013
Statement of Financial Performance (R) (R)
Amount Amount
Account Before After
General expense 3,426,438 2,784,013
Marketing, Trade and Investment - 525,758
Employee costs 1,718,695 1,602,028 The reclassification is for branding expenditure incurred that is now classified under Marketing, Trade and Investment from general expense and provision for leave expense from general expense now classified as employee costs.
Statement of Financial Position
Before After
Provision for leave pay* Trade and other payables - 11,1667
Other Creditors^ Trade and other payables - 26,374
*The reclassification is in line with GRAP 25. And the standard requires provision for leave pay to be part of Trade and Other Payables. ^The reclassification is to consolidate all other creditors items to Trade and other payables for easy of reference.
27 Purchase of Property, plant and equipment
TEDA Annual Report 2013/14 Page - 84 -
During the period, the municipal entity acquired property, plant and equipment with an aggregate cost of R 10,037,748 which was acquired by means of funds from City of Tshwane. A total of R 9,990,480 was for cash purchases of fixed and intangible assets.
28 Budget
The entity has been allocated a budget of R 47.5 million and there is an approval to retain the surplus amounting to R 14 million which was effected during the adjustment period. The approved budget covers the period from 01 July 2013 to 30 June 2014. The budget and accounting bases differ. The financial statements are prepared on the accrual basis using a classification on the nature of expenses in the statement of financial performance. The financial statements differ from the budget, which is approved on the cash basis. A reconciliation between the actual amounts on the comparable basis as presented in the statement of comparison of budget and actual amounts and the actual amounts in the cash flow statement for the period ended 30 June 2014 is presented below. The financial statements and budget documents are prepared for the same period. There is a basis difference: the budget is prepared on a cash basis and the financial statements on the accrual basis.
28.1 Reconciliation of cash flow to Budget and actual comparison statement
2014 Operating Financing Investing Total
Actual as per Budget and Actual comparative statement. 5,008,929 - (10,037,481) (5,028,552)
Basis Difference (5,067,546) (588,483) - (5,656,029)
Actual amount in the Statement of Cash Flows (58,617) (588,483) (10,037,481)
(10,684,581)
2013 Operating Financing Investing Total
Actual as per Budget and Actual comparative statement. 2,876,131 - 1,867,732 4,743,863
Basis Difference 14,623,616 97,888 (3,627,997) 11,093,507
Actual amount in the Statement of Cash Flows 17,499,747 97,888 (1,760,265) 15,837,370
TEDA considers 9% a material variance in monitoring spending trends, where a detail explanation of the variance is important in order to aid planning and decision making. The budget is as per the economic classification and explanation on spending is as follows;
28.2 Compensation of Employees
Compensation of employees has increased by 815% (R17,3 million) due to the recruitment drive aimed at ensuring that TEDA delivers on its strategic objects and that of the CoT as per the Service Delivery Agreement.
28.3 Remuneration to Board of Directors
The TEDA is continually growing in terms of size and vision strong leadership and solid governance structure is vital and achieving this, remuneration for board members has increased by 110% (R1.8 million) compared to 2012/13 expenditure of R1,5 million.
28.4 Goods and Services
TEDA is a fairly new entity and during the period cost for goods and services increased by 936% (R31 million) largely attributed to establishment cost of the entity. The entity has also implemented numerous projects in partnership with CoT.
28.5 Capital Expenditure
The entity procured large quantities of office furniture, equipment for and computers in order to provide a habitable and conducive working environment for its employees and total expenditure amounts to R3,8 million which a 123% increase compared to R1,7million of prior year.
TEDA Annual Report 2013/14 Page - 85 -
The remaining budget is anticipated to be spent on commitments and accruals.
29 Related parties
Controlling municipality: City of Tshwane Metropolitan Municipality Municipal entity under the same control: Housing Company Tshwane Municipal entity under the same control: Sandspruit Water Works Association Compensation to board members and key management Refer to note 17 & 18
2014 2013
Related party balances:
(R) (R)
Loan accounts - Owing to related parties
City of Tshwane Metropolitan Municipality
- 588,842
Related party transactions:
Transfer made by the related party
City of Tshwane Metropolitan Municipality 47,500,000 25,000,000 Payment to the related party
City of Tshwane Metropolitan Municipality 588,482 108,473 Payment of creditors by related party
City of Tshwane Metropolitan Municipality
- 108,473 Payments of board fees by related party
City of Tshwane Metropolitan Municipality
- 385,704
30 Commitments
Approved and contracted 19,854,962 2,098,216
Total Commitments 19,854,962 2,098,216
30.1 Commitments under
operating lease
Not later than one year 7,817,094 -
Later than one year and not later than five years 11,441,226 -
Later than five years - -
Total Commitments 19,258,320 -
Operating lease commitment is the rental of offices used by TEDA situated at: 349 Witch-Hazel Avenue; Eco-origin Building; Block F; Highveld Extension 70; Centurion for the period of three years starting from 1st of November 2013.
