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TEDA Annual Report 2013/14 Page - 1 -

TSHWANE ECONOMIC DEVELOPMENT AGENCY

ANNUAL REPORT 2013/14

Sign Off: Acting CEO TEDA: Mr S D Mogaladi

Signature of Acting CEO:

Chairperson of TEDA BOARD: Mr Luthando Vutula

Signature of Chairperson: ……………………………...

SED/SEH/HOD Name: ……………………..………………………………

Signature of SED/SEH/HOD: ………..……………………………………

DCM Name: ………………………………………………………………….

Signature of DCM: …………………………………………………………


Abbreviations and Acronyms:

AIDC Auto Industry Development Corporation

APC Audit and Performance Committee

CAPEX Capital Expenditure Budget

CEO Chief Executive Officer

CFO Chief Financial Officer

CM City Manager

CoT City of Tshwane

CSS Corporate and Shared Services

DCM Deputy City Manager

DED City’s Department of Economic Development

EM Executive Mayor

FINRISK Finance and Risk Committee

GDS Growth Development Strategy

ICC International Convention Centre

IDP Integrated Development Plan

IT Information Technology

KPA Key Performance Area

KPI Key Performance Indicator

MAYCO Mayoral Committee

MFMA Municipal Finance Management Act

MMC Member of the Mayoral Committee

MSA Municipal Systems Act

MTREF Medium Term Revenue and Expenditure Framework

OPCA Operation Clean Audit

OPEX Operating Expenditure Budget

REMCO Remuneration and Ethics Committee

SCM Supply Chain Management

SDBIP Service Delivery Budget Implementation Programme

SDA Service Delivery Agreement

SED Strategic Executive Director

SLA Service Level Agreement

TEDA Tshwane Economic Development Agency

TITIIC Tshwane International Trade Investment and Infrastructure Conference

ToR Terms of Reference


Country of incorporation and domicile South Africa

Legal form of entity Private Company

Company registration number 2006/019396/07

Nature of business and principal activities Facilitate economic development in the Tshwane

areas

Controlling entity City of Tshwane Metropolitan Municipality

Board of Directors Mr L Vutula (Chairperson)

Ms RS Bahula- Ermias

Mr H Gouvelis

Ms LD Haskins

Ms CBB Mahlati (retired 10th March 2014)

Mr J Matsho

Mr CR Mpyane

Ms NM Ntsinde

Mr FK Sibanda

Ms N Singh

Mr JL Thubakgale

Mr MW Yates

Accounting Officer Mr S Mogaladi (Acting CEO)

Chief Financial Officer Ms MC Sebogodi

Physical Address 349 Witch- Hazel Avenue

Eco-origin Building, Block F

Highveld Ext. 70, Centurion

0057

Postal Address P. O. Box 11751

Zwartkops

0051

Auditors Auditor-General of South Africa

Bankers Standard Bank


TABLE OF CONTENTS Page

Foreword by the Chairperson of the Board...................................................................................... 5

Executive summary……………………………………………………………………………………….. 6

CHAPTER 1

Foreword by Acting Chief Executive Officer………………………………………………….. 7

1.1 Vision and Mission………………………………………………………………………………… 7

1.2 Key strategic Objectives……………………………………………………………………… 8

1.3 Key Policy Developments…………………………………………………………………… 8

1.4 Key service delivery improvements……………………………………………………… 9

1.5 Report of the Auditor General …………………………………………………………… 11

CHAPTER 2

2.1 Corporate Governance……………………………………………………………………… 15

2.2 Legislative background prescribing the functions of the entity……………………….. 17

2.3 Functioning of the Board against the work-plan 2013/14………………………………. 17

2.4 Board Committees……………………………………………………….……………………… 17

2.5 Risk Management and Internal Controls…………………………………………………… 20

2.6 Supply chain Processes and Procedures………………………………………………… 22

CHAPTER 3

3.1 Service Delivery Performance………………………………………………………………….. 26

3.2 Performance Overview………………………………………………………………………… 26

CHAPTER 4

4.1 Human Capital Management……………………………………………………………… 34

4.2 Human Capital Policies………………………………………………………………………… 35

4.3 Human Resources Disclosures………………………………………………………………… 36

4.4 Competency levels of Finance and Supply Chain officials ........................................... 38

CHAPTER 5

5.1 Financial Assessment................................................................................................ 39


CHAIRPERSON’S FOREWORD

TEDA initially had a Board that comprised of 12 members, however 1 board member resigned

during the year under review. Board committees have been increased to six to ensure more

focus and enhanced oversight on the operations of TEDA.

To regulate the relationship between the Shareholder (City of Tshwane) and TEDA, a Service

Delivery Agreement was signed at the beginning of the financial year. The Service Delivery

Agreement is supported by five year strategic plan and multiyear year business plan. TEDA

made strides in focusing on ensuring that it delivers on its mandate as set out in the SDA with its

shareholder. The Board put a concerted effort in providing the strategic direction and support

through a strategic planning session involving both the Board of Directors as well as

management. This provided the necessary clarity in terms of expectation by the shareholder

and the resultant obligations, roles and responsibilities of the Board and Executive

management.

It is critical that in the medium term TEDA identifies untapped areas within Tshwane area, on

which it can initiate and come up with projects that will create an impact in support of the

aims of Tshwane Vision 2055.

Key executive management positions were filled within the core business units in order to

further build capacity within TEDA and deliver on the expectations by the shareholder. The

long term plans are such that TEDA should create less dependency on the CoT funding and

should become a financially sustainable organisation.


EXECUTIVE SUMMARY

TEDA is a municipal entity of the City of Tshwane which was created as a special purpose

vehicle that has to assist the CoT in employing strategies for economic growth and job

creation. TEDA’s performance in the 2013/14 financial year was guided by an approved

business plan. The performance of TEDA was measured on a monthly and quarterly basis

against its set objectives as captured in the approved business plan. However, due to the

delay in filling the core business posts, some of the key performance targets could not be met,

despite the performance improvement plan that TEDA developed in order to ensure that those

are met within the reporting period. The improvement plan however helped in partially

meeting some of these targets

TEDA ensured that at the beginning of the financial year, systems were put in place to have an

operational organization that will be able to carry out its mandate. Several policies within the

support function were drafted and approved. TEDA went through a challenging period with

limited funding and had to exercise cost saving measures and also reduce on spending by

going through a reprioritization exercise by identifying projects and activities that could no

longer be implemented in 2013/14 as initially planned.

Projects that TEDA undertook were those in conjunction with the City on a co-funding

arrangement as stipulated in the signed Service Level Agreement between TEDA and

Department of Economic Development in the City.

Institutional arrangements

TEDA is accountable to the MMC responsible for the Department of Economic Development

and City Planning, who provides political oversight on TEDA mandate. DED provides the

operational, financial and strategic support to TEDA in carrying out its mandate. The Board of

TEDA has a strategic oversight role on the TEDA’s mandate. The City of Tshwane, as the

shareholder, is represented at the Board sittings by the officials from the DED on an observer

status. The shareholder and the Board communicate on a regular basis and there is a set

Annual General Meetings where TEDA's performance is reviewed by the Shareholder.


CHAPTER 1

FOREWORD OF THE CHIEF EXECUTIVE OFFICER

This report sets out the TEDA Budget and Performance Assessment for 2013/14 financial year

against its scorecard as approved in the Business Plan.

Performance Review

TEDA conducted a strategic planning session in the first quarter which culminated in the

development of a 5 year strategic plan.

TEDA went on a recruitment drive in the first quarter of the year with the aim of ensuring that

there is capacity to carry out TEDA's mandate. While the initial intention was to fill more posts,

the reality of limited funding prevented this from happening. Instead, certain priority posts were

identified as crucial and therefore had to be funded to also ensure that the resources are

spread equitably within TEDA operations especially in the core business units namely, Trade

and Investment and Programme and Project Management The year under review was more

focused on development and implementation of policies and procedures, building of systems

to comply with the MFMA and other important prescripts within the local government

environment.

For the future TEDA sought to ensure adequate staffing, however this needed to be preceded

by the review of its capacity alongside its strategic objectives hence the prioritization of the

Organisational Design toward ensuring the appropriate Human Capital model for the agency.

Alongside this initiative another priority was towards attaining the goal of sustainability through

the development of an institutional model that would identify different revenue streams

In the year under review, TEDA focused on identifying key strategic risks and the corresponding

mitigation action plans. However, due to the absence of dedicated risk officers within the

organisation and limited support at the time, the said management plans could not be

implemented

In 2012/13 TEDA‘s performance was not audited in terms of the predetermined objectives.

Save for the Business Plan whose KPI’s were not found to be in line with National Treasury

Framework for Performance Information. There were findings in the SCM processes for which

there was a need for improvement. Moving into the future TEDA sought to ensure the existence

of institutional policies including the tightening of control measures on an on-going basis.

Finance Review

The total budget allocated to TEDA for 2013/14 was R47,5 million and so far indications are

that 98% of the budget has been spent and with the tight controls implemented to prevent

over spending of the allocated budget, it is anticipated that the expenditure levels will be kept

within the budget in the mid-term period. There were major variances between the budget

allocated for employee costs and actual expenditure due to unfilled positions. However,

management developed a recruitment plan to ensure that TEDA is capacitated to deliver on

its mandate.

1.1 VISION

The Vision of the Tshwane Economic Development Agency SOC Limited is:

‘TEDA strives to be a leading African economic development agency’


Mission

The mission of the Tshwane Economic Development Agency SOC Limited is:

‘To provide innovative investor solutions so as to attract and develop strategic industries

and businesses into the Capital City in order to strengthen and position South Africa in

the continent’

1.2 KEY STRATEGIC OBJECTIVES

TEDA key strategic objectives stated below were informed by its mandate aligned with Vision

2055, the City of Tshwane IDP 2011-16 and these provided the basis for the work done by TEDA

in the 2013/14 financial year. In order to realise the objectives, a number of key performance

indicators were identified in line with each objective and these were used as a measure of

performance throughout the year.

The Key Strategic Objectives of TEDA are:

1. To promote, facilitate and coordinate trade and investment in strategic

infrastructure to create value for the CoT.

2. To identify, design, develop and manage projects with strategic economic

and social benefits for the greater Tshwane community.

3. To develop and maintain Tshwane as a unique (sector specific) tourist

destination.

4. To develop and maintain a strategic immovable and property asset portfolio

for maximum return on investment.

5. To develop, facilitate and promote viable foreign and local investments into

City of Tshwane

6. To establish and build TEDA as a strong and effective organisation in the

context of good governance best practices

1.3 KEY POLICY DEVELOPMENTS

During 2013/14 TEDA undertook a process of conducting a strategic review of its organizational

structure and business processes towards aligning the 2013/14 Business Plan with the Service

Delivery Agreement. This resulted in a five year Strategic Plan which guided TEDA's operations

TEDA’s annual performance report depicts progress made in meeting its set targets at the

beginning of the financial year 2013/14. TEDA experienced a sluggish start at the beginning of

the financial year due to the fact that it was engaged with capacitating the core business

units and therefore some of the set targets were not met within the planned period. This

prompted TEDA management in the third quarter to draw up a performance improvement

plan in order to ensure that the targets are met by the end of the financial year. Although not

all the targets were met as intended, the plan yielded some results in certain instances.

While there were limited financial resources in the 2013/14 financial, TEDA had to give priority

to building capacity within the core business areas to ensure that in the next financial year

there is sufficient capacity to carry out and realise its mandate. TEDA generated some project

ideas in the latter part of 2013/14 with the aim of taking these through the business

development process in the 2014/15 financial year.


1.4 KEY SERVICE DELIVERY IMPROVEMENTS AND 2012/13 AND 2013/14 TRENDS

During the 2012/13 financial year, TEDA as a new entity, appointed the Board of Directors, CEO

and CFO to start the operations of the company and lay foundation for a full and operational

organisation. During the 2013/14 financial year, the company adopted a management

structure and appointed key Executives in both core and support areas to enable

achievement of the set objectives. This allowed the Board to put more emphasis on exercising

its oversight role and fiduciary duties and leave the daily operations of the company to its

management complement.

The appointment of key Executive managers also assisted the Board to develop and adopt a

Business Plan and Five Year Strategy to drive the implementation of the company’s broader

mandate. Below are the highlights of the year under review:

Major Success and highlights of the year

o TEDA received an unqualified audit report.

o Critical corporate policies, guidelines and marketing strategies were approved within

this financial year.

o 98% of suppliers were paid within the 30 days turn-around time.

o The TEDA Corporate Identity manual was completed. The manual gives direction to the

logo and how it has to be applied. The new offices' look and feel application drew their

inspiration from the TEDA identity manual.

o The China Expo was the first international platform that TEDA participated in. TEDA was

part of the Department of Trade and Industry (DTI) delegation. TEDA visited three cities

Xiamen, Shanghai and Beijing. TEDA was introduced to the China top 500 businessmen

in Beijing. TEDA was also introduced to other agencies in South Africa and other parts of

China.

o The Africa Public Private Partnership Conference was a noteworthy platform to launch

TEDA to the African continent and international market. TEDA's branding was in posters

around Sandton, the publication of the conference, the programme and digital

platforms. The CEO of TEDA had the opportunity to make a 15 minute presentation on

Government and government agencies on PPPs. The CEOs of organisations like DBSA

the ministries of Nigeria, Uganda were able to interact with what TEDA does on its

exhibition stand and during other networking sessions available.

o Although TEDA had a limited budget allocation, it managed to fill the most critical posts

in the core business and ensure that the support functions are also capacitated

especially within finance and supply chain to conform to the segregation of duties as

required in that environment.


o In order to avoid over spending TEDA ensured that there were strict controls put in

place through cost containment measures.

o TEDA made its mark on the JSE, Sawubona and Leadership magazines. The mandate of

TEDA and sectors of importance were exposed in these magazines.

o The TEDA website is up and running.

o The successful hosting of the inaugural SMME funding fair on 19 June 2014 attended by

approximately 300 participants

Challenges and mitigation controls

Table 1: Challenges and Mitigation Controls

CHALLENGES MITIGATION CONTROLS

Automatic rotation of suppliers Excel spreadsheet utilized while procuring an

automated system.

Challenges in tracking Identity numbers of service

providers that have been awarded contracts and

are in the employ of the state.

MBD declaration forms are utilised to minimize non-

compliance.

Expenditure and budget management Established budget management steering

committee

Adherence to supplier’s payment schedule

Ensured that all suppliers are paid within 30 working

days by paying on Thursdays.

Some of TEDA commitments for the year were

cancelled due to limited funding.

Only those commitments that are crucial were

prioritized to be funded.

Joint hosting of the TEDA website with the City of

Tshwane website resulting in delays in uploading

real time content.

TEDA is in a process of securing a service provider

to assist TEDA with migration of the website to a

separate environment.


1.5 AUDITOR GENERAL REPORT

Table 2: Action Plan based on Auditor General’s report of 2012/13 Ref

Nr

Previous Status Current Status

Description

Detail

Action Plan

and/or Progress

Responsible

Dept & Process

Owner and

Implementation

Date

Follow-up

Audit Results

Audit

opinion

Management

comments and

Implementation

date

1 Policies not in

Place

Policies not in

Place

- Performance

management

policy not in

place

Code of

ethics not in

place

Asset

management

policy not in

place

- Fraud

prevention

plan not in

place

- Consultants

policy

- Human

resource

management

policy not in

place

Policies were

drafted waiting

for board

approval.

Human

resource

management

policy were

approved by

the board

CEO: TEDA Completed.

The policies

have been

implemented.

3 Strategic

Planning and

Performance

Management:

Strategic

Planning and

Performance

Management:

- The entity

did not have

multi-year

business plan

that is aligned

to the service

delivery

agreement

- Indicators

not specified

to measure

performance

TEDA has

implemented

an approved

2013/14

strategic plan

and business

plan with set

indicators that

are aligned to

the SDA.

CEO:TEDA The business

plan

provided was

not

complete,

targets are

not

measurable.

A request has

been

submitted to

meet with the

client in order

to address

the matter.

4 Deviation

from Supply

Chain

Management

Regulation

Only one

quotation

obtained for

awards

between R30

000 and R200

000

Awards

above R30

000 were not

advertised

TEDA has its

own supplier

database and

is process of

awarding both

contracts and

establishing

panel of

service

providers

- Compliance

checklist is

developed to

ensure

Compliance to

SCM process

- Prior to

participating in

CoT contract

CEO:TEDA The entity is

now

complying

with SCM

regulation.

