ANNUAL REPORT | 2014-15

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CONTENTS

Glossary of Terms 4

LEA Corporate Profile 6

LEA Board of Directors 8

Executive Management 12

LEA Branch/ Incubator Managers 14

Chairman’s Statement 20

Chief Executive Officer’s Statement 24

Board and Governance 28

Corporate Governance Statement 30

Business and Performance Review 32

Promotion of Citizen 18Entrepreneurship

Diversification of the Economy 32

Development of a Competitive 38SMME Community

LEA Business Incubation 40Programme

Enhancing Service Delivery 43

LEA and its Human Resources 44

LEA Corporate Social Investment 46(CSI) Initiatives

Financial Statements 49 - 82

LEA Corporate Information 83 - 84

Client Testimonials

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Glossary of TermsBAC Botswana Accountancy CollegeBAM Botswana Agricultural BoardBDS Business Development ServiceBEMA Botswana Exporters and Manufacturers

AssociationBHM BotswanaHorticulturalMarketBIH BotswanaInnovationHubBITC Botswana Investment and Trade CentreBIUST BotswanaInternationalUniversityofScience

and TechnologyBNPC BotswanaNationalProductivityCentreBOBS Botswana Bureau of StandardsBOCCIM BotswanaConfederationofCommerce

Industry and ManpowerBOPEU BotswanaPublicEmployeesUnionBTC BoardTenderCommitteeBTO BotswanaTourismOrganisationCBO CommunityBasedOrganizationsCCF ChannelCorporateFoundationCDE Centre for Development of EnterpriseCEDA CitizenEntrepreneurialDevelopment

AgencyCEO ChiefExecutiveOfficerCETP CommonEffluentTreatmentPlantCOSO CommitteeofSponsoringOrganizationsof

the Treadway Commission CSI Corporate Social Investment CLRI CentralLeatherResearchInstitute

CSR CorporateSocialResponsibilityDNIP DepartmentofNationalInternship

ProgrammeDPSM DirectorateofPublicServiceManagementEAW EntrepreneurshipAwarenessWorkshopEDT Entrepreneurship Development TrainingEIA Environmental Impact Assessment ERM Enterprise-wideRiskManagementEDF European Development FundFAC FinanceandAuditCommitteeFIBI FrancistownIndustrialBusinessIncubatorGEI GlobalEnterprenurshipIndexHRC HumanResourceCommitteeHR Human ResourcesIP IntellectualPropertyISO InternationalStandardsOrganizationLEA Local Enterprise AuthorityLE Large EnterprisesME Micro EnterprisesMOA Ministry of AgricultureMOU MemorandumofUnderstandingMTI Ministry of Trade and IndustryMYSC Ministry of Youth Sport and CultureNFTRC NationalFoodTechnologyResearchCentreNGO Non-GovernmentalOrganizationNSIC NationalSmallIndustriesCorporationOP OfficeofthePresidentPECU PovertyEradicationCoordinatingUnit

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PSC ProjectSteeringCommitteePSDP Private Sector Development ProgrammePSLE PrimarySchoolLeavingExaminationsQMS Quality Management SystemSAITEX SouthernAfricanInternationalTrade

ExhibitionSBA Small Business ActSHE Safety, Health and Environment SME Small and Medium EnterprisesSMME Small, Medium and Micro EnterpriseTAC TechnicalAdvisoryCommittee

Definition of terms Business incubation - A programme designed to support the successful development of start-up enterprisesofferinginfrastructureandotherservicesin a controlled environment

Pre Start-up Business-Abusinessideathathasnotyetbeenimplemented.

Start-up Business-Abusinessthathasbeeninoperationforlessthantwelvemonths.

Existing Business-Abusinessthathasbeeninoperationformorethantwelvemonths.

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The Local Enterprise Authority (LEA) was established by theSmall Business Act of 2004, Chapter 43:10 of the Laws of Botswana to carry out on behalf of the Governmentof Botswana, and more specifically the Ministry ofTrade and Industry (MTI), the mandate of entrepreneurship and enterprise development inBotswana.

Our Mandate:In accordance with the Small Business Act, the Authority’s mandate is to promote entrepreneurship and SMME development through:

• Providingbusinessdevelopmentservices inter alia through; screening,businessplanfacilitation,trainingandmentoring;

• Identifyingbusinessopportunitiesforexistingandfuture SMMEs;

• Promotingdomesticandinternationallinkages,especiallybetweenSMMEsandgovernment,largebusinessentitiesandotherSMMEs;

• Facilitatingchangesinregulations,qualitymanagement systems and standards, infrastructure and accesstofinance;

• Facilitatingtechnologyadoptionanddiffusion;

• Promotinggeneralentrepreneurship and SMME awareness.

TheAuthority’skeydeliverablesinsummary are as follows;

• Promotionofcitizenentrepreneurship;

• Furtherdiversificationoftheeconomy;

• Promotionofexports;• Developmentofacompetitive

SMME community;• Creationofsustainable

employmentopportunities;• Promotionofthedevelopment

ofverticalintegrationandthehorizontallinkages;betweenSMMEs and primary industries in agriculture, mining and tourism;

• Improvedefficiencyinthedeliveryofservicestobusiness;

• Promotionofbusinesslinkagesbetweensmallandlargeenterprises.

The Authority prides itself in having an extensive country-wide footprint of 13 branches. Through theguidance of the Quality Management System Standard ISO 9001:2008, the highly specialized quality of serviceis standardized in all the branchesand clients are therefore guaranteed excellent service in the entire LEA

LEA Corporate Profile

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branch network regardless of thelocation. The thirteen branchesare in Francistown, Gaborone,Ghanzi, Kanye, Kasane, Masunga, Maun, Mochudi, Molepolole, Ramotswa, Selibe-Phikwe, Seroweand Tsabong. In addition to thebranches, there are four BusinessIncubators whose objective is toprovide business space, sharedfacilities and impact driveninterventions geared at attainingaccelerated growth of the enterprisesincubated.

TheLEAIncubatorsareasfollows;• FrancistownIndustrialBusiness

Incubator• GaboroneLeatherIndustries

Incubator• GlenValleyHorticulture

Incubator• PilaneMultipurposeBusiness

Incubator

Our VisionTobethecentreof excellence for entrepreneurship and sustainableSMMEdevelopment in Botswana.

Our MissionTo promote and facilitate entrepreneurship and SMME development through targeted interventionsinpursuitofeconomicdiversification.

Our Value Proposition“’Empowering the entrepreneur to start and growtheirbusiness.”

LEA Values

Self-Driven

We are passionate, eager to learn, persistent and determined to achieve personal goals so that the entireteamachievesitsdesiredresults.

Transformational Leadership

We are inspired and self-led, motivated,innovativeandaccountabletoachievemaximumpotentialinafavorableworkenvironment.

Partnership

Throughourinternalteamworkandeffectivepartnershipwithstakeholders,oureffortsaresynergizedresultinginthesuccessofourclientele.

Botho

We are courteous, polite, and approachable.Weexecuteallourtransactionswithclientsandotherstakeholderswithintegrity.

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LEA Board of DirectorsA MR. BATLHATSWI TSAYANG Board Chairman

B Mrs Bilkiss Moorad FAC (Chair) & HRC

C Mr Rockie Mmutle FAC & HRC

D Mr Oabile Regoeng TAC & HRC

A B C D

KEY: TAC- Technical Advisory Committee | FAC- Finance and Audit Committee | HRC- Human Resource Committee | BTC- Board Tender Committee

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E F G H

E Mrs Masego Marobela FAC & BTC

F Mr Thatayaone Molefhi TAC & FAC

G Dr Haniso Motlhabane BTC & TAC

H Mrs Mama M. Maite HRC (Chair) & TAC

I Mr Boniface G Mphetlhe TAC (Chair) & BTC (Resigned 04/12/2014)

J Mrs Hilda Mocuminyane Vice Chairperson, BTC (Chair - Resigned 31/07/2014)

Not included in the picture above

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MR. BATLHATSWI TSAYANGAstheChairmanoftheLEABoard,MrTsayanghasaMaster’sDegreeinPublicAdministrationandisknowledgeableintheHumanResourceManagementsphere.MrTsayanghaspreviouslysatontheBotswanaHousingCorporationBoardaswellastheBotswanaMedicalAidSocietyBoard.He currently sits as an assessor at the Industrial Court of Botswana.Mr TsayanghasworkedattheCentralTransportOrganisation,BotswanaRailways,AirBotswanaandNationalTransportandCommunicationsamongstotherentitiesbeforejoiningtheprivatesector.

MRS. MASEGO MAROBELAMrsMarobela, theManagingDirector of the BotswanaBureauof Standards has aMaster’sDegree in Business Administration and a Master of Science (Analytical Chemistry). Shepreviously worked at the then Ministry of Commerce and Industry (Botswana – GermanyTechnical Cooperation Project to establish the National Quality Assurance System), theDepartmentsofWaterAffairsandGeologicalSurveys.Shehascontributed to thesuccessofthe SADC Technical Barriers to Trade structures’ strategies, and served as Chairperson of two committees (Measurement Traceability and Accreditation). She represents Botswana on theInternationalOrganization for Standardization Council and is amember of theUniversity ofBotswanaCouncil.

MR. OABILE REGOENGMrRegoenghasastuteknowledgeasaPublicRelationsExecutiveandBusinessDevelopmentSpecialist who has a reputable record of successfully delivering strategies that have seenbusiness development initiatives penetrate the market segment through successful ProjectManagement.MrRegoengholds aMaster’sDegree inBusinessAdministration- Finance.Hehaspreviouslyworkedat theNationalDevelopmentBank (NDB)andCitizenEntrepreneurialDevelopmentAgency(CEDA).Hehassincejoinedtheprivatesectorasapropertydeveloper.He is currently serving as theBoardChairpersonof KwenengDistrictVentures (PTY) Ltd, aninvestmentarmofKwenengDistrictCouncil.

DR. HANISO MOTLHABANEDrHanisoMotlhabanehasaPhDinPolicyProcesswithspecialisationinPolicyImplementation.HehasexperienceintheEducationSectorinparticulartheAgriculture,ScienceandTechnologyspheres.Hehasheldcriticalrolesinvariousresearchinstitutionsasamemberofthetaskforcesandsteeringcommitteestherein. He iscurrentlywiththeBotswanaInternationalUniversityof Science and Technology (BIUST). DrMotlhabanewas a BoardMember of the Forum onSustainableAgriculture.

LEA Board of Directors

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MRS. BILKISS MOORADMrsBilkissMooradisanaccomplishedSeniorExecutivewhorosethroughtheranksofthecorporateworldforover25years,ofwhich16hasbeenintheinsuranceandbankingsector.SheisaCharteredAccountant,FCCA.MrsMooradishighlyskilledinbusinessdevelopmentandrelationshipmanagement.Sheisalsoknownforhereffectiveleadershipskills,strategicthinkingandinnovativeideas.MrsMooradstartedtwolifeinsurancecompanies;ABSALifeBotswanaandLibertyLife.ShehasalsoworkedatBarclaysBankofBotswanaandBotswanaLifeInsurance.SheiscurrentlytheChiefExecutiveOfficeratZurichInsurance.