30.2 Commitment Accounting
Purchase orders issued 596,642 2,098,216
TEDA Annual Report 2013/14 Page - 86 -
Total Commitments 596,642 2,098,216
31 Additional Disclosures in Terms of Municipal Finance Management Act
2014 2013
33.1 PAYE, SDL and UIF (R) (R)
Opening balance
1,035,739 -
Current period payroll deductions
6,183,852 1,035,739
Amount paid
(6,634,578) -
Balance unpaid (Included in payables)
585,013 1,035,739
33.2 Employee Benefits
Pension Fund* 236,161 -
Group risk^ 94,204 -
Medical Aid‖ 559,539 -
889,904 -
*The entity has a pension fund defined contribution plan with Momentum where employees pay a fixed amount and the employer pays for the administration fees. ^*The entity has a group risk plan with Discovery Life employees pay a fixed amount and the employer pays for the administration fees.
―Medical Aid contributions are with Discovery Medical Aid Scheme and Bonitas Medical Aid Scheme.
33.3 Audit Fees
External Audit 175,813 -
175,813 -
32 Fruitless and Wasteful Expenditure
Reconciliation of fruitless and wasteful expenditure (included under general expenses)
Opening balance - -
Fruitless and Wasteful expenditure current year 38,990 -
Condoned or written off - -
Transfer to receivables for recovery – not condoned - -
Fruitless and Wasteful awaiting condonement 38,990 -
Reconciliation of Fruitless and Wasteful (included under general expenses) Included above under other expenses is interest incurred amounting to R38,990 from SARS for late submission of PAYE,SDL and UIF, which was due to the delay in registering for PAYE,SDL and UIF.
TEDA Annual Report 2013/14 Page - 87 -
33 Irregular Expenditure
Reconciliation of irregular expenditure (included under general expenses)
Opening balance 1,188,088 -
Irregular expenditure current year - 1,188,088
Condoned or written off (1,188,088) -
Transfer to receivables for recovery – not condoned - -
Irregular expenditure - 1,188,088
Incident
Disciplinary steps/criminal proceedings
Non-compliance with the SCM regulations. Procurement made by CoT in relation to the acquisition of recruitment services to recruit TEDA CEO, CFO, Company Secretary and Office Manager.
None
34 Deviation from Supply Chain Management regulations
Paragraph 12(1)(a)-(d)of Government gazette No. 27636 issued on 30 May 2005 states that a supply chain management policy must provide for the procurement of goods and services by way of a:
Written or verbal quotation for values up to R2,000 up to R10,000 (VAT included),
Formal written quotations for values over R10,000 up to R200,000 (VAT included), and
Competitive bidding process for values above R200,000 (VAT Included).
Paragraph 36 of the same gazette states that the accounting officer may dispense with the official procurement process in certain circumstances, provided that he records the reasons for any deviations and then reports them to the next meeting of the accounting officer and includes a note to the annual financial statements. In terms of section 36(1)(a) of the Supply Chain Management Regulations, the accounting officer may dispense with the official procurement processes in the following instances:
in an emergency
if such goods or services are produced or available from a single provider only
for the acquisition of special works of art or historical objects where specifications are
difficult to complete
in any other exceptional case where it is impractical or impossible to follow the official
procurement processes.
Deviation from tender and quotation process:
Sole suppliers
Emergency
Impracticality
TEDA deviated from the official procurement processes during the financial year due to services available from a single supplier -
Services available from a single provider only (R1,566,756)
Sole supplier (R301,558)
TEDA deviated from the official procurement processes during the financial year due to impracticality in inviting a competitive bidding process-
TEDA Annual Report 2013/14 Page - 88 -
Tenant installations R6,172,569
35 Regulation 45
The annual financial statements of a municipality must disclose particulars of any award of more than R2 000 to a person who is a spouse, child or parent of a person in the service of the state or has been in the service of the state in the previous 12 months indicating:
2.5.31 The name of that person
2.5.32 The capacity in which that person is in the service of the state/municipality; and
2.5.33 The amount of the award
The winning bidder L.J du Plooy declared that his spouse works for the National Treasury. The award of the contract to the value of R157, 320 followed normal procurement process and no competing bidders were disadvantaged in the process. The declaration of the bidder does not have negative impact on TEDA.
36 Contingent Liability
The entity has a contingent liability as at 30 June 2014, the details are as follow: There has been a disciplinary case against the former CEO of the entity and based on the outcome of the hearing, he was dismissed on the 30th April 2014 and his salary was stopped with immediate effect. The former CEO has lodged the appeal against his dismissal and the case was not finalised at the time of submitting this Annual Financial Statements. The remaining contract value from the time of dismissal is estimated at R 9.1 million including litigation cost of R400,000.
TEDA Annual Report 2013/14 Page - 89 -
Annexure A: Recommendations of the Audit and Performance Committee Annexure B: Disclosure of Financial Interest Annexure C: Third Tier Administrative Structure