EL IDZ Annual Report 2010/11 by Get News

Index

Submission to Executive Authority

Introduction by the Chairman

Chief Executive Officer’s Report:

Statement of Corporate Governance

Report of the Board Audit Committee

Report of the Auditor – General Corporate Social Responsibility

General Information

Programme Performance and Trend Reports

- Zone Development (Infrastructure & Technical Operations) - Business Development and Investment Promotion - Zone Management and Investor Servicing - Science & Technology Park - Institutional Development & Corporate Administration - Accounting & Administration - Information & Communication Technology (ICT) - Human Resource Management Reports

33 41 45 57 61 69 77 81

- About East London IDZ - Vision, Mission and Values

Annual Financial Statements – 31 March 2011

THE EXECUTIVE AUTHORITY Mr M Jonas Member of the Executive Council for ECONOMIC DEVELOPMENT AND ENVIRONMENTAL AFFAIRS AND TOURISM REPORT OF THE EAST LONDON INDUSTRIAL DEVELOPMENT ZONE (PTY) LIMITED FOR THE PERIOD 1 APRIL 2010 TO 31 MARCH 2011 We have the honour of submitting our Annual Report for the East London Industrial Development Zone (Pty) Limited

………………… SN Kondlo Chief Executive Registered address East London Industrial Development Zone (Pty) Ltd Administration Building Lower Chester Road Sunnyridge 5200 PO Box 5458 GREENFIELDS 5208 Telephone: +27 43 702 8200 Facsimile: +27 43 736 6405 Email: info@elidz.co.za Website: www.elidz.co.za

EAST LONDON IDZ - ANNUAL REPORT Executive Authority

Introduction by the

Chairman “The East London IDZ also strengthened its strategy to maximise its impact on the lives of the region’s citizens”

Substantial commonality of purpose is evident between the core objectives of the IDZ Programme and principal intents articulated within the National Growth Path (NGP). This arises both in respect to broad strategic intent/philosophy as well as in regard to the identification of specific priorities and short-term tactical responses in relation to the focusing of attention on priority sectors and interventions. In essence, both the NGP and provincial industrial development activities -- including those explicitly targeted via the investment attraction efforts of the IDZ operators -- are seeking to institute new, catalytic pathways towards growth and prosperity that will lead to delivery of more and quality jobs, arising from the operation and expansion of more resilient, internationally competitive industries, which are active both within the regional and global market domains. The East London IDZ continues to refocus its strategies in order to align to the NGP. As such, going into the 2010/11 financial year the East London IDZ understood that, although its mandate was to attract strategic export oriented investments and develop manufacturing capabilities, the attraction of local investments with backward linkages was also paramount. The East London IDZ also strengthened its strategy to maximise its impact on the lives of the region’s citizens.

EXTENDING THE REACH Faster growth: The East London IDZ is already active in 6 of the 10 NGP growth sectors with its strategic involvement and intensive investment promotion targeted at new sectors like renewable energy and minerals beneficiation which will in turn contribute to economic growth. Since the location of its first investor facility in 2005, the ELIDZ has secured 26 investors for the zone with a total investment value of R1, 3 bn. To date 24 of these investors are already operating from their world class facilities in the zone, with the remainder in the process of constructing their facilities.

Labour absorbing growth:

Entrance tour to the ELIDZ’s first Agro processing facility

EAST LONDON IDZ - ANNUAL REPORT Introduction by the Chairman

Key to the East London IDZ’s contribution in this regard is the attraction of investors in labour intensive industries, such as the agro-processing industry, which have significant backward linkages to the rural economy. This has been one of the most challenging aspects in the period under review with respect to the impact of the qualifying BBBEE enterprises.

global economic downturn. As at the end of March 2011, the industries in the East London IDZ have created 12 070 direct construction jobs, 1370 direct manufacturing and just under 200 direct services related jobs since inception.

Small business support:

team of professionals that continually ensure a clean annual audit track record of accomplishment. The future is however not without challenges and key to the challenges facing the ELIDZ are:

The East London IDZ continues to target to spend 30%of its annual expenditure on companies that are classified as SMME by the end of the MTEF period. The East London IDZ has also finalised its SMME development strategy which will be implemented for the next financial year. An incubation facility for small manufacturers is also being planned as part of the Science and Technology Park development. The East London IDZ BBBEE rating raised to Level 1 in the period under review with 96% of all expenditure for the 2010/11 financial year being towards qualifying BBBEE enterprises.

•

Skills Development Participation

Concrete recommendations on a number of these issues are under active discussion between national and provincial government in the context of their operational significance for the implementation of the IDZ programme.

The ELIDZ has been partnering with government and other stakeholders in driving learnerships and apprentice training and creating an opportunity for internships and in-service training of unemployed graduates. In partnership with the Office of the Premier, the ELIDZ has to date facilitated a total of 92 learners undergoing an intensive learnership programme in various technical qualifications including Automotive Component Manufacturing, Welding, Fitting and Machining as well as mechatronics.

• •

The increased cost of utilities, especially the electricity increase, continues to impact on the pace of growth of current investors and the ELIDZ’s ability to attract new investors. The continued lack of clarity on policy framework for the IDZ programme could impact on future funding model for ELIDZ. The absence of meaningful incentives for IDZs continues to constrain the IDZ programme in competing with other low-cost developing countries for investment.

The Department of Trade and Industry is co-ordinating a process of IDZ policy review that contemplates a range of policy enhancements, that could lead to the formulation of dedicated enabling legislation for IDZs and so better equip and assist the Eastern Cape’s IDZs to operate as catalysts of inward investment and industrial expansion.

The ELIDZ also collaborated with Matla Water Heating for the development of a training programme in which local youths are empowered with expertise in the installing and maintenance of solar system. In the year under review, 12 students were taken through an intensive internship programme in various disciplines within the East London IDZ.

The Future

........................................ Zolile Tini – Chairman

The East London IDZ future is on solid ground and the company is on track to fulfilling its mandate as a key economic driver in the Eastern Cape. By spreading its wings to boosting skills development, the East London IDZ has also proven that it takes its role of changing people’s lives with the utmost seriousness. The company will continue to attract strategic, diverse investment into the zone and ensure future sustainability. Being identified as a key economic driver by the NGP has also ensured a much stronger voice for the IDZ programme, a feat that will ultimately lead to more adequate policy tools and IDZ specific incentives. The East London IDZ team will work even harder to ensure that the company continues to be a preferred investment destination. The board will continue leading a dedicated

EAST LONDON IDZ - ANNUAL REPORT Introduction by the Chairman

Guests approaching the Sunningdale Dairy processing plant

EAST LONDON IDZ - ANNUAL REPORT Introduction by the Chairman

CHIEF EXECUTIVE OFFICER’S REPORT “The period under review also saw approval of 6 new projects by the East London IDZ board”

Key to the East London Industrial Development Zone’s existence is the attraction of strategic investments that will contribute to the growth of the Eastern Cape economy and diversify the manufacturing sector while ensuring critical job creation. This, together with the renewed focus by government to structure the South African economy through the National Growth Path, became the framework for the East London IDZ’s performance plan for the 2010/11 financial year. In line with this thinking, the East London IDZ continued to contribute towards the transformation of the Eastern Cape manufacturing sector through the attraction and settling of strategic investment projects that would, amongst other things, diversify the province’s manufacturing base, strengthen some of the key manufacturing sectors as well as enhance the composition and rate of economic growth in the region.

INVESTMENT ATTRACTION The East London IDZ’s investment attraction strategy for 2010/11 was based on two fundamental principles namely: a focus on the attraction of strategic high impact domestic investments, with an intended bias towards domestic projects; as well as the strengthening of the organisation’s sector diversification initiatives. As at the end of the financial year this strategy was visibly reaping rewards for the organisation as evident in the investment projects pipeline, which demonstrated a dilution of the previously automotive sector, dominated portfolio from 43% of the total pipeline in 2009/10 to 29% in 2010/11. The period under review also saw approval of 6 new projects by the East London IDZ board. These projects have a combined investment value of R3.4 billion and a job creation potential of 1035 new direct jobs. The new investments for this period double the value of investment secured since the inception of the East London IDZ and this is a sign that the organisation’s attraction of a diverse mix of high impact investors is a key success factor going forward.

SECTOR DIVERSIFICATION The East London IDZ fully embraces the global trend to move towards green power and has strategically positioning itself to align with the international trend towards more sustainable business development practices and sees tremendous opportunities in the new but highly contested renewable energy sector. One of the exciting projects in this sector is a pilot 110 Mega Watt Photovoltaic facility within the IDZ. Matla Solar - first investor in the East London IDZ renewable energy sector.

EAST LONDON IDZ - ANNUAL REPORT Chief Executive Officer’s Report

The investment value of this project is R2.8 billion with a job creation potential of 350 direct jobs and 1300 construction jobs. This project is projected to add R29 million per annum in value adding activities in the Buffalo City region and will further assist in improving the energy security and reduce the dependence of the Eastern Cape region on the traditional Eskom supply that is transmitted over long distances from out the province. The zone’s growing agro-processing sector remains a strategic sector to locate in the zone due to its labour intensive nature and solid backward linkages especially in light of the renewed job creation focus brought out by the National Growth Path. With the call for auto manufacturers to develop environmentally friendly vehicles to reduce the global carbon footprint, the East London IDZ is extensively marketing itself as an ideal location for the manufacturing and assembly of an electric car for the commercial market. To date, the East London IDZ had been confirmed as the preferred location for the manufacturing of South Africa’s first electric vehicle, the Joule by its manufacturers, Optimal Energy. The East London IDZ and the Department of Economic Development and Environmental Affairs continue to assist Optimal Energy in lobbying for government support and the securing of a strategic implementation partner that would assist in fast-tracking the commercialisation of this project. This multi-billion rand project will not only increase the country’s automotive local content value, but it will also create spin offs for component manufacturers and other related industries with the introduction of new opportunities in the sector including power electronics, electric motors, lithium ion batteries and battery management systems. Optimal Energy aims to produce and sell 50 000 vehicles a year from 2013, with 80% of the vehicles produced destined for export markets. The project will also bring new technology and skills for the automotive sector, whilst also optimising the use of the province’s skilled workforce with the creation of at least 1900 direct and 9000 indirect jobs. The East London IDZ is quickly gaining reputation as one of the best locations for farming certain aqua culture species in South Africa. To further strengthen its competitive edge in this sector, the organisation is looking at developing shared infrastructure for this sector, including the construction of a seawater pipeline whichpipeline, which will be accessible to all current and future aqua-culture investors in the zone. As part of its business plan the ELIDZ had zoned 32 hectors in its Zone 1A for the location of aqua-culture investments – to date 62% of this land has already been taken up by investors and the demand is growing.

large scale projects whilst also optimising some of the vacant industrial properties in close proximity to the East London IDZ such as Berlin. As at the end of the financial year, the East London IDZ was in a process of accessing a portion of the old Berlin industrial area from Buffalo City in order to develop renewable energy and agro-processing nodes. The period under review saw the completion of key projects such as the Matla Beneficiation Company facility, the construction of the Big Foot facility as well as corporate buildings such as the ELIDZ Head Office and the Zone 1 C office park which currently houses the provincial Innovation Hub and the Science and Technology Park initiatives.