MR. THATAYAONE MOLEFHIMrMolefhibringswithhimawealthofexperience,knowledgeandunderstandingofvariousindustriesfrombothpublicandprivatesector.HeholdsBEnginMetallurgy,MScinAdvancedManufacturingSystemsfromBrunelUniversityintheUnitedKingdom,ProfessionalDiplomainPurchasing&Supply(CIPS),ProjectManagementProfessional(PMI),CertifiedStrategyPractitioner(Palladium)andaCertifiedContractandCommercialManagementProfessional(IACCM).HeistheChairmanofPMIBotswanaChapterFormationSteeringCommitteeandExecutiveCommitteeMemberofSouthernDistrictFarmersAssociation.MrMolefhiworksforDebswanaastheBusinessDevelopmentManager.

MR. ROCKIE MMUTLEMr Rockie Mmutle has a Master’s Degree in Business Administration and Bachelorof Commerce (Management). Mr Mmutle has worked for G4S Botswana Limited andMedicalRescueBotswanaLimited.HewasaBoardMemberofBankofBotswana.He isknowledgeableinStrategyDevelopmentandhasvastexperienceinthebusinesssector.HeiscurrentlywithKansaiPLASCONBotswana(PTY)Ltd.

MRS. MAMA M. MAITEMrs Mama M. Maite has an MBA, and MSc in Human Resource Management, a PostGraduate Diploma in Human Resources Studies as well as a Bachelor of Commerce (BCom), and has over 17 years experience in Human Resource management. Throughout herprofessional career she has developed and implemented Strategic people agenda aligned tooverallbusinesspriorities.MrsMaiteiscurrentlywithStandardCharteredBotswanaastheHeadofBusinessHR,RetailClientsandGroupTechnologyandOperations.MrsMaitehasworkedfortheBotswanaBureauofStandards,BotswanaTrainingAuthority,BotswanaAgriculturalMarketingBoardandDirectorateofPublicServiceManagement(DPSM).

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A Dr Tebogo T. K. Matome Chief Executive Officer

B Mr Cosmas Moapare Deputy CEO - Client Services

C Mrs Masego Gwaila-Madanika Deputy CEO - Support Services

D Mrs Joy Norman Board Secretary & Legal

Services Manager

E Mr Moshe C. Z. Libengo Director, Corporate Services

F Mr Kabelo Mkwane Director, National Branch

Network

G Ms Masego Mookodi Director, Human Resources

H Mrs Boikhutso Kgomanyane Director, Corporate & Stakeholder Communications

Executive Management

D E

A

GF H

B C

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I Mr Gordon Mbongwe Strategy Manager

J Mr Lesitamang Paya Director, Innovation & Sector Support

K Mr Mbati Lebang Director, Risk & Internal Audit

L Mr Donald Fologang Director, Capacity Development

M Ms Dynah Solani Director, Research & Development

N Mr Ephraim Kentse Director, Information Technology

O Mr Lisenda Lisenda Director, Corporate Planning

P Mr Gaboipeelwe Motlhabane Quality Management Representative

L M N

O P

I J K

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LEA Branch Managers

leadership

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as playing as a team and taking initiative to

do what needs to be done when it needs to

be done as a team.

At LEA, we define

leadership

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LEA Branch Managers

A

E

B

F

C

G

D

H

A Mr. Obakeng Segwagwe Senior Manager (South)

B Mrs. Kgomotso Masunga Branch Manager (Serowe)

C Ms. Anastacia Mamelodi Branch Manager (Mochudi)

D Mr. Lesedi Ngakane Branch Manager (Molepolole)

E Mrs. Dulu Moaisi Branch Manager (Ramotswa)

F Mr. Kago Ntebela Branch Manager (Kanye)

G Ms. Martha Keikanetswe Branch Manager (Ghanzi)

H Mr Kagiso Habangana Branch Manager (Selibe-Phikwe)

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I

L

J

M

K

N

I Mr. Golebaone Molefe Branch Manager (Tsabong) [A]

J Mrs. Gertrude Molefi Branch Manager (Gaborone)

K Mr. Agripah Hengari Branch Manager (Maun)

L Ms. Mmoloki Kesalopa Branch Manager (Francistown)

M Ms. Segakolodi Ntebele Branch Manager (Masunga)

N Mr. Oneneile Padipadi Branch Manager (Kasane)

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LEA Incubator Managers

Ms Mpho Kgalamono - Incubator Manager [A] Gaborone Leather Industries Incubator

Mr Mothusi Kelebogile - Incubator Manager Pilane Multi-purpose Incubator

Mrs Malebogo Phillip - Incubator Manager Francistown Industrial Business Incubator

Mr Isaac Bok - Incubator Manager Glen Valley Horticulture Incubator

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Chairman’s Statement

Mr. Batlhatswi Tsayang

16%increase in overall performance against target of 75%

H I G H L I G H T S

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The 2014-15 financial year marks the beginning of the implementation of LEA’s new Corporate Strategy for the period 2014-17, where the organization shifted its focus from the initial four agricultural sub-sectors of dairy, leather, horticulture and piggery. LEA is now committed to assisting enterprises in all sectors, and service differentiation in the SMMEs environment. The new strategy allows the organization to service all the sectors, providing among other services comparative business advice to potential and existing enterprises. The strategy has since been accepted by the public following a successful launch in July 2014. The organization is on course in delivering its key mandate of nurturing competitive and sustainable SMME development and thereby contributing significantly to job creation, poverty eradication and economic diversification which are high priorities of the Government in the next five years.

The organization has managed to make significant progress in the implementation of two key projects, being the Leather Industry Park and the Rapid Incubation, following securing of funding from the Office of the President for the latter project. A validation study was conducted for the Leather Park in Lobatse and the estimated cost of the project is P415m with the expected creation

of more than 7900 jobs when fully operational. The refurbishment of the Rapid Incubation centre in Gaborone is currently on schedule with the expected date of completion being 30th September 2015. The Rapid Incubation Centre will allow many citizens to be screened and trained for various business opportunities.

LEA has been able to achieve its performance target with the overall organizational performance result for 2014-15 standing at 91%, which is 16% above the set target of 75%. These results are a clear indication that LEA continues to make strides in the realization of its mandate as per the Small Business Act, particularly in the areas of job creation and entrepreneurship development and thus contributing immensely to the Government’s noble agenda of economic growth and diversification.

We do, however, continue to experience challenges as we deliver on the mandate. Such challenges relate primarily to the inability of LEA to fully perform its mandate due to budgetary constraints, as well as conditions precedent to the creation of new enterprises such as serviced land, operating or working space, costs of Environmental Impact Assessments (EIA), cost of water survey, cost of drilling boreholes (low yields, blanks) and

On behalf of the Board of Directors of the Local Enterprise Authority (LEA), I am pleased to present the LEA Annual Report for the financial year 2014-15. The report gives a brief synopsis of the operations, achievements, challenges and milestones of LEA projects in pursuit of the organisational mandate. The Annual Report highlights the performance of the organization for the financial year under review.

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others. These are stumbling blocks for SMME growth and start-ups. Added to this is the continued loss of our human resources due to our uncompetitive employee remuneration structure. As a service organization, the human resource is no doubt the most strategic asset of our organization. However, LEA will continue to engage with relevant stakeholders to find lasting solutions to these challenges.

Going forward, I would like to see LEA doing more to assist in reducing the country’s import bill particularly in areas such as the production of vegetables. It goes without saying that in terms of the Small Business Act, the Authority is not an income generating organization, but in my view it may be prudent to seek an amendment of the Act, in order to allow the Authority to move towards revenue generation activities, thereby reducing dependence on Government funding. We shall endeavor to advocate for better and improved collaboration with the Office of the President- Poverty Eradication Coordinating Unit and other Government Ministries such

as Local Government and Rural Development, Youth, Sports and Culture.

I wish to conclude by expressing my sincere gratitude, on behalf of the LEA Board, Management and Staff, to our parent Ministry of Trade and Industry, the Minister and the Permanent Secretary for their unwavering support to LEA, as it is through their support that LEA is able to continually deliver on its mandate. Our various stakeholders including the entire SMME community have also shown immense support by partnering with LEA to drive the country’s development agenda.

_____________________ Mr. Batlhatswi Tsayang Chairman of the Board

Chairman’s Statement [continued]

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Chief Executive Officer’s Statement

216.9minvestment value created against a target of P85.6 million. From this value, P27.3 million was as a result of LEA interventions.

24 426attendedtheEntrepreneurship

AwarenessWorkshops

Dr Tebogo Kingsley Matome

1445jobscreatedagainstatargetof667

H I G H L I G H T S

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A key tenet of this new Strategy is that LEA is now open to servicing clients from all sectors of our economy. This shift in the strategy is informed by the economic imperatives of the day, where job creation and the need to facilitate SMME-led local private sector growth through the Economic Diversification Drive have become national priorities. This strategy is relevant as you will note that the key priorities of the current government include poverty eradication, job creation, youth empowerment and employment; all of which are inextricably linked deliverables. Youth unemployment has become a major problem in the country and is indeed a key concern for developmental institutions like LEA, given that the youth form the majority of unemployed population.

The new 2014-17 LEA Strategy was formulated after conducting extensive consultations with both our internal and external stakeholders. The message from our stakeholders was very clear and unequivocal; being that, in order to remain relevant to Batswana, LEA should adopt a strategy that will allow the organisation to service a clientele from all sectors within the country, and furthermore provide such services in a cost effective manner to the different cohorts within the SMME sector. LEA addressed the latter issue via segmenting its clientele into Micro Enterprises (MEs) on the one hand and the Small and Medium

Enterprises (S&MEs) on the other; thus offering differentiated services and interventions to these two cohorts.

This new intervention delivery model recognises that MEs (enterprises with an annual turnover of less than P300, 000) require and indeed benefit greatly from input-based/supply-led interventions. On the other hand the S&MEs (enterprises with an annual turnover of more than P300,000 but less that P5 million), who are at the cusp of achieving international competitiveness benefit more from bespoke and demand-based services which will increase their profitability, investment value, turnover and employment creation.

This service delivery model has also allowed us to optimize the cost of our services, especially in our current operating environment, which is characterised by constrained financial resources. Furthermore this new model has allowed the organisation to properly target the development of our internal capacity, thereby ensuring that our client facing staff specialise in assisting the different SMME cohorts to which they are assigned.

LEA’s robust performance during the 2014-15 financial year is evidence that the new 2014-17 Strategy has been well bedded down, and most importantly that it has

It is with great pleasure that I present the performance of the Local Enterprise Authority for the 2014-15 financial year. 2014-15 marked the first year of the implementation of the 2014-2017 LEA Strategy; a strategy aimed at further accelerating business start-up and growth within the SMME sector of Botswana, which should result in the much needed employment creation.

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Chief Executive Officer’s Statement [continued]

been well received by Batswana. Our 2014-15 overall performance stands at 91%, which is significantly above our performance target of 75%. I will now go on to bring out the performance of the key measures and indicators that we were tracking during this 2014-15 financial year, whose aggregate result has led to the robust performance for the year. The first two indicators that we measure, attesting to the popularity of the new Strategy, are the number of new clients registered under our MEs and S&MEs wings. We registered 4993 MEs against a target of 1760.