- Three (3)

written

quotations

are

requested

from different

prospective

suppliers.

- TEDA has an

active

website

where

projects

above R30


Ref

Nr

Previous Status Current Status

Description

Detail

Action Plan

and/or Progress

Responsible

Dept & Process

Owner and

Implementation

Date

Follow-up

Audit Results

Audit

opinion

Management

comments and

Implementation

date

TEDA will

evaluate

Compliance to

avoid

irregularities

- TEDA has

developed

website,

currently in the

implementation

process.

currently TEDA

is utilising notice

board

000 are

advertised.

- TEDA

complies with

SCM

processes for

awards

above R200

000

In the period under review TEDA received an Unqualified Audit Opinion. The current audit

outcome for the 2013/14 financial year is more on the compliance issues relating to

performance management and disclosure of information. This is a positive progression from the

previous audit results as there were repeat findings between the two years. This indicates the

effectiveness of the audit mitigation plan that was employed to address the audit matters.

Table 2A: Action Plan based on Auditor General’s report of 2013/14

NO AUDIT FINDINGS ACTION PLAN RESPONSIBLE

PERSON

TIME FRAME

1. Entity developed but

did not implement a

multi-year business

plan

The entity will refine

business planning in

line with National

Treasury Guidelines,

taking into

consideration

recommendations

from AG and

incorporate these on

the revised business

plan 2014/15

Senior Manager :

Strategy and

Performance

Immediate

2. Disclosure of

commitments

Quality assurance will

be done to enhance

the disclosure

commitment.

Integrated financial

management will be

introduced to minimise

manual data

management

Chief Financial

Officer

28 February 2015

3. Presentation and

disclosure of budget

information


be done to enhance

the presentation of

the Statement of

Comparison of Budget

and Actual

amount will be

amended to present

the budget in an easy

manner to follow that

is comparable and

consistent with the

Chief Financial

Officer

Immediate


approved budget

4. Interest income

recorded in incorrect

period


be done to enhance

the presentation of

the Annual Financial

Statements

Chief Financial

Officer

Immediate

5. Non-compliance with

Section 99(2)(b) of

the MFMA relating to

payment of suppliers

Management

introduced the Age

analysis of payment to

service to monitor 30

days turnaround

period. All invoices are

inspected against the

quotation and the

purchase order to

ensure that correct

amounts are paid to

the service providers

within 30 days as per

MFMA.

Chief Financial

Officer

Immediate

6. Contingent liability

note incomplete

Management to

ensure that

confirmation on

contingent liabilities is

sought from the legal

advisor/attorney

before AFS

preparation.

Chief Financial

Officer

Immediate

7. Failure to completely

disclose all deviations

in the financial

statements

Management to

ensure that deviation

is sought for contracts

exceeding 12 months

where it is not feasible

to invite bid

Chief Financial

Officer

Immediate

8. Weakness in system

of internal control:

Operating

expenditure

Management to

ensure that processes

and systems

description are

regularly reviewed,

updated and

adhered to.

Chief Financial

Officer

Immediate

9. Payments not made

within 30 days

All purchase orders

where good and

services are delivered

to be inspected on

monthly basis to

ensure that

outstanding invoices

are tracked and thus

pay the service

provides within 30

days as per MFMA.

Furthermore, the entity

will procure an

Integrated Financial

System that will assist in

automating the

procure-to-pay

processes.

Chief Financial

Officer

28 February 2015

10. Incorrect points

awarded to

prospective bidder

Scores reviewed

accordingly.

Management will

conduct quality

Chief Financial

Officer

Immediate


assurance on the

calculation of points

before a tender is

awarded

11. Reference check on

employees not

performed

MIE has been

contracted to

conduct background

checks on all new

employees.

Executive:

Corporate

Services

12. Disclosure of the

minimum

competency level in

the annual report


be done to enhance

the presentation of

the Annual report. The

annual report will be

amended

accordingly.

Senior Manager:

Strategy and

Performance

Immediate

13. SCM policy omitted

some of the aspects

of the SCM regulation

Management has

reviewed the entire

SCM policy to ensure

that it complies with all

applicable legislation.

Chief Financial

Officer

31 January 2015

14. Declaration of interest

was not obtained

from supplier

Paragraph 2.8 has

since been

completed

accordingly and there

is no conflict of interest

(#6). Management will

review the

completeness of bid

documentations.

Chief Financial

Officer

Immediate

15. Non-disclosure of

persons employed by

the state as required

by SCM regulation

Management will

ensure that there is

proper

communication

between SCM and

Finance especially

regarding information

that goes into the

financial statements.

Chief Financial

Officer

Immediate

16. Mid-Term Report for

2013/14 not submitted

to parent municipality

within the required

time

The Board work-plan

has been

synchronized with the

reporting dates of the

City.

Snr Manager

Strategy and

Performance

immediate

17. Indicators and targets

not well-defined /

specific

SMART principles have

been applied in

crafting the indicators

in the ensuing years as

well as the revised

business plan 2014/15.

Snr Manager

Strategy and

Performance

Immediate

18. Non-disclosure in

performance report of

measures to improve

performance

Corrective measures

will be implemented in

the mid-term report of

2014/15.

Snr Manager

Strategy and

Performance

19. Deficiencies noted on

the performance

report and approved

business plan

The entity will refine

business planning in

line with National

Treasury Guidelines,

taking into

consideration

recommendations

from AG and the

information will be

Snr Manager

Strategy and

Performance

Immediate


reported accordingly

in the annual report.

20. Authorized bank

signatories not

updated timely

Bank signatories have

been updated and

timeous amendments

will be made in future

to avoid recurrence.

Chief Financial

Officer

Immediate

21. Tenant installation

costs not capitalised

and amortised

Key role player in the

AFS preparations will

be sent to GRAP

training. Furthermore,

the AFS preparation

timetable for the

subsequent financial

years will amended so

as to provide ample

time for the reviewers.

Chief Financial

Officer

Immediate

22. Income tax and

deferred tax

misstatements noted.

Chief Financial

Officer

Immediate

23. Competency

assessments for

prescribed officers

not performed

Competency

assessments will be

performed for all

prescribed officers in

2014/15

Executive:

Corporate

Services

2014/15

Quarter 4

24. AOPO- indicators not

well defined

Technical indicator

descriptions to be

drawn and included in

the adjusted business

plan to align with

objectives set.

Snr Manager

Strategy and

Performance

Immediate

25. AOPO-Key

performance not

specific

Technical indicator

descriptions to be

drawn and included in

the adjusted business

plan to align with

objectives set.

Snr Manager

Strategy and

Performance

Immediate

26. Invoices paid for not

addressed to TEDA

The finance unit will

design an invoice

minimum requirement

checklist to be

completed by the end

user departments to

be attached to the

invoice when

submitted to finance

Chief Financial

Officer

Immediate

27. Failure to follow the

bidding process for

contracts greater

than R200 000 or

longer than 12

months

Management will

ensure that all future

contracts of small

value are handled as

deviations as it is not

cost effective to invite

tender for small

amounts

Chief Financial

Officer

Immediate


CHAPTER 2

2.1 CORPORATE GOVERNANCE

The Board of Directors of TEDA is committed to promoting a high ethical and performance

excellence culture within the company. The Board is devoted to ensuring the highest

standards of corporate governance compliance, corporate social responsibility, risk

management and prudent financial management.

The Board is responsible to the company’s shareholder, the City of Tshwane, for the

implementation of the shareholder compact and long term business strategy through oversight

on the management of the company’s operations in line with the company’s vision, i.e. TEDA

strives to be a leading African economic development agency.

The Board of Directors confirms that the company has, during the year under review; complied

with the King Code on Corporate Governance (King III), save in the following respect:

a) Board, Committee, individual and Chairperson appraisals were not performed due to lack

of sufficient funds for this purpose.

Composition of the Board of Directors

The Board of Directors consists of non-executive directors only as depicted in the table below.

Adv. CBB Mahlati resigned as a director in March 2014.

The Board of Directors of TEDA as stipulated in the King Code III and the Code of Conduct for

Directors referred to in section 93L of the Municipal Systems Act, 2000 as amended.


Table 3: Board of Directors

NAME OF BOARD

MEMBER

CAPACITY:

EXECUTIVE / NON-

EXECUTIVE

RACE GENDER BOARD COMMITTEE MEMBERSHIP

L Vutula

(Chairperson)

Non-Executive African Male N/A

Bahula-Ermias, RS Non-Executive African Female Social and Ethics Committee,

Projects Committee

Gouvelis, H Non-Executive White Male Trade and Investments

Finance, Risk and Governance

Committee

Haskins, LD Non-Executive Coloured Female Trade and Investments Committee,

Risk and Governance Committee

Mahlati, CBB Non-Executive African Female Trade and Investments, Remunerations

Committee

Matsho, J Non-Executive African Male

Remunerations Committee,


Committee

Mpyane, CR Non-Executive African Male Projects Committee,

Remunerations Committee

Ntsinde, NM Non-Executive African Female

Projects Committee


Committee

Sibanda, FK Non-Executive African Male

Trade and Investments Committee

Projects Committee

Singh, N Non-Executive Indian Female Finance, Risk and Governance

Committee,

Social and Ethics Committee

Thubakgale, JL Non-Executive African Male Social and Ethics Committee,

Remunerations Committee

Yates, M Non-Executive White Male Projects Committee,

Trade and Investments Committee


2.2 LEGISLATIVE BACKGROUND PRESCRIBING THE FUNCTIONS OF THE ENTITY

TEDA strives to comply with the Constitution of the Republic and the enabling general

legislative prescripts. In particular, TEDA is committed to comply with all its relevant applicable

legislation i.e. the Companies Act, Municipal Finance Management Act, Municipal Systems

Act, Broad Based Black Economic Empowerment Amendment Act, National Environmental

Management Act, Occupational Health and Safety Act, Labour Relations Act, Basic

Conditions of Employment Act, Employment Equity Act, Promotion of Access to Information

Act, the Skills Development Act and the regulations thereof.

TEDA has approved a Corporate Governance Policy Framework in April 2014. The policy

framework sets out, amongst other things, roles and responsibilities of the shareholder, Board

and management. As part of its Corporate Governance Policy Framework, TEDA also adopted

a Delegation of Authority Framework and Supply Chain Management Policy which reserves

certain powers and functions to the Board, management committees, CEO and individual

Executive Managers.

Furthermore, the Corporate Governance Policy Framework was developed in line with the King

Report on Corporate Governance, 2009 (King III). It also incorporates the Code of Conduct for

employees and directors, Fraud Prevention Policy, Conflict of Interests Policy and ICT

Governance Framework. TEDA adopted various Human Capital Policies in compliance with

labour market legislation.

2.3 FUNCTIONING OF THE BOARD AGAINST THE WORK PLAN 2012/13.

The Board approved an Annual Work Plan at the beginning of the financial year and

amended it later in the year after its review of Board Committee.

2.4 BOARD COMMITTEES

BOARD COMMITTEES

The Board established the following committees to strengthen its oversight role:

2.4.1 Projects Committee

The mandate of the committee is to advise the Board on the implementation of the projects

portfolio of TEDA. The committee uses the Projects Management Framework adopted by the

Board in order to perform its functions.

2.4.2 Trade and Investment Committee

The mandate of the committee is to advise the Board on CoT economic development

initiatives which include, but are not restricted to:

Trade and Investment Promotion, Facilitation and Aftercare

Implementing the CoT’s investment pipeline

Promotion of Export-Ready Companies

Development Facilitation which includes packaging and promoting investment

projects and nodal development e.g. the Implementation of the Inner City

Revitalisation Programmes.


2.4.3 Remunerations Committee (REMCO)

The mandate of the committee is to advise the Board on the development and

implementation of the remuneration and recruitment policies of TEDA as well as other human

capital policies.

2.4.4 Finance, Risk and Governance Committee

The terms of reference of this committee include:

Ensuring the development of corporate governance, financial and organisational

performance policies of TEDA.

Monitoring TEDA’s compliance with laws and regulations and reporting to the Board

any incidents of non-compliance.

Ensure that TEDA’s fraud prevention policies are in place and implemented.

Ensure the development and management of a Risk Management Policy and plans.

2.4.5 Social and Ethics Committee

This statutory committee was established in terms of the Companies Regulations, 2011. Its terms

of reference include, amongst other things, monitoring the activities of the company on socio-

economic development matters and the company's standing with regard to:

The principles set out in the United Nations Global Compact Principles.

The OECD recommendations regarding corruption.

The Employment Equity Act, 1998.

The Broad-Based Black Economic Empowerment.

TEDA’s corporate social responsibility.

2.4.6 Directors Affairs Committee

The Committee’s purpose is to assist the Board with matters pertaining to:

Review and amendment of the structure and composition of Board Committees.

Ongoing review the performance of Board Committees.

Review of the Annual Work Plan of the Board.

Develop and recommend to the Board training development priorities for Directors,

individually and collectively, as well as Director Induction Programme.

There is no membership of the committee at this stage. The activities mentioned above are

currently the responsibilities of the Company Secretary in terms of facilitation and execution in

collaboration with the Shareholder’s Unit.

2.4.7 Audit and Performance Committee of the CoT and its Municipal Entities

The risk based audit function of TEDA is dependent on the shared resource provided by the

CoT through the Group Audit Committee and the Group Internal Audit Unit.


DIRECTOR’S MEETING ATTENDANCE

During the year under review directors’ attendance was as follows:

Table 4: TEDA Board of Directors meetings

Table 5: Board Committee Meetings NAME OF BOARD

MEMBER

FINANCE AND

RISK

FINANCE,

RISK AND

GOVERNACE

REMCO TRADE AND

INVESTMENT

PROJECTS

COMMITTEE

SOCIAL

AND

ETHICS

Mr L Vutula

(Chairperson)

Adv CBB Mahlati 7 n/a 6

Mr CR Mpyane 8 7

Mr FK Sibanda 3 0 5

Mr H Gouvelis 2 1 9 1

Mr J Matsho 1 10 7

Adv JL

Thubakgale

5 8 1

Adv LD Haskins 4 1 0 8

Mr MW Yates 3 1 9

Mrs N Singh 5 1 3 0

Ms NM Ntsinde 4 1 9

Mrs RS Bahula-

Ermias

5 7 1

NAME OF BOARD MEMBER TOTAL NO OF MEETINGS

HELD

TOTAL NO OF MEETINGS

ATTENDED

Mr L Vutula (Chairperson) 18 18

Adv CBB Mahlati 18 12

Mr CR Mpyane 18 16

Mr FK Sibanda 18 14

Mr H Gouvelis 18 17

Mr J Matsho 18 18

Adv JL Thubakgale 18 16

Adv LD Haskins 18 12

Mr MW Yates 18 18

Mrs N Singh 18 14

Ms NM Ntsinde 18 17

Mrs RS Bahula-Ermias 18 15


2.5 RISK MANAGEMENT AND INTERNAL CONTROLS

RISK MANAGEMENT AND INTERNAL CONTROLS

2.5.1 TEDA’s risk management strategy

TEDA has adopted Enterprise Risk Management (ERM) Strategy and Policy of City of Tshwane.

The Strategy lays out guiding principles for the management of risk on an ERM basis. This

strategy comprises the totality of all the structures, policies, strategies and procedures within

TEDA that deal with risk management at various levels

2.5.2 Provision of TEDAs risk management plan

Table 6: TEDA’s strategic risk register

STRATEGIC OBJECTIVE RISKS CURRENT CONTROLS MANAGEMENT ACTION

To establish and build

TEDA as a strong and

effective organisation

in the context of good

governance best

practices

Lack of critical

skills

1. Business processes have

been developed and

currently being

implemented.