BUILDING AN INVESTOR COMMUNITY Despite the slow recovery from the economic downturn, the zone is abound with manufacturing activity covering a number of diverse sectors including the automotive, agro-processing, mineral beneficiation , aqua culture and transport and logistics and renewable energy. As at the end of the 2010/11 financial year, 24 companies were operating from their world class manufacturing facilities in the East London IDZ and benefitting from the zone’s customised business solutions and shared services which are designed to increase the competitiveness of strategic companies that locate in the zone. This is in line with the second leg of the East London IDZ’s role, which talks to the operation of a world class zone in order to ensure that attracted investors are retained. As part of ensuring continued relevance of its value offering to investors, the East London IDZ commissioned a Customer Value Analysis (CVA) exercise which focused on understanding key value drivers for investors in respective sectors. The exercise focused on understanding key value drivers for investors in respective sectors, and how the East London IDZ was performing in such regard. This exercise has led to the revision of the ELIDZ customer servicing strategy to be in line with customer needs.

INSPIRED INNOVATION

A GROWING INDUSTRIAL LANDSCAPE

The East London IDZ is facilitating the development of a Science and Technology Park. The main objective of the Science and Technology Park is to encourage and support the start up and incubation of innovative high growth knowledge and technology based businesses and to further foster development and application of high technology to industry.

In response to some of rapid sector development that is happening within the zone, the East London IDZ continues to explore possibilities with regard to the acquisition of strategic parcels of land around the city in order to accommodate

The development of the Science and Technology Park will increase the competitiveness of the Eastern Cape region. Key to this development is the linkage to the relevant programmes of the regional universities in order to create the link between

EAST LONDON IDZ - ANNUAL REPORT Chief Executive Officer’s Report

industry, education institutions and government to deepen innovation that leads to the development of commercialisation of new technology for economic growth to respond to the shortage of skilled graduates. This will further contribute to the province’s long-term strategy of building a knowledge economy. The planned STP facility, which is now moving into its pilot phase, will support dedicated technology units that will guide and resource the province’s efforts, the attendant attraction of investment into manufacturing and associated sector enabling services.

to build the new generation C-Class to be launched in 2014. Similarly, the East London IDZ will continue to lobby for the necessary interventions with regard to the perceived challenges around key investment decision drivers such as infrastructure, logistics and the general cost of doing business and will continue to assist government in developing possible solutions, which will help build the profile of the Eastern Cape as the ideal investment destination.

In 2009, the Fixed Asset Policy of the ELIDZ was reviewed to include a section on the periodic valuation of the assets by an independent valuer with appropriate expertise such that the company assets always reflect a true financial position. For the 2011 Open Market Valuation, a slight decrease from the 2010 values was observed and this is attributable to a number of factors being: •

• • • •

The current slow recovery in the economic conditions affecting the manufacturing sector has resulted in difficult trading conditions for the investors in the ELIDZ, this has resulted in the ELIDZ supporting tenants to minimise the impacts through reduced rentals. Some buildings remained vacant for longer periods awaiting investment decisions by multinationals, and this constituted a vacancy risk for ELIDZ property portfolio The Capitalisation Rate (cap rate) applied by the valuer is a reflection of the above risk factors, which was even higher than the previous period, resulting in the lowering of the value of the property The above stated factors resulted in a valuation loss of R119 million which was reduced by the operating profit of R36 million to a loss for the year of R83 million, using the Depreciated Replacement Method. The ELIDZ expects an improvement in trading conditions in the coming financial years resulting in investors reducing the current vacancy rate and being able to pay market rentals with the resultant decrease in capitalisation rates, which will bode well for the ELIDZ Property Portfolio.

FUTURE OUTLOOK The East London IDZ will continue to explore how it can optimise its role as one of the key implementation arms for government’ s economic growth strategy. Key to this will be streamlining and refining the organisation’s role in shaping the investment promotion activities in the province and how these can be sharpened to yield better results and optimise existing synergies. The organisation will continue to build on existing strengths within the region and maximise existing opportunities in sectors such as the automotive sector. Key to this will be the identification of possible opportunities emanating from the recent awarding of the local Mercedes Benz plant

EAST LONDON IDZ - ANNUAL REPORT Chief Executive Officer’s Report

………………………………............ S N Kondlo – Chief Executive Officer

STATEMENT OF CORPORATE

GOVERNANCE From left to right: The East London IDZ Board, H Batidzarai, J Brown, N Anderson, Cllr D.M Matika, S Kondlo, Z Tini, Ald Badenhorst. Absent: S Mase, M Saziwa

The board of the ELIDZ recognises the need to conduct the affairs of the company with integrity, in accordance with generally accepted corporate practices, and is committed to upholding the governance principles incorporated in the Code of Corporate Practices and Conduct, set out in the King Report. Towards this end, the ELIDZ maintains the following governance structures and practices.

Board The ELIDZ board comprises nine members, including the chairman and chief executive officer. With the exception of the chief executive officer, who serves ex officio, all members of the board are non-executive members nominated by various stakeholders. The board met seven times and to discharge its responsibility of giving strategic direction to the company. It performed its collective responsibility of providing effective corporate governance, which involves the coordination and management of relationships between the management of the company, its board, its shareowners and other relevant stakeholders. Its main responsibilities during this period were to:

East London IDZ - head office building.

EAST LONDON IDZ - ANNUAL REPORT Statement of Corporate Governance

• • • • • • • • •

Determine the purpose and values of the ELIDZ Determine the strategy to achieve its purpose and to implement its values in order to ensure that the company thrives Exercise leadership, enterprise, integrity and judgment in directing the company so as to achieve continuing prosperity for the company Ensure that procedures and practices are in place that protect the company’s assets and reputation Monitor and evaluate the implementation of strategies, policies, management performance criteria and business plans Ensure that the company complies with all relevant laws, regulations and codes of best practice Develop a clear definition of the levels of materiality or sensitivity in order to determine the scope of delegation of authority and ensure that it reserves specific powers and authority to itself Ensure that technology and systems used in the company are adequate to run the business properly and for it to compete through the efficient use of its assets, processes and human resources Identify key risk areas and key performance indicators of the business enterprise in order for the company to generate economic profit so as to enhance shareholder value in the long term while recognising the wider interests of society

• • •

Monitor and manage potential conflicts of interest of management, board members and the shareholders Regularly assess its performance and effectiveness as a whole, and that of individual directors, including the chief executive officer Ensure that the company has developed a succession plan for its chief executive and senior management.

Board Meetings Board members attended board meetings and participated fully, frankly and constructively in board discussions and other activities as guided by its charter. They brought the benefit of their particular knowledge, skills and abilities in discharging their responsibility of ensuring the continued success of the company. During the year under review, there were four scheduled meetings and in addition, three special Board meetings were held making it seven altogether. The attendance record of the individual board members is disclosed in the table below, in line with the recommendations as set out in King II.

Conflict Of Interest A register was completed to ensure that conflicts of interest were recorded where applicable and transparency entrenched. Board members were required to: • • •

Inform the board of conflicts or potential conflicts of interest they may have in relation to particular items of business, in particular the awarding of tenders, preferably in advance Disclose their interests at the ELIDZ, other directorships, and any other area of potential conflict of interest Absent themselves from discussion or decisions on matters in which they have a close and material connection or conflicting interest.

policy on executive and staff remuneration and measures employee performance in the discharge of their functions. Attendance of ELIDZ Board & Committee Meetings for Period 1 April 2010- 31 March 2011 NAME AND TOTAL NUMBER OF MEETINGS

Board EXCO Audit Finance Investment AGM & & Services Special Tender Board 7

1 R’

Mr. Z M Tini, Chairperson

Mr. S Kondlo, Ex-officio

Alderman J. Badenhorst

Ms. N. Anderson

Cllr. D M Matika

Ms. J. Brown

Mr. H. Batidzirai

1 2

R86 766.48

Mr. X Pakathi * 9

R65 320.25

R54 556.10

R75 886.50

Mr. M. Matshamba 7 1

Mr. J. Clark **

7 3

Ms. T. Mnqetha ***

Executive Committee

Ms. C. Putzier**

This committee consists of the chief executive officer and five non-executive board members. Its principal function is to attend to urgent matters requiring immediate decisions. It also assists the CEO in acting for the board and managing the day-to-day operations when the board is not in session, subject to the board’s limitation on the delegation of authority to the CEO.

Mr. G. Simms**

This committee also performs the role of the Human Resources and Remunerations Committee in that it determines and recommends to the board the ELIDZ’s general

Members

X. Mbangxa **

Board Committees

Directors Fees

Mr. M. Saziwa

R40 796.90

Mr. N. Ncunyana *** Mr. M. Daca Mr. S. Mase *resigned

5 ** external: not board member

***Committee member EAST LONDON IDZ - ANNUAL REPORT Statement of Corporate Governance

Audit and Risk Management Committee This committee is comprised of a non-executive director (who acts as chairperson) and two non-executive directors. One suitably qualified external committee member (not a board member) with auditing skill and experience has been co-opted into the committee. The chief executive officer, chief financial officer, the internal auditors and the external auditors are invited to attend meetings. The main objective of this committee is to provide the board with the assurance that the internal controls are appropriate and effective and to monitor the component parts of the audit and compliance process. The specific role of the audit and risk committee is to assist the board in discharging its responsibility to, amongst other things: • • • • • • • •

Safeguard assets Maintain adequate accounting records Develop and maintain effective systems of internal control Promote the independence of both the external auditors and internal audit function Review the scope and outcome of audits Enquire into the process of risk identification and the measures in place to contain these risks Ensure that the board and the executive committee make informed decisions and are aware of the implications of such decisions regarding accounting policies, practices and disclosure Provide as much assistance and information as possible to the board to enable it to discharge its responsibilities appropriately.

Finance and Tender Committee The committee is comprised of one non-executive director (who acts as a chairperson), two non-executive directors as members and two suitably qualified external committee members (not board members). The chief executive officer and the chief financial officer attend the meetings. The board has delegated powers to the Finance and Tender Committee to: • • • •

Review and recommend to the board the Business Plan and Annual Budget and any amendments thereto Review the draft interim and final accounts Monitor the internal accounting systems Review the quarterly management reports and recommend these to the board for approval

EAST LONDON IDZ - ANNUAL REPORT Statement of Corporate Governance

• • •

Monitor the process of risk management, analyse and recommend changes to the board on the risk management system Analyse the submissions of tenders and award these according to the delegation of authority limits Analyse the submission of tenders and recommend for board approval those that exceed the delegated authority.

Investment Committee This committee consists of four non-executive board members and the chief executive officer. Its principal functions are to: • Provide guidance to the organisation concerning the attraction and settling of investors into the IDZ • Monitor the progression of investment promotion efforts via the management of the potential investor pipeline • Monitor compliance with environmental legislation applicable to the attraction and settlement of investor industries • Give advice to shape and direct the compilation and periodic revision of the ELIDZ’s investment promotion strategy.

Code of Conduct An internal code of conduct has been adopted and signed by all personnel of the ELIDZ as a governance initiative that commits the organisation and its personnel to the maintenance of highest ethical standards. All employees are expected to adhere to this code of conduct in the execution of their responsibilities while in the employ of the ELIDZ.

REPORT OF THE

BOARD AUDIT & RISK COMMITTEE

Report by the Board Audit and Risk Committee in terms of Treasury Regulations 27(1) (10) (b) and (c) to the Public Finance Management Act of 1999 (as amended)

We are pleased to present our report for the financial year ended 31 March 2011.