We also registered 102 S&MEs against a target of 41. This means that we were able to attract significant numbers of SMMEs to whom we shall administer LEA interventions aimed at assisting them to either start, strengthen or grow their businesses; thus culminating in aggregate national economic growth, and a greater number of new jobs created in the economy. Another indicator that we measure is the number of outreach programmes we engage in during the year; these are aimed at explaining our mandate and service offering to Batswana. We conducted 472 outreach programmes during 2014-15 against a set target of 338. We believe that these outreach activities were instrumental in attracting the large numbers of MEs and S&MEs that came to register and apply for LEA services during the year.

Another key indicator that we tracked was the number of jobs recorded during the year. According to a recent World Bank report on jobs, firms and countries face two challenges being job creation and job retention. We have come up with two sub-strategies that address these challenges as well. In the 2014-15 financial year, a total of 1445 jobs were recorded against a target of 667. Of these, a total of 1128 jobs were recorded when the S&ME clients joined LEA seeking our interventions, and we have duty to ensure that these jobs are retained. The balance which is 317 jobs, was created after the S&MEs had joined LEA, emanating directly from our interventions. The other key indicator that we measure is the total investment value recorded by our clients. For

2014-15 a total Investment Value of P216.9 million was registered against a target of P85.6 million. From this value, P27.3 million was as a result of LEA interventions through the approval of 20 business plans by different financing institutions.

Other key indicators that we measure, include interventions we administer to provide the foundation for our clients to start and grow their businesses, therefore rendering them competitive in the market. One such indicator is the number of entrepreneurs/businesses to whom we provide training, mentoring and business advisory services. During 2014-15, 1596 entrepreneurs were trained, mentored and coached against target of 1486. Of these, 1415 entrepreneurs received training interventions, while 181 entrepreneurs received mentoring and coaching interventions. Another critical indicator that we track is the number of people (especially the youth) who attend LEA Entrepreneurship Awareness Workshops. These are aimed at sensitising different members of society on the basic requirements for one to become an entrepreneur, and also to outline the different empowerment opportunities in entrepreneurship. In 2014-15, the organisation was able to reach out to 24,426 individuals, mostly secondary and brigades students, against a target of 24,000.

The sterling organisational performance that I have articulated above is also buttressed by the ranking that Botswana achieved in the 2015 Global Entrepreneurship Index (GEI). The 2015 GEI primarily measures the level of entrepreneurial activity in a country, as supported by the institutional ecosystem that supports entrepreneurship and enterprise development. Botswana is ranked second (2nd) in Sub-Saharan Africa, and sixty sixth (66th) in the world among the 130 countries surveyed. This ranking confirms the progress that the country has achieved through its numerous entrepreneurship promotion and development initiatives, of which LEA is unquestionably one of the main contributors.

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To further strengthen the entrepreneurial development ecosystem of Botswana, LEA has during 2014-15 developed a National Entrepreneurship Policy which holistically addresses how entrepreneurship can be more systematically inculcated within our people. The central tenet of this policy is the recognition of the power that education has in developing the skills to generate an entrepreneurial mind-set, which is the key to enterprise development and hence the growth of our SMME sector. The policy has so far been reviewed by our parent Ministry and is being taken through the government approval process.

As I mentioned in my 2013-14 Annual Report statement, LEA was engrossed in the preparatory work for the development of two major projects, being the Rapid Incubation and the Leather Park projects. I am happy to report that the work on these two projects has progressed well during 2014-15. It is our expectation that the Rapid Incubation Project will be commissioned next year during the 2015-16 financial year, whilst the Leather Park project is expected to be commissioned by March 2018. I strongly believe that these two projects will be major game changers in job creation and economic diversification. The Rapid Incubation project will address the issue of lack of entrepreneurial skills amongst the out of school youth and the disadvantaged groups in the society. The programme aims to empower potential beneficiaries of Government schemes with practical skills of running a business before disbursement of funds to reduce project failure rates. The Leather Park earmarked for Lobatse will have the entire leather activities in one area, from raw hides to finished leather goods. Once operational, the project is expected to create about 7900 jobs.

LEA has been able to achieve all the above within a milieu of worsening resource constraints, which militate against our ability as an organization to fully execute our mandate. Some aspects of our mandate that suffer as a result of constrained resources manifest in our inability to accept a higher number of clients coming in to request for our services; inability to regularly visit

our ailing clients to administer our interventions which ensure their sustainability and growth; our inability to attract and retain key staff who are instrumental in achieving the targets set for us by our nation; our inability to regularly update our internal operational systems and software to ensure proper functioning of our processes and internal controls. We believe that if LEA was afforded more financial resources, we could be able to do significantly more to achieve our mandate, and hopefully improve our country’s ranking in the Global Entrepreneurship Index.

Let me conclude by extending our appreciation to our parent Ministry, the Ministry of Trade and Industry, for their continued and unwavering support for LEA. I also thank the LEA Board for the much valued strategic guidance and direction that they provide to the organisation. I also thank my colleagues, being the LEA management and employees; it is through their hard work, dedication and loyalty to the organization that LEA has been able to exceed its performance targets for 2014-15. Last but critically important, I thank our customers and stakeholders; our customers for the trust they continue to have in the quality of our interventions, and our stakeholders for their partnership in the implementation of LEA’s various initiatives and interventions aimed at growing the economy of our beloved country.

_____________________________Tebogo T.K. MatomeChief Executive Officer

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Board and Governance

TheLEABoardhasacurrentmembershipoften(10),whereinthemembersareexpertsinthefinancialandhumanresourcesfieldsamongothers.TheLEABoardhasfour(4)sub-committeesthatprovidestrategicguidancetotheorganizationincompliancewiththestatutoryrequirements.

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TechnicalAdvisoryCommitteeThe Technical Advisory Committee provides strategic guidance on projects that form part of LEA’s mandate. The Committee further deals with matters of the following nature:• Providing business planning, training and

advisory services.• Identifying business opportunities for

existing and future SMMEs.• Promoting domestic and international

linkages, especially between SMMEs and government, large business entities and other SMMEs.

• Facilitating changes in regulation, quality management systems and standards, infrastructure and access to finance.

• Facilitating technology adoption and diffusion.

• Promoting general entrepreneurship awareness.

• Setting and monitoring of performance targets of the organization.

HumanResourceCommitteeThe Human Resource Committee considers human resource matters of a strategic nature such as the appointment of executive management, ensuring the development, adoption and implementation of human resource policies. Additionally, it deals with creating a conducive environment for the attraction and retention of quality human resources for LEA.

BoardTenderCommitteeThe Board Tender Committee considers and makes decisions on all tenders and tender related matters.

FinanceandAuditCommitteeThe Finance and Audit Committee advises the Board on financial and audit related matters. The Committee ensures that financial resources are aligned with the organization’s strategic direction, as well as promotes and ensures transparency and accountability in all financial matters. Where necessary, the Committee has powers to institute investigations of a financial or administrative nature to protect the interests of the Authority.

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Internal ControlThe internal control and risk management processes associated with financial and operational reporting have been planned in such a way that they produce sufficient certainty over the reliability of reporting and to ensure that the applicable laws and regulations have been complied with. The LEA Board of Directors have approved the corporate policies on which the control environment is based, as well as the policies relating to risk management and corporate governance. The financial reporting process incorporates internal control principles pursuant to the COSO framework (Committee of Sponsoring Organizations of the Treadway Commission).

Control environmentLEA’s internal control system supports the implementation of the organisation’s strategy and ensures compliance with regulations as well as the reliability of financial and operational reporting. The Code of Conduct approved by LEA’s Board of Directors is based on LEA’s values and defines the ethical principles through which business operations are conducted. The internal control framework consists of operating guidelines and processes, information and communication processes, as well as monitoring of controls designed for business operations and support functions. The control environment for financial reporting is described in the finance procedure manual.

RecognisingandManagingRiskIn an effort to ensure that the organisation is prepared to promptly and positively mitigate risks which may be encountered during the course of business, the following mechanisms have been established by the LEA Board:

Enterprise-wide Risk Management (ERM)FrameworkThe organisation has implemented an ERM framework from which a comprehensive corporate risk register is generated. The risk register focuses the organisation on effective risk management by identifying risks which could have a negative impact on the achievement of corporate and business objectives, as well as control measures necessary for mitigating these risks. Regular reviews are conducted to assess and update the risk register.

Safety, Health and Environment (SHE) StructuresLEA maintains SHE structures throughout its branch network to continuously improve on safety, health and environmental concerns within the workplace.

BusinessContinuityPlan(BCP)The organisation is implementing a Business Continuity Plan to ensure minimal disruption to critical business processes and operations in the event of a disaster. During the period under review, detailed continuity plans were implemented for the following critical business processes; Information Technology (IT) services, Human Resources (HR), Finance, Shared Services (Procurement) and Corporate and Stakeholder Communications. Management is continuously reviewing the continuity plans for adequacy, relevance and completeness.

Corporate Governance Statement

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Internal AuditThe Internal Audit department is an independent assurance provider that undertakes reviews geared towards providing assurance to the Board, Management and LEA stakeholders on matters relating to: • Efficiency and effectiveness of risk

management, control and governance• Reliability of financial and operational

reporting• Compliance with policies, procedures and

laws• Safeguarding of organisational assets.

The Finance and Audit Committee reviews and approves the Internal Audit Plan. Internal Audit reports to the Finance and Audit Committee on a quarterly basis on the outcomes of

reviews performed. The Internal Audit function has been instrumental in reviewing of the organization’s risk management practices and strengthening of the overall control environment. The Committee has considered and is satisfied with the effectiveness of the Internal Audit function. The Board continues to support and place reliance on the work of Internal Audit.

FraudPolicyandWhistle-blowingHotlineIn an endeavor to dissuade unethical business practices and promote transparency, the organisation has adopted a Fraud Policy and an independent Whistle-blowing Service through which wrongdoing may anonymously be reported. The policy also provides for the protection of whistleblowers.

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The Local Enterprise Authority (LEA) embarked on a new strategy (2014-17)with effect from July 2014. Thisfollowed the 2010-14 agricultural sub-sector strategy that focused onhorticulture, piggery, leather anddairy.

March 2015 therefore marked the end of the first year of the implementation of the 2014-17 strategy. In the new strategy, LEA opened up to assisting entrepreneurs across all sectors of the economy, as well as offering fit-for-purpose differentiated services to the two categories; Micro Enterprises (MEs) on one hand and the Small and Medium Enterprises (SMEs) on the other. The service offering to MEs was designed to be input based while that of SMEs is outcome based.

The SMME sector continues to encounter challenges such as inaccessibility of serviced land, operating or working space, escalating costs of Environmental Impact Assessment (EIA), electricity connection and inaccessibility of markets among others. These conditions hinder the successful creation of new enterprises and expansion of existing entities. Despite these inhibiting factors, the 2014-15 financial year ended in a high note for the organization, for both corporate scorecard and key strategic projects.

The Pilot Rapid Incubation Project has progressed well, highlighted by the Memorandum of Understanding between the Local Enterprise Authority and the National Small Industries Corporation (NSIC) of India, who will be guiding the project as industry specialists. The refurbishment of the old IFS facility to house the incubator is in progress, and the project will be commissioned during the 2014-16 financial year.

The Leather Industry Park inception stages have started, with the technical and financial feasibility of the project carried out in 2014. This validation study was done in partnership with the Central Leather Research Institute (CLRI) of India.