1. To conduct skills audit

2. To develop organisational

development processes





governance best

practices

Lack of financial

sustainability

model

1.Continuous monitoring on

the budget and

performance

1. Develop and implement

financial sustainability plan

To promote, facilitate

and coordinate trade

and investment in

strategic infrastructure

to create value for

CoT

Failure to attract

investors

No control 1. Investment assessment

framework to be developed

2. Develop investment

promotion strategy

Task owner:

3. To package investment

incentives

Task owner:

4. Employ additional

capacity

To promote, facilitate

and coordinate trade

and investment in

strategic infrastructure

to create value for

CoT

Failure to

facilitate and

assist investors

1. Linking investors to

strategic alliances on a

project by project basis

2. High level analysis of

investor requirements in

Tshwane

1. Conduct market research

on investor environment

through

2. Continuous development

investor after-care

programme

To facilitate

implementation of

agreements signed

between CoT and

stakeholders

Inadequate

stakeholder

engagement

1. Communication policy in

place to deal with the

stakeholder engagement

1. To develop and implement

a stakeholder engagement

strategy

To identify, design,

develop and manage

projects with strategic

economic and social

benefits for the

greater Tshwane

Incorrect

assessment of

projects

1. Project Assessment model

developed and currently

being implemented

1. Develop procedure

manual

2. Conduct training on

appropriate model

3. Review the assessment


STRATEGIC OBJECTIVE RISKS CURRENT CONTROLS MANAGEMENT ACTION

community model to introduce flexibility

and appropriateness





governance best

practices

Poor

implementation

of governance

processes

1. Companies Act, MFMA,

PFMA, Approved policies

and procedures of TEDA

2. Training conducted on

policies and procedures

and induction programmes

1. Revise and finalise

organisational design

process

2. Ensure policies and

procedures are in place for

key business processes

2.5.3 Risk management assessment processes followed

TEDA adopted the Public Sector Risk Management Framework from National Treasury and the

King III report on Corporate Governance to ensure that risk management processes within

TEDA are streamlined to best practices as indicated on the Enterprise Risk Management policy

for CoT and its Entities.

An assessment and review of the risks TEDA faces is undertaken annually. This process strives to

achieve the identification of the critical risks the Entity may face to enable it to formulate

appropriate risk strategies and action plans to mitigate and address these risks where

necessary.

To ensure TEDA’s future sustainability, we have looked at risks facing the Entity across our major

risk categories, these being Strategic risk, Financial risk, Operational risk, Governance risk and

Information Technology risk.

TEDA management owns the responsibility to ensure that risk management strategy and policy

is implemented. They do this by taking active responsibility in the risk management process. TEDA’s risk management, internal audit and the Audit Committee functioning

The Board has delegated the responsibility of creation and monitoring of risk management to

the Risk Committee and for reviewing the effectiveness of the internal controls to the Audit and

Performance Committee. These Committee uses information drawn from a number of different

sources to carry out this review:

Internal Audit provides objective assurance – their annual work plan is developed in

conjunction with management and focuses on key risks and key internal controls. In the light of

Internal Audit’s recommendations, management develops and implements corrective action

plans, which are tracked to completion by Internal Audit at City of Tshwane and the results

reported to executive management, Audit and Performance Committee and the Board;

Managers are responsible for the identification and effective management of all risks in their

areas of responsibility, and how they will mitigate risk through enhancement of the internal

control measures applied in their respective area of operations. Further objective assurance is

provided by the external auditors and other external specialists.


2.6 ENTITY’S SUPPLY CHAIN PROCESSES AND PROCEDURES

Supply Chain Management is an integral part of financial management and its role is to render

support service in terms of goods and professional services to Tshwane Economic

Development Agency. Goods and services are procured in a system that is fair, equitable,

transparent, competitive and cost effective. It is always ascertained that the procurement

system operates within a framework that promotes and protects (HDI’s) Historically

Disadvantaged Individuals and also provides categories of BEE preference in allocating

contracts.

Supply Chain Management is divided into 5 elements (phases) which are summarised below:

Demand Management: Demand Management deals with the identification of need for goods

and services, ensuring that requirements are linked to budget, conducting stakeholder

analysis, drafting of specifications or terms of reference, determining Preferential Procurement

Strategies, determining the evaluation criteria, determining the lead and delivery times,

estimate the cost of goods and services, obtain necessary approvals for the acquisition of

goods and services. In this phase, the end user plays the biggest role with the assistance of the

Procurement unit. A Specification Committee is appointed, comprised of the end user and

SCM members and any other role player to facilitate this process.

Acquisition Management: This is the second phase of SCM. At this phase, a decision on how to

approach the market is made. The total cost of ownership is determined. Bid documents are

compiled. Bids are invited, evaluated and contracts are signed. This phase is executed by the

Procurement unit with some assistance from the end user and other role players. A Bid

Evaluation Committee is appointed, comprised of the end user and SCM members and any

other role player to facilitate this process. A Tender Committee known as Bid Adjudication

Committee is also appointed to evaluate the adjudicated contracts.

Logistics Management: This is the third phase that elaborates on the requisitioning of goods

from store (Inventory Management). It deals with items which are kept from store for issuing to

end users on request. Such items are kept in store due to the repetitive or frequent requirement

which makes it impractical to invite price quotations for each request. Orders are placed from

suppliers that are registered onto the Supplier Data Base System in order to solicit the above

goods unless a contract has been entered into. The process of placing orders, receiving and

dispatching falls within this ambit.

Disposal Management: This is a phase where unserviceable, redundant or obsolete movable

items are dealt away with. A Disposal committee is appointed to recommend the proper

disposal strategy.

All the above elements are conducted in accordance with the delegated powers/ authority.

Supply Chain Performance: This is the final phase. This is where projects are monitored at their

completion. The SCM process is monitored whether the desired objectives and goals are

achieved.

Asset Management: SCM is also responsible for the effective, efficient, economic and

transparent use, management, safeguarding and maintenance of assets. Various types of

forms are utilised to ensure proper control while relocating and or moving assets around. Assets

must be physically assessed annually so as to determine their useful live. This is accomplished

through inspecting the physical condition of the assets.


2.6.1 Supply chain management capacity within TEDA

Currently, SCM is comprised of the following three (3) permanent staff members and one

temp.

DESIGNATION RESPONSIBILITY

Senior Manager: SCM Supply Chain Performance and Policy Development

Manager: SCM Tender Administration

Supply Chain Practitioner Price Quotation

Temp Asset and Inventory Management

2.6.2 TEDA procurement in line with the provisions of the MFMA

Identification and prioritization of need by end user

Confirm availability of funds (Budget)

Analyze the market to be utilized and research specifications

Determine whether to go out on tender or Price quotation.

Draft Terms of Reference (Specification committee minutes, Code of Conduct,

Attendance Register, Minutes or Memo)

Special conditions (if applicable)

Prepare bid documents

Publication on relevant media.

Briefing session (if relevant)

Issue and receipt register

Short listing of bidders on minimum requirements of the bid

Memorandum to the end-user and comments from the end user.

Presentations (if necessary) (Evaluation committee minutes, Code of Conduct,

Attendance Register, Minutes or Memo

Evaluation (Price) 80/20 below 1 million and 90/10 above 1million

Functionality and BEE evaluation

Vetting of service providers (National Treasury, SARS and CIPRO and various entities)

Recommendations (BAC) (Bid Adjudication committee minutes, Code of Conduct,

Attendance Register, Minutes or Memo

Approval and award (Accounting officer)

Probity check whenever necessary

Confirmation letter to SARS and Cipro if above 10 million (NIPP)

Advertise results on website

Conduct due diligence

The Supply chain management policy approval in line with the Municipal Finance

Management Act No. 56 of 2003.

All SCM policies are approved by the relevant Board, through REMCO. Before approval is

granted or the policy is adopted, it is ensured that the policy is aligned to all relevant legislative

framework like the SCM Directive for Municipal Accounting officers, Municipal Acts, Municipal

Supply Chain Model etc.


Table 7: SCM Challenges and Remedial Actions

Challenges Resolutions

Deciding on the procurement strategy to be

embarked on, whether least coast selection, quality

based selection, individual appointment of

consultant, Single source selection etc.

Evaluate the type of service or commodity in

consultation with the end user, frequency of the

need, availability of budget, the urgency of the

service, technicality of the service and the

scarcity of the service.

Negotiating rates for prices to be paid for goods

and services especially professional services like

legal services where it is difficult to estimate the

number of hours.

This position takes into account budget constraints

and quality requirements and bases decisions on

these factors.

Deciding on Preferential procurement strategies to

be taken and evaluation criteria to be used for

various projects.

The above involves market analysis, black

economic empowerment and analysing the need

to either go out on tender or satisfy needs through

the supplier’s data base system.

The following deviations were motivated accordingly and approved:

Table 8: Deviations

DEVIATION

NO

SERVICE PROVIDER AMOUNT REASON FOR DEVIATION

1 African Public Private Partnership R351 327.79 Single Source Selection for a

Conference

2 Ningiza Horner R1 million Legal opinion for the Accounting

officer

3 EMS (SAITEX) R194 431.78 Single source selection

Table 9: TEDA’s supply chain committees and functions

SUPPLY CHAIN

MANAGEMENT

COMMITTEES:

COMMITTEE

GUIDELINES FUNCTIONS

AND

PURPOSE

OF THE

COMMITTEE

NO OF

MEETINGS

PLANNED

ACTUAL REASONS

FOR

DEVIATION

INTERVENTION/

ACTION TAKEN

Bid

Specification

Committee

Regulation

27 of the

Municipal

SCM Act

Compile

Specification

and Terms of

Reference

8 5 Budget

constraints

Reprioritisation of

both Budget and

Projects

Bid Evaluation

Committee

Regulation

28 of the

Municipal

SCM Act

Evaluation of

bidder’s

ability to

execute the

contract in

accordance

with set

standards

and criteria

8 5 Budget

constraints

Reprioritisation of

both Budget and

Projects

Bid

Adjudication

Committee

Regulation

29 of the

Municipal

SCM Act

Considers

the report of

the

evaluation

committee,

depending

on

delegated

powers,

either

8 5 Budget

constraints

Reprioritisation of

both Budget and

Projects


approve or

recommend

to the

Accounting

officer.


Table 10: TEDA bid Adjudication Committee Structure and non-compliance with the requirements

SUPPLY CHAIN

MANAGEMENT

PROCUREMENT

THRESHOLD AND

DELEGATIONS

(TABLE 10) VALUE

OF PURCHASE

PROCUREMENT METHOD AND

REQUIREMENTS

DELEGATED

AUTHORITY

OVERSIGHT ROLE PROCUREMENT

REQUIREMENTS

DEVIATIONS

REASONS INTERVENTION/ ACTION

TAKEN

0 to R2,000 Petty Cash CFO CFO N/A N/A N/A

R2 0001 to R10 000 3 ( three) Quotations CEO CEO N/A N/A N/A

R10,000 to R30 000 3 ( three) formal Written price

quotation

CEO CEO N/A N/A N/A

R30 001 to R200

000

3 ( three) formal written quotations CEO CEO Non-advertisement on

website

Website was on

developmental

stage

Website developed

and functional

Tenders above

R200 000 to R10

million and long

term contracts

A competitive bidding process :

Advertising the tender for a

period of 30 days in the

newspaper and Government

tender bulletin.

Advertising of the tender in

newspapers;

Allocate in accordance with the

preferential points system

Bid

adjudication

Committee

CEO 1. 5th Africa Public

Private Partnership

Conference

2. Procurement of

legal services on

appointment of

Ningiza Horner

3. EME (SAITEX)

Single Source

Selection

Conference

The legal opinion

required had to

do with the

Accounting

officer

Single Source

Selection

Deviation motivated

and approved

Deviation motivated

and approved

Deviation motivated

and approved

Tenders above R10

million

A competitive bidding process :

Advertising the tender for at least

30 days in newspapers;

Allocate in accordance with the

preferential points system

CEO TEDA BOARD N/A N/A N/A


CHAPTER 3

3.1 SERVICE DELIVERY PERFORMANCE

TEDA entered into a Service Delivery Agreement with CoT and the agreement is subject to annual review by the City. The SDA was used as a basis for the

development of the TEDA business plan of 2014/15

3.2 PERFORMANCE OVERVIEW -

Table 11a: TEDA Contribution to the SDBIP 2013/14

STRATEGIC OBJECTIVE KEY PERFORMANCE INDICATOR 2013/14 TARGET ANNUAL PERFORMANCE

ACHIEVED

TARGET ACHIEVED OR NOT

ACHIEVED

Promote shared economic

growth and job creation

Nr of new income earning

opportunities facilitated (TEDA) 1000 80 920

Promote shared economic

growth and job creation

Number of SMMEs and

entrepreneurs supported

(TEDA) 500 271 229

*TEDA facilitated the Porsche Investment into the City to the value of R120 million against an annual target of R1 billion.

Table 11b: TEDA Performance Scorecards for 2013/14

STRATEGIC OBJECTIVE KEY PERFORMANCE

INDICATOR

2013/14 TARGET ANNUAL PERFORMANCE

ACHIEVED

TARGET ACHIEVED

OR NOT ACHIEVED

CORRECTIVE MEASURES

2. Promote shared

economic growth and

job creation

Develop Economic

Strategy that factors

CoT and Conventional

Economic Drivers

Develop and

implement Economic

Strategy that factors

CoT and Conventional

Economic Drivers

Export Development and

Promotion Implementation

Plan & Investment Outlook

have been finalized.

Achieved

2. Promote shared

economic growth and

job creation

Concluded research

and developed

feasibility studies

Develop and

Implement Inner City

Revitalization and

EPWP Programme

Development

TEDA is working closely with

the Tsosoloso Programme,

DED, Road and Transport,

City Planning to execute

identified projects, and

develop business cases for

newly identified projects.

EPWP capacity will be

assigned to identified

projects.

Not achieved TEDA is working very closely with

the Tsosoloso Programme, DED,

Roads and Transport, City

Planning, to execute identified

projects, and develop business

cases for newly identified

projects. EPWP capacity will be

assigned to identified projects

2. Promote shared

economic growth and

Improved trade,

investment and tourism

Improved trade,

investment and tourism

One Tshwane Company

managed to establish a

Achieved



INDICATOR


ACHIEVED

TARGET ACHIEVED

OR NOT ACHIEVED

CORRECTIVE MEASURES

job creation coordination and

management

coordination and

management

Exhibitions and Events

Management Strategic

Land Consolidation

and Integration

business partnership with

Indian company as a result

of TEDA facilitation of

Tshwane companies’

participation in the Indian

business delegation.

Received follow up requests

regarding further

information on TITIIC from

South African Embassies and

Economic Representatives

abroad.

Identified and held

meetings with key

stakeholders after Tshwane

Business Forum

Attended DTI Integrated

National Export Strategy

Stakeholders workshop

2. Promote shared

economic growth and

job creation

Identified and

promoted Tshwane

trade and investment

areas and aftercare

4 Identified and

promoted Tshwane

trade areas and

aftercare

Investor visitation

programme commenced in

2 trade areas. Visited AIDC

in Automotive Supplier Park

in Roslyn and Ford-SA in

Silverton and provided after

care to Ford SA.

Reference Document Plan

on Export Development and

Promotion Implementation

has been submitted.

Position Paper on Tshwane

Exporters Awards has been

finalised

Not achieved After care will be conducted in

the new financial year.



INDICATOR


ACHIEVED

TARGET ACHIEVED

OR NOT ACHIEVED

CORRECTIVE MEASURES

Investment outlook study

has been submitted and

TEDA official formed part of

the consultants’ team which

engaged with various

stakeholders including large

foreign enterprises in

Tshwane. The study will be

used to effect appropriate

aftercare programme

2. Promote shared

economic growth and

job creation

Properly facilitated and

hosted local, regional

and global events and

activities.

Properly facilitated

and hosted local,

regional and global

events and activities

China Expo – Participated in

the CIFIT Expo mission in

partnership with the DTI to

promote TITIIC in China

Africa Public Private

Partnership – Teda brand

exposure to international

market on the on the 3- 5

December

Participated in the Pan

African Parliament 10th year

celebration Exhibition.

Brand exposure in the NTI

(National Tooling Initiative

Programme)

Exhibition in Mining Indaba

in Cape Town.

Hosted the TEDA Funding

Fair

Participated in the SAITEX

Exhibition

Achieved

6. Financial

Sustainability

Mobilized funds, CoT,

National / Provincial,

10% Mobilized funds as

per the funding from

Not achieved Funding model will be developed

and implemented before the end



INDICATOR


ACHIEVED

TARGET ACHIEVED

OR NOT ACHIEVED

CORRECTIVE MEASURES

Private sector , Donors COT and as per the

strategic Plan

of the financial year.

5.Promote Governance

and Active Citizenry

Consolidated strategic

thrust and reporting

100% Compliance

reporting (Strategy and

Budget)

100% - reports submitted

within the stipulated

timeframes.

Not Achieved TEDA will synchronize the

reporting dates to CoT and that

of the Board meetings



Management and

coordination of the

various components

within the organization.