Audit Committee Members The audit committee consist of the members listed hereunder and should meet 4 times per annum as per its approved terms of reference. During the current year 3 meetings were held:

Name of Members Ms. N. Anderson Cllr. D M Matika Ms. J. Brown Ms. T. Mnqetha

Audit Committee Responsibility: We report that we have adopted appropriate formal terms of reference in our charter in line with the requirements of Section 51(1)(a)(11) of the Public Finance Management Act, No. 1 of 1999 and Treasury Regulation 3.1. We further report that we conducted our affairs in compliance with this charter.

The effective of internal control The system of internal control applied by the ELIDZ over financial and risk management is effective, efficient and transparent.

Accordingly, we can report that the system of internal control over financial reporting for the period under review was efficient and effective.

Evaluation of Financial Statements: We have: • Reviewed and discussed the annual financial statements to be included in the annual report; • Reviewed changes in accounting policies and practices. • Reviewed the company’s compliance with legal and regulatory provisions We concur with and accept the Auditor-General of South Africa’s report on the annual financial statements, and are of the opinion that the annual financial statements should be accepted read together with the report of the Auditor-General South Africa. Internal Audit: We are satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to the company in its audits. Auditor-General: We have met with the Auditor-General South Africa to ensure that there are no unresolved issues. On behalf of the Audit Committee:

In line with the PFMA and the King III Report on Corporate Governance requirements, Internal Audit provides the Audit Committee and management with assurance that the internal controls are appropriate and effective. This is achieved by means of risk management process, as well as the identification of corrective actions and suggested enhancements to the controls and processes. From the various reports of the Internal Auditors and the Audit Report on the Annual Financial Statements, it was noted that no matters were reported that indicate any material deficiencies in the system of internal control or any deviations there from.

EAST LONDON IDZ - ANNUAL REPORT Report of the Board Audit & Risk Committee

……………………………………….. N Anderson – Audit Committee Chairman We are pleased to present our report for the financial year ended 31 March 2011.

REPORT OF THE

AUDITOR GENERAL

REPORT OF THE AUDITOR-GENERAL TO THE EASTERN CAPE PROVINCIAL LEGISLATURE ON THE EAST LONDON INDUSTRIAL DEVELOPMENT ZONE (PROPRIETARY) LIMITED REPORT ON THE FINANCIAL STATEMENTS Introduction 1.

I have audited the accompanying financial statements of the East London Industrial Development Zone (Proprietary) Limited, which comprise the statement of financial position as at 31 March 2011, and the statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory information, and the directors’ report, as set out on pages XX to XX. Accounting authority’s responsibility for the financial statements

The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) and the requirements of the Companies Act of South Africa, 1973 (Act No. 61 of 1973) (Companies Act) and the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA), and for such internal control as management determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor-general’s responsibility

EAST LONDON IDZ - ANNUAL REPORT Report of the Auditor General

As required by section 188 of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996), section 4 of the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and, section 282 of the Companies Act, my responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with International Standards on Auditing and General Notice 1111 of 2010 issued in Government Gazette 33872 of 15 December 2010. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error,Inerror, In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

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

13.

Opinion

Predetermined objectives

In my opinion, the financial statements present fairly, in all material respects, the financial position of the East London Industrial Development Zone (Proprietary) Limited as at 31 March 2011, and its financial performance and cash flows for the year then ended in accordance with SA Statements of GAAP and the requirements of the Companies Act and the PFMA

In accordance with the PAA and in terms of General notice 1111 of 2010, issued in Government Gazette 33872 of 15 December 2010, I include below my findings on the annual performance report as set out on pages XX to XX and material noncompliance with laws and regulations applicable to the entity.

Presentation of information 14. The following criteria is relevant to the findings below: • Performance against predetermined objectives is reported using the National Treasury guidelines,

9. As disclosed in note 3 to the financial statements, the corresponding figures for 31 March 2010 have been restated as a result of an error only discovered during the year ended 31 March 2011.

15. Audit findings: Reasons for major variances between planned and actual reported targets were not provided in the report on predetermined objectives • Adequate explanations for major variances between the planned and the actual reported targets for programmes 3 and 4 were not provided as required in terms of the relevant reporting guidance. In total 82% of the reported targets with major variances were not explained. • Explanations for variances for programme 4 were not supported by adequate and reliable corroborating evidence. In total 24% of reasons for differences were not supported by adequate and reliable corroborating evidence.

Additional matters

Usefulness of information

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

16. The following criteria are relevant to the findings below: • Consistency: The reported objectives, indicators and targets are consistent with the approved annual performance plan. • Relevance: A clear and logical link exists between the objectives, outcomes, outputs, indicators and performance targets. • Measurability: The indicators are well defined and/or verifiable, and targets are specific, and/or measurable, and/or time bound.

Emphasis of matter 8. l draw attention to the matter below. My opinion is not modified in respect of this matter:

Restatement of corresponding figures

Prior year audited by a predecessor auditor 11. The financial statements of the prior year were audited by a predecessor auditor in terms of section 4(3) of the PAA. An unqualified audit report was issued on 30 July 2010 by the predecessor auditor.

Unaudited supplementary schedules 12. The supplementary information set out on pages 125 to 126 does not form part of the financial statements and is presented as additional information. I have not audited these schedules and, accordingly, I do not express an opinion thereon.

17. Audit findings: Reported objectives, indicators and targets are not consistent when compared with the planned objectives • Reported performance against predetermined objectives is not consistent with the approved annual performance plan. • Thirty-one percent of objectives in the annual performance report were not consistent with planned objectives,

EAST LONDON IDZ - ANNUAL REPORT Report of the Auditor General

• •

Fourty-seven percent of indicators in the annual performance report (APR) were not consistent with planned indicators. Fifty-three percent of targets in the APR were not consistent with planned targets.

Changes (including reasons for and approval thereof) to planned objectives, indicators and targets are not disclosed in the report on predetermined objectives

•

In total 61% of the changes to the objectives, indicators and targets of the approved strategic and annual performance plan for the year under review, were not disclosed and explained as required in terms of the relevant National Treasury preparation guide.

Changes to planned objectives, indicators and targets are not approved • Different objectives, indicators and targets were reported on as opposed to the approved strategic/annual performance plan. These objectives, indicators and targets were not approved subsequent to the strategic planning process. Planned objectives, indicators and targets are not relevant to the mandate and/ or objectives of the entity • The indicators and targets as per the annual performance plan did not relate directly in more than 42% of instances to the institution’s strategic goals and objectives as per the five year strategic plan. Planned and reported targets are not specific or time-bound • Twenty one percent of the selected programmes of the planned and reported targets were not: - Specific in clearly identifying the nature and the required level of performance (22%) - Time-bound in specifying the time period or deadline for delivery (57%). Planned and reported indicators are not well defined • Of the selected programmes, 26% of the planned and reported indicators were not clear, as ambiguous data definitions did not allow for data to be collected consistently. Planned and reported indicators are not verifiable • Valid performance management processes and systems, that produce actual performance against the planned indicators do not exist for 65% of the indicators of the selected programmes.

Reliability of information 18. The following criteria are relevant to the findings below: • Validity: Actual reported performance has occurred and pertains to the entity.

EAST LONDON IDZ - ANNUAL REPORT Report of the Auditor General

• •

Accuracy: Amounts, numbers, and other data relating to reported actual performance have been recorded and reported appropriately. Completeness: All actual results and events that should have been recorded have been included in the annual performance report.

19. Audit findings: Reported performance against indicators is not valid, accurate and complete when compared to source information • Of the selected programmes 65% of the reported indicators were not valid, accurate and complete based on the source information or evidence provided.

Compliance with laws and regulations Strategic planning 20.

The accounting authority neither consulted with its executive authority of the Eastern Cape on its shareholder compact, nor did it compile one for the year under review. This resulted in the entity not complying with the National Treasury Regulation (in terms of section 76 of the PFMA) (TR), regulation 29.2.1 and 29.2.

21.

The accounting authority did not ensure that the public entity has and maintained an effective, efficient and transparent system of internal control, which should describe and represent how the entity’s processes of performance planning, monitoring, measurement, review and reporting is conducted, organised and managed as required by section 51(1)(a)(i) of the PFMA.

Annual financial statements, performance and annual report 22.

The accounting authority submitted financial statements for auditing that were not prepared in all material aspects in accordance with generally accepted accounting practice (and supported by full and proper records) as required by section 55(1) (a) and (b) of the PFMA. The material misstatements identified during the audit including Investment Property, Property, plant and equipment, Grant income and Deferred income and Commitments were subsequently corrected.

Procurement and contract management 23. The procurement system and processes did not comply with the requirements of a fair, equitable, transparent, competitive and cost-effective procurement system as per section 51(1)(a)(iii) of the PFMA, in that: • Bids were not invited through a public advert on the Construction Industry Development Board website for construction contracts.

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East London Industrial Development Zone did not register projects with the Construction Industry Development Board as required by Section 18(1)(1) of the Construction Industry Development Board Regulations. Bid documentation did not specify the evaluation and adjudication criteria to be applied. Procedures per the procurement policy were not followed for the appointment of consultants.

INTERNAL CONTROL In accordance with the FAA and in terms of General notice 1111 of 2010, issued in Government Gazette 33872 of 15 December 2010, I considered internal control relevant to my audit, but not for the purpose of expressing an opinion on the effectiveness of internal control. The matters reported below are limited to the significant deficiencies that resulted in the findings on the annual performance report and the findings on compliance with laws and regulations included in this report.

Leadership 24.

Oversight responsibility on the preparation of the financial statements, compliance with the laws and regulations and internal control was not adequately exercised by the accounting authority. As a result of the lack of review over reporting processes material audit adjustments had to be made to commitments, investment property, property, plant and equipment and deferred income.

25. Leadership did not have documented and approved internal policies and procedures to address the process of collection, recording, processing, monitoring and reporting of performance information. 26. Sufficient oversight is not exercised on the procurement of construction contracts and the appointment of consultants.

Financial and performance management 27. Monitoring and control over the recording and reporting of predetermined objectives is inadequate.

East London 29 July 2011

Auditing to build public confidence

EAST LONDON IDZ - ANNUAL REPORT Report of the Auditor General

Matla Diamond Polishing building

EAST LONDON IDZ - ANNUAL REPORT Report of the Auditor General

CORPORATE

SOCIAL RESPONSIBILITY

The East London IDZ Corporate Social Investment Committee continued to drive programmes in line with the organisations focus CSI areas. These key objectives of the CSI committee are as follows: • • • • • •

To genuinely improve the environment under which the ELIDZ operates To improve the life of the identified beneficiaries within the identified focus areas To use CSI as a means of reaching current and potential ELIDZ clients and employees To have a beneficial effect on employee morale, loyalty and pride To positively increase organisational awareness and improve the ELIDZ’s image To supplement the ELIDZ’s direct advertising and marketing promotion initiative

Key focus identified by the organisation to implement these objectives are: Education The ELIDZ has seen a gap in the product that institutions of higher learning are producing. The organization has further realized that the ELIDZ needs to play a role in the moulding of these products especially those that are relevant to the ELIDZ. It is because of the above reasons that the ELIDZ has identified Education as one of the focus areas for its CSI product. To this end the ELIDZ has engaged on an education support programme with the University of Fort Hare in order to provide tuition assistance to top performers in various faculties which are deemed to be aligned to the East London IDZ operation. For the 2010/11 financial year, 4 new students were granted bursaries for the programme while one of the first students graduated as a result of the ELIDZ’s support.