In order to enhance technology adoption and diffusion, the Authority undertook a remodeling exercise at its four (4) business incubators. The re-modelling is also intended to ensure that more Batswana benefit from the incubation programme over a given period. All these projects will contribute towards the realization of job creation and poverty eradication. A total of 1445 jobs were recorded against a target of 667, and a total investment value of P216.9m was realized against a target of P85.6m.

Business and Performance Review

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Promotion of EntrepreneurshipIn an effort towards inculcating a culture ofentrepreneurship among Batswana, the LEA Capacity DevelopmentarmcontinuestoconductEntrepreneurshipAwarenessWorkshopstotargetedinstitutionsandgroups.AsatendofMarch2015,24426participantshadgonethroughtheEAW,againsta targetof24000.EAWisaninitiativethatseekstopromotegeneralentrepreneurshipand SMME awareness amongst Batswana, in accordance with theLEAmandate.Participants included learners inseniorsecondaryschools,brigades,technicalcolleges,aswellasprisonersandofficials fromvariousGovernmentDepartments.

The promotion of entrepreneurship is also being achieved through participation at various outreach activities across the country. These are activities that accord the Authority a platform to communicate to the public the organizational mandate, as well as market its products and services. These include mobile stops, roadshows, career fairs, Kgotla meetings, trade fairs and market days among others. During the year under review, LEA attended four hundred and seventy-two (472) outreach activities against the targeted 338.

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Diversification of the economy

AGRI

CULT

URE

TOUR

ISM

TOUR

ISM

SERV

ICES

MANUFACTURING

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Key Strategic Projects

The following projects or initiativeswere implemented during the year to address gaps such as lack offinished leather in the country, lackof entrepreneurial skills and lackof serviced land for horticulturalprojects.

Leather Industry ParkThe leather sector park with a common effluent treatment plant was adopted as a development model to address the lack of finished leather for SMMEs, and as at 31st March 2015, the validation study was carried out by the Central Leather Research Institute (CLRI) of India. The final report with recommendations has since been submitted to the Ministry of Trade and Industry for Government consideration.

Pilot Rapid IncubatorLEA has collaborated with the National Small Industries Corporation (NSIC) of India to assist with implementing the Rapid Incubation Model to address lack of entrepreneurial skills amongst the out of school youth and the disadvantaged groups in the society. In addition, the model will empower the

potential beneficiaries of Government schemes before disbursement of funds to reduce project failure rates. The project is sponsored by the Office of the President under the poverty eradication programme.

Twelve (12) projects will be incubated and these are: toilet roll manufacturing, maize flakes (corn flakes), biscuit (cookies)/bread making, sunflower oil extraction, detergent liquid making, packaging (granules/powder), tomato ketchup, wire nail making, socks knitting, soya milk extraction, potato wafers making and ice cream cone manufacturing.

The project is expected to be completed in the 2015-16 financial year. Furthermore, the project will play a crucial role in employment generation, poverty eradication, provision of critical skills, economic diversification and wealth creation.

.

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Horticulture40ProjectThe development of the horticulture sector needs a different approach to reduce reliance on importation of horticulture products. There are major limitations in the industry which have retarded the development of the sub-sector, such as inadequate infrastructure, lack of appropriate skills and technology amongst others. The Glen Valley Horticulture Incubator was established to address some of

these limitations. In order to ensure that incubator graduates have access to land to implement what they learnt, LEA is in the process of identifying 40 horticulturalists to occupy serviced land around established dams and water sources along the eastern corridor of Botswana, where these farmers would run projects.

LEA Impact Assessment Study The Local Enterprise Authority undertook an Impact Assessment study in 2014 with the objective of establishing the impact of LEA interventions on its SMMEs. The need to carry out this study is as per the Small Business Act, which requires LEA to monitor and evaluate the impact of its functions.

The four key indicators used to measure impact of LEA interventions are employment created, wage bill, annual turnover and investment on key business assets. This study has established that all these indicators have on average experienced a positive change over the period between 2007 and 2013. The annual average increase ranged from 14% for employment to 35% for annual turnover over the reference period. This is an indication that LEA has been able to have positive impact that contributed to the increase of the key indicators leading to establishment of new businesses, survival and sustainable job creation among LEA assisted SMMEs. That notwithstanding, the impact has been limited to sustaining businesses within the SMME category only, as there has been very low graduation figures; an indication that the increase in the key indicators have not been enough to elevate the recipients of LEA interventions from SMMEs to Large Enterprises (LEs).

The low graduation of clients can be directly linked to the low uptake of advanced business development services across all the LEA service areas which tend to be more impactful than the basic interventions. The main reasons for low uptake of advanced business development relates to prohibitive costs as most of these interventions such as product and process quality certifications are expensive for SMMES to meet the requirements and maintain the standards. Other advanced business interventions such

Diversification of the economy [continued]

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as export facilitation also require substantial investment to maintain regular and consistent supply quantities as well as meeting the export market requirements. To overcome this challenge, LEA continues to advocate for the setting up of an SMME Competitiveness Development Fund, which aims at enhancing general SMME competiveness through financial support.

The results of the Impact Assessment study are key to LEA as a fully government funded organization which needs to justify

its continued funding as well as additional funding by showing its impact on the SMME development in Botswana. Within the organization, the results of the impact assessment study provide information on the relevance of interventions; facilitating, revision, enhancement or withdrawal of interventions that are not yielding the intended outcomes. On the overall, the Impact Assessment study results guide future strategic decision making on SMME development agenda at LEA.

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Development of a Competitive SMME Community

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BUSINESS PLANNING AND CREDIT FACILITATION During the 2014-15 financial year, the organization facilitated development and submission of twenty business plans worth P27.3m to various financing institutions. The business plan development process remains a functional pre-requisite to increase investment value through converted business plans, number of new SMMEs, and employment creation. However, the business plan approval rate remains low as financiers continue to regard SMMEs as high risk and therefore apply overly cautious measures on consideration for funding.

NUMBER OF NEW SMMES LEA continues to enroll new SMMEs into its portfolio, as evidenced by 102 SMEs registered against a target of 41, and 4993 MEs registered against a target of 1760. The surge in the number of new SMMEs seeking LEA services was mainly a result of the excitement created by the new strategic focus and opening up to assist all enterprises across sectors.

TRAINING AND SKILLS DEVELOPMENTThe Authority, through its capacity development arm, delivered a total of 1596 interventions during the 2014-15 financial year, consisting of 1410 clients trained and 181 mentoring and coaching interventions. The bulk of the training recipients (1156) were micro enterprises, both LEA and non-LEA clients, who were trained on basic courses, namely the Entrepreneurship Development Training (EDT), business planning, records keeping and sales and marketing.

Training targeted at Small and Medium Enterprises included sector specific offerings as well as consultancies and mentoring on nutritional analysis and shelf life analysis, development of Human Resources policies, website development, Management Systems and Product Certification, branding, labelling and packaging amongst others.

CLUSTER DEVELOPMENT LEA continues to sensitize potential entrepreneurs on the clustering concept and its benefits. During the 2014-15 financial year, a total of 56 LEA assisted Small and Medium Enterprises were met. These were the Lake Ngami Fishermen (28), South East District Piggery Agricultural Management Association (8) and small stock and dairy farmers (20) at Sukunya. Efforts to assist the Lake Ngami Fishermen to form a functional cluster are ongoing, and they have since registered as a cooperative society. The cooperative’s process of developing a business plan is in progress, with the help of LEA, and a Board of Directors has been elected. In addition, the South East District Piggery Agricultural Management Association was trained on Business plan development, to enhance their skills of developing a business case for the Association.

CREATION AND DEVELOPMENT OF LINKAGESLEA continues to facilitate SMEs’ products and services exposure to potential markets, through forging links with buyers. LEA assist SMEs also exhibit at various trade fairs at subsidized rates, where they meet potential buyers and establish supply relationships through buyer-seller meetings. A total of thirty-eight SMEs participated at six trade fairs during the 2014-15 financial year. Exhibiting clients met with buyers to appreciate market requirements, network and benchmark best practice across industries. The trade fairs attended are: BOCCIM Northern Trade Fair, Chobe Harvest Show, Property Expo, Ghanzi Agricultural Show, Global Expo and the National Agricultural Show.

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In order to align with the 2014-17 organisational strategy, the Authority developed a turnaround strategy for the four incubators, to achieve optimal results in terms of production, technology adoption, and skills acquisition for accelerated growth.

The re-modelling will also cater for, and ensure an increase in the number of beneficiaries or entrepreneurs graduating from these facilities. Implementation of re-modelled operations is in progress at Glen Valley Horticulture Incubator, Gaborone Leather Industries Incubator and Pilane Multi-Sector Incubator. The Francistown Industrial Business Incubator re-modelled operations will resume in the 2015-16 financial year.

AdoptedmodelsforLEAincubatorsThe Glen Valley Horticulture Incubator has been turned into a training and production centre, accommodating trainees for a full cropping cycle which is nine months in the case of tomato production.

The Leather Industries Incubator was converted into a training and incubation centre, and participants will be incubated for two years as opposed to three years of stay as in the previous years. The training aspect was introduced in order to equip entrepreneurs in the leather industry with skills and relevant technology in leather products manufacturing. Training courses offered include designing, cutting, lasting and finishing.

The Pilane Multi-Purpose Incubator has been modified to focus on food processing and industrial manufacturing.

The Francistown Industrial Business Incubation (FIBI) is being re-modelled to specialize on metal works, carpentry, textile and other services provision. In addition, FIBI will take advantage of the mining sector around Francistown to manufacture and supply special machine parts needed by the mines.

2014BotswanaSMMEPitsoandSeminarThe Botswana SMME Pitso is an annual event on the LEA calendar that seeks to bring together all stakeholders who play a role in the SMME sector development in Botswana. The platform accords participants an opportunity to network and discuss topical issues, including successes and challenges that hinder the SMME sector growth, as well as identify measures that will ensure an improved business landscape for SMMEs to thrive. The 2014 Pitso was held under the theme: “Innovation & Technology: A key to competitiveness”.

LEA business incubation programme

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Seminars The seminars are held on the day of the Pitso, where various capacity development institutions and markets disseminate information to the SMMEs in attendance, to equip them with knowledge that will ensure informed decision making. The 2014 seminars were conducted by Orange Botswana, Department of Agricultural Research, Botswana Bureau of Standards (BOBS), National Food Technology Research Centre (NFTRC), Botswana Innovation Hub (BIH), Botswana Horticultural Market (BHM), Botswana Agricultural Marketing Board (BAMB), Thapong Visual Arts, Competition Authority and SPEDU.

COLLABORATIOnSDuring the 2014-15 financial year, the Local Enterprise Authority signed project based Memorandums of Understanding (MOU’s) with various organisations, to strategically partner in enhancing delivery of services to various target beneficiaries.

Botswana Accountancy College (BAC)The implementation of the LEA and Botswana Accountancy College (BAC) Memorandum of Understanding (MOU) is ongoing. Four LEA clients were identified to participate in the programme; Dobi Foods (Pty) Ltd, Art cultural Centre, Dips Motors and Sunrise Travel and Tours. A total of twenty (20) BAC student consultants were identified to work with these clients, to carry out diagnosis, identify challenges experienced by these SMEs as well as recommend measures to improve their operations and enhance their growth.