Effective functioning of

TEDA across all Sections

Critical policies

implemented, basic

operating systems

implemented, critical posts

filled, performance

agreements signed by

Executives.

Achieved



TEDA Board and

management

compliance as per

applicable legislation

Effective functioning of

the Board and

committee

Meeting documents

prepared and circulated.

Minutes of meetings finalized

and action lists circulated.

Corporate Governance

Policy Framework

developed and approved.

Terms of Reference of Board

committees reviewed.

MoI approved by Council.

Register of interest updated.

Statutory returns and notices

filed with CIPC

Achieved



Compliant TEDA

policies and regulations

100 % Compliance to


Most approved policies

implemented and complied

with.

Not Achieved Monitoring compliance with




Adequate auditing

services and audit

committee tasks

Appointment of the

Internal audit capacity

and effective

functioning of Audit

committee

TEDA makes use of a co-

sharing arrangement with

CoT

Achieved



INDICATOR


ACHIEVED

TARGET ACHIEVED

OR NOT ACHIEVED

CORRECTIVE MEASURES



Strategy, mitigation,

action and generic

items , identified fraud,

corruption and theft

and Corrective Models

Risk register developed Risk register developed. Achieved

2. Promote shared

Economic Growth and

job creation

Analysis: local

economics; property

market, investment

trends, and sustainable

interventions.

Report of Analysis with

proposed actions on

local economics;

property market,

Investment trends, and

sustainable

interventions.

Final Export Development

and Promotion Plan

submitted

Final Investment Outlook

submitted

Achieved

2. Promote shared

Economic Growth and

job creation

Secured FDI’s for

purpose of improved

Tshwane economic

development

4 Secured FDIs for

purpose of improved

Tshwane

Investment by Porche S.A

worth R120 million

Not achieved TEDA will review investor

attraction strategies.

2. Promote shared

Economic Growth and

job creation

Project Plan and

Implementation Model

supported by

Stakeholders including

the COT

Project Plan and

Implementation Model

supported by

Stakeholders including

the COT

TEDA adopted several COT

projects via its Project

Management Framework.

According to the TEDA/DED

SLA, TEDA provides financial

support to the projects while

DED remains technical

partner to the stakeholders.

Joint reporting is done by

TEDA and DED on each

project

Achieved

6. Financial

Sustainability

Effective capital and

investment

management and

TEDA sustainability

100% Compliance in

reporting Budget

Reports

100 Achieved



Effective and compliant

supply chain

management and

reporting

100% Compliant SCM

will relevant prescripts

100 Not Achieved Continuous monitoring of the

policy implementation.



Effective human

resources management

92% Fully Capacitated

TEDA and all legislative

prescripts developed

and monitored

All critical policies

developed and

implemented.

Not Achieved Appointment of an Expert on

development of Organizational

design.



INDICATOR


ACHIEVED

TARGET ACHIEVED

OR NOT ACHIEVED

CORRECTIVE MEASURES

5.Promote sound

Governance and

Active Citizenry

Budget aligned

Operational Plans,

Business Plan

compliance

Budget aligned

Operational Plans ,

Business Plans 100%

compliance with

relevant prescripts

Budget aligned plans

implemented and prescripts

were adhered to.

Achieved

5. Promote sound

Governance and

Active Citizenry

Develop relations with

the city budget section.

100% implement

integrated Financial

systems

Relations with the City

Budget section have been

maintained

Achieved

5. Promote sound

Governance and

Active Citizenry

Comply with City

Budget Instrument

100% Implement

Integrated Financial

System-

Due to prioritization of funds,

a fully integrated financial

system has not been

implemented

Not achieved The integrated financial system

will be implemented in the

2014/15 financial year.

6.Improve Financial

Sustainability

Effective and

Compliant TEDA

Funding Mobilization for

Other Projects

Effective and

Compliant TEDA

Funding Mobilization for

Other Projects

Model for income

generation not yet

developed

Not achieved TEDA mobilization plan to be

developed and implemented

before the end of quarter 4

2.Promote shared

economic growth and

job creation

Revitalization and

Maintenance of

Designated Property

Portfolio

Revitalization and

Maintenance of

Designated Property

Portfolio

Unit not yet in operation and

work will be carried out in

14/15 financial year.

Not achieved TEDA will set up an asset

management unit that will deal

with this KPI and discussions are

underway to establish the unit

and build capacity to deliver on

the KPI.

5. Promote sound

Governance and

Active Citizenry

Best case scenario ICT

connectivity

Fully Integrated ICT

System

ICT Governance Framework

has been approved, ICT

Terms of Reference and

Internet Usage has been

approved.

Not achieved ICT governance framework is in

the process of being developed.

TEDA will be having a draft

framework by end of march 2014.

5. Promote sound

Governance and

Active Citizenry

Best internal and

external

communications

processes, systems and

management

Best internal and

external

communications

processes, systems and

management

Development of the

Communication and

Marketing strategy.

Development of the Media

policy.

Compiled 4 media releases

on APPP, TEDA Profile, SMME

Funding Fair and TITIIC.

Placing of articles in JHB

Achieved



INDICATOR


ACHIEVED

TARGET ACHIEVED

OR NOT ACHIEVED

CORRECTIVE MEASURES

stock exchange publication,

Frontier Market Network,

Sawubona Magazine,

Leadership Magazine, SME

online publication.

Arranging media interviews

on Tshwane FM and Power

FM with Focus on SMME

Funding Fair.

Coverage received from

Sowetan on the Funding

Fair, CNBCA for APPP, Power

FM and Tshwane Radio.

Launching of the TEDA

website and regularly

updating it.

Receiving brand exposure

on Frontier Market Network

and successfully received 6

investments leads.

Launch of the electronic

newsletter.

Interacted and joined the

State Owned Entities

Communication Forum.

Securing a domain name for

TITIIC website and

developing Terms of

Reference for the

development of TITIIC

Website.

Streamlining internal

Communication by

establishing one point of



INDICATOR


ACHIEVED

TARGET ACHIEVED

OR NOT ACHIEVED

CORRECTIVE MEASURES

dissemination of

organizational information.

Printing, layout design and

editing of the Annual report

for 2012/13 financial year


CHAPTER 4

4.1 HUMAN CAPITAL MANAGEMENT

TEDA Organogram and staff component

During the financial year 2013/14 financial year, the company managed to attract skills across

the business. The staff component of TEDA is currently at 37 with two (2) being contract

workers. The organization has six executives, two (2) males and four (4) females. There was only

one (1) resignation.

Table 12: EEA report on (Female positions, people with disabilities

JOB LEVELS BLACK

(A/C/I)

WHITE FOREIGN

NATIONALS

GENDER GRAND

M F M F M F M F Total

Executives 2 4 0 0 0 0 2 4 6

Senior

Management

6 5 0 0 0 0 6 5 11

Middle

Management

2 5 0 0 0 0 2 5 7

Operational 3 2 0 0 0 0 3 2 5

Support 0 5 0 0 0 0 0 5 5

Total Permanent 13 21 0 0 0 0 13 21 34

Temps & Interns 1 2 0 0 0 0 1 2 3

Grand Total 14 23 0 0 0 0 14 23 37

There is a significant number of female representation (23) in comparison with a total of 14

males. Currently women occupy 66 % of executive roles in TEDA.

Furthermore 63% of the total staff head count is represented by black females whereas 38 % of

positions are occupied by black males.


Table 13: No of approved positions filled and vacant

4.2 HUMAN CAPITAL POLICIES

Priority for this financial year was the development of human resources policies to ensure an

effective management of human capital. Fourteen (14) relevant management policies have

been approved to bring synergy between employee value proposition and the organisations’

people management philosophy as well as legislative prescripts. Process and Systems have

been developed to ensure proper work flow. Staff complement of TEDA increased to 37 within

a short space of time.

BUSINESS UNITS

2013/14 APPROVED POSTS AS

PER THE STRUCTURE

NO. OF FILLED

POSTS

VACANT POSTS

Office of the CEO

10

3

7

Company Secretary

3

3

-

CFO

11

8

3

Corporate Services

13

9

4

Asset Management

6

-

6

Trade and Investment

5

4

1

Projects Portfolio

7

4

3

Marketing and

Communications

7

6

1

Total

62

37

25


4.3 DISCLOSURES

Human Resources Disclosures concerning TEDA

Table 14: Human Resources Head Count per UNIT 2012/13 2013/14 CHALLE

NGES

INTERVENTION

/ACTION TO

BE TAKEN UNITS NO

.

OF

PO

STS

NO

.

OF

FILL

ED

PO

STS

NO. OF

VACA

NCIES

VACA

NCIES

%

UNITS NO

.

OF

PO

STS

NO

.

OF

FILL

ED

PO

STS

NO. OF

VACA

NCIES

VACA

NCIES

%

Chief

Executiv

e Officer

17 3 14 82 Chief

Executiv

e Officer

13 6 7 54 Post to be

filled in

2014/15

Chief

Financia

l Officer

18 1 17 94 Chief

Financia

l Officer

11 8 3 28

Corpora

te Affairs

9 0 9 100 Corpora

te Affairs

13 9 4 31

Strategi

c

Partners

hips

7 0 7 100 Strategi

c

Partners

hips

100

Asset

Manage

ment

9 0 9 100 Asset

Manage

ment

6 - 6 100

Projects

Officer

9 0 9 100 Projects

Officer

7 4 3 43

Trade

and

Investm

ent

5 0 5 100 Trade

and

Investm

ent

5 4 1 20

Tourism

and

Marketin

g

9 0 9 100 Tourism

and

Marketin

g

7 6 1 15

Legal

services

9 0 9 100 Legal

services

TOTAL 92 4 88 96 62 37 25 40

There is a significant number of female representation (23) in comparison with a total of 14 males.

Currently women occupy 66 % of executive roles in TEDA.

Furthermore 63% of the total staff head count is represented by black females whereas 38 % of positions

are occupied by black males.


TRAINING AND DEVELOPMENT

Table 15: Training MANAG

EMENT

TYPE

OF

TRAI

NING

2012/13 2013/14

GEN

DER

EMPL

OYEES

IN

POST

AS 30

JUNE

2012/

13

LEARNE

RSHIPS

SKILLS

PROGR

AMMES

&

OTHER

SHORT

COURSE

S

OTHE

R

FOR

MS

OF

TRAI

NING

TO

TAL

GEN

DER

EMPL

OYEES

IN

POST

AS 30

JUNE

2013/

14

LEARNE

RSHIPS

SKILLS

PROGR

AMMES

&

OTHER

SHORT

COURSE

S

OTHE

R

FOR

MS

OF

TRAI

NING

TO

TAL

REM

ARKS

Offici

als

F Y n/a 2 2 4

MANAGEMENT OF LEAVE

Table 16: Leave Records

TYPES

OF

LEAVE

2012/13 2013/14 DAYS

TOTAL

SICK

LEAVE

ON SPECIAL

AND SICK

LEAVE

(MEDICAL

CERTIFICATE

PROVIDED,

DEATH

CERTIFICATE

AND STUDY

LEAVE INFO)

DAYS DESCRIPTION TOTAL

SICK

LEAVE

ON SPECIAL AND

SICK LEAVE

(MEDICAL

CERTIFICATE

PROVIDED, DEATH

CERTIFICATE AND

STUDY LEAVE INFO)

Annual

leave

6 Documents

were provided

to HR

6 Annual

Leave

- - 274

Special

(study)

Leave

- Documents

were provided

to HR

2 Sick Leave 128 Documents were

provided to HR

128

Special

(study)leave

- Documents were

provided to HR

47

Unused

rows

Family

Responsibility

Leave

- Documents were

provided to HR

8

Unpaid

Leave

- 8

In 2012/13 only 6 and 2 days of annual and study leave days were utilized respectively. There

was an active sick leave utilization of 128 days in 2013/14.

Study leave reported an increase in utilization of 47 days in comparison with 2 days utilized in

2012/13. Only 8 days of both unpaid and family responsibility leave were used in 2013/14


Table 17: Human Resources Gender and Race

INDICATOR BASELINE 2012/13

TARGET

2012/13

ACTUAL

2013/14

TARGET

2013/14

ACTUAL

COMMENTS

African staff % of

total staff

0 n/a 100% 100% 60% TEDA is currently

undergoing an

Organisationl Design

exercise that will inform

the structure and related

targets

Female staff as % of

total staff

0 n/a 66% 75% 62%

African Female

managers % of

senior management

0 n/a 33% 75% 46%

4.4 COMPETENCY LEVELS OF FINANCE AND SUPPLY CHAIN OFFICIALS

Table 18: Progress report on financial competency development

Financial Competency Development: Progress report Description A.

Total number of

officials employed

by Municipality

(Regulation

14(4)(a) and (c)

Consolidated:

Competency

assessments

completed for A

(Regulation

14(4)(b) and (d)

Consolidated:

Total number of

officials whose

performance

agreements

comply with

Regulation 16

(Regulation

14(4)(f)

Consolidated:

Total number of

officials that meet

prescribed

competency

levels (Regulation

14(4)(e)

Financial officials 4 0 4 0

Accounting officer 0 0 0 0

Chief financial

officer

1 0 1 0

Senior manager 1 0 1 0

Any other financial

officers

2 0 2 0

Supply Chain

Management

officials

3 0 3 0

Head of Supply

Chain

Management unit

0 0 0 0

Supply Chain

Management

senior manager

1 0 1 0

Any other Supply

Chain

Management

officials

2 0 2 0

TOTAL 7 0 7 0


TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd

(Registration number: 2006/019396/07)

ANNUAL FINANCIAL STATEMENTS For the year ended 30 June 2014

TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014

Table of Contents


Contents Page

General Information 41

Accounting Officer‘s Responsibilities and Approval 42 Directors Report

43

Report of the Audit Committee 48 Report of the Independent Auditors – Auditor General 49 Statement of Financial Position 50 Statement of Financial Performance 51 Statement of Changes in Net Assets 52 Cash Flow Statement 53 Statement of Comparison of Budget and Actual Amounts

54-55

Accounting Policies 56-72 Notes to the Annual Financial Statements 73-89


Accounting Officer’s Responsibilities and Approval


The accounting officer is required by the Municipal Finance Management Act (Act 56 of 2003) (MFMA) and the Companies Act of South Africa, to maintain adequate accounting records and is responsible for the content and integrity of the Annual financial statements and related financial information included in this report. It is the responsibility of the accounting officer to ensure that the Annual financial statements fairly present the state of affairs of the municipal entity as at the end of the financial year and the results of its operations and cash flows for the year then ended. The external auditors are engaged to express an independent opinion on the Annual financial statements and was given unrestricted access to all financial records and related data. The Annual financial statements have been prepared in accordance with the effective Standards of Generally Recognised Accounting Practices (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The Annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The accounting officer acknowledges that he is ultimately responsible for the system of internal financial control established by the municipal entity and places considerable importance on maintaining a strong control environment. To enable the accounting officer to meet these responsibilities, the accounting officer sets standards for internal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the municipal entity and all employees are required to maintain the highest ethical standards in ensuring the municipal entity‘s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the municipal entity is on identifying, assessing, managing and monitoring all known forms of risk across the municipal entity. While operating risk cannot be fully eliminated, the municipal entity endeavors to minimize it by ensuring that appropriate infrastructure, controls, systems and ethical behavior are applied and managed within predetermined procedures and constraints. The accounting officer is of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the Annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or deficit. The accounting officer has reviewed the municipal entity‘s cash flow forecast for the year to 30 June 2015 and, in the light of this review and the current financial position, acknowledges that the municipal entity will have to secure access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently reviewing and reporting on the municipal entity's Annual financial statements. The Annual financial statements have been audited by the municipal entity's external auditors in accordance with the Companies Act, 2008 (Act No 71 of 2008) and their report is presented on pages ___ to ___. The Annual financial statements set out on pages _____ to _____ which have been prepared on the going concern basis, were approved by the board directors, and accounting officer on ___________________ and signed by: __________________________ Accounting Officer


Director’s Report


2.5.3 Incorporation

The company was incorporated in South Africa on 23 June 2006 and obtained its certificate to commence business on the same day.