Special ELIDZ Promotions and other opportunistic donations Flagstaff Trust Account: Setting up of an education Trust account for the Mangena 7, a family of orphans in Flagstaff in order to give opportunity to these children to access higher education. The ELIDZ employees and the ELIDZ corporate have collaborated to raise funds for this family and have, in a period of twelve months raised just over R35 000 rands to go towards the children’s higher education. Angels Orphanage and Cotlands: Facilitated partnership between Angels Orphanage in Scenery Park and Cotlands, a non-governmental organisation which helps community entities with nutrition, growth monitoring and basic education training. • • • • • •

Sponsorship of uniforms with Umso Construction to three children’s homes Rally to Read Campaign which includes a sponsor of a mobile library to a rural school in Peddie Crime Reporting Centre – The ELIDZ has donated the use of one of its properties to the Westbank community to be utilised as a Crime Reporting Centre Kit sponsorship for Border Bears, a wheelchair basket ball team Khanya Career Expo Ulwazi ngu Ndoqo Educational Outreach to Engcobo

Job Creation & Skills Development The Eastern Cape has got a challenge when it comes to a sufficient skills database for potential investors. As an organization that is attracting investors to manufacture from the province, the ELIDZ has a crucial role to play in the development of skills in specific niches for potential investors. It is in line with this identified need that the ELIDZ continues to target investments that are labour intensive and continues to employ programmes such as learnership and skills development programmes in order to fully respond to some of the key challenges under this pillar. Twelve students underwent a rigorous internship programme in the ELIDZ whilst 56 learners are currently placed with a number of business both within and outside of the East London IDZ. 23

EAST LONDON IDZ - ANNUAL REPORT Corporate Social Responsibility

The East London IDZ participated in the annual Rally to Read Campaign

GENERAL

INFORMATION

The East London Industrial Development Zone is a greenfield development project that is part of a sub-regional economic growth and employment creation initiative driven by national government’s micro-economic reform strategy, as implemented by the South African Department of Trade and Industry (DTI). The industrial development zone is rapidly taking shape on Buffalo City’s West Bank, adjacent to the existing East London Port and Airport. It has some 248,2ha of land available in its Phase 1 developments for the accommodation of new industry. The project includes the intended establishment of a Customs Controlled Area to allow for duty-free importation of manufacturing inputs utilised in the production of export products. It also provides access to a variety of general and sector-specific industrial investment incentives. The development and operation of the zone are managed by the East London Industrial Development Zone (Pty) Limited under authorisation issued by the state. The company was established to plan and implement the East London IDZ in a phased manner to offer manufacturing and other industrialists – and especially export industries – attractive industrial property, featuring world-class infrastructure and dedicated utilities and other services. The Manufacturing Development Act 187 of 1993 governs the ELIDZ. The Act’s regulations established the Industrial Development Zone (IDZ) Programme to administer the application and appointment of IDZ operators and enterprises; to administer IDZs; and to provide matters incidental thereto.

Vision The Vision of the East London Industrial Development Zone (Pty) Limited is: World class operator of a prestigious industrial complex where highly competitive organisations thrive on streamlined business benefits and stimulate regional economic growth.

Mission To provide investor solutions and to attract and develop strategic industries that strengthen South African export competitiveness through the development and operation of a thriving, specialized industrial complex.

Construction of the ELIDZ New Head Offices

EAST LONDON IDZ - ANNUAL REPORT General Information

The ELIDZ pursues its mission through the setting of programmes of action, which seek to ensure the creation and delivery of:

FINANCIAL OVERVIEW

• • •

The four major programme components and their performance reports are detailed below:

a suitable location for the establishment of strategic investments; promotion and development of productive links between domestic and zonebased industries, to optimise use of existing infrastructure, generation of employment and creation of technology transfers; and enablement of the beneficiation of local resources by resource- seeking industries.

The organization maintains four broad programmes in addressing these objectives. These are: • • • •

Institutional Development and Corporate Administration; Zone Development (Infrastructure and Technical Operations); Business Development and Investment Promotion; Zone Management and Investor Servicing.

ELIDZ Values Customer-Focused The needs of our customers shape and drive our plans and actions

Solution-Oriented In every situation we seek out possibilities that will win success for our customers and ourselves

Knowledgeable We build individual and collective expertise through continuous learning and active knowledge sharing

Synergy

Budget for 2010/11

Amount R 000

Institutional Development and Corporate Administration

53 479

Zone Development (Infrastructure / Operations)

315 868

Business Development and Investment Promotion

13 557

Zone Management and Investor Servicing

21 312

TOTAL

404 216

Grant income of R135,2 million has been allocated by the Department of Economic Development and Environment Affairs (DEDEA). This amount represents a 7.6% increase from the R127,6 million allocated during the 2009/10 financial year. The Department of Trade and Industry has, for the 2010/11 financial year, allocated an amount of R124 million of grant income. The two amounts total R259,2 million which, when added to income projected to be generated from operations of R33,5 and income carried over from prior year amounting to at R143,2, produces a total income for the 2010/11 financial year of R436 million. The ELIDZ is required to pay VAT on grant income received. To comply with tax law, every tranche of grant income received is subject to the deduction of a 14% VAT portion. From the above total income of R436 million, the amount that will be spent on the ELIDZ’S annual programmes (Infrastructure development and operations) of the ELIDZ is R404.2 million, with the balance of R31,8 million due to be paid over to SARS as tax on grant funding. The following table reflects the source of income to finance the approved budget for capital projects and operations during the 2010/11 financial year.

It is our unique skill in being able to combine diverse contributions into synergistic solutions

SOURCE

Efficiency

DEDEA

We respond with speed, and are accurate, capable and responsible in utilisation of resources.

EAST LONDON IDZ - ANNUAL REPORT General Information

APPROVED BUDGET

135 257

DTI

124 000

Operating/ prior year Income

176 798

436 055

TOTAL

INCOME

At 31 March 2010 some projects valued at approximately R160 million were in progress and at different levels of construction, with some having been recently committed in line with the confirmation of the 2010/11 budget allocation by both DEDEA and the DTI. From these committed projects, construction valued at R131 million was provided for in the 2009/10 financial year budget. This amount has been carried forward from the 2009/10 budget to complete these committed projects. The table below illustrates the total amount available for capital and operations for the 2010/11 financial year including funding for the completion of the projects carried forward from the 2009/10 financial year and other income from that year. SOURCE DEDEA

INCOME RECEIVEABLE

APPROVED BUDGET

135 257

DTI

124 000

Prior Year

143 294

33 504

436 055

Operating Income TOTAL

The total amount that was initially available for the 2010/11 financial year was R436 055 million. On the 27th October 2010, the ELIDZ Board approved the allocation of an additional amount of R7.7 million that was received from the Buffalo City Municipality for the construction of superstructure and small zone development services. At the same time the South African Revenue Services refunded an amount of R1,3 million to the ELIDZ for Income tax. This amount was also allocated to the Zone Development budget as additional provision for small developmental projects. When the original budget was prepared, an amount of R33,5 million was projected as own generated revenue. At the time of making projections, the envisaged increase in electricity rates was not yet confirmed and as such could not be forecast accurately nor could it be foreseen that the funds allocated to the Optimal Energy project would take longer to disburse hence remain generating interest in the bank account. As a result of the two as main reasons, actual own generated revenue exceeded forecast by close to double for utilities and more than double for other income. As a result of this the own generated revenue increased from R33,5 million to R53 million and the additional revenue of R20 million allocated to Zone Development. As necessitated by the imminent commencement of the Optimal Energy project, together with other funding pressures from investors for superstructure facilities, the ELIDZ appealed to the DTI for additional funding. As response to that appeal, the DTI allocated a further R198 million, a R100 million of which was received during December and the balance of R98 million in January 2011.

All the above stated additional amounts that were allocated to the Zone Development program had an effect of increasing the Zone Development budget and the total ELIDZ budget for the 2010/11 financial year by R203 million and R227 million respectively. The Zone Development program budget thus increased from R315, 8 to R518, 2 million and the total budget for the ELIDZ 2010/11 financial year increased from R436 to R663 million. The new budget allocation per program is tabulated hereunder; Budget for 2010/11

Amount R 000

Institutional Development and Corporate Administration

53 479

Zone Development (Infrastructure / Operations)

518 234

Business Development and Investment Promotion

13 557

Zone Management and Investor Servicing

21 312

TOTAL

606 582

The new income and the tabulation of the sources thereof appear in the following table: The total sources of income in the following table differ from the above allocation by R56 million, which is the VAT on grant funding, paid over to SARS. SOURCE

INCOME RECEIVABLE

APPROVED BUDGET

DEDEA

135 257

DTI

322 000

Prior Year

143 294

Operating Income

53 186

Other

9 000

TOTAL

662 737

EAST LONDON IDZ - ANNUAL REPORT General Information

Actual Expenditure versus Income: For period: April 2010 to March 2011 Budget DEDEA 2010/2011

Budget Dti 2010/2011

PROJECT

R’000

Zone Development (Infrastructure / Operations)

50 465

282 456

21 312

Business Development & Investment promotion

11 692

Institutional Development & Public Relations

11 082

Human Resources

5 843

Information Technology

11 286

Accounting & Administration

6 966

EXPENDITURE

Trading, Finance & Other Income

Zone Management & Investor Services

Science & Technology

Prior Year Income

Adjusted Income 2010 / 2011

1st Quarter

R’000

62 186

123 127

1 865

5 421 12 881

4th Quarter

Income Year-toDate

Variance

% Varance

R’000

48 188

54 267

62 158

26 900

191 513

518 234

326 721

63%

21 312

3 524

4 786

4 649

5 491

18 450

21 312

2 862

13%

13 557

2 437

2 914

2 402

3 538

11 291

13 557

2 266

17%

11 082

2 249

3 543

3 568

2 210

11 570

11 082

-488

-4%

5 421

359

525

2 475

3 718

5 421

1 703

31%

5 843

1 436

1 902

1 277

1 636

6 251

5 843

-408

-7%

24 167

5 018

4 490

3 188

2 807

15 503

24 167

8 664

36%

6 966

1 392

2 166

1 736

1 631

6 925

6 966

64 603

74 427

79 503

46 688

26 5221

606 582

341 769

56%

518 234

118 646

282 456

62 186

143 294

606 582

Output Vat Required

16 611

39 544

56 155

Total Vat inclusive

135 257

322 000

62 186

143 294

662 737

2nd Quarter

VARIANCE

3rd Quarter

Total Vat exclusive

• • •

INCOME

TOTAL

The Zone Development and Infrastructure budget constituted 85% of the ELIDZ overall funds available for operations of R606, 582. The combined budget for all remaining programmes (Zone Management and Investor Servicing, Business Development and Investment Promotion and Institutional Development and Corporate Administration) constituted 15% of the budget. On the overall, cash amounting to 56% of the budget had not been paid out though this was committed to Zone development and Infrastructure projects in progress as at 31 March 2011

EAST LONDON IDZ - ANNUAL REPORT General Information

PROGRAMME

PERFORMANCE & TREND REPORTS From left to right: The East London IDZ Executive Management, T Zweni, T Gwintsa, S Kondlo, N Madyibi and J Burger

Programme Performance: The various divisional reports that follow detail specific operational responses and policy steps that were implemented by the ELIDZ to address the various challenges the organisation faces, in conjunction with its affected stakeholders in government and in industry. A graphical representation of the income and expenditure for the year under review is reflected below:

EXPENDITURE TRENDS All Programmes ALL PROGRAMMES

R’000 380 000 360 000 340 000 320 000 300 000 280 000 260 000 240 000 220 000 180 000 160 000 140 000 120 000 100 000 80 000 60 000 40 000 20 000 Actual Spending Budget for 2010/11

650 600 550 500

R610,088 million

R610,108 million

450 400 350 300 250

R265,221 million

200

Quarter 1 64 603 70 923

Quarter 2 74 427 109 720

Quarter 3 79 503 75 718

Quarter 4 46 688 353 747

150 100 50 -

Annual Budget

Budget Year to date

Expenditure

The graph above reflects the quarterly expenditure performance of all programmes as against budget forecast

The graph above reflects the budget vs. expenditure for all programmes

Zone Development and Infrastructure

Other Programmes (Departments)

TECHNICAL SERVICES

R’000 380 000 360 000 340 000 320 000 300 000 280 000 260 000 240 000 220 000 180 000 160 000 140 000 120 000 100 000 80 000 60 000 40 000 20 000 Actual Spending Budget for 2010/11

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

OTHER DEPARTMENTS

R’000

26 000 24 000 22 000 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0

Quarter 1 48 188 51 835

Quarter 2 54 267 84 827

Quarter 3 62 158 52 561

Quarter 4 26 900 332 517

The graph above compares the infrastructure expenditure against budget on quarterly basis.