DepartmentofNationalInternshipProgramme(DNIP)LEA and the DNIP collaborated on the youth business mentorship initiative that aims to attract young start-up entrepreneurs, who have the time and the energy to be mentored by existing businesses through on-the-job training. The potential entrepreneur is attached to the sponsoring company that they are in the same line of business with. The programme provides the youth an opportunity to learn necessary business management skills and prepare them to manage their own businesses in future. The DNIP identifies “would-be-entrepreneurs” and provides them with a stipend during their year of mentoring. Fourteen intern officers have successfully been attached to twelve enterprises during 2014-15, and negotiations are on-going with nine more companies to host more interns.

NationalSmallIndustriesCorporation(NSIC)ofIndiaLEA and NSIC collaborated on the development of the SMMEs in Botswana, and signed an MOU in 2014. The first project to be executed through this partnership is the Pilot Rapid Incubator, which will serve as a demonstration and training center on various technologies used to produce selected products. The three months incubation programme will also include capacity building on the incubates, assisting them to source and install machinery/equipment and raw materials as inputs to start their own businesses.

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Centre for Development of Enterprise (CDE)LEA and CDE have partnered in the framework of the Private Sector Development Programme (PSDP). The PSDP was initiated by BOCCIM in 2008 with the assistance of Commonwealth Secretariat. The programme was meant to stimulate and sustain growth within the private sector through capacity building and improvement of the business environment for SMMEs to grow. The programme partners are CDE, European Development Fund (EDF), Ministry of Trade and Industry (MTI) and Channel Corporate Foundation (CCF). CDE serves as the executing agency for this programme. The Priority Sectors of the PSDP are manufacturing, agro industry and tourism, ICT, Construction and Public Works.

One hundred (100) SMMEs and Community Based Organisations (CBOs) were identified as beneficiaries and they were audited by LEA Business Advisors, Botswana National Productivity Centre (BNPC) and Botswana Innovation Hub (BIH) amongst others.

Ministry of Youth Sports and Culture(MYSC)ProjectLEA collaborated with the Ministry of Youth, Sports and Culture in order to assist youth projects with training and mentoring. The initiative was prompted by the fact that many youth projects were either collapsing or struggling to sustain. As such, there was a need to partner with the Ministry to remedy the situation. The first phase of project implementation was to empower the youth officers with relevant skills needed in the business fraternity, and the second phase was to train and mentor youth beneficiaries so that the business survival rate is improved. As at March 2015, 295 youth officers had been trained on various courses, namely business plan appraisal, project management and Entrepreneurship Development Training.

LEA business incubation programme [continued]

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Enhancing Service Delivery

THE QUALITY MANAGEMENT SYSTEM – BOS ISO 9001:2008 CERTIFICATION

LEA has documented, implemented and maintains a Quality Management System (QMS) in accordance with the requirementsoftheinternationalISO9001:2008Standard.

LEAwasfirstcertifiedin2009bytheBotswanaBureauofStandards(BOBS).Thecertificationserves to provide evidence of compliance against the requisitestandardaswellas theorganisation’s commitment to standardisedqualityservicedelivery.

Throughout the years, since the initialcertification in 2009, BOBS has conductedbi-annual surveillance audits to verifythe continued compliance against thepromises made, which is pivotal to customer

satisfaction. The 2014-2015 financialyear marks the sixth year of continuouscertificationoftheLEAQMS.

TheLEAQMScertificationensuresthatthereexists standard documented processes and procedures by the Authority at Head Officeand theentire thirteen (13)branchesacrossBotswana.Inordertoensureconsistencyandstandardized service delivery, certificationof the QMS was, and continues being anintegral feature of the organization. Theimplementation and maintenance of acertifiedQMShasallowedtheorganizationtodevelop efficient working practices, focusedon theobjectivesof theorganisation,whichprovidesanimpetustocustomersatisfaction.In our endeavor to factual approach to decision making, the LEA QMS is subjectedto both internal and external audits, andthis provides a platform for continualimprovement.

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In an effort to ensure theimplementation of the LEA strategy,theorganizationcontinuestorecruitand strive to retain its personnel.Thisisachievedinpartbymotivatingstaff through various platforms andcreating a conducive environment.Staff Engagement remains a keyinitiative insuring that staff aremeaningfully engaged and hence haveasenseoffulfilmentworkingfortheAuthority.

As at 31st March 2015, the Authority’s staff complement stood at 307 against an establishment of 349. This is an increase of 2.3% from the March 2014 figure of 300. However the organization had a turnover of 7.5% against a target of 13%. This is a decrease of 3.8% in turnover as compared to the 2013-14 financial year. Although the turnover might seem low as compared to the target it must be noted that 43% of the turnover was from client facing divisions, which has a negative impact on continuity in delivering the LEA mandate.

CAPACITY BUILDING In a bid to improve aptitude, the organization trained 127 employees during this financial year. Training was focused on the client-facing divisions, so as to build staff capacity and enhance service delivery. In addition, employees continue to enroll in self-development programmes and the organization assists them by granting study leave and advances as per the Learning, Training and Development Policy.

LEA and its Human Resources

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STAFF WELFAREStaff welfare plays a critical role in employee productivity. Forty-six employees utilized the University of Botswana counselling services during 2014-15. The aim of this counselling service is to provide voluntary employee support on work related issues, emotional and psycho-social challenges. In addition, a total of 19 employees were awarded the ‘Employee Service Awards’, being recognition for their continued service to the Authority for five years and above. This was in addition to the 156 awarded during the 2013-14 financial year. The total number of employees who have been with the organization in excess of five years continues to be high and this is a positive development as it represents continuity in the organization, despite the high staff turnover.

EMPLOYEE RELATIONSThe LEA signed a recognition agreement with the Botswana Public Employees Union (BOPEU) on the 19th September 2014. This great milestone plays a pivotal role in regulating the work relationship engagement principles between management and the union. The parties continue to engage each other in creating a conducive work relationship.

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In 2014, LEA donated the Primary School Leaving Examination (PSLE) revision books, stationery and wall clocks for all classrooms. In addition, LEA sponsored the school’s 2014 prize giving ceremony, to honour the Standard Seven pupils as well as award high performers across subjects and standards. The awards are also meant to motivate the rest of the students to study hard and look forward to recognition in future. The revision books and prize giving ceremony amounted to P122,000.00.

LEA Corporate Social Investment (CSI) Initiatives

In the midst of promotingentrepreneurship and sustainableSMME development in Botswana, LEA also engages in Corporate Social Responsibility(CSR)projectswiththeintention of uplifting the livelihoodsofthebeneficiaries.

The adoption of Mpiti Primary School inMatobo village signifies the Authority’sdetermination to upholding the Vision 2016Pillarof“AnEducatedandInformedNation”,as well as the response to the Ministry of Education and Skills Development “Adopt aSchool”initiative.TheAuthorityhasadoptedthe school for a period of three years, from

2013-2015.

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Branch Network CSR ProjectsMasunga BranchIn living the Vision 2016 Pillar of a Compassionate, Just and Caring Nation, the LEA Masunga Branch raised contributions and handed groceries, blankets and chairs to a needy family in Masunga village, as 2014 Christmas gifts. These efforts by LEA staff complements the government efforts and commitment to attain a Vision 2016 pillar of a “Compassionate, Just and Caring Nation”. The branch also erected a boundary fence for the family, and connected a portable water tap, to accord the family members a dignified life.

Serowe BranchThe LEA Serowe Branch staff joined by village Authorities, the community and other stakeholders, embarked on a litter picking and clean-up campaign exercise in Mogorosi village. The branch demonstrated the need to create and support environmental health awareness as well as maintain safe and cleaner surroundings in the communities they operate in. The Serowe branch intends to carry out similar activities in other villages that they conduct business in.

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Notes

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ANNUAL FINANCIAL STATEMENTS ANNUAL REPORT

2014-15

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Authority Information

Business Operations:

To promote and facilitate entrepreneurship and enterprise development in Botswana through targeted interventions

Authority Registration:

The Authority was incorporated under the Small Business Act No. 7 of 2004

Registered Address:

2nd Floor, Block A, Plot 50676

Fairgrounds Office Park

Gaborone

Postal Address:

Private Bag 191

Gaborone

Auditors:

PricewaterhouseCoopers

Bankers:

Standard Chartered Bank Botswana Limited

First National Bank of Botswana Limited

Barclays Bank of Botswana Limited

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Statement of Responsibility by the Members of the Board 52

Report of the Independent Auditors 53

Statement of Comprehensive Income 54

Statement of Financial Position 55

Statement of Changes in Funds 56

Statement of Cash Flows 57

Significant Accounting Policies 58 - 63

Financial Risk Management 64 - 65

Critical Accounting Estimates and Judgements 66

Notes to the Financial Statements 67 - 79

Detailed Income Statement Annexure I

Notes to the Detailed Income Statement Annexure II

LEA Corporate Information 83 - 84

Contents

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Index to the Financial Statements for the year ended 31 March 2015

The Board Members of the Local Enterprise Authority are responsible for the annual financial statements and all other information presented therewith. Their responsibility includes the maintenance of true and fair financial records and the preparation of annual financial statements in accordance with International Financial Reporting Standards and in the manner required by the Small Business Act Botswana (Cap. 25).

The Authority maintains systems of internal control, which are designed to provide reasonable assurance that the records accurately reflect its transactions and to provide protection against serious misuse or loss of Authority assets. The Board Members are also responsible for the design, implementation, maintenance and monitoring of these systems of internal financial control. Nothing has come to the attention of the Board Members to indicate that any significant breakdown in the functioning of these systems has occurred during the year under review.

The going concern basis has been adopted in preparing the annual financial statements. The Board Members have no reason to believe that the Authority will not be a going concern in the foreseeable future based on forecasts and available cash resources.

Our external auditors conduct an examination of the financial statements in conformity with International Standards on Auditing, which include tests of transactions and selective tests of internal accounting controls. Regular meetings are held between management and our external auditors to review matters relating to internal controls and financial reporting. The external auditors have unrestricted access to the Board Members.

The financial statements set out on pages 54 to 79 and the supplementary information on annexure I to II were authorised for issue in accordance with a resolution of the Members of the Board on 2 September 2015 and are signed on their behalf by:

Chairman Chief Executive Officer

Statement of Responsibility by the Members of the Boardfor the year ended 31 March 2015

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Independent Auditor’s Report to the Members of Local Enterprise Authority

Report on the Financial StatementsWe have audited the accompanying financial statements of Local Enterprise Authority, which comprise the statement of financial position as at 31 March 2015, and the statement of comprehensive income, changes in funds and cash flow for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 54 to 79.