2.5.4 Review of activities

2.5.5 Main business and operations

TEDA was established in June 2006 by the City of Tshwane (CoT) with the main purpose of investment attraction into the City and therefore addressing inequality, unemployment and poverty. TEDA developed six strategic objectives in the 2013/14 financial year flowing from its mandate. The core business of TEDA is made up of Trade and Investment and Project Management Portfolio, with Marketing and Communications unit as a hybrid between support and core business. There is a strong element of business development within the core operations which will be incorporated in the future under one of the units to create a complete value chain. TEDA recognises the City of Tshwane in its capacity as shareholder, as the main stakeholder among the other government and private sector institutions which it has to partner with in executing its mandate. TEDA has formed some strategic partnerships in the year under review with some critical stakeholders for instance, the National Department of Trade and Industry (DTI), the Gauteng Growth and Development Agency (GGDA), SA Chamber of Commerce, SA Embassies abroad and Embassies of Foreign countries in South Africa, SA Economic Attaches‘ in Foreign countries, other local and International Trade and Investment Agencies.

2.5.6 Important policy decisions and strategic issues facing the entity

TEDA being in its second year of operation is still faced with the challenge of making itself a visible and known brand. The Agency is still striving towards making an impact within the City of Tshwane in the economic development milieu. There is a need for a concerted effort by TEDA to focus on implementation of projects and initiatives that will contribute towards the achievement of the Tshwane Vision 2055. While the CoT funding to TEDA is gradually being tapered down in the medium term period, there are plans to access alternative sources of funding and develop income generating initiatives for future TEDA sustainability. One of the strategic issues facing TEDA is making strategic choices underpinned by guiding philosophical standpoints. For example choices between the agency being the direct provider of services or playing a facilitation role, working in collaboration with partners and other providers or being in competition with them and choosing between many or few offerings with low and high impact respectively against the backdrop of available resources.

2.5.7 Comment on significant events that have taken place during the year

In the year under review TEDA has added more human capacity across its support and core units, however the core units still need more capacity in order to achieve TEDA‘s business scorecard for the ensuing years. TEDA hosted a funding fair in the latter part of the financial year targeted at small, medium and medium enterprises (SMME‘s) and the event attracted approximately 300 participants from a arrange of SMME‘s. This was done in conjunction with other government funding agencies for information dissemination on the support and access to funding opportunities that are available for SMME‘s. TEDA took part in the China Expo as delegates under the National Department of Trade and Industry. This presented the Agency with an opportunity to market itself among international stakeholders operating within the similar arena of economic development. TEDA also co-sponsored and facilitated the Africa Public Private Partnership event with the aim of exposing TEDA to the African and international markets.

2.5.8 Comment on major projects undertaken or completed during the year


Director’s Report


TEDA implemented co-funded projects with the City of Tshwane as per the Service Level Agreement entered into between the two parties. TEDA met its funding obligations for these projects and reported on them accordingly. These were:

National Tooling Institute Programme (NTIP) – the tooling academy has absorbed 79

learners in the 2013/14 financial year. These learners are in a programme which will

ensure that they are employed within the manufacturing industry;

Hammanskraal Stalls- Some of these stall are complete whilst others are still under

construction with completion anticipated in early 2014/15 financial year.

Automotive Industry Development Centre (AIDC) . TEDA’s contribution was towards

funding of the setting up of the Project Management Office (PMO).

Refurbishment of the Mamelodi rondavels within the proposed cultural precinct.

One of the important projects managed by TEDA is the Tshwane International Trade and Investment Conference (TITIIC) aimed at promoting the City as an investment destination. This project is scheduled for launch in May 2015.

2.5.9 Information on predetermined objectives

Six strategic objectives were developed in line with the TEDA mandate. Annual and quarterly targets were set as milestones to achieve the objectives. These were duly reported on, on a monthly, quarterly and mid- term basis to the Board as well as the City of Tshwane. TEDA had challenges in meeting its set targets in the 2013/14 financial year due to the limited resources, both human and financial. However, a performance improvement plan was developed towards ensuring that some targets were adequately met through the limited means available. Notably targets on the SMME support improved in the last quarter of 2013/14 due to the inaugural Funding Fair hosted by TEDA. A portfolio of evidence was also created for each quarter performance reports to substantiate the achieved milestones. The detailed report on how well TEDA did on the key performance indicators and targets is contained in the chapter 3 of the annual performance report.

2.5.10 Policies Approved by the Board

A total of 14 institutional policies were approved in the year under review. Additional policies are being developed to ensure that TEDA subscribes fully to imperatives such as ―triple bottom line‖ reporting in terms of Corporate Governance frameworks.

2.5.11 Staffing

In the year under review TEDA made strides in appointing Executives in all business and support units. For the ensuing years the agency will have full human resource capacity comprising suitable qualified staff to enable TEDA to deliver on its mandate. This is in light of the Organisational Design exercise which has started and which will not only advise on the appropriate structure for TEDA in line with its strategy but also define the Human Capital model for TEDA in line with the envisaged new status of a larger entity.

2.5.12 Going concern

Tshwane Economic Development Agency has an accumulated surplus of R5 million. The annual financial statements have been prepared on a going concern basis as the directors have no reason to believe that the entity will not be a going concern in the foreseeable future. The entity is wholly owned by the City of Tshwane and the municipality has no intention to liquidate the entity.

2.5.13 Subsequent events


Director’s Report


The directors are not privy to any matter or circumstance arising since the end of the financial year that can significantly affect the financial results.

2.5.14 Value Added Tax

The entity was not registered as a VAT vendor at the end of the reporting date. However it is registered for VAT effective from 1

st July 2014.

2.5.15 Share capital and equity

There were no changes in the authorised or issued share capital of the entity during the year under review.

2.5.16 Directors’ personal financial interest

The Directors have declared that they do not have any personal interests in the contracts entered into by the entity.

2.5.17 Directors

The Directors of the entity during the year under review and to the date of this report are as follows: Name Nationality Changes

South African Mr L Vutula (Chairperson) South African Ms RS Bahula- Ermias South African

Mr H Gouvelis South African

Ms LD Haskins South African Ms CBB Mahlati South African Retired on the 10

th March 2014

Ms J Matsho South African

Mr CR Mpyane South African

Ms NM Ntsinde South African

Mr FK Sibanda South African

Ms N Singh South African

Mr JL Thubakgale South African

Mr MW Yates South African

2.5.18 Corporate Governance

The Directors are committed to promoting a high ethical and performance excellence culture within the company and to ensuring the highest standards of corporate governance compliance, corporate social responsibility, risk management and prudent financial management. The Board is responsible to the company‘s shareholder, the City of Tshwane, for the implementation of the shareholder compact and long term business strategy through oversight on the management of the company‘s operations in line with the company‘s vision, i.e. TEDA strives to be a leading African economic development agency.

The Board of Directors confirms that the company has, during the year under review, complied with the King Code on Corporate Governance (King III).


Director’s Report


Board appraisals were not performed due to lack of sufficient funds for this purpose.

The salient features of the entity‘s adoption of King III are outlined below:

2.5.19 Board of directors

The Board:

Retains oversight control over the entity, its plans and strategy;

Acknowledges its responsibilities as to strategy, compliance with internal policies, laws

and regulations, effective risk management and performance measurement,

transparency and effective communication both internally and externally by the entity.

Is of a unitary structure comprising 11 non-executive directors all of whom are

independent non-executive directors as defined in the code.

2.5.20 Director Development

The entity has during the year under review provided corporate governance training to its Directors.

2.5.21 Board Committees

The Board has delegated certain functions to the following well-structured committees. All board members with the exception of the chairperson serve in more than one committee. (Detail relating to the frequency of meetings and attendance of committees is contained in the performance report)

2.5.22 Finance and Risk Committee

The committee comprises eight non-executive directors. The committee exercise oversight role on finance and risk related matters.

2.5.23 Projects Committee

The committee comprises six non-executive directors. The committee exercise oversight role on the planning and execution the projects that are in line with the entity‘s business plan. It also monitors the performance and spending progress of the projects.

2.5.24 Remuneration Committee

This committee comprises eight non-executive directors. The committee exercise oversight role on human resources and remuneration matters affecting the entity.

2.5.25 Social and Ethics Committee

The committee was established in terms of section 43 of the Companies Regulations, 2011 and has four members. This committee exercises its responsibilities in terms of subsection (5) of the Regulations.

2.5.26 Chairperson and Chief Executive

The chairperson is a non-executive and independent director (as defined by the King Code).


Director’s Report


The roles of Chairperson and Chief Executive Officer (CEO) are separate. The collective responsibilities of management vest in the CEO and as such the CEO bears the ultimate responsibility for all day to day management functions. The TEDA Board delegates responsibilities to management through the CEO, who in turn sub-delegates to Executives reporting to him.

2.5.27 Company Secretary

The Company Secretary was appointed with effect from 01 August 2013 and performs the functions as required in terms of section 88 of the Companies Act, 2008.

2.5.28 Audit Committee

The Audit Committee function is performed by the group audit and performance committee established by the City of Tshwane for all its municipal entities.

2.5.29 Risk Management

The entity has performed risk assessment and compiled a risk register for 2013/14.

2.5.30 Internal Audit

The entity utilised the shared service provided by the City of Tshwane‘s group internal audit unit to perform internal audit functions. 10. Holding entity

The entity is wholly owned by the City of Tshwane Metropolitan Municipality. 11. Auditors

The Auditor-General of South Africa will continue in office in accordance with section 90 of the Companies Act of South Africa and section 92 of the Municipal Finance Management Act. 12. Dividends

No dividends were declared for the year under review. _________________ L. Vutula Chairperson: Board of Directors

______________ Date


Report of Audit Committee



Report of the Independent Auditor – Auditor General


TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Financial Position


Restated

Notes

2014 (R)

2013 (R)

ASSETS

Current assets 7,637,871 18,067,102

Cash and Cash Equivalents 4 5,152,789 15,837,370

Other Receivables 5 255,350 -

Prepayments 6.1 2,229,732 2,229,732

Non-Current Assets 9,934,891 1,873,210

Property, Plant and Equipment 7 9,756,622 1,834,475

Intangible Assets 8 178,269 21,039

Deferred Taxation 9 - 17,696

Total assets 17,572,762 19,940,312

LIABILITIES

Current Liabilities 9,342,888 17,184,818

Trade and other Payable 10 3,809,736 1,423,308 Loan from shareholder 11 - 588,482 Unspent Grant 12 2,461,277 14,036,837 Taxation 23 3,071,875 1,136,191

Non-Current Liabilities 465,451 -

Operating lease 13 455,751 - Deferred Taxation 9 9,700 -

Total liabilities 9,808,339 17,184,818

Net Assets 7,764,423 2,755,494

Shareholders‘ equity 14 1,000 1,000 Accumulated surplus 7,763,423 2,754,494

Net Assets 7,764,423 2,755,494

TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Financial Performance


Restated

Notes 2014 2013

(R) (R) Revenue

Exchange transactions 15.1

Interest earned 176,095 26,046

Other operating income 4,250 -

Non-exchange revenue 15.2

Grant revenue recognised 59,075,560 10,963,164

Total Revenue 59,255,905 10,989,210

Expenses

Employees costs 16 (19,452,372) (1,718,695)

Remuneration of Board Members 17 (3,397,149) (1,953,900)

Depreciation and amortisation expense 18 (1,895,453) (12,218)

General Expenses 19 (11,404,005) (2,784,013)

Projects 20 (13,425,376) -

Marketing, Trade and Investment 21 (2,646,887) (525,758)

Loss on assets written off 22 (62,655) -

Total Expenditure (52,283,897) (6,994,584)

Profit before net finance cost 6,972,008 3,994,626

Net Finance Cost - -

Profit before taxation 6,972,008 3,994,626

Taxation 23 (1,963,079) (1,118,495)

Profit for the year 5,008,929 2,876,131

Attributable to:

Net Asset holders of the Entity 5,008,929 2,876,131

TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Changes in Net Assets


Note Share capital and equity

Accumulated Surplus/(Deficit) Total net assets

(R) (R)

Opening balance as reported at 01July 2012

1,000 (121,637) (120,637)

Changes in net assets

Restated surplus for the year 26

-

2,876,131

2,876,131

Total changes

-

2,876,131

2,876,131

Balance at 01 July 2013 as restated

1,000 2,754,494 2,755,494

Changes in net assets

Surplus for the year

- 5,008,929

5,008,929

Total changes

-

5,008,929

5,008,929

Balance as at 30 June 2014

1,000 7,763,423

7,764,423

TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Cash Flow Statement


Note 2014 2013

(R) (R)

Cash flows from operating activities

Receipts 47,661,431 25,026,046

Transfers and Subsidies 47,500,000 25,000,000

Interest income received 157,181 26,046

Receipts from sale of tender documents 4,250 -

Payments (47,720,048) (7,526,299)

Compensation of Employees and Board Fees (22,411,471) (2,213,043)

Goods and Services (25,308,577) (5,313,256)

Net cash Generated from operating activities 24 (58,617) 17,499,747

Net cash outflows from operating activities

(58,617) 17,499,747

Cash flows from investing activities

(10,037,481) (1,760,265)

Purchase of Motor Vehicles - (1,067,708)

Purchase of Office Equipment (576,800) (357,064)

Purchase of Computer Equipment (1,304,086) (311,561)

Purchase of Office Furniture and Fixtures (7,968,717) (2,797)

Purchase of Intangible Assets (187,878) (21,135)

Cash flows from financing activities (588,482) 97,888

Loan received from shareholders - 97,888

Loan repayment to the shareholders (588,482) -

Net Increase (Decrease) in cash and cash equivalents

(10,684,581) 15,837,370

Cash and cash equivalents at the beginning of the year

15,837,370 -

Cash and cash equivalents at the end of the year 25 5,152,789 15,837,370

TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Comparison of Budget and Actual Amounts Budget prepared on cash basis of accounting


Original Budget

Roll-over

Adjustments

and Vireme

nt

Final budget

Actual amounts on

comparable basis

Difference

between final budget

and actual

Percentage Spen

d

Refer Note

Revenue

Revenue from Non-exchange transactions

15.1

City of Tshwane- Transfers and rollover funds

47,500,0

00

14,036,

836

61,536,

836

47,500,

000

14,036,

836 77%

Revenue from exchange transactions

15.2

Interest Income - -

-

157,181

(157,18

1)

Other receipts and Operating Income (Tender Documents Sales)

- -

- 38,160

(38,160)

Total Revenue

47,500,000

14,036,

836

61,536,

836

47,695,

341

13,841,

495 78%

Expenditure

Employee costs

(24,000,000)

(1,483,

972)

6,443,4

72

(19,040,500)

(18,476,899)

(563,60

1) 97%

Remuneration of Board Members

(1,500,000)

(100)

(2,443,473)

(3,943,473)

(3,934,573)

(8,900)

100%

17

General Expenses and Marketing, Trade and Investment

(13,450,0

00)

(6,941,

771)

(100,00

0)

(20,491,871)

(19,160,280)

(1,331,

591) 94%

19 and

21

Projects Expenditure

(8,550,000)

(5,610,

993)

(14,160,993)

(12,882,794)

(1,278,

199) 91% 20

Operating Expenditure

(47,500,000)

(14,036,836)

(57,636,836)

(54,454,546)

(3,182,

290)

Capital Budget - - (3,900,

000)

(3,900,

000)

(3,925,

376) 25,376 101% 27

Total Expenditure

(47,500,000)

(14,036,836)

- (61,536,837)

(58,379,922)

(3,156,

914) 95%

(Deficit)/Surplus for the year - - - - (10,684,581)

10,684,

581

Actual Amount on Comparable Basis as presented in the Budget and Actual Comparative Statement

- - - - (10,684,581)

10,684,

581

Reconciliation (Basis Difference)

Loss on assets written off (62,655

)

Taxation

(1,963,

079)

Depreciation and Amortisation of Intangible Assets

(1,895,

453)

TSHWANE ECONOMIC DEVELOPMENT AGENCY (Pty) Ltd Annual Financial Statements for the year ended 30 June 2014 Statement of Comparison of Budget and Actual Amounts Budget prepared on cash basis of accounting


Operating Lease Liability

(455,75

1)

Movement in receivables

255,35

0

Statement of Comparison of Budget and Actual Amounts (Continues)

Movement in trade and other payables

(2,386,

426)

Movement in Unspent Grant

11,575,

560

Fixed and Intangible Assets

10,037,482

Loan repayment to Shareholder (CoT)

588,482

Actual Amount in the Statement of Financial Performance

6,972,0

08


Accounting policies to Annual Financial Statements _____________________________________________________________________


The principal accounting policies applied in the preparation of these Annual Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

1. Basis of Preparation

1.1 Statement of Compliance

The Annual financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board and Municipal Financial Management Act No 56 of 2003. Those relevant to TEDA are listed below;

Standard number Standard Description Effective Date

GRAP1 (as revised 2012) Presentation of Financial Statements 01 April 2013

GRAP2 (as revised 2012) Cash Flow Statements 01 April 2013

GRAP3 (as revised 2012) Accounting policies, changes in accounting estimates and errors

01 April 2013

GRAP9 (as revised 2012) Revenue from exchange transactions 01 April 2013

GRAP13 (as revised 2012) Leases 01 April 2013

GRAP14 (as revised 2012) Events after the reporting date 01 April 2013

GRAP17 (as revised 2012) Property, plant and equipment 01 April 2013

GRAP19 (as revised 2012) Provisions, contingent liabilities and contingent assets 01 April 2013

GRAP20 (as revised 2012) Related parties 01 April 2013

GRAP21 (as revised 2012) Impairment of non-cash generating assets 01 April 2013

GRAP23 (as revised 2012) Revenue from non-exchange transactions 01 April 2013

GRAP24 (as revised 2012) Presentation of budget information in the Financial Statements

01 April 2013

GRAP25 (as revised 2012) Employee benefits 01 April 2013

GRAP31 (as revised 2012) Intangible assets 01 April 2013

GRAP104 (as revised 2012) Financial Instruments 01 April 2013

IAS12 (as revised in 1998) Income Taxes 01 April 2013

1.2 Basis of Measurement, Functionality and presentation currency

These Annual financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention unless specified otherwise. They are presented in South African Rand, which is the entity‘s functional currency.