ALL PROGRAMMES: BUDGET vs. EXPENDITURE April 10 - March 2011

R’m

Inst. Dev & PR Actual Spending Budget for 2010/11

11 570 11 082

Science & Technology

3 718 5 421

Accounting

Inv. Serv

Bus. Dev

6 925 6 986

6 251 5 843

15 503 24 167

18 450 21 312

11 291 13 557

A graphical representation of the expenditure performance against budgets for all programmes other than the zone infrastructure development programme

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Programme Performance Report ZONE DEVELOPMENT (INFRASTRUCTURE /TECHNICAL OPERATIONS) PROGRAMME AIM The Zone Development programme encompasses the development of zone infrastructure and superstructure and the attendance to zone planned preventative maintenance. A development framework plan is utilised to allocate funds efficiently and effectively for infrastructure development, zone operations and technical services delivery.

BUDGET PROVISION: Zone Development (Infrastructure / Technical Operations)

PROGRAMME Technical projects

Budget The pie graph below indicates the portion of the total ELIDZ budget allocated to the Zone Development (Infrastructure / Operations) Programme for the financial year (April 2010 to March 2011).

TOTAL

Budget

Expenditure

Variance

R’000

518 234

191 513

326 721

518 234

191 513

326 721

The Budget and Expenditure components are compared in the graph to indicate the expenditure variance against the budget. R’000

14%

Other Program Budgets Zone Dev. Budget

86%

540 000 510 000 480 000 450 000 420 000 390 000 360 000 330 000 300 000 270 000 240 000 210 000 180 000 150 000 120 000 90 000 60 000 30 000 -

Budget Yr to Date

Expenditure

COMMENTS ON EXPENDITURE Budget Vs Expenditure The table below indicates the budget allocation to the Zone Development (Infrastructure/ Operations) Programme for the financial year (April 2010 to March 2011) and reports the actual level of expenditure, which reflects an under-spending variance.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Over the past 12 months, for the 2010/2011 financial year, for the Zone Development programme, responsible for Infrastructure and Technical Operations, It is pleasing to advise that several infrastructure and superstructure projects were undertaken and completed, as planned,

These projects were executed in accordance with the approved Capex Budget and Opex Budget for the past financial year. Based on the earlier approved Capex budget of R 273,236 m for the 2010/2011 financial year, prior to the adjusted Capex budget, as at the last quarter of 2010/2011.

During the past financial year under review, Zone Development managed to plan and execute some necessary and vital infrastructure as well as superstructure projects (factories etc. for approved Zone Enterprises Investors).

During December 2010 and January 2011 additional funding was received from the dti, as necessitated by the imminent commencement of the Optimal Energy project, together with other funding pressures from investors for superstructure facilities, the EL IDZ submitted an appeal to the dti for additional funding.

The achievements to date during the current financial year are as set out below:-

In response to this appeal, the dti allocated a further R 198, 0 m, of which an amount of R 100, 0 m was received in December 2010 and the balance for R 98, 0 m was receipted in January 2011. The full amount of the additional funding was allocated to Zone Development, with the Zone Development Budget was increased from R 315, 868 m to an amount of R 518, 234 m. Over the past 12 months, infrastructure and superstructures projects were undertaken with some projects still at the “Work – In – Progress” stage as at financial year end..

ACHIEVEMENTS: Reverting to the comments under the expenditure to date, during the 2010/2011 financial year, an amount of: R 241, 513 m was spent on ongoing infrastructure and superstructure projects. On the other hand, due to circumstances outside the control of the EL IDZ several projects were delayed due to delays in securing land leases and approvals from certain authorities, including Marine and Coastal Management Services. The latter approvals delayed the commencement of construction of the Pump Station Project, which formed one of the three approved projects, for the Mari Culture Projects, approved during the previous financial year, by the EL IDZ board. The impact of the delays compounded and affected the planned project start date and caused delays of approximately 6 months. This delay negatively influenced the projected cash flow for this project as well as the total cash flow for the various Capex and Opex Projects for the 2010/2011 financial year. Due to the delays, the original project completion was scheduled for July 2011 and has now moved the completion date out to end of December 2011. The impact on the planned expenditure, during the current financial year, was an under spending of the amount of between: R 42, 0 m to R 43, 0 m. Expenditure on the Planned Preventative Maintenance, during the financial year under review, was well within the projected planned expenditure of R 12, 4 m.

INFRASTRUCTURE DEVELOPMENT PROGRAMME STATUS REPORT (AS AT 31 MARCH 2011) PROJECT

APPOINTED CONTRACTOR

% COMPLETE

New Waste Sorting & Transfer Station

Mpumalanga Construction

100%

Completion of the Bulk Earthworks & Platform in Zone 1 B

Newport / Basil Read

100% (remedial works being actioned)

Zone 1 C Office Park Earthworks Platform & Electrical Underground Services

Performance Electrical – completed the electrical installation.

100% ( electrical ) 100% ( bulk earthworks )

Umso JV

Sunningdale Dairy Platform :

Steffanutti Stocks

100%

Completion of the Balance of the Internal Ring Road in Zone 1 A :

Mpumalanga Construction

100%

Completion of the New Diamond Factory in Zone 1 A:

NMC

100%

New Sunningdale Dairy Factory

Steffanutti Stocks

100%

New Zone 1 C Office Park

Kwikspace

100% (first phase)

Completion of New EL IDZ Corporate Offices

Stefanutti Stocks

100 % (reached works completion stage)

Mpumalanga

100% complete

Completion of the New EL IDZ Central Store.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

ELIDZ Seawater Pipeline Reservoir for the development of the Aquaculture sector

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

OPPORTUNITIES: During the past financial year, Zone Development had the opportunity to participate in several long terms, strategic projects that are at various stages of advancement. From the early Front End Engineering Phase, to feasibility stage of various projects, early concept and sketch plan stage and investigation stage.

•

meters of factory and warehouse space for future MBSA W 205 Automotive Suppliers to be set up in the Zone;

•

In addition to the earlier investigations carried out into future factory expansion and possibilities in Zone 1 A, Zone Development also highlighted the opportunities for future factory expansion for an additional separate factory linked to the Agro Processing Cluster, to be located in close proximity to the existing Sunningdale Dairy Factory;

•

It was possible based on the early advanced forward planning, carried out by Zone Development to go out to tender on two separate bulk earthworks and factory projects in February 2011 and submit these tenders for approval to the main EL IDZ Board in March 2011;

•

These two major factory projects totalling some approx. R 170 million (allowed for the commitment of approx. 96% of the available additional funding received from the dti in December 2010 and January 2011, in the amount of R 198,0 m (excluding the adjustment for Vat of 14% );

•

These two projects will be executed during the 2011 / 2012 financial year, with completion planned for the second and third quarters of 2012 / 2013 financial year

•

Zone Development are at present busy with the forward planning around the future various infrastructure and superstructure projects, that are planned to be executed during the 2011 / 2012 financial year as well as the MTEF period.

Amongst the various long - term, strategic projects that Zone Development is involved with are the following:•

Multi Model OEM project – where various front end engineering work as well as a functional specification and early feasibility studies have been completed:

•

Zone Development business unit was involved with the master planning of the future East London Science and Technology Park (EL STP) with the Head of the EL STP project and his team.

•

The Zone Development team has also been working on two new renewable energy projects – both using Photo Voltaic – monocrystaline cell – technology for a future 10 Mw and future 100 Mw park. Front end engineering design investigations, feasibility study investigations, meetings and submissionto BCM as well as Eskom for interconnectivity and co – generation submission as well as environmental scoping report, basic assessments, and later full EIA applications are well underway;

•

The Zone Development project team is also investigating the needs of the future APP (Agricultural Processing Park) to be established in the greater Berlin Industrial area.

•

Zone Development business unit has been successful with the application submitted to BCM for the leasing of approx. 867 ha of land in the Berlin area for the future Renewable

Energy Park as well as the future APP (Agro Processing Park); • •

The 20 year lease for the land in Berlin was submitted to BCM for approval in approx. October 2010 and was approved at BCM by the full Council meeting held on the 29th March 2011. Based on forward planning of various infrastructure and superstructure requirements, for the EL IDZ, taking account of the future expansion of the existing ASP (Automatic Supplier Park ) platform and factories , it was through investigations ascertained that two further platforms and engineered fill could be constructed, allowing for the future construction and development of approx. 30,000 square

The Zone Development business unit identified various opportunities for future rezoning of various properties owned by the EL IDZ as well as future possible properties to be procured by the EL IDZ for future Zone Enterprises. These properties adjoin Zone 1 A and Zone 1 D .Plans are already underway to procure these various properties as well as following through on the rezoning of the properties for future usage. The EL IDZ has completed a 20 year Infrastructure Master Plan, which will be continuously reviewed and updated, to accommodate the requirements for various future clusters, such as the Renewable Energy Cluster and the Agro Processing Park Cluster. The implementation of the Facilities Management Software Package that was procured by the EL IDZ is at an advanced stage. The Maximo Software System is being used to capture all the various infrastructure and superstructure assets that have already been completed, in addition to infrastructure asset management, for the current and future assets as well as budgeting and control

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective Deliver IDZ Infrastructure and Superstructures.

Output/ Deliverable

Serviced land readied for sale or lease)

Infrastructure Development Projects Completed.

Maintain Quality, reliable estate and utility services

Output performance measure/services delivery indicator

Serviced Land for Phase 1

Number of Infrastructure Development Projects Completed.

ACTUAL PERFORMANCE AGAINST TARGET Target Phase 1 area (completed) (comprising 248,2 ha)

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

The entire approx. 248, 2 ha of land in Zone 1 A has already been serviced within Zone 1 A and has been readied for sale / lease, with the preference to lease all of the land in the Mari Culture Cluster comprising approx. 30, 0 ha.