Members’ Responsibility for the Financial StatementsThe Authority’s members are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as the members determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of Local Enterprise Authority as at 31 March 2015, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Individual practising member: Butler Phirie GaboronePractising number: 19900312 Date:

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Statement of Comprehensive Income for the year ended 31 March 2015

2015 2015 2014 Notes P P Revenue grants 144,200,000 134,000,000 Amortisation of capital grants 14 11,008,532 6,999,029

Other operating income 4 2,330,027 3,760,833 Recurrent expenditure 4 (156,993,175 ) (142,389,858 )Operating surplus 545,384 2,370,004 Finance income 6 1,836,135 901,390 Total comprehensive surplus for the year 2,381,519 3,271,394

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Statement 0f Financial Position as at 31 March 2015

2015 2015 2014 Notes P P ASSETS Non-current assets Property, plant and equipment 9 78,736,898 80,520,264 Intangible assets 10 - - 78,736,898 80,520,264 Current assets Receivables and prepayments 11 7,014,846 11,040,571 Cash and cash equivalents 12 32,929,277 10,863,516 39,944,123 21,904,087 Total assets 118,681,021 102,424,351 FUNDS AND LIABILITIES Funds Accumulated surplus / (deficit) 2,311,619 (69,900 ) Non-current liabilities Capital grants 13 94,697,775 81,706,250 Current liabilities Trade and other accounts payable 14 18,910,702 17,574,078 Borrowings 15 2,760,925 3,213,923 Total liabilities 21,671,627 20,788,001 Total funds and liabilities 118,681,021 102,424,351

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Statement of Changes in Fundsfor the year ended 31 March 2015

Accumulated Surplus/ (deficit ) P P For the year ended 31 March 2014 Balance at 1 April 2013 (3,341,294 ) Total comprehensive surplus for the year 3,271,394 Balance at 31 March 2014 (69,900 ) For the year ended 31 March 2015 Balance at 1 April 2014 (69,900 ) Total comprehensive surplus for the year 2,381,519 Balance at 31 March 2015 2,311,619

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Statement of Cash Flows for the year ended 31 March 2015

2015 2015 2014 Notes P P Operating surplus for the year 545,384 2,370,004 Adjusted for: Non cash items Depreciation of Property, plant and equipment 9 8,732,857 6,661,314 Amortisation of capital grants 13 (11,008,532 ) (6,999,02 ) Amortisation of intangible assets 10 - 3,441,231 Profit on disposal of property, plant and equipment (117,750 ) (120,250 )Changes in working capital Receivables and prepayments 4,025,725 (2,782,417 ) Trade and other accounts payable 1,336,624 4,243,553 3,514,308 6,814,406 Foreign exchange gain 6 13,320 74,969 Net cash generated from operating activities 3,527,628 6,889,375 Cash flows from investing activities Interest received 6 1,822,815 826,421 Acquisition of property, plant and equipment 9 (6,949,491 ) (2,441,541 )Proceeds from disposal of property, plant and equipment 117,750 120,250 Transfer of property, plant and equipment 9 - 82,502 Net cash used in investing activities (5,008,926 ) (1,412,368 ) Cash flows from financing activities Capital grants received 13 24,000,057 - Net cash generated from financing activities 24,000,057 - Net increase in cash and cash equivalents 22,518,759 5,477,007 Cash and cash equivalents at beginning of year 7,649,593 2,172,586 Cash and cash equivalents at end of year 12 30,168,352 7,649,593

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Significant Accounting Policiesfor the year ended 31 March 2015

General InformationLocal Enterprise Authority carries on the business to promote and facilitate entrepreneurship and enterprise development in Botswana through targeted interventions. The entity is an authority, a government parastatal, incorporated and domiciled in Botswana. The address of its registered office is 2nd floor; Block A, Plot 50676, Fairgrounds Office Park, Gaborone. The financial statements set out on pages 54 to 79 have been approved by the Members of the Board on 2 September 2015.

1 Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

1.1 Basis of preparation The financial statements of Local Enterprise Authority have been prepared in accordance with International Financial Reporting Standards (“IFRS”) under the historical cost convention. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Authority’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in the “Critical accounting estimates and assumptions” section of the financial statements.

a) Listed below are a few IFRSs or IFRIC interpretations,standardsandamendments relevanttotheAuthorityeffectiveforthefirst timefor31March2015financialyear-ends. Noneoftheseisexpectedtohavea significanteffectonthefinancialstatements oftheAuthority,

Amendments to IAS 32 – ‘Financial Instruments: Presentation’, on financial instruments asset and liability offsetting (effective date: 1 January 2014). The IASB has issued amendments to the application guidance in IAS 32, ‘Financial instruments: Presentation’, that clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. However, the clarified offsetting requirements for amounts presented in the statement of financial position continue to be different from US GAAP.

IASB issues narrow-scope amendments to IAS 36, ‘Impairment of assets’ on recoverable amount disclosures (effective date: 1 January 2014). The amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less cost of disposal.

Amendment to IAS 19, ‘Employee benefits’, on defined benefit plans (effective date: July 2014). These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans.

The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary.

b) Listedbelowareanumberofnewstandards andamendmentstostandardsand interpretationsareeffectivepost31March 2015financialyearends,andhavenotbeen appliedasearlyadoptioninpreparingthese financialstatements.Noneoftheseis expectedtohaveasignificanteffectonthe financialstatementsoftheAuthority

Amendments to IAS 1,’Presentation of financial statements’ disclosure initiative (effective date January 2016). In December 2014 the IASB issued amendments to clarify guidance in IAS 1 on materiality and aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies.

Amendment to IAS 16,’Property, plant and equipment’ and IAS 38,’Intangible assets’, on depreciation and amortisation (effective date: January 2016). In this amendment the IASB has clarified that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset.

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The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset.

Amendments to IAS 16, ‘Property, plant and equipment’ and IAS 41, ‘Agriculture’ on bearer plants (effective date: January 2016). In this amendment to IAS 16 the IASB has scoped in bearer plants, but not the produce on bearer plants and explained that a bearer plant not yet in the location and condition necessary to bear produce is treated as a self-constructed asset. In this amendment to IAS 41, the IASB has adjusted the definition of a bearer plant include examples of non-bearer plants and remove current examples of bearer plants from IAS 41.

IFRS 15 – Revenue from contracts with customers (effective date: 1 January 2017). The FASB and IASB issued their long awaited converged standard on revenue recognition on 29 May 2014. It is a single, comprehensive revenue recognition model for all contracts with customers to achieve greater consistency in the recognition and presentation of revenue. Revenue is recognised based on the satisfaction of performance obligations, which occurs when control of good or service transfers to a customer.

Amendments to IFRS 9 – Financial Instruments (2009 & 2010), financial liabilities, de-recognition of financial instruments, financial assets (effective date: January 2018). This IFRS is part of the IASB’s project to replace IAS 39. IFRS 9 addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value. The IASB has updated IFRS 9, ‘Financial instruments’ to include guidance on financial liabilities and de-recognition of financial instruments. The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from IAS 39, ‘Financial instruments: Recognition and measurement’, without change, except for financial liabilities that are designated at fair value through profit or loss.

1.2 Property, plant and equipment All property, plant and equipment are included at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Authority and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Depreciation is calculated using the straight-line method to allocate the cost of each asset to their

residual values over their estimated useful lives as follows:

Land and buildings 40 years Leasehold improvement 5 years Plant and equipment 4 years Furniture and fittings 10 years Office equipment 5 years Motor vehicles 4 years Computer equipment 4 years Library books 5 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other gains/ (losses) in the statement of comprehensive income.

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Significant Accounting Policies [continued]for the year ended 31 March 2015

1.3 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

1.4 Financial assets

1.4.1 Classification

The Authority classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Financialassetsatfairvaluethroughprofitorloss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short- term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets.

Loansandreceivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the reporting date. These are classified as non- current assets. The Authority’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the statement of financial position (Notes 1.5 and 1.6).

Available-for-salefinancialassets Available-for-sale financial assets are non- derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. There are no financial assets classified as fair value through profit or loss and available-for-sale at the reporting date.

1.4.2 Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade date, the date on which the Authority commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or losses are initially recognised at fair value and transaction costs are expensed in the statement of comprehensive income. Loans and receivables are carried at amortised cost using the effective interest method. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Authority has transferred substantially all risks and rewards of ownership.

1.4.3 Impairment of financial assets

The Authority assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. Impairment testing of trade receivables is described in Note 1.5.

1.4.4 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

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1.5 Receivables

Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Authority will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the receivable is impaired.

The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of comprehensive income.

When a receivable is uncollectible, it is written off against the allowance account for receivables. Subsequent recoveries of amounts previously written off are credited in the income.

1.6 Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

1.7 Government grants

Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the Authority.

Grants relating to the acquisition of property, plant and equipment are credited to other comprehensive income on a straight line basis over the expected useful lives of the related assets. The related assets are shown at cost less accumulated depreciation. When an asset financed through capital grants is disposed of, the total unamortised portion of the capital grant relating to the asset is credited to the statement of comprehensive income in the year of disposal.

Operating grants are recognised in the statement of comprehensive income in the period in which the related expenditure is incurred. Grants received for which the related project have not commenced are included in current liabilities as deferred income.

1.8 Provisions

Provisions claims are recognised when, the Authority has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is

recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

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1.9 Trade accounts payable

Trade accounts payable are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

1.10 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in Botswana Pula, which is the Authority’s functional and the presentation currency. (b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. Foreign exchange gains and losses that relate to cash and cash equivalents are presented in the statement of comprehensive income within ‘finance income or cost’.

All other foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other (losses)/gains’.

1.11 Revenue recognition Governmentgrants Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Authority will comply with all attached conditions. Grants relating to costs are deferred and recognised in the statement of comprehensive income over the period necessary to match them with the costs they are intended to compensate. Grants relating to property, plant and equipment are included in funds as capital grants and are credited to the statement of comprehensive income on a straight line basis over the expected useful lives of the related assets. The related assets are shown at cost less accumulated depreciation.

Saleofservices The Authority sells training and resource centre services. These services are provided generally as fixed price.

Sale of services is recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

Interestincome Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the Authority reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan and receivables are recognised using the original effective interest rate.

Operatingleaserentals Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments received under operating leases are credited to the statement of comprehensive income on a straight-line basis over the period of the lease.

1.12 Employee benefits

The Authority contributes to a defined contribution pension plan for its permanent citizen employees. The Authority contributions are charged to statement of comprehensive income in the year which they accrue and the Authority has no further liability.

A defined contribution plan is a pension plan under which the Authority pays fixed contributions into a separate fund and will have no legal or constructive obligation to pay further contributions, if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.

Significant Accounting Policies [continued]for the year ended 31 March 2015

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For employees who are on contracts, the Authority pays gratuity in accordance with the respective contracts of employment.

1.13 Current and deferred income tax

The Authority is exempt from tax in terms of the second schedule (chapter 52.01) of the Income Tax Act of 1995 as amended.

1.14 Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made / income received under operating leases (net of any incentives received from the lessor) is charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

1.15 Intangible assets

An intangible asset is recognised when: • it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and • the cost of the asset can be measured reliably. Intangible assets are initially recognised at cost.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

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 every period-end.

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 4 years

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2.1 Financial risk factors

The Authority’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Authority’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Authority’s financial performance. Risk management is carried out under policies approved by the Members of the Board. (a) Market risk

(i) Cash flow and fair value interest rate risk

As the Authority has neither significant interest bearing assets nor variable interest bearing liabilities, the Authority’s income and operating cash flows are substantially independent from changes in market interest rates. (ii) Other price risk

The Authority is not exposed to other price risks such as equity price risk, commodity price risk, prepayment risk and residual value risk. (iii) Foreign currency risk

The Authority has USD denominated bank deposit as disclosed in note 8.3. Management has conducted stress tests on the year-end exchange rate between the USD and Pula based on 5% fluctuation and concluded that there is no significant impact on the Authority’s income.

(b) Credit risk

Financial assets of the Authority, which are subject to credit risk, consist mainly of cash and cash equivalents, deposits with banks and financial institutions and SMME customers. Cash deposits are held with high- credit-quality financial institutions. The credit quality of the customers is assessed by credit control, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal ratings. The utilisation of credit limits is regularly monitored. Sales to SMME customers are settled mainly in cash, cheques or bank transfers.

The credit quality of financial assets is disclosed in note 8.2.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying operations due to their short term nature, management of the Authority aims to maintain flexibility in funding by keeping committed credit lines available.

The Authority’s financial liabilities as given in the table on page 17 consist of accounts payable and borrowings. The analysis of financial liabilities into relevant maturity groupings are based on the remaining period at the reporting to the contractual maturity date.

Financial Risk Management for the year ended 31 March 2015

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(c) Liquidity risk (continued)

Less than 1 year More than 1 year Total and Less than 7 years P P P

At 31 March 2015 Accounts payable 4,181,413 - 4,181,413 Borrowings 2,760,925 - 2,760,925

At 31 March 2014 Accounts payable 5,357,716 - 5.357,716 Borrowings 3,213,923 - 3,213,923

2.2 Capital risk management

The Authority is a Government organisation with the main object being to promote and facilitate entrepreneurship and SMME development. As such all operations of the Authority are funded by Government and therefore not subject to capital risk.

2.3 Fair value estimation of financial instruments

Financial instruments consist of trade receivables, bank and cash balances and other accounts payables resulting from normal business operations. The nominal value less impairment provision of trade receivables and accounts payable are assumed to approximate their fair values. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

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Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

3.1 Critical accounting estimates and assumptions

The Authority makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within financial year are discussed in the following paragraphs.

Impairmentlossondebtors

The Authority reviews its receivables to assess impairment on a continuous basis. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the Authority makes judgments as to whether there is any observable data indicating that there is measurable decrease in estimated cash flows from receivables. Management uses estimates based on historical loss experience of assets. The assumptions used for estimating the amount and timing of cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

Residualvalueandusefullivesofproperty,plant andequipmentandintangibleassets

The Authority determines the estimated useful lives and related depreciation charges for its property, plant and equipment and intangible assets. This estimate is based on projections about the continued existence of a market for its services and intangibles and the ability of the Authority to penetrate a sufficient portion of that market in order to operate effectively. The Authority increases the depreciation charge where the useful lives are less than previously estimated, or it will appropriately impair technically obsolete or non-strategic assets that have been abandoned or identified for sale.

Residual values are based on current estimates of the value of these assets at the end of their useful lives.

Critical Accounting Estimates and Judgementsfor the year ended 31 March 2015

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Notes to the Financial Statements for the year ended 31 March 2015

2015 2015 2014 P P 4 Surplus for the year The following items have been credited/(charged) in arriving at the net surplus for the year: (i) Annual government subvention 144,200,000 134,000,000 (ii) Amortisation of capital grants 11,008,532 6,999,029 (iii) Other operating income Profit on disposal of property, plant and equipment 117,750 120,250 Rental income 778,096 1,352,813 SMME conference and fair income - 70,500 Sundry income 346,299 1,409,445 Telephone recoveries 405,192 615,710 Tender fees 30,200 57,600 Training and resource centre income 652,490 134,515 2,330,027 3,760,833 (iii) Expenses by nature Amortisation of intangible assets - (3,441,231 ) Auditors’ remuneration - current year (292,000 ) (262,977 ) Board sitting allowance (245,024 ) (119,847 ) Business travel, accommodation and allowances (3,815,107 ) (2,533,558 ) Computer expenses (4,587,717 ) (4,809,941 ) Consultancy fees (3,532,968 ) (1,305,006 ) Depreciation of property, plant and equipment (Note 9) (8,732,857 ) (6,661,314 ) Insurance (2,324,925 ) (1,971,825 ) Legal fees (235,393 ) (114,258 ) Operating lease rentals (10,022,501 ) (10,552,463 ) Project expenses Leather Park (3,312,239 ) - Project expenses Rapid Incubator (1,302,357 ) - Remuneration paid to senior management (5,298,066 ) (4,906,101 ) Repairs and maintenance (2,231,623 ) (2,140,678 ) Security expenses (2,199,485 ) (2,183,316 ) Seminars, retreat and conference costs (2,174,930 ) (1,543,139 ) Subtotal (50,307,192 ) (42,545,654 )

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Notes to the Financial Statements [continued]for the year ended 31 March 2015

2015 2015 2014 P P Subtotal (50,307,192 ) (42,545,654 ) Staff costs (Note 5) (81,511,829 ) (80,555,756 ) Staff training (2,508,503 ) (1,091,909 ) Staff welfare (1,787,803 ) (1,466,814 ) Stationery and printing (1,981,809 ) (1,465,804 ) Telephone, mobile and fax (5,572,979 ) (6,135,691 ) Training and mentoring costs (2,423,108 ) (1,302,877 ) Other expenses (10,899,952 ) (7,825,353 ) (156,993,175 ) (142,389,858 ) 5 Staff costs Salaries and wages 71,861,385 70,694,817 Pension costs 5,978,782 5,483,045 Staff gratuity 3,671,662 4,377,894 81,511,829 80,555,756

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2015 2015 2014 P P 6 Finance income Foreign exchange gain 13,320 74,969 Interest on bank deposits 1,822,815 826,421 1,836,135 901,390 7 Income tax The authority is exempted from income tax in terms of the second schedule (chapter 52.01) of the Income Tax Act of 1995 as amended. 8 Financial instruments 8.1 Financial instruments by category The accounting policies for financial instruments have been applied to the line items below: Loans and receivables 31 March 2015 P Assets as per the statement of financial position Trade and other receivables excluding prepayments 2,452,721 Cash at bank 32,914,470 35,367,191 Other financial liabilities Liabilities as per the statement of financial position Trade and other accounts payable 18,910,702 Borrowings 2,760,925 21,671,627 Loans and receivables 31 March 2014 P Assets as per the statement of financial position Trade and other receivables excluding prepayments 7,932,941 Cash at bank 10,849,871 18,782,812

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8.1 Financial instruments by category (continued) 31 March 2014 Other financial liabilities P Liabilities as per the statement of financial position Trade and other accounts payable 17,574,078 Borrowings 3,213,923 20,788,001 8.2 Credit quality of financial assets The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates: 2015 2014 P P Trade and other receivables excluding prepayments Rating Deposits Not rated 649,550 4,906,977 Other receivables Not rated 1,651,814 1,978,344 2,301,364 6,885,321 Cash at bank Rating Standard Chartered Bank Botswana Limited Not rated 737,074 4,442,848 First National Bank of Botswana Limited Not rated 25,951,184 5,924,858 Barclays Bank of Botswana Limited Not rated 468,715 480,737 African Alliance Limited Not rated 1,505 1,428 BancABC of Botswana Limited Not rated 5,755,992 - 32,914,470 10,849,871 There are no credit ratings available for financial institutions in Botswana. The above banks are listed companies and have reported sound financial results and continued compliance with minimum capital adequacy requirement set by the regulator. None of the financial assets that are fully performing has been renegotiated during the year.

Notes to the Financial Statements [continued]for the year ended 31 March 2015

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8.3 The Authority’s exposure to foreign currency risk is analysed below All amounts in Botswana Pula As at 31 March 2015 Botswana Pula US Dollars Total Trade and other receivables excluding prepayments 2,452,721 - 2,452,721 Cash and cash equivalents 32,829,571 84,899 32,914,470 35,282,292 84,899 35,367,191 Borrowings 2,760,925 2,760,925 Trade and other accounts payable 18,910,702 - 18,910,702 21,671,627 - 21,671,627 As at 31 March 2014 Botswana Pula US Dollars Total Trade and other receivables excluding prepayments 7,932,941 - 7,932,941 Cash and cash equivalents 10,764,778 85,093 10,849,871 18,697,719 85,093 18,782,812 Borrowings 3,213,923 - 3,213,923 Trade and other accounts payable 17,574,078 - 17,574,078 20,788,001 - 20,788,001

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Notes to the Financial Statements [continued]for the year ended 31 March 2015

9 Property, plant and equipment Capital work Land and Leasehold Plant and Furniture Office Motor Computer Library Total in progress buildings improvements equipment and fittings equipment vehicles equipment books P P P P P P P P P P Year ended 31 March 2014 Net book amount at beginning of year - 71,872,318 1,530,611 1,297,623 3,570,457 937,633 113,926 5,436,333 63,638 84,822,539 Additions - 38,520 - - 12,400 74,163 1,737,352 574,106 5,000 2,441,541 Depreciation - (1,931,025 ) (399,910 ) (795,449 ) (651,014 ) (380,734 ) (367,128 ) (2,103,650 ) (32,404 ) (6,661,314 ) Disposals - - - - - - (399,572 ) - - (399,572 ) Depreciation on disposal - - - - - - 399,572 - - 399,572 Transfer - - (72,864 ) (4,647 ) (4,991 ) - - - - (82,502 ) Net book amount at end of year - 69,979,813 1,057,837 497,527 2,926,852 631,062 1,484,150 3,906,789 36,234 80,520,264 As at 31 March 2014 Cost - 77,324,739 15,172,711 3,393,044 6,509,755 5,829,438 20,751,952 18,626,217 326,082 147,933,938 Accumulated depreciation - (7,344,926 ) (14,114,87 ) (2,895,517 ) (3,582,903 ) (5,198,376 ) (19,267,802 ) (14,719,428 ) (289,848 ) (67,413,674 ) Net book amount - 69,979,813 1,057,837 497,527 2,926,852 631,062 1,484,150 3,906,789 36,234 80,520,264 Year ended 31 March 2015 Net book amount at beginning of year - 69,979,813 1,057,837 497,527 2,926,852 631,062 1,484,150 3,906,789 36,234 80,520,264 Additions 71,792 57 - 88,394 367,979 420,595 3,184,536 2,795,296 20,842 6,949,491 Depreciation - (1,811,213 ) (911,520 ) (434,726 ) (661,349 ) (347,810 ) (829,450 ) (3,717,939 ) (18,850 ) (8,732,857 ) Disposals - - - - - - (419,016 ) - - (419,016 ) Depreciation on disposal - - - - - - 419,016 - - 419,016 Net book amount at end of year 71,792 68,168,657 146,317 151,195 2,633,482 703,847 3,839,236 2,984,146 38,226 78,736,898 As at 31 March 2015 Cost 71,792 77,324,796 15,172,711 3,481,438 6,877,734 6,250,033 23,517,472 21,421,513 346,924 154,464,413 Accumulated depreciation - (9,156,139 ) (15,026,394 ) (3,330,243 ) (4,244,252 ) (5,546,186 ) (19,678,236 ) (18,437,367 ) (308,698 ) (75,727,515 ) Net book amount 71,792 68,168,657 146,317 151,195 2,633,482 703,847 3,839,236 2,984,146 38,226 78,736,898

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9 Property, plant and equipment Capital work Land and Leasehold Plant and Furniture Office Motor Computer Library Total in progress buildings improvements equipment and fittings equipment vehicles equipment books P P P P P P P P P P Year ended 31 March 2014 Net book amount at beginning of year - 71,872,318 1,530,611 1,297,623 3,570,457 937,633 113,926 5,436,333 63,638 84,822,539 Additions - 38,520 - - 12,400 74,163 1,737,352 574,106 5,000 2,441,541 Depreciation - (1,931,025 ) (399,910 ) (795,449 ) (651,014 ) (380,734 ) (367,128 ) (2,103,650 ) (32,404 ) (6,661,314 ) Disposals - - - - - - (399,572 ) - - (399,572 ) Depreciation on disposal - - - - - - 399,572 - - 399,572 Transfer - - (72,864 ) (4,647 ) (4,991 ) - - - - (82,502 ) Net book amount at end of year - 69,979,813 1,057,837 497,527 2,926,852 631,062 1,484,150 3,906,789 36,234 80,520,264 As at 31 March 2014 Cost - 77,324,739 15,172,711 3,393,044 6,509,755 5,829,438 20,751,952 18,626,217 326,082 147,933,938 Accumulated depreciation - (7,344,926 ) (14,114,87 ) (2,895,517 ) (3,582,903 ) (5,198,376 ) (19,267,802 ) (14,719,428 ) (289,848 ) (67,413,674 ) Net book amount - 69,979,813 1,057,837 497,527 2,926,852 631,062 1,484,150 3,906,789 36,234 80,520,264 Year ended 31 March 2015 Net book amount at beginning of year - 69,979,813 1,057,837 497,527 2,926,852 631,062 1,484,150 3,906,789 36,234 80,520,264 Additions 71,792 57 - 88,394 367,979 420,595 3,184,536 2,795,296 20,842 6,949,491 Depreciation - (1,811,213 ) (911,520 ) (434,726 ) (661,349 ) (347,810 ) (829,450 ) (3,717,939 ) (18,850 ) (8,732,857 ) Disposals - - - - - - (419,016 ) - - (419,016 ) Depreciation on disposal - - - - - - 419,016 - - 419,016 Net book amount at end of year 71,792 68,168,657 146,317 151,195 2,633,482 703,847 3,839,236 2,984,146 38,226 78,736,898 As at 31 March 2015 Cost 71,792 77,324,796 15,172,711 3,481,438 6,877,734 6,250,033 23,517,472 21,421,513 346,924 154,464,413 Accumulated depreciation - (9,156,139 ) (15,026,394 ) (3,330,243 ) (4,244,252 ) (5,546,186 ) (19,678,236 ) (18,437,367 ) (308,698 ) (75,727,515 ) Net book amount 71,792 68,168,657 146,317 151,195 2,633,482 703,847 3,839,236 2,984,146 38,226 78,736,898

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74

Notes to the Financial Statements [continued]for the year ended 31 March 2015

10 Intangible assets P Year ended 31 March 2015 Net book amount at beginning of year - Amortisation - Net book amount at end of year - As at 31 March 2015 Cost 13,811,702 Accumulated depreciation (13,811,702 ) Net book amount - Year ended 31 March 2014 Net book amount at beginning of year 3,441,231 Amortisation (3,441,231 ) Net book amount at end of year - As at 31 March 2014 Cost 13,811,702 Accumulated depreciation (13,811,702 ) Net book amount - Intangible assets comprise of software and license costs relating to computerised accounting packages and systems.

2015 2014 P P 11 Receivables and prepayments Receivables 2,441,406 2,472,101 Provision for impairment (2,290,049 ) (1,424,481 ) 151,357 1,047,620 Deposits and prepayments 5,211,675 8,014,607 Other receivables 1,651,814 1,978,344 7,014,846 11,040,571

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11 Receivables and prepayments (continued) Receivables that are less than six months past due are not considered as impaired. As of 31 March 2015, receivables of P 128,791 (2014: P 728,758) were past due but not impaired. These relate to a number of independent customers for whom there is no history of default. The age analysis of receivables is as follows:

2015 2014 P P Up to 30 days 10,897 19,181 Between 31 and 60 days 11,669 75,655 Over 60 days 128,791 728,758 151,357 823,595 The carrying amounts of receivables and prepayments are denominated in Botswana Pula. As of 31 March 2015, trade receivables of P 2,290,049 (2014: P 1,424,481) were impaired and provided for in full as the recovery of these debtors were not expected to be significant. The aging of these receivables are as follows:

2015 2014 P P

Over 120 days 2,290,049 1,424,481 Movement of the provision for impairment of receivables are as follows:

2015 2014 P P Balance at beginning of the year 1,424,481 1,318,716 Write off during the year (653,273 ) - Current year provision 1,518,841 105,765 Balance at the end of year 2,290,049 1,424,481

The creation and release of provision for impaired receivables have been included in administrative expenses in the statement of comprehensive income. The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Authority does not hold any collateral as security.

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76

Notes to the Financial Statements [continued]for the year ended 31 March 2015

12 Cash and cash equivalents 2015 2014 P P Short term bank deposits - call account balances 32,160,319 10,186,755 Current account balances 754,151 663,116 Cash in hand 14,807 13,645 32,929,277 10,863,516 For the purpose of the statement of cash flows the year end cash and cash equivalents comprises of the following: Cash in hand 14,807 13,645 Bank deposits 32,914,470 10,849,871 Bank Overdraft (Note 16) (2,760,925 ) (3,213,923 ) 30,168,352 7,649,593

13 Capital grants 2015 2014 P P

Balance at beginning of year 81,706,250 88,705,279 Additions 24,000,057 - Amortisation for the year (11,008,532 ) (6,999,029 ) Balance at end of year 94,697,775 81,706,250

Capital grants represent Government grants given to the Authority to finance the purchase of property, plant and equipment. Capital grants are transferred to the income statement in a manner that represents the economic benefits generated through the usage of the related assets. As at the reporting date, there were no unfulfilled conditions attached to the capital grants.

14 Trade and other accounts payable 2015 2014 P P Trade accounts payable 4,181,413 5,357,716 Accruals 364,206 279,956 Provisions (Note 14.1) 14,365,083 11,936,406 18,910,702 17,574,078 The Members of the Board consider the carrying amount of trade and other accounts payable to approximate their carrying values due to their short term nature.

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Gratuity Leave pay Total P P P

14.1 Provisions Balance at beginning of year 5,166,955 6,769,450 11,936,406 Provision for the year 3,927,487 2,326,232 6,253,719 Payments made during the year (2,854,493 ) (970,549 ) (3,825,042 ) Balance at end of year 6,239,949 8,125,133 14,365,083

Gratuity Staff members who are on contracts receive terminal gratuities in accordance with their contracts of employment. An accrual is made for the estimated liability towards such employees up to the reporting date. Leave pay Paid absences are accounted for on an accrual basis over the period in which employees have provided services.

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Notes to the Financial Statements [continued]for the year ended 31 March 2015

15 Borrowings 2015 2014 P P

Current Bank overdraft 2,760,925 3,213,923 The Authority does not have a bank overdraft facility. The above balance represents a book overdrawn position. 16 Events after the reporting date The members of the Board confirm that there were no events that occurred after the reporting date which require adjustments to or disclosure in these financial statements. 17 Commitments and contingencies Operating lease commitments – where the authority is the lessee

2015 2014 P P

a) The future aggregate minimum lease payments under non- cancellable operating leases are as follows: Not later than 1 year 7,950,074 7,507,485 Later than 1 year and no later than 5 years 1,476,735 15,315,405 9,426,809 22,822,890

b) Capital commitments – Projects There has been no capital expenditure contracted for at the reporting date but not yet incurred for the 2014/15 and 2013/14 financial years. c) Contingent liabilities There is a litigation against the Authority through which P 2.2 million is sought by the claimant. The Authority’s Directors consider the success of the litigation against the Authority as unlikely. As per the external legal advisor the maximum possible exposure is P 0.6 million and accordingly a disclosure of such has been made in the annual financial statements. The case should be resolved within the next two years.

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18 Related party transactions

2015 2014 P P Transactions with senior management Remuneration paid to senior management 5,298,066 4,906,101 Transactions with the Board Sitting allowances paid to Board Members 245,024 119,847

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Detailed Income Statementfor the year ended 31 March 2015

Annexure I

2015 2014 P P

Revenue grants 144,200,000 134,000,000 Amortisation of capital grants 11,008,532 6,999,029 Other operating income 2,330,027 3,760,833

Recurrent expenditure Advertisement (500,138 ) (628,528 ) Amortisation of intangible assets - (3,441,231 ) Auditors’ remuneration - current year (292,000 ) (262,977 ) Bank charges (157,055 ) (149,316 ) Board sitting allowance (245,024 ) (119,847 ) Board meeting expenses (390,473 ) (143,201 ) Business travel, accommodation and allowances (3,815,107 ) (2,533,558 ) Computer expenses (4,587,717 ) (4,809,941 ) Consultancy fees (3,532,968 ) (1,305,006 ) Courier and postage (258,584 ) (188,639 ) Depreciation of property, plant and equipment (8,732,857 ) (6,661,314 ) Doubtful debts (1,518,841 ) (105,765 ) Donations (368,646 ) (79,945 ) Glen Valley consumables (1,148,164 ) (936,689 ) Insurance (2,324,925 ) (1,971,825 ) Legal fees (235,393 ) (114,258 ) Motor vehicle expenses (1,862,259 ) (1,526,554 ) Office expenses (1,398,784 ) (1,114,167 ) Operating lease rentals (10,022,501 ) (10,552,463 ) Project expenses Leather Park (3,312,239 ) - Project expenses Rapid Incubator (1,302,357 ) - Promotion and publicity (1,767,237 ) (1,468,338 ) Remuneration paid to senior management (5,298,066 ) (4,906,101 ) Repairs and maintenance (2,231,623 ) (2,140,678 ) Research costs (550,521 ) (570,011 ) Security expenses (2,199,485 ) (2,183,316 ) Seminars, retreat and conference costs (2,174,930 ) (1,543,139 ) Subtotal (60,227,894 ) (49,456,807 )

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2015 2014 P P

Subtotal (60,227,894 ) (49,456,807 ) SMME conference and fair - current year (252,831 ) (593,766 ) Staff costs (81,511,829 ) (80,555,756 ) Staff training and recruitment (2,508,503 ) (1,091,909 ) Staff welfare (1,787,803 ) (1,466,814 ) Stakeholder management (465,580 ) (171,920 ) Stationery and printing (1,981,809 ) (1,465,804 ) Subscriptions (260,839 ) (148,514 ) Telephone, mobile and fax (5,572,979 ) (6,135,691 ) Training and mentoring costs (2,423,108 ) (1,302,877 ) (156,993,175 ) (142,389,858 )Operating surplus for the year 545,384 2,370,004 “ This detailed income statement does not form part of the audited financial statements covered by the audit opinion on page 53“.

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Notes to the Detailed Income Statementfor the year ended 31 March 2015

Annexure II

2015 2014 P P

1 Other income Profit on disposal of property, plant and equipment 117,750 120,250 Rental income 778,096 1,352,813 SMME conference and fair income - 70,500 Sundry income 346,299 1,409,445 Telephone recoveries 405,192 615,710 Tender fees 30,200 57,600 Training and resource centre income 652,490 134,515 2,330,027 3,760,833

“ This schedule of notes to the detailed income statement does not form part of the audited financial statements covered by the audit opinion on page 53“.

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