1.3 Significant judgements and sources of estimation uncertainty

In preparing the Annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the Annual financial statements and related disclosures. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Annual financial statements are disclosed below.

1.3.1 Trade receivables and/or loans and receivables

The entity assesses its trade receivables and loans and receivables for impairment at each statement of financial position date. In determining whether an impairment loss should be recorded in the statement of financial performance, the entity makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The entity assesses its trade receivables and loans and receivables for impairment at the end of each reporting period.




In determining whether an impairment loss should be recorded in surplus or deficit, the entity makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. Each receivable is reviewed individually at year end.

1.3.2 Property, plant and equipment

The entity‘s management determines the estimated useful lives and residual values of property, plant and equipment. These assessments are made on an Annual basis and use historical evidence and current economic factors to estimate the values. Administrative computer equipment, office furniture and equipment, exhibits and motor vehicles are not componentised. These assets do not have significant parts that are considered to have an estimated useful life different to the estimated useful life of the asset as a whole.

1.3.3 Fair value estimation

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the entity for similar financial instruments. The carrying amount of cash and cash equivalents, trade and other receivables and trade and other payables approximated their fair values due to the short-term maturities of these assets and liabilities.

1.3.4 Impairment testing

The entity reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. If the recoverable amount is less than the carrying amount, an impairment loss should be recognised in the statement of financial performance.

1.3.5 Provisions

Provisions were raised and management determined an estimate based on the information available. Additional disclosures of these estimates of provisions are included in note 10.1.

1.3.6 Taxation

Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The entity recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The entity recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the entity to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the entity to realise the net deferred tax assets recorded at the statement of financial position date could be impacted. Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. The entity establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company‘s domicile. As the Company assesses the probability for litigation and subsequent cash outflow with respect to taxes as remote, no contingent liability has been recognised. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable surplus will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable surplus together with future tax planning strategies.

1.3.7 Effective interest rate

The entity used the prime interest rate to discount future cash flows.

1.3.8 Allowance for doubtful debts




On debtors an impairment loss is recognised in surplus and deficit when there is objective evidence that it is impaired. The impairment is measured as the difference between the debtors carrying amount and the present value of estimated future cash flows discounted at the effective interest rate, computed at initial recognition.

1.4 Property, plant and equipment

Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period.

The cost of an item of property, plant and equipment is recognised as an asset when:

it is probable that future economic benefits or service potential associated with the item will flow to the entity; and

the cost of the item can be measured reliably.

Property, plant and equipment were initially measured at cost.

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost.

Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at date of acquisition.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories.

Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management.

Property, plant and equipment are carried at cost less accumulated depreciation and any impairment losses.

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Average useful life

Computer equipment 3 years Furniture and Fixtures 5 – 16 years Motor Vehicle 5 years Office equipment 5 – 8 years

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

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

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

Items of entity are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset.

The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. The gain or loss arising from the de-recognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. Gains shall not be classified as revenue.




Assets which the agency holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities are transferred to inventories when the rentals end and the assets are available-for-sale. These assets are not accounted for as non-current assets held for sale. Proceeds from sales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the entity.

1.5 Intangible assets

An asset is identified as an intangible asset when it:

is capable of being separated or divided from an entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, assets or liability; or

arises from contractual rights or other legal rights, regardless whether those rights are transferable or separate from TEDA or from other rights and obligations.

An intangible asset is recognised when:

it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the TEDA; and

the cost or fair value of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

An intangible asset acquired through a non-exchange transaction, the cost shall be its fair value as at the date of acquisition.

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when:

it is technically feasible to complete the asset so that it will be available for use or sale.

there is an intention to complete and use or sell it.

there is an ability to use or sell it.

it will generate probable future economic benefits or service potential.

there are available technical, financial and other resources to complete the development and to use or sell the asset.

the expenditure attributable to the asset during its development can be measured reliably.

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

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.

The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.

Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Useful life

Computer software 3 years

Intangible assets are derecognised: when no future economic benefits or service potential are expected from its use or disposal. The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It is recognised in surplus or deficit when the asset is derecognised.




1.6 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity.

The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibles.

A financial asset is:

cash;

a residual interest of another entity; or

a contractual right to:

receive cash or another financial asset from another entity; or

exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.

A financial liability is any liability that is a contractual obligation to:

deliver cash or another financial asset to another entity; or

exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity.

Financial instruments at fair value comprise financial assets or financial liabilities that are instruments held for trading. A financial instrument is held for trading if:

it is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or

on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short term profit-taking;

non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at fair value at initial recognition; and

financial instruments that do not meet the definition of financial instruments at amortised cost or financial instruments at cost.

Classification

The entity has the following types of financial assets (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:

Class Category

Cash and cash equivalent Financial asset measured at amortised cost Receivable from exchange transactions Financial asset measured at amortised cost

The entity has the following types of financial liabilities (classes and category) as reflected on the face of the statement of financial position or in the notes thereto:

Class Category

Payables from Exchange transaction Financial liability measured at amortised cost

Initial recognition

The entity recognises a financial asset or a financial liability in its statement of financial position when the entity becomes a party to the contractual provisions of the instrument.

Transaction costs are recognised as part of the cost of the instrument. Subsequent to initial recognition these instruments are measured as set out above.

1.6.1 Financial Risk Management

Overview




The entity has exposure to the following risks from its use of financial instruments: • Credit risk; • Liquidity risk; and • Interest rate risk. This note presents information about the entity‘s exposure to each of the above risks, the entity‘s objectives, policies and processes for measuring and managing risk, and the entity‘s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the entity‘s risk management framework. The entity‘s risk management policies are established to identify and analyse the risks faced by the entity, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the ent ity‘s activities. The entity aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. Credit risk

Credit risk is the risk of financial loss to the TEDA if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the TEDA‘s receivables from customers. Potential concentrations of credit risk consist mainly of cash and cash equivalents. Deposits

TEDA limits its counterparty exposures from its money market investment operations by only dealing with well-established financial institutions of high quality credit standing as approved by the National Treasury.

The credit qualities of counterparties are also reviewed on a continuous basis by the National Treasury.

Liquidity risk

Liquidity risk is the risk that TEDA will not be able to meet its financial obligations as they fall due. The entity‘s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the entity‘s reputation. The entity receives government grants every year based on budget requirements. Interest rate risk

TEDA has adopted a policy of ensuring that the entity‘s income and operating cash flows are substantially independent of changes in market interest rates, due to the underlying nature of the business. TEDA has no interest bearing assets or liabilities. Accordingly the entity‘s income and expenses are substantially independent of changes in markets rates of interest. As a result, changes in the market rate of interest have a negligible impact on the financial performance of the entity. Capital management

TEDA has developed systems and internal controls that are sufficient and effective in maintaining efficient levels of both components of working capital, current assets and current liabilities. The working capital management ensures that TEDA has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.

1.7 Employee benefits Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the entity has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.




Post-employment benefits: Defined contribution plans

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

Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined contribution plans where the entities obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan. A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit in surplus or deficit when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund Post-employment benefits: Defined benefit plans

These post-employment benefit plans other than defined contribution plans. Defined benefit plans may be unfunded, or they may be wholly or partly funded by contributions by an entity, and sometimes its employees, into an entity, or fund, that is legally separate from the reporting entity and from which the employee benefits are paid. The payment of funded benefits when they fall due depends not only on the financial position and the investment performance of the fund but also on an entity‗s ability (and willingness) to make good any shortfall in the fund‗s assets. Therefore, the entity is, in substance, underwriting the actuarial and investment risks associated with the plan. TEDA does not participate in any defined benefit plan as at 30 June 2014.

Medical benefits

The entity provides medical benefits for its employees through defined contribution plans. The entity has no further

payment once contributions have been paid. The contributions are recognised as employee benefit expenses in

profit or loss in the periods during which the services are rendered by the employees.

Bonus plans

The entity recognises a provision for bonuses where contractually obliged or where there is a past practice that has

created a constructive obligation as a result of services received from the employee and the obligation can be

measured reliably.

Leave entitlement

Employee entitlements to Annual leave are recognised when they accrue. An accrual is raised for the estimated liability for Annual leave as a result of services rendered by employees up to the reporting date. The related expense is recognised as employee benefit expenses in profit or loss.

1.8 Income tax

Current tax assets and liabilities

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the Statement of Financial Position date. Deferred tax assets and liabilities

A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neither accounting surplus nor taxable profit (tax loss). A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable surplus will be available against which the deductible temporary difference can be utilised. A deferred tax




asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neither accounting surplus nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses to the extent that it is probable that future taxable surplus will be available against which the unused tax. Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences, except:

When the deferred tax liability arises from the initial recognition of goodwill or an asset

or liability in a transaction that is not a business combination and, at the time of the

transaction, affects neither the accounting surplus nor taxable surplus or deficit

In respect of taxable temporary differences associated with investments in subsidiaries,

associates and interests in joint ventures, when the timing of the reversal of the

temporary differences can be controlled and it is probable that the temporary

differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable surplus will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax deficit can be utilised, except when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting surplus nor taxable surplus or loss. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable surplus will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable surplus will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

1.9 Provisions and Contingencies

Provisions are recognised when the entity has a present obligation as a result of a past event, for which it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the obligation. All the provisions of the entity are short-term in nature and measured at present value of the expenditures expected to be required to settle the obligation.

Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.

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




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

Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognised as an interest expense.

A provision is used only for expenditures for which the provision was originally recognised. Provisions are not recognised for future operating deficits.

If an entity has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and measured as a provision.

A constructive obligation to restructure arises only when an entity:

has a detailed formal plan for the restructuring, identifying at least: the activity/operating unit or part of a activity/operating unit concerned; the principal locations affected; the location, function, and approximate number of employees who will be compensated for services

being terminated; the expenditures that will be undertaken; and when the plan will be implemented; and

has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it.

A restructuring provision includes only the direct expenditures arising from the restructuring, which are those that are both:

necessarily entailed by the restructuring; and

not associated with the on-going activities of the entity

No obligation arises as a consequence of the sale or transfer of an operation until the entity is committed to the sale or transfer, that is, there is a binding agreement.

Contingent assets and contingent liabilities are not recognised but disclosed in the financial statements.

1.10 Revenue

1.10.1 Revenue from exchange transactions

Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners.

An exchange transaction is one in which the entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm‘s length transaction.

1.10.1 Revenue from exchange transactions (Continues)

Measurement

Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates.

Rendering of services

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are




1.10.2 Revenue from non-exchange transactions

Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, an entity either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange.

Recognition

An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow. As the entity satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction.

Measurement

Revenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the entity.

When, as a result of a non-exchange transaction, the entity recognises an asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue.

The transfer from City of Tshwane Metropolitan Municipality is recognised when it is probable that future economic benefits will flow to TEDA and when the amount can be measured reliably. A transfer is recognised as revenue to the extent that there is no further obligation arising from the receipt of transfer payment.

Conditions on transferred assets are stipulations that specify that the future economic benefits or service potential embodied in the asset is required to be consumed by the recipient as specified or future economic benefits or service potential must be returned to the transferor.

1.11 Finance Income

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in the Statement of Financial Performance, using the effective interest method.

1.12 Unauthorised, Irregular, Fruitless and wasteful expenditure

Unauthorised expenditure is treated as a current asset in the statement of financial position until such expenditure is recovered from a third party or funded from future revenue.

satisfied:

• the amount of revenue can be measured reliably; • it is probable that the economic benefits or service potential associated with the transaction will flow to

the entity; • the stage of completion of the transaction at the reporting date can be measured reliably; and • the costs incurred for the transaction and the costs to complete the transaction can be measured

reliably.

When services are performed by an indeterminate number of acts over a specified time frame, revenue is recognised on a straight line basis over the specified time frame unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed.

When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of completion is determined by total services to be performed.




Irregular expenditure means expenditure, other than unauthorised expenditure, incurred in contravention of or not in accordance with a requirement of any applicable legislation, including the Municipal Finance Management Act, the State Tender Board Act, or any regulations made in terms of this act, or any provincial legislation providing for procurement procedures in that provincial government.

Irregular expenditure is treated as expenditure in the Statement of financial performance after approval per the departmental delegations.

Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned

Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. Fruitless and wasteful expenditure must be recovered from the responsible official (a debtor account should be raised), or the vote if the responsible official cannot be determined. It is treated as current assets in the statement of financial position until such expenditure is recovered from the responsible official or funded from future revenue.

1.13 Related parties

The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the national sphere of government are considered to be related parties.

Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions.

Close members of the family of a person are considered to be those family members who may be expected to influence, or be influenced by, management in their dealings with the entity.

Only transactions with related parties not at arm‘s length or not in the ordinary course of business are disclosed.

1.14 Key management personnel

The key management of TEDA refers to the Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Executive Directors.

1.15 Prior year errors

Prior year errors are omissions from, and misstatements in, an entity‘s financial statements for one or more prior periods arising from failure to use or the misuse of reliable information that was available when the financial statements for that period were issued, and could have been reasonably expected to be taken into account in those financial statements. All prior year errors are corrected retrospectively to the earliest period practicable. Comparative amounts for prior years in which the error occurred are restated.

1.16 Commitments

Commitments are legal obligations to undertake in a given way, at a given time in the future. Usually commitments refer to the requirement for parties to a futures contract to make or receive delivery of the underlying commodities on the expiration date of the contract or through a valid purchase order.

1.17 Budget information

Budget information in accordance with GRAP 1 and 24, has been provided in a separate disclosure note to these Annual financial statements. General purpose financial reporting by TEDA shall provide information on whether resources were obtained and used in accordance with the legally adopted budget.




The Annual financial statements and the budget are on a different basis of accounting therefore a comparison with the budgeted amounts for the reporting period have been included in the Statement of comparison of budget and actual amounts.

1.18 Comparative figures

Prior year comparatives

When the presentation or classification of items in the Annual financial statements is amended, prior period comparative amounts are also reclassified and restated, unless such comparative reclassification and / or restatement is not required by a Standard of GRAP.

The nature and reason for such reclassifications and restatements are also disclosed.

Where material accounting errors, which relate to prior periods, have been identified in the current year, the correction is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly.

Where there has been a change in accounting policy in the current year, the adjustment is made retrospectively as far as is practicable and the prior year comparatives are restated accordingly.

The presentation and classification of items in the current year is consistent with prior periods.

1.19 Offset

Where a legally enforceable right of offset exists for recognised financial assets and financial liabilities, and there is, an intention to settle the liability and realise the asset simultaneously, or to settle on a net basis, all related financial effects are offset.

1.20 Leases

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

Operating leases - lessee

All leases that TEDA enters into as a lessee, and where the lessor retains substantially all the risks and rewards of ownership of the underlying asset, are classified as operating leases. Payments made under operating leases are charged against revenue on a straight-line basis over the term of the lease.

2. New standards and interpretations

2.1 Approves Standards and interpretations issued, but not yet effective

Standard number Standard name Effective date (if applicable)

GRAP 18 Segment Reporting No effective date

GRAP 20 Related Party Disclosures final – Original No effective date

GRAP 82 Service Concession arrangements No effective date

GRAP 105 Transfer of Functions Between Entities Under Common Control – Original No effective date

GRAP 106 Transfer of Functions Between Entities Not Under Common Control – Original No effective date

GRAP 107 Mergers – Original No effective date

GRAP 108 Statutory receivables No effective date

GRAP 18 Segment Reporting:

The standard requires the identification and aggregation of the operating segments of the entity into reportable




segments. For each of the reportable segments identified details of the financial performance and financial position will be disclosed. The precise impact of this on the financial statements of the entity is still being assessed but it is expected that this will only result in additional disclosures without affecting the underlying accounting. This standard does not yet have an effective date. GRAP 20 Related Party Disclosures final – Original:

This Standard requires disclosure of related party relationships, transactions and outstanding balances, including commitments, in the consolidated and separate financial statements of the reporting entity in accordance with the Standard of GRAP on Consolidated and Separate Financial Statements. This Standard also applies to individual financial statements.

Related party transactions and outstanding balances within an economic entity are to be disclosed in an entity‘s financial statements. Intra-group related party transactions and outstanding balances are eliminated in the preparation of the consolidated financial statements of the economic entity. The entity has early adopted the standard and its disclosure requirements, which prompt the entity to make separate disclosures about the major classes of transactions with management that they have undertaken, refer to Note 16 and 17 of the Annual financial statements. GRAP 32 Service Concession arrangements – Original:

A service concession arrangement is a contractual arrangement between a grantor and an operator in which: (a) the operator uses the service concession asset to provide a mandated function on behalf of the grantor for a specified period of time; and (b) the operator is compensated for its services over the period of the service concession arrangement. A service concession asset is an asset used to provide a mandated function in a service concession arrangement that: (a) is provided by the operator which: (i) the operator constructs, develops, or acquires from a third party; or (ii) is an existing asset of the operator; or (b) is provided by the grantor which: (i) is an existing asset of the grantor; or (ii) is an upgrade to an existing asset of the grantor. Recognition and measurement of a service concession asset

The grantor shall recognise an asset provided by the operator and an upgrade to an existing asset of the grantor as a service concession asset if: (a) the grantor controls or regulates what services the operator must provide with the asset, to whom it must provide them, and at what price; and (b) the grantor controls—through ownership, beneficial entitlement or otherwise—any significant residual interest in the asset at the end of the term of the arrangement. The grantor shall initially measure the service concession asset at fair value. Where the grantor recognises a service concession asset in accordance with paragraph .07 (or paragraph .08 for a whole-of-life asset), the grantor shall also recognise a liability. The grantor shall not recognise a liability when an existing asset of the grantor is reclassified as a service concession asset in accordance with paragraph .10, except in circumstances where additional consideration is provided by the operator, as noted in paragraph.13. The entity has not yet adopted the standard and there should be no impact on the annual financial statements as no concession arrangements has taken place. GRAP 105 Transfer of Functions Between Entities Under Common Control - Original:

The standard refers to a transaction or event in which an acquirer can be identified, and that occurs between entities under common control. A transfer of functions between entities under common control is a reorganisation and/or reallocation of functions between entities that are ultimately controlled by the same entity before and after a transfer of functions, and that control is not transitory. For a transaction or event to occur between entities under common control, the transaction or event needs to be




undertaken between entities within the same sphere of government or between entities that are part of the same economic entity. Entities that are ultimately controlled by the same entity before and after the transfer of functions are within the same economic entity. The extent of non-controlling interests in each of the entities that are involved in a transfer of functions before and after the transfer of functions is not relevant in determining whether the transaction or event involves entities under common control.

Recognition and measurement Accounting by the acquirer Para.35 As of the transfer date, the acquirer shall recognise the purchase consideration paid (if any) to the

transferor and all the assets acquired and liabilities assumed in a transfer of functions. The assets acquired and liabilities assumed shall be measured at their carrying amounts.

Accounting by the transferor Para.51 As of the transfer date, the transferor shall derecognise from its financial statements, all the assets

transferred and liabilities relinquished in a transfer of functions at their carrying amounts.

The entity has not yet adopted the standard and there should be no impact on the annual financial statements as no transfer of functions has taken place. GRAP 106 Transfer of Functions Between Entities Not Under Common Control - Original:

A transfer of functions undertaken between entities not under common control could involve an acquisition or transfer of another entity or the acquisition or transfer of part of another entity. Para.20 This Standard defines a transfer of functions as the reorganisation and/or there-allocation of functions between entities by transferring functions between entities or into another entity. The transfer of functions must be undertaken between entities not under common control. An acquirer might obtain control of an acquire in a variety of ways, for example:

(a) by transferring cash, cash equivalents or other assets (including net assets that constitute a function); (b) by incurring liabilities; (c) by exchanging residual interests; (d) by providing more than one type of consideration; or (e) without transferring consideration, including through a binding arrangement.

Para.21 A transfer of functions between entities not under common control may be structured in a variety of ways, which include but are not limited to:

(a) one or more functions become controlled entities of an acquirer or the net assets of one or more functions are legally acquired or transferred by the acquirer; or (b) one entity transfers its net assets, or its owners transfer their residual interests, to another entity or its owners.

The impact of this on the annual financial statements of the entity is not significant since the entity has not been a party to transfer of functions between entities not under common control. GRAP 107 Mergers – Original

The standard refers to a transaction or event for where no acquirer can be identified. A merger is the establishment of a new combined entity in which none of the former entities obtains control over any other and no acquirer can be identified. Determining whether an acquirer can be identified includes a consideration of, amongst other things, which of the combining entities initiated the transaction or event, the relative size of the combining entities, as well as whether the assets or revenue of one of the entities involved in the transaction or event significantly exceed those of the other entities. A merger can either involve the combination of two or more entities in which one of the combining entities continues to become the new reporting entity, or a new reporting entity is established from the combining entities. The concept of control and a function is not relevant in a transaction or event that meets the definition of a merger. The impact of this on the annual financial statements of the entity is not significant since the entity has not been a party to any merger. GRAP 108 Statutory Receivables – Original




Statutory receivables are receivables that: (a) arise from legislation, supporting regulations, or similar means; and (b) require settlement by another entity in cash or another financial asset. The transaction amount (for purposes of this Standard) for a statutory receivable means the amount specified in, or calculated, levied or charged in accordance with, legislation, supporting regulations, or similar means. Measurement

An entity shall initially measure statutory receivables at their transaction amount. The statutory receivables shall be measured initially in accordance with the relevant Standard of GRAP. The amount determined on initial measurement in accordance with another Standard of GRAP is the same as the transaction amount described in this Standard. Recognition

An entity shall recognise statutory receivables as follows: (a) if the transaction is an exchange transaction, using the Standard of GRAP on Revenue from Exchange Transactions; (b) if the transaction is a non-exchange transaction, using the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers); or (c) if the transaction is not within the scope of the Standards of GRAP listed in (a) or (b) or another Standard of GRAP, the receivable is recognised when the definition of an asset is met and, when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity and the transaction amount can be measured reliably. The impact of this on the annual financial statements of the entity will not be significant once the standard is effective.

3 Financial Risk Management

Information about TEDA‘s exposure to risks, its objectives, policies and processes for measuring and managing

such risks are disclosed in the Accounting policies. The quantitative disclosure is provided in this note.

3.1 Credit Risk

Exposure to credit risk

Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The entity only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit

risk at the reporting date was:

2014 2013

(R) (R)

Trade and Other Receivables 255,350 - Cash and cash Equivalents 5,152,789 15,837,370




5,408,139 15,837,370

At 30 June 2014, TEDA did not consider there to be any significant concentration of credit risk that had not been

adequately provided for.

No security is held against Cash and Cash Equivalents.

3.3 Liquidity Risk

The entity‘s risk to liquidity is a result of the funds available to cover future commitments. The entity manages liquidity risk through an on-going review of future commitments.

2014

Trade and Other

Payables

Less than 1 year 3,809,736

Between 1 and 2 years -

3,809,736

2013

Trade and Other Payables

Less than 1 year 1,423,308

Between 1 and 2 years -

1,423,308


Notes to Annual Financial Statements


2014 2013

4 Cash and Cash Equivalents (R) (R)

Cash and cash equivalents consist of the following:

Cash on hand 436 2,965

Cash at bank* 5,152,353 15,834,405

5,152,789 15,837,370

*The entity has a current and salaries bank accounts with Standard Bank which is used to meet the entities obligations. Bank Statement balances Cashbook balances

2014 2013 2014 2013

Primary Account - 410791830 3,426,693 15,834,405 3,427,129 15,837,370

Salaries Account - 011057491 1,725,660 - 1,725,660 -

5,152,353 15,834,405 5,152,789 15,837,370

5 Account Receivables

SARS (PAYE credit)* 202,069 -

Board Members 34,094 -

Employees 273 -

Interest Income accrued 18,914 -

255,350 -

*The SARS credit emanates from over payment of PAYE and the receivable from board members relates to overpayments to board members.

6 Prepayment

6.1 Prepaid 2,229,732 2,229,732

2,229,732 2,229,732

Prepaid expenses relates to funds paid in advance to CSIR to secure a venue for hosting Tshwane International Trade and Infrastructure Investment Conference (TITIIC) to be held in May 2015 and was previously reported that the conference will take place in May 2014 which was postponed to May 2015.




7 Property, Plant and Equipment

7.1 Reconciliation of Carrying Value

2014

2013

Cost

Accumulated

Depreciation & Impairm

ent

Carrying Value

Cost Accumulated Depreciation & Impairment

Carrying Value

Motor Vehicles 1,067,708

(217,377) 850,331

1,067,708 (3,835) 1,063,873

Office Equipment 933,862 (75,993) 857,869

357,064 (2,699) 354,365

Computer Equipment 1,650,260

(311,594) 1,338,666

419,028 (5,561) 413,467

Furniture & Fixtures 7,971,488

(1,261,732) 6,709,756 2,797 (27) 2,770

Total 11,623,31

8 (1,866,6

96) 9,756,622

1,846,597 (12,122) 1,834,475

7.2 Reconciliation of Property, Plant and Equipment – 2013

Carrying Value

Opening Balance

Additions

Disposal

Transfers

Depreciation

Impairment

Revaluation

Prior Year Errors

Carrying Value

Closing Balance

Motor Vehicles

1,067,7

08 (3,835) 1,063,873

Office Equipment

357,06

4 (2,699) 354,365

Computer Equipment

419,02

8 (5,561) 413,467

Furniture & Fixtures

2,797 (27) 2,770

Total

1,846,597

(12,122) 1,834,475

7.3 Reconciliation of Property, Plant and Equipment – 2014

Carrying Value

Opening Balance

Additions

Disposal

Transfers

Depreciation

Impairment

Revaluation

Prior Year Errors

Carrying Value

Closing Balance

Motor Vehicles

1,063,873 - (213,542) 850,331

Office Equipment

354,365 576,80

0 (73,296) 857,869

Computer Equipment

413,467 1,304,0

90 (62,65

5) (316,236) 1,338,666

Furniture & Fixtures

2,770 7,968,7

18

(1,261,732)

6,709,756

Total 1,834,475 9,849,6

08 (62,65

5)

(1,864,806)

9,756,622




Change in accounting estimates

During the year ended 30 June 2014, TEDA reviewed the useful lives of its assets. The following classes of assets were reviewed; Useful lives before change Useful lives after change

Furniture and Fixtures 5 years 5 -16 years Office Equipment 5 years 5 - 8 years The overall net effect of the change is a reduction in the depreciation charge of R99 550.

8 Intangible Assets

8.1 Reconciliation of Carrying Value

2014 2013

Cost

Accumulated Amortisation &

Impairment

Carrying Value

Cost

Accumulated Amortisation &

Impairment

Carrying Value

Computer Software

209,013

(30,744) 178,269 21,135

(96) 21,039

Total 209,013

(30,744) 178,269

21,135

(96) 21,039

8.2 Reconciliation of Intangible Assets – 2013

Carrying

Value Openi

ng Balan

ce

Additions

Disposals

Transfers

Amortisation

Impairment

Revaluation

Internally

Developed

Carrying Value

Closing Balance

Computer Software

- 21,135 (96) 21,039

Total - 21,135 (96) 21,039

8.2 Reconciliation of Intangible Assets – 2014




Carrying

Value Openi

ng Balan

ce

Additions

Disposals

Transfers

Amortisation

Impairment

Revaluation

Internally

Developed

Carrying Value

Closing Balance

Computer Software

21,039 187,87

7

- - (30,647) - - - 178,269

Total 21,039 187,87

7 - - (30,647) - - 178,269

*Impairment test was performed by management on all of its assets including intangible assets using the following impairment indicators;

a. Inspection of any physical damage, b. Disposal plans, c. Performance of the assets and d. Changes in technological environment.

As a result of the impairment test TEDA management could not find any asset/s that warrants being impaired since most of the assets are fairly new and no damage was discovered during the asset verification process and also no significant technological changes were identified which have an adverse effect on computer equipment and other assets sensitive to technological changes.


9 Deferred taxation

2014 2013

(R) (R)

Deferred taxation balances are presented in the statement of financial position as follows:

- Deferred tax asset - 17,696

- Deferred tax liability

9,700 -

9,700 17,696

Temporary differences

Property, equipment and intangible assets (402,925) (14,971)

Provision - leave pay 265,615 32,667

Unspent grant 689,157 3,930,314

Section 24C allowance (689,157) (3,930,314)

Straight lining of lease 127,610 -

(9,700) 17,696

Movement in deferred taxation

Balance at the beginning of the year 17,696 -

Property, equipment and intangible assets (387,954) (14,971)

Provision - leave pay 232,948 32,667

Unspent grant (3,241,157) 3,930,314

Section 24C allowance 3,241,157 (3,930,314)

Straight lining of lease 127,610 -

(9,700) 17,696

10 Trade and Other Payables from Exchange Transactions

Trade creditors*

1,848,111 175,600

Board fees Accrual 227,534 92,043

Employee Contributions Accrual 161,463 3,259

Payable: SARS 624,002 1,035,739

Leave Pay Accrual^ 10.1 948,626 116,667

Total creditors

3,809,736 1,423,308

*Other creditors of R26,374 disclosed in prior year are reclassified under Trade Creditors to achieve fair presentation of balances.

^Leave pay accrual has been reclassified under Trade and Other Payables.

10.1 Employee benefit liability Provision for leave entitlement 948,626 116,667

Total Provisions 948,626 116,667

Reconciliation of Movement in Employee benefit liability

Opening Balance 116,667 -

Provisions for Leave entitlement raised 1,612,386 116,667

Leave entitlement used (780,427) -

Closing Balance 948,626 116,667


2014 2013

(R) (R)

11 Loan from shareholders

Opening Balance 588,482 49,640

Payments made by CoT on behalf of TEDA - 538,842

Loan repayment (588,482) -

Closing Balance - 588,482

12 Unspent Grant

Transfers from City of Tshwane 47,500,000 25,000,000

Movements during the year

Balance at the beginning of the year 14,036,837 -

Income recognised during the year (59,075,560) (10,963,163)

(2,461,277) 14,036,837

The Unspent Grant is a transfer from the CoT to enable the entity to achieve its strategic objective as per the Service Delivery Agreement.

13 Operating lease liability

Operating lease smoothing effect 455,751 -

455,751 -

Operating lease liability is from the rental of offices used by TEDA situated at: 349 Witch-Hazel Avenue; Eco-origin Building; Block F; Highveld Extension 70; Centurion for the period of three years starting from 1st of November 2013. It is caused by the escalation on rental payable at every anniversary date.

14 Share Capital and equity

Authorised 1,000 ordinary shares of R1 each 1,000 1,000

Issued - -

Ordinary 1,000 ordinary shares of R1 each 1,000 1,000

15 Revenue

15.1 Revenue from exchange transactions Interest Earned

Bank: Current Account

176,095 26,046

Other Operating Income

Sale of Tender Documents 4,250 -

Total

180,345 26,046

15.2 Revenue from non-exchange transactions

Grant revenue recognised 59,075,560 10,963,164

Total 59,075,560 10,963,164

16 Employee Related Costs

2014 2013

(R) (R)


Basic Salary/Wages costs

17,672,289 1,557,798

Contributions for UIF,SDL, pension fund, group risk and medical aid

948,124 44,230

Movement in leave provision 831,959 116,667

Employee Related Costs

19,452,372 1,718,695

2014 2013

(R) (R)

Employees Employees

Average number of employees 39 09

Included in the employee costs are the following key management personnel: 16.1 Remuneration of the Chief Executive Officer as at 31 April 2014

Basic Salary

1,720,367 810,031

Contributions to UIF,SDL, Group Risk, Medical and Pension Fund

169,160 32,379

Total

1,889,527 842,410

16.2 Remuneration of the Chief Financial Officer

Basic Salary

1,185,552 399,405 Contributions to UIF,SDL, Group Risk, Medical and Pension Fund

36,018 5,190

Total

1,221,570 404,595

16.3 Remuneration of other senior managers

Basic Salary

4,379,072 - Contributions to UIF,SDL, Group Risk, Medical and Pension Fund

234,311 -

Total

4,613,383 -

17 Remuneration of Board Members

L Vutula (Chairperson) 288,504 217,348

RS Bahula- Ermias 278,569 319,696

H Gouvelis 290,024 171,632

LD Haskins 183,954 225,476

CBB Mahlati (Retired March 2014) 215,581 151,944

J Matsho 385,853 184,568

CR Mpyane 323,447 349,852

NM Ntsinde 287,298 286,632

FK Sibanda 252,790 11,688

N Singh 240,406 11,688

JL Thubakgale 340,204 11,688

MW Yates 310,519 11,688

Total Board Members' Remuneration 3,397,149 1,953 900

18 Depreciation and Amortisation Expense

Motor Vehicles

213,542 3,835

Office Equipment

73,296 2,699


Computer Equipment

316,236 5,561

Furniture & Fittings

1,261,732 27

Intangible Assets

30,647 96

Total Depreciation and Amortisation

1,895,453 12,218

19 General Expenses

2014 2013

(R) (R)

Included in general expenses are the following:-

Advertising 765,318 776,518

Audit Fees 175,813 -

Bank charges 31,232 14,676

Catering 132,415 33,990

Communication Expenses 131,304 3,270

Conferences and delegations 186,935 753,265

Consulting fees (including legal expenses)* 2,894,852 817,199

Insurance 78,700 927

IT Expenses 678,982 -

Licence fees – vehicles - 1,140

Printing and stationery 384,379 119,870

Rental of Offices and storage 5,086,739 -

Travel and subsistence 272,368 205,293

Utilities 217,909 -

Other 367,059 57,865

11,404,005 2,784,013

*Expenditure of R525,758 incurred under consulting fees in 2013 has been reclassified to Marketing, Trade and Investment. Provision for leave pay of R116,667 under general expenses in 2013 has been reclassified to employee cost. General expenses totaling R642,425 has been reclassifies as previously mentioned.

19.1 Fruitless and wasteful expenditure

Included above under other expenses is interest incurred amounting to R38,990 from SARS for late submission of PAYE,SDL and UIF, which was due to the delay in registering for PAYE,SDL and UIF.

Interest charges 38,990 -

38,990

20 Projects

National Tooling project 1,326,672 - TITIIC 680,776 - Stalls 4,700,000 - Special projects 4,117,928 - AIDC project 2,600,000 -

13,425,376 -

21 Marketing, Trade and Investment

Local & International Exhibitions 127,638 -

Trade Conferences & Missions 877,205 -

Research & Development - Marketing 955,762 -


Public Relations 45,363 -

Marketing Production* 640,919 525,758

2,646,887 525,758

*During 2013/14 financial year the entity incurred expenses amounting to R525,758 that was reported under consulting expenses and it has since been reclassified under marketing production item.

2014 2013

22 Loss on assets written off (R) (R)

Proceeds - -

Less : Carrying amount of assets written off 62,655 -

62,655 -

Computer equipment to the carrying value of R62,655 has been stolen.

23 Taxation

Normal tax 1,935,684 1,136,191

- Current year 1,935,684 1,136,191

- STC - -

- Over provision - Prior year - -

Deferred tax 27,395 (17,696)

- Current year 27,395 (17,696)

- Rate change - -

- Under provision - prior year - -

1,963,079 1,118,495

23.1 Taxation liability movement Opening balance 1,136,191 1,136,191 Current year 1,935,684 -

Closing balance 3,071,875 1,136,191

Reconciliation of the tax expense Tax in Note @ 28% 1,963,079 1,118,495 Profit before tax 6,972,008 3,994,626 Tax as a % of income before tax 28.16% 28.00% Reconciliation between applicable tax rate and average

effective tax rate

Tax effect on permanent differences 28% 28% Tax effect on non-deductible expenses 0.16% 0%

28.16% 0%

No provisional taxation has been paid.

24 Net cash flow generated by operating

activities


Net surplus (Deficit) as per Statement of Comprehensive income 5,008,929 2,876,131 Adjusted for items separately disclosed

Taxation 1,963,079 1,118,495 Loss on assets written off 22 62,655 - Adjusted for non-cash items: Depreciation and Amortisation of Intangible Assets 18 1,895,453 12,218 Movement in Operating Lease Liability 13 455,751 -

Net cash flow generated by operations before movements in

working capital 9,385,867 4,006,844

Movements in working capital 2014 2013

(R) (R)

(Increase) in prepaid expense - (2,229,732) (Increase) in receivables (255,350) - Increase in trade and other payables 2,386,426 1,685,799 Increase (Decrease) in deferred income (11,575,560) 14,036,836

Cash flow generated by operations (58,617) 17,499,747

25 Cash and cash equivalents

Cash and cash equivalents included in the cash flow statement comprise the following;

Cash on hand

436

2,965

Cash as per bank balances 5,152,353 15,834,405

5,152,789 15,837,370

26 Prior Year Errors

Adjustments amounting to R 2,025,222 were processed against Opening Retained Earnings. These adjustments emanated from the carrying amount of property, plant and equipment purchased and prepayment erroneously not deducted from the unspent grant balance as per GRAP 23, taxation expense and deferred tax amount that were incorrect. The impact of the adjustments is as follows:

Effect on statement of financial performance

Revenue

Increase in revenue realised from non-exchange transactions (3,968,580)

Increase in taxation expense 1,943,358

Net effect onSurplus(deficit) for the period (2,025,222)

Effect on statement of financial position

Non-current Asset

Decrease in deferred tax asset (818,736)

Current liability

Decrease in Unspent Grant liability 3,968,580

Increase in Taxation liability (1,136,191)

Non-current Liability

Decrease in deferred tax liability 11,569

Net effect on retained earnings 2,025,222


26.1 The impact of the above changes in the restated 2013 balances is as follows:

2013 as previously

Stated Change After Change

Statement of Financial Position effect

Non-current Asset

Deferred tax 836,433 (818,737) 17,696

Current liability

Deferred income liability (18,005,416) 3,968,580 (14,036,836)

Non-current Liability

Deferred tax liability (11,569) 11,569 -

Statement of Financial Performance effect

Revenue

Transfers from City of Tshwane (6,994,584) (3,968,580) (10,963,164)

Taxation 824,863 (1,943,358) (1,118,495)

26.1 Reclassification of Items The following Items are reclassified in order achieve fair presentation of balances. The reclassified items are listed below as follows;

2013 2013

Statement of Financial Performance (R) (R)

Amount Amount

Account Before After

General expense 3,426,438 2,784,013

Marketing, Trade and Investment - 525,758

Employee costs 1,718,695 1,602,028 The reclassification is for branding expenditure incurred that is now classified under Marketing, Trade and Investment from general expense and provision for leave expense from general expense now classified as employee costs.

Statement of Financial Position

Before After

Provision for leave pay* Trade and other payables - 11,1667

Other Creditors^ Trade and other payables - 26,374

*The reclassification is in line with GRAP 25. And the standard requires provision for leave pay to be part of Trade and Other Payables. ^The reclassification is to consolidate all other creditors items to Trade and other payables for easy of reference.

27 Purchase of Property, plant and equipment


During the period, the municipal entity acquired property, plant and equipment with an aggregate cost of R 10,037,748 which was acquired by means of funds from City of Tshwane. A total of R 9,990,480 was for cash purchases of fixed and intangible assets.

28 Budget

The entity has been allocated a budget of R 47.5 million and there is an approval to retain the surplus amounting to R 14 million which was effected during the adjustment period. The approved budget covers the period from 01 July 2013 to 30 June 2014. The budget and accounting bases differ. The financial statements are prepared on the accrual basis using a classification on the nature of expenses in the statement of financial performance. The financial statements differ from the budget, which is approved on the cash basis. A reconciliation between the actual amounts on the comparable basis as presented in the statement of comparison of budget and actual amounts and the actual amounts in the cash flow statement for the period ended 30 June 2014 is presented below. The financial statements and budget documents are prepared for the same period. There is a basis difference: the budget is prepared on a cash basis and the financial statements on the accrual basis.

28.1 Reconciliation of cash flow to Budget and actual comparison statement

2014 Operating Financing Investing Total

Actual as per Budget and Actual comparative statement. 5,008,929 - (10,037,481) (5,028,552)

Basis Difference (5,067,546) (588,483) - (5,656,029)

Actual amount in the Statement of Cash Flows (58,617) (588,483) (10,037,481)

(10,684,581)

2013 Operating Financing Investing Total

Actual as per Budget and Actual comparative statement. 2,876,131 - 1,867,732 4,743,863

Basis Difference 14,623,616 97,888 (3,627,997) 11,093,507

Actual amount in the Statement of Cash Flows 17,499,747 97,888 (1,760,265) 15,837,370

TEDA considers 9% a material variance in monitoring spending trends, where a detail explanation of the variance is important in order to aid planning and decision making. The budget is as per the economic classification and explanation on spending is as follows;

28.2 Compensation of Employees

Compensation of employees has increased by 815% (R17,3 million) due to the recruitment drive aimed at ensuring that TEDA delivers on its strategic objects and that of the CoT as per the Service Delivery Agreement.

28.3 Remuneration to Board of Directors

The TEDA is continually growing in terms of size and vision strong leadership and solid governance structure is vital and achieving this, remuneration for board members has increased by 110% (R1.8 million) compared to 2012/13 expenditure of R1,5 million.

28.4 Goods and Services

TEDA is a fairly new entity and during the period cost for goods and services increased by 936% (R31 million) largely attributed to establishment cost of the entity. The entity has also implemented numerous projects in partnership with CoT.

28.5 Capital Expenditure

The entity procured large quantities of office furniture, equipment for and computers in order to provide a habitable and conducive working environment for its employees and total expenditure amounts to R3,8 million which a 123% increase compared to R1,7million of prior year.


The remaining budget is anticipated to be spent on commitments and accruals.

29 Related parties

Controlling municipality: City of Tshwane Metropolitan Municipality Municipal entity under the same control: Housing Company Tshwane Municipal entity under the same control: Sandspruit Water Works Association Compensation to board members and key management Refer to note 17 & 18

2014 2013

Related party balances:

(R) (R)

Loan accounts - Owing to related parties

City of Tshwane Metropolitan Municipality

- 588,842

Related party transactions:

Transfer made by the related party

City of Tshwane Metropolitan Municipality 47,500,000 25,000,000 Payment to the related party

City of Tshwane Metropolitan Municipality 588,482 108,473 Payment of creditors by related party


- 108,473 Payments of board fees by related party


- 385,704

30 Commitments

Approved and contracted 19,854,962 2,098,216

Total Commitments 19,854,962 2,098,216

30.1 Commitments under

operating lease

Not later than one year 7,817,094 -

Later than one year and not later than five years 11,441,226 -

Later than five years - -

Total Commitments 19,258,320 -

Operating lease commitment is the rental of offices used by TEDA situated at: 349 Witch-Hazel Avenue; Eco-origin Building; Block F; Highveld Extension 70; Centurion for the period of three years starting from 1st of November 2013.

30.2 Commitment Accounting

Purchase orders issued 596,642 2,098,216


Total Commitments 596,642 2,098,216

31 Additional Disclosures in Terms of Municipal Finance Management Act

2014 2013

33.1 PAYE, SDL and UIF (R) (R)

Opening balance

1,035,739 -

Current period payroll deductions

6,183,852 1,035,739

Amount paid

(6,634,578) -

Balance unpaid (Included in payables)

585,013 1,035,739

33.2 Employee Benefits

Pension Fund* 236,161 -

Group risk^ 94,204 -

Medical Aid‖ 559,539 -

889,904 -

*The entity has a pension fund defined contribution plan with Momentum where employees pay a fixed amount and the employer pays for the administration fees. ^*The entity has a group risk plan with Discovery Life employees pay a fixed amount and the employer pays for the administration fees.

―Medical Aid contributions are with Discovery Medical Aid Scheme and Bonitas Medical Aid Scheme.

33.3 Audit Fees

External Audit 175,813 -

175,813 -

32 Fruitless and Wasteful Expenditure

Reconciliation of fruitless and wasteful expenditure (included under general expenses)

Opening balance - -

Fruitless and Wasteful expenditure current year 38,990 -

Condoned or written off - -

Transfer to receivables for recovery – not condoned - -

Fruitless and Wasteful awaiting condonement 38,990 -

Reconciliation of Fruitless and Wasteful (included under general expenses) Included above under other expenses is interest incurred amounting to R38,990 from SARS for late submission of PAYE,SDL and UIF, which was due to the delay in registering for PAYE,SDL and UIF.


33 Irregular Expenditure

Reconciliation of irregular expenditure (included under general expenses)

Opening balance 1,188,088 -

Irregular expenditure current year - 1,188,088

Condoned or written off (1,188,088) -

Transfer to receivables for recovery – not condoned - -

Irregular expenditure - 1,188,088

Incident

Disciplinary steps/criminal proceedings

Non-compliance with the SCM regulations. Procurement made by CoT in relation to the acquisition of recruitment services to recruit TEDA CEO, CFO, Company Secretary and Office Manager.

None

34 Deviation from Supply Chain Management regulations

Paragraph 12(1)(a)-(d)of Government gazette No. 27636 issued on 30 May 2005 states that a supply chain management policy must provide for the procurement of goods and services by way of a:

Written or verbal quotation for values up to R2,000 up to R10,000 (VAT included),

Formal written quotations for values over R10,000 up to R200,000 (VAT included), and

Competitive bidding process for values above R200,000 (VAT Included).

Paragraph 36 of the same gazette states that the accounting officer may dispense with the official procurement process in certain circumstances, provided that he records the reasons for any deviations and then reports them to the next meeting of the accounting officer and includes a note to the annual financial statements. In terms of section 36(1)(a) of the Supply Chain Management Regulations, the accounting officer may dispense with the official procurement processes in the following instances:

in an emergency

if such goods or services are produced or available from a single provider only

for the acquisition of special works of art or historical objects where specifications are

difficult to complete

in any other exceptional case where it is impractical or impossible to follow the official

procurement processes.

Deviation from tender and quotation process:

Sole suppliers

Emergency

Impracticality

TEDA deviated from the official procurement processes during the financial year due to services available from a single supplier -

Services available from a single provider only (R1,566,756)

Sole supplier (R301,558)

TEDA deviated from the official procurement processes during the financial year due to impracticality in inviting a competitive bidding process-


Tenant installations R6,172,569

35 Regulation 45

The annual financial statements of a municipality must disclose particulars of any award of more than R2 000 to a person who is a spouse, child or parent of a person in the service of the state or has been in the service of the state in the previous 12 months indicating:

2.5.31 The name of that person

2.5.32 The capacity in which that person is in the service of the state/municipality; and

2.5.33 The amount of the award

The winning bidder L.J du Plooy declared that his spouse works for the National Treasury. The award of the contract to the value of R157, 320 followed normal procurement process and no competing bidders were disadvantaged in the process. The declaration of the bidder does not have negative impact on TEDA.

36 Contingent Liability

The entity has a contingent liability as at 30 June 2014, the details are as follow: There has been a disciplinary case against the former CEO of the entity and based on the outcome of the hearing, he was dismissed on the 30th April 2014 and his salary was stopped with immediate effect. The former CEO has lodged the appeal against his dismissal and the case was not finalised at the time of submitting this Annual Financial Statements. The remaining contract value from the time of dismissal is estimated at R 9.1 million including litigation cost of R400,000.


Annexure A: Recommendations of the Audit and Performance Committee Annexure B: Disclosure of Financial Interest Annexure C: Third Tier Administrative Structure