Nil

Complete 5 (five) Infrastructure projects

The following infrastructure projects were completed: (1) Completion of the Zone 1 B Bulk Earthworks Platform & Engineered Fill: (2) New Waste Sorting & Transfer Station & enabling infrastructure: (3) Completion of the balance of the internal ring road and electrical services in Zone 1 A (released the final retention monies): (4) Completion of the Zone 1 C engineered fill platform: (5) Completion of the electrical infrastructure installation to the Zone 1 C office park area; (evidence file: practical completion and work completion certificates)

Nil.

Nil. .

Superstructure Projects Completed:

Number of Superstructure Projects Completed:

Complete 5 (five) Superstructure projects.

The following Superstructure Projects were completed viz. : (1) New Corporate Head Office Building: (2) New Sunningdale Dairy Factory Project: (3) New Diamond Polishing Factory: (4) New Zone 1 C Office Park: (5) New Centralized Container Store: (evidence file: practical completion and work completion certificates = to superstructure)

Square Meters of superstructure built to meet market demand.

Number of Square Meters of superstructure built to meet market demand.

Complete. 20 316 square meters

As at the end of the financial year, a total as built area of 21, 202 square meters of offices and factories was achieved.

Nil.

Expenditure on approved Capex projects.

Percentage of capital budget expended or committed by Financial Year End.

Expend and or commit 100% of R 273, 236 m.

An amount of: R 192 m was spent..The new adjusted Annual Budget for Zone Development was then increased from the initial budget of: R 315 m to a new adjusted budget as at the end of January 2011 (when the balance of the additional appropriated R 198,0 m was received) to a new amount of R 518 m.

Achieved approx. 88.4 % expenditure of the original 2010 / 2011 Budget. Refer to the main report for reasons for under expenditure.

Estate utility services up at all time

Percentage uptime of estate and utilities services

Achieve 98% uptime for estate utility services.

Zone Development, during the past financial year was through the monitoring and evaluation process able to ensure that the uptime of estate and utility services was in line with the forecasted target of 98 % for the year.

Nil.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

Output/ Deliverable

Output performance measure/services delivery indicator

ACTUAL PERFORMANCE AGAINST TARGET Target

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

1(one) % variance. Due to major water loss.

System losses for water controlled effectively

. Percentage System Losses sustained in supply of water services.

Range of 5 % - 7 %.

Based on an overall synthesis and taking into account various factors to be explained in the report, overall, on average for the year a system loss of approximately 8 % was incurred. This compared to the target of between 5 to 7 %. This was primarily because of a major water loss during October 2010, caused by bank wash away, of the new-engineered fill bulk earthworks platform in Zone 1 B. Emergency repairs were at the time carried out to the damaged water main in zone 1 B.

System losses for electricity controlled effectively

% (Percentage) System Losses sustained in supply of electricity services.

Less than 5 %

Based on a full reconciliation for the period under review, Zone Development were able to contain any electrical system losses to 2, 8 % for the Zone.

Nil. .

Achieve Competitive IDZ Construction Delivery :

Feasibility study and Elemental Costing are undertaken for each project. Reflects the average construction costs

. % (Percentage) deviation of annual average construction costs for factory and office space from E. Cape Average Construction cost norms.

Max. 20% deviation.

Based on a survey of building costs of factory and offices for the major centres, compared to East London , that was undertaken in November 2010, Comparing the average overall average costs this revealed that: Average costs in East London were approx. 5,26 % higher than average costs in Port Elizabeth. (Or put another way the average costs in East London were within 94,74 % of comparative costs in Port Elizabeth )

Deviation of 5, 26 %.

Build IDZ Property Portfolio Performance and Yields.

The property portfolio yields returns for the ELIDZ.

Average Yield as a percentage on transacted leased buildings

In range 2% to 5 %

Based on the various leases concluded during the past financial year , on average the yield achieved was 2,8 %

Nil.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

Output/ Deliverable

Average percentage yield on transacted leased properties â&#x20AC;&#x201C; land leases. (consider contents of the third column to be moved to the second column and the contents of the second column to be moved to the third column) Build Construction related Employment Creation

Employment creation during the construction phase of development

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

ACTUAL PERFORMANCE AGAINST TARGET

Output performance measure/services delivery indicator

Number of construction jobs created.

Target

13.25%

3 234

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

During the past financial year under review, no new land leases have been concluded and we are as Zone Development thus not able to report against this item.

Nil.

Achieved 2 877 construction related jobs.

Achieved 88, 96 % of target. Variance due to delays experienced on project execution.

East London IDZ - Automotive Supplier Park EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Programme Performance Report BUSINESS DEVELOPMENT & INVESTMENT PROMOTION The main goal of the Business Development programme, as informed by the corporate strategy, is the attraction of investors and investments into the East London Industrial Development Zone, with a specific focus on export industries. Key industry clusters have been identified and specific business strategies are in place to secure these investors. The direct impact will be to create employment opportunities and stimulate economic growth in the region.

Budget The pie graph below indicates the portion of the total ELIDZ budget that was allocated to the Business Development & Investment Promotion Programme for the financial year (April 2010 to March 2011).

Other Program Budgets Business Dev. Budget

98%

Budget Vs Expenditure The table below indicates the budget allocation to the Business Development & Investment Promotion Programme for the financial year (April 2010 to March 2011) and the actual level of expenditure, which reflects an over-spending variance.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

BUDGET PROVISION: Business Development & Investment Promotion Budget

Expenditure R’000

Variance

PROGRAMME

R’000

Business Development

13 557

11 291

2 266

13 557

11 291

2 266

TOTAL

R’000

The Budget and Expenditure are compared in the graph below to indicate the expenditure variance against budget. R’000 14 000 13 000 12 000 11 000 10 000 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 -

Budget Yr to Date

Expenditure

COMMENTS ON EXPENDITURE There is an under-expenditure of 16.7 % for the year. This amount has already been committed, as some projects had run over following financial year. The expenditure for the following items was budgeted for during this financial year but not paid yet owing to the delays in contracting suitable service providers;

ICT and electronics study has been finalised but not paid yet. They will be paid soon

Agro-processing Park concept has not been fully paid yet. Only the first phase has been paid for. This amount will be expended during the month of June 2011.

Pre-feasibility study for the Multi-Model OEM has not been paid for yet. Full expenditure will be incurred by the end of August 2011.

ACHIEVEMENTS: The ELIDZ continues to proactively engage in promotional activities in an attempt to attract targeted investors and investments into the zone. More potential investors, in targeted sectors continue to show interest at the ELIDZ as suitable location. Networking and collaborative efforts with other key role players and relevant stakeholders in South Africa and abroad are continuing to optimise on costs whilst ensuring that more investment promotion business is generated for the East London IDZ. During 2010/11 year, investment pipeline grew by 63 percent , with more potential to invest and create more job opportunities. The sector diversification of the investment pipeline was also improved, with more potential investors from agro-processing increasing from 6 per cent last year to 20 per cent this year. The high dependence on the automotive sector was also reduced as this portfolio reduced from 43 per cent to 29 per cent. More investors were secured this year as reflected in the annual performance targets table below.

OPPORTUNITIES: The improvement of the global FDI Investment environment, due to global economic recovery, albeit slow, is improving the investorâ&#x20AC;&#x2122;s propensity to invest in foreign countries, thus creating more global FDI stock. This invariably creates more opportunities for the ELIDZ to target this increasing number of multinationals wanting to invest offshore. The positive impact of the 2010 World Cup on the negative perceptions of South Africa as a risky country to do business is also making it less difficult to attract investors into the Zone. The ELIDZ has also packaged sector specific offerings, where unique selling points in targeted, are identified and packaged, such as the Multi-OEM concept to not only take advantage of more positive sentiments about the country, but also to make sure that it becomes easy for the Automotive OEMs to set up operations at the ELIDZ at relatively less costs. Sector specific offerings are also being developed for other sectors, like Agroprocessing. The ELIDZ has also packaged bankable investment projects, where specific investment opportunities are identified, through various sector studies,

packaged into bankable investment projects that are then marketed and sold to potential investors. To this extent, two projects from Energy sector, two from the ICT and Electronics, and one from Renewable sectors were packaged this year, thus creating specific investment opportunities for potential investors. The bi-lateral trade agreements, such as AGOA, EU, etc, do complement the relatively small market of South Africa, by making easy for companies with operations in South Africa to access other global markets. The new incentive package by the DTI does also help in making some companies interested in setting up operations in South Africa.

CHALLENGES The negative impact of the Global economic recession is not over yet, and still making it difficult, not only to attract investors at the pace the ELIDZ would like to, but also is prolonging the bedding down of the investment projects. This has forced some investors to change their investment models. For example, a situation does exist where an investor that had elected to purchase land and build their own factory as part of their investment model would change and ask the ELIDZ to build a factory and lease it to the investor with an option to buy. This becomes a challenge, sometimes, as the realisation of that investment would depend on the availability of funds at the ELIDZ. The lack of IDZ specific incentives continue to make the IDZ less attractive than industrial zones in other countries. South Africa is still perceived as relatively high cost production country, and this, coupled with the fact that the country far from the main global markets such as Europe and USA makes it difficult for some multinationals to invest. Lack of critical skills in critical areas of the value chains of some sectors makes it attract investors in those sectors.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

Secure Strategic, Targeted Investment

Build investmentrelated Employment Creation

Identify and develop key industry clusters

Output/ Deliverable

ACTUAL PERFORMANCE AGAINST TARGET

Output performance measure/services delivery indicator

Target

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

Investors secured

Number of investment agreements signed (FDI and Domestic

A total of six targeted investors have been secured and approved by the ELIDZ. Property lease and sale agreements are being negotiated for signatures with these investors

No agreements have been signed yet due to the protracted negotiations that are still taking place with the approved investors.

Lease and Sale agreements

Value of investment agreements signed

R450m

The approved six targeted investors are projecting an investment of R3.4 billion.

As explained above

Size of Land sold or leased to the investors. All transacted properties fully occupied

Annual land uptake

14 ha

Approved investors are projecting purchasing and leasing 158ha from the ELIDZ.

As explained above.

% occupancy of transacted properties

Min 95% occupancy

88% occupancy rate has been achieved

7% variance, owing to stalling negotiations with one investor that was already secured for this vacant factory but could not finalise the signing of the lease agreement, due to the delays in contract signing with their customer. Negotiations are still continuing

Jobs created

Rate of projected industrial employment creation

1.5 jobs per R-m (675 jobs )

1035 direct jobs at 0.3 jobs per million have been projected by the investors approved by the ELIDZ board during this financial year. + There is, however, 7850 indirect jobs that are also projected. These two figurs combined create 2.6 jobs per million

A target of 1.5 direct jobs per million was not achieved, due, to the more capital-intensive nature of the investments attracted into the zone.

one

One Agro-processing cluster concept developed

Industrial Cluster Concepts developed

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Number of new cluster concepts developed per annum

Strategic Objective

Output/ Deliverable Active and operational industrial clusters

Packaged Investment Projects

Develop and package sector specific value offerings

Sector specific value offerings

ACTUAL PERFORMANCE AGAINST TARGET

Output performance measure/services delivery indicator Cumulative number of industry clusters active in the IDZ

Number of packaged investment projects

Number of packaged sector specific offerings

Target

one

4 packaged projects: - 3x Agro-proc - Pharma

Packaged Sector Innovative Offering: - 1x Auto

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

The automotive cluster is continues to be active and operational as a result of the ELIDZ advisory and support intervention, particularly at the time of the global recession.

5 investment projects( 2 x Agroprocessing, 1x Renewable energy and 2 ICT& Electronics) have been packaged

Opportunity arose to package one renewable energy plus two ICT & Electronics projects and only two Agro-processing projects could be packaged over and above the three mentioned above. One Agro-processing and One pharmaceuticals could not be packaged as planned, due to the limited time and human resource capacity available.

Multi-Original Equipment Manufacturer (Multi-OEM) concept has been developed, packaged and launched as an Automotive Sector specific offering for the ELIDZ (Source: concept document for Multi-OEM)

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Programme Performance Report ZONE MANAGEMENT & INVESTOR SERVICING PROGRAMME AIM

To ensure the development of a commercially viable, effective, attractive and sustainable industrial development venue, through pursuit of value-adding strategies that aim to: •

develop and implement after-care programmes to retain tenants and investors;

•

promote equitable job, skills and SMME opportunities;

•

promote efficient and effective zone operations;

•

enhance government stakeholder administration to reduce the administrative burden of doing business within the ELIDZ through provision of a one-stop-shop

•

Deliver a congenially safe, healthy and environmentally friendly industrial location

Other Program Budgets Investor Serv. Budget

97%

BUDGET vs. EXPENDITURE Figure 1 (Budget and expenditure)

BUDGET PROVISION: Zone Management & Investor Services PROGRAMME Investor Services TOTAL

Budget

Expenditure

Variance

R’000

21 312

18 450

2 862

21 312

18 450

2 862

R’000 22 000 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 -

BUDGET The above table 1, reflects an under spending of 13%. This was mainly attributable to employment costs. Investor Service had budgeted for the post of the customs and logistics specialist, that has been not been filled owing to the non publication of customs protocols and procedures for the designation and registration of the customs controlled area.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Budget Yr to Date

Expenditure

ONE-STOP-SHOP Development of a one-stop-shop concept is being pursued through a number of strategies, which are intended to assist in the establishment of a comprehensive governmental services window for delivery of public services and facilitating channel of partnership with government.

MARCH - 2010

FEB - 2010

JAN - 2010

DEC - 09

NOV - 09

OCT - 09

SEP - 09

AUG - 09

JUL - 09

COMPLIANCE CHART, Dust Dust (PM10) Monthly Average

Dust (PM10) Limit

MARCH

FEBRUARY

JANUARY

Compliance with Exceedance Requirement Compliance with Annual Limit

DECEMBER

200 180 160 140 120 100 80 60 40 20 0

NOVEMBER

Construction related health and safety management is on going for current projects. The lost time injury rate (LTIFR) has steadily dropped and is currently maintained at national norm levels. The ELIDZ’s target is to maintain it below the national norm at 0.3 and has intensified its programmes to reduce injuries on site. The number of projects currently underway has also significantly reduced affecting the number of man-hours) worked (MHW thereby affecting the LTIFR values as the MHW are used as the denominator in the calculation.

Figure 2: Air Quality Compliance Chart-Dust (2010/2011)

OCTOBER

ISO 14001 and OHSA 18001 certification has been maintained and the both the environmental management and the health and safety system has been reviewed to incorporate the latest changes in the standards. The Surveillance audit took place in February 2010 and the ELIDZ issued with a certificate in June 2010. There were no major non-conformances recorded and the certification been maintained for the sixth year running.

The ELIDZ monitors air quality using both a mobile station operated by SABS and a fixed station and all the monitored gases, oxides of nitrogen; nitrogen dioxide and sulphur dioxide are in a range of two orders of magnitude below the national limits. PM10 (dust) levels are lower than one sixth of the limit values. The ELIDZ generally targets values to be 50% below the national limits.

SEPTEMBER

SAFETY HEALTH ENVIRONMENT AND QUALITY

a) Air quality monitoring

AUGUST

• Pro-active Investor compliance, performance and business sustainability management.

Environmental Monitoring

JUL Y

• Centralised facility management.

Figure: 1 Lost Time Injury Frequency Rates for ELIDZ Construction Projects (2010/2011)

JUNE

• Development of an incubator facility and science park to create an innovation value chain for the development of SMME’s and new industries.

JUN - 09

• Development of a skills supply chain and zone labour management practices in order to deal with wage rate parity and labour productivity.

MAY

• Development of centralised value-adding services that contribute to lowering the cost of doing business in the ELIDZ, thereby improving the zone competitiveness. The ELIDZ is developing centralised facilities for the next cluster development (mari-culture) that will include centralised sea water supply, veterinary services and processing facilities.

LTIFR National Norm

MAY - 09

• The development of a “single window customs and logistics” system.

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

APRIL

The development of” executive desks” within relevant government departments to expedite the settling of businesses by streamlining licensing and authorisation processes.

APRIL - 09

•

ELIDZ Construction Projects - Lost Time Injury Frequency Rate (April 2010 - March 2011)

PM10 Levels, ug/m3

Effort in developing the one stop shop concept includes;

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Figure 3; Air Quality Compliance Chart-Ozone (2010/2011)

Figure 5: Air Quality Compliance Chart- Oxides of Nitrogen 2010/11

COMPLIANCE CHART, Nitrogen Dioxide

0.01

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

MARCH

0.2

Compliance with Periodic Limits

0.15 0.1 0.05

MONTH 2008

JANUARY

DECEMBER

NOVEMBER

OCTOBER

SEPTEMBER

AUGUST

0 JUL Y

MARCH

FEBRUARY

JANUARY

DECEMBER

NOVEMBER

OCTOBER

SEPTEMBER

AUGUST

JUL Y

JUNE

MAY

0.25

JUNE

0.01

0.3

MAY

0.02

NO2 Monthly Average NO2 Limit

0.35

APRIL

NO2 Levels, parts per million

0.03

Compliance with Periodic Limits

APRIL

SO2 Levels, parts per million

SO2 Limit

MONTH 2008

COMPLIANCE CHART, Oxides of Nitrogen

0.05 0.04

MARCH

Figure 6; Air Quality Compliance Chart Nitrogen Dioxide 2010/11

COMPLIANCE CHART, Sulphur Dioxide SO2 Monthly Average

FEBRUARY

MONTH

Figure 4; Air Quality Compliance Chart Sulphur Dioxide 2010/11

0.06

FEBRUARY

MONTH 2008

JANUARY

0 DECEMBER

MARCH

FEBRUARY

JANUARY

DECEMBER

NOVEMBER

OCTOBER

SEPTEMBER

AUGUST

JUL Y

JUNE

MAY

NOVEMBER

0.02

0.03 0.02

OCTOBER

0.04

SEPTEMBER

0.06

Compliance with Periodic Limits

0.05

AUGUST

Compliance with Instantaneous & Hourly Limits

JUL Y

0.08

0.07 0.06

JUNE

0.1

NO2 Limit

0.08

MAY

0.12

NO2 Monthly Average

0.09

APRIL

O3 Limit

NO2 Level, parts per million

O3 Monthly Average

0.14

APRIL

O3 Levels, parts per million

COMPLIANCE CHART, Ozone

a) Water Quality Monitoring

of this type of PPE (i.e. hand gloves).

No water quality monitoring took place in this dry season.

This year sees a 61% increase in attendance of employees with backache, most commonly amongst maintenance personnel. Back strain is one of the most common occupational conditions in industry and is indicative of possible problems with workstation ergonomics or un-controlled repetitive work involving unsuitable work practices. There is need to conduct training sessions on ergonomics to reduce the incidence of back injuries.

b) Industrial Effluent Monitoring Industrial effluent monitoring is undertaken weekly downstream of each designated industry as well as on all the storm-water outlets in the zone. In general industrial effluent is within permitted limits as set out in the municipal effluent permits, with the exception of and incidence where effluent from an agro-processing plant was discharge into the storm water system as a result of a blocked sewer discharge pipe.

MEDICAL CLINIC SERVICES There has been a 78% increase in the utilization of the clinic (from 1 489 to2 651visits in 2010/11 FY). This trend has been steadily growing since 2008. The increase in attendance is attributable to new factories, increased confidence in the service and the provision of additional services, such voluntary HIV counselling and testing (VCT) and the management of sexually transmitted diseases (STI’s). Figure 7: ELIDZ Clinic Attendance By Gender 2010/11

140 120

120

100 80 60

180

169

121 98

103

117

152

160

132

120

140 100 80

MALE FEMALE

MARCH

FEB

JAN

DEC

NOV

OCT

SEP

0 AUG

0 JUL

20 JUN

20 MAY

APRIL

Number of Case Attendance

180

Family planning services have seen a 161% growth in attendance; Sunningdale Dairy, the security company and the Feltex group employ many women of childbearing age and this has contributed to the increase in attendance. There is a need to look at the involvement of public health education in the area of family planning, perhaps in conjunction the department of health. HIV AIDS 23 employees underwent VCT; and all indications are that this service will be utilized more in the coming year, suggesting an establishment of a more comprehensive programme on HIV/Aids management. Upper Respiratory Track infections

ELIDZ Total Clinic Attendance By Gender (2010/11) 160

Family planning

The clinic has noticed numerous employees presenting to the clinic with irritant contact dermatitis. The causative agents are usually fibres and chemicals, which result in rashes on the hands and forearms. It is clear that adequate personal protective equipment (PPE’s) issued to workers particularly gloves are the culprit and the concern with the quality and sensitivity index. There is need to be followed up with tenants as part of occupational hygiene programmes. A further implication of this result is the proper use and control of chemical in factories that warrant the use

The most common ailment remains upper respiratory tract infection, which includes colds and flu. This year saw 456 attendances were recorded and most of these patients attend the clinic daily for the duration of their illness. The provision of daily medical support for such common ailments assists in the reduction of absenteeism. Blood Pressure Management The attendance for blood pressure monitoring has more than doubled. All employees with borderline hypertension are given BP monitoring charts on which they have their blood pressure recorded weekly. Education regarding lifestyle changes is given in an attempt to reduce and control this very common chronic condition. Injury on Duty (IOD): There has been 27 IOD’s during the 2010/11 financial year. All minor injuries were assessed and treated by the clinic staff with only three injured employees requiring referral. The reportable injuries were a laceration, which required suturing, an injured ankle and the one disabling injury; a traumatic amputation of an arm was dealt with and referred to hospital.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

PERSONNEL

Figure 8; number of cases per ailment 2010/11

Number of Cases Per Ailement seen at the ELIDZ Clinic 2010/11 900

Cases

800 700 600

PERFORMANCE

500 400 300 200 100 Allergies Backache ENT Eye Dental/Oral Mal/Fatigue FP: Injection FP: Tablets FP: Condoms GIT Headache Musculo-Skel Skin/Dressings Resp: Upper Resp: Lower Urinary tract Gynae STI/Other HPT/BP Mon Diabetes TR HIV/AIDS/VCT Psych/Epilepsy Referrals IODâ&#x20AC;&#x2122;s

JOB CREATION The tenant industry jobs have maintained a steady trend following last yearâ&#x20AC;&#x2122;s recession. The introduction of two new tenants Matla Diamond Beneficiation and the Sunningdale Dairies have significantly increased the job count in the zone. Figure 8 below shows the total employment for the ELIDZ from 2003/04 financial year to 2010/11 FY. There has been a steady growth in tenant industry employment following depressed growth as a result of the 2008/09 global economic crisis. Figure 8 includes cumulative job opportunities that have occurred in construction and these translate to 217 fulltime equivalent (FTE) jobs.

ELIDZ Total - Employment - Trends 2003 - 2011 Number of Jobs

3000 2000 1000

IDZ Corporate Construction job opportunities Zone Services Tenants

The development of the ELIDZ has also grown organically and its growth not based on well-articulated processes and as such job overlaps are numerous and this often has led to operational bottlenecks and frustrations. The ELIDZ is currently undergoing structural re-alignment to address this issue, and will undergo a comprehensive process review in support of this process.

CHALLENGES SARS has recently published several documentation with regard to designation and operations of the Custom Control Area. The following documentation was published on the 14th February 2011;

5000 4000

The performance of the Investor Services Department has improved year-on-year, due to improved staff complement. The staff complement is 90% of its approved capacity. The ELIDZ has moved to having several customers and service providers in the zone, which brings new challenges and stretch to the current resources. The nature of work is changing due to operational matters arising from operations. Several processes related issues have arisen and require attention. Comprehensive work was done to ascertain the health of processes and the verdict reached was that a comprehensive overhaul of these processes must take place. The lack of robust processes has lead to numerous problems relating to work package determination as well as defining handover points. This has contributed to inefficient delivery of the ELIDZ strategy as far as customer relations is concerned.

Customs Controlled Area (CCA) Designation

6000

2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2000/10 2010/11 15 15 23 29 41 48 53 68 0 146 1061 804 1417 1560 2085 5002 65 0

54 0

64 0

Figure 8; ELIDZ Employment trends 2003/4-2010/11

Nine (9) out of the ten (10) budgeted posts are filled leaving at two vacancies. There is one post budgeted for this financial year. The recruitment of the Customs and logistics specialist has been halted pending the outcome of the CCA operational model design that is taking place with the assistance of a service provider.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

74 480

76 600

131 736

131 635

154 1371

Standard Operating procedure; registration of rebate user (schedule 3, 4 and 6). Reference number SC-CW-02-03

Customs controlled Ares gate control. Reference number; SC-CF-02-03.

Customs Duty and Vat Implications for CCA Transactions. Reference number SCCW-02-03-A1.

4. Industrial Development zones; registration, designation and licensing. Reference number SC-CF-19-S18.

The publication of these procedures should make it possible to finally implement the CCA and its Tax and duty incentives. However, there are still challenges with regard to the structure of the programme, which still advocate an area based designation of the CCA. The consequence of this is the inevitable development of multiple pocket of CCA’s each with its requisite infrastructure. This approach will not only be costly but is antagonistic to the cluster approach in that service related tenants are not allowed under the current interpretations of the CCA. The current programme structure introduces VAT benefits (Zero-rated supplies) from supplies into the CCA however, the interpretation of the CCA as an export country under the VAT Act, and the CCA according to the Customs Act is not an export country poses an operational conflict and possibly nullifies the benefit. Further to these structural problems in the protocols and legislation the administrative burden placed on the operator requires a large resources that must be planned and require some time to execute.

Automotive Component Manufacturing NQF 3 – 9 learners

Automotive Component Manufacturing NQF 4 – 8 learners

Welding Applications NQF 3 – 8 learners

4. Welding Applications NQF 3 – 10 learners 5.

Fitting and Machining NQF 4 – 8 learners

6. Mechatronics NQF 4 – 10 learners Figure 2 (Learnership programme; current intake spread per qualification)

ELIDZ - Learnership Programme Intake 2010 / 11 FY

Despite these constraints, the ELIDZ is engaging with SARS and is in the process of applying for parts of the IDZ to be designated as CCA’s. ELIDZ Science/Techno-Park The Science park project, is progressing well and still at planning stage. A site for the co-location of the science park and the Walter Sisulu University school of Engineering has been agreed and concept layouts developed. Negotiations are underway with the community, which utilises the site for recreational purposes currently. Several planning studies including the Business Plan and other engineering studies have been commissioned. The pilot science park will be located in the new office park in zone IC. This is intended to begin to generate science park activity and provide a testing ground for some concepts to be applied in the development of the main park.

SUCCESSES Skills development and facilitation

Machatronics

19% Fitting & Machining (NQFL4)

15%

15% 19%

Automotive component manufacturing (NQFL4)

Welding application (NQFL3)

Below is a table showing the previous year’s intake and performance where an 85% completion rate and 87% competency rate were recorded. Some of those that were found competent in the 2009/10 programme progressed to the current Learnership programme. NQFL2 -

Mechatronics

NQFL2 -

Welding Application

NQFL2 -

Automotive Component Manufacturing

•

NQFL3 -

Automotive Component Manufacturing

A total of 53 learners (figure 2) out of the 60 approved by the Office of the Premier to be funded to continue on NQFL3 and NQFL4 have started with their programmes although the NQFL4 Automotive Component Manufacturing had a late start as a result of Buffalo City FET not having the requisite accreditation. The 53 learners are pursuing the following qualification;

15%

Welding application (NQFL4)

Progress has been made with regards to the second intake of this programme and is as follows; Learnership programme

17%

Automotive component manufacturing (NQFL3)

NQFL3 -

Fitting & Machining

NQFL3 -

Welding Application

Intake (2009/10) Completed Competent

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Intake (2009/10)

Completed

Competent

NQFL3 Welding Application

NQFL3 Fitting & Machining

Automotive Component NQFL3 Manufacturing

Automotive Component Manufacturing

NQFL2 Welding Application

NQFL2 Mechatronics

12 92

10 75

NQFL2

Molan Pino South Africa (Pty) Ltd an automotive component manufacturer located in the automotive supplier park, producing foam and rubber components will be expanding its operation next year and construction for its extension will commence in January 2011. Incentive Application The ELIDZ has partnered with IQUAD service an Eastern Cape born company to provide incentive application and administration support to tenants. To date three application for the Enterprise investment Programme have been approved and will be paid out to the investors over the coming three years. There are three applications awaiting approval. Figure 9; DTI approved EIP incentives 2010/11

The table below shows an even split between male and female learners in the programme. Although disabled candidates are targeted during recruitment, only one disable candidate was admitted into the programme.

ELIDZ - Tenants’ DTI Approved Incentive 2007 - 2011 40 35 30 25 20 15 10 5 0

ELIDZ - Skills Development Facilitation Programme 2007 - 2011 (Equity Breakdown) 100 80 60 40 20 0

56 2007/08

56 2008/09 Male (Black)

94 2009/10

54 2010/11

Female (Black)

Services

Project Investment ZAR (mil) EIP Incentive ZAR (mil)

Matla Diamond (Pty) Ltd

Matla Solar (Pty) Ltd

Sunningdale Dairies

The following services have been commissioned as part of the zone operations aimed at benefiting investors through exploitation of economies of scale; •

Medical services

Tenant Issues:

•

Zone security and ingress control

Sea-Tek trading as Wavelengths 150 has been successfully liquidated and rentals and utility owed to the ELIDZ have been paid Espadon Marine a fin-fish production facility located in the IDZ adjacent to the liquidated Sea-Tek site has bought the assets and plans to expand its operations on this site. A new lease agreement with Espadon Marine (Pty) Ltd is under negotiation.

•

Landscaping and vegetation management

•

Transportation to the Zone

•

Utility services (electricity and water)

•

Centralised logistics services

Carcoustics South Africa (Pty) Ltd an automotive heat shield manufacturing company located in the Automotive Supplier Park since 2007 closed its doors on the 15th December 2010 owing to consolidation by its parent company based in Germany, despite this unit posting profits even during the recent recession.

•

General waste management.

•

Centralised canteen services & Conferencing

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

The ELIDZ procured a service provider (COLLECTALL) for the waste sorting and transfer station and the operator will commence operations in June 2011. Customer Relations The ELIDZ conducted a Customer value analysis in a bid to understand what it does best and what it should be doing to improve its competitiveness as a location of choice. As part of this study, the ELIDZ examined the levels of satisfaction among tenants with the current value proposition and the outcome is summarised below. The level of dissatisfaction on average is 10% against a target of 10% or less while the satisfaction rate is segmented from mediocre to high as depicted in figure 10. Figure 10; ELIDZ tenants Satisfaction survey summary results

Respondents recorded satisfaction around: 1.

Security

Zone infrastructure provision, 73% described this as average to good

Payment and billing, 62% described as average to good service

4. Crisis response, 66% described this as average to good 6. Renegotiation of contracts. 63% described this as average to good

Fig 26: Perceptions on ELIDZ Customer Service Bad or unsatisfactory service Average service

Weak service Good service

Renegotiation of contracts

13%

25%

Payments & billing

13%

25%

Crisis Response Technical support

9% 29%

General Maintenance

12% 6%

18%

53%

20%

Infrastructure Provision

25% 31%

45%

27%

13%

38% 31%

13% 21%

50% 41%

24% 20%

40%

60%

80%

18%

100%

Source: Urban-Econ EC Customer Value Survey, 2010 The investment decision making process that the ELIDZ followed was recorded as being a good service. Respondents noted that the level of communication and support during the phases of investment attraction and signing of contracts was high.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

Output/ Deliverable

Target

Actual performance results (and reason for any variance)

Measure the quality of customer relationship value through segmentation profiles.

percentage of dissatisfaction

Measure the Customer loyalty profile

Percentage of loyal customers

50%

Measure the number of new customer accounts accessing the ELIDZ services.

number of new customers

>3 customers

Receptivity to service offering is 100% where all new customers have taken up ELIDZ services offered (telephony, Incentive services and clinic services have all been taken up by Matla Diamond, Sunningdale, Diary; Elpet and MSC)

Measure the number of customers terminating use of ELIDZ services

number of terminations

Nil

No tenants have so far terminated services.

Reduce/ contain cost of doing business ratio

Measure the cost of doing business in the IDZ and ensure it is lower than the rest of Buffalo City.

Percentage below benchmark

3% below Benchmark

70% Study has been commissioned through IQUAD. The relative cost for the ELIDZ will be measure in the next quarter. Study is not complete yet

Minimise the safety, health and environmental impacts of the project

Maintain low occupational health related injuries and diseases.

Lost Time injury rate

0.1

Current lost time injury rate is 0.5 at industry national norm. The high figure which is at national norm levels has a significant contribution of injury rates from a fatality that occurred in 2009. Furthermore reduced number of construction projects result in reduced man-hours that are a denominator in the calculation of the injury frequency rates. Therefore, any disabling injury that occurs has a significant impact under these circumstances.

Maintain environmental due diligence for the project

measure the number of environmental citation received by the organisation.

No environmental citations received by the ELIDZ in this financial year.

Certification

100%) Certification Surveillance was completed. Currently the ELIDZ has maintained certification for the sixth consecutive year.

Achieve and Sustain Positive Customer Relations

Improve Market receptivity of ELIDZ value offering.

Maintain Certification Safety and Health (OHSAS 18001)

ACTUAL PERFORMANCE AGAINST TARGET

Output performance measure/services delivery indicator

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

<10% dissatisfaction

95% The Customer value analysis study by Urban Econ suggest

Customer loyalty profile has been measure based on continued use of services provided by the ELIDZ mainly Telephony; incentive services and the clinic. Customer loyalty currently stands at .>90%

Strategic Objective

Output/ Deliverable

ACTUAL PERFORMANCE AGAINST TARGET

Output performance measure/services delivery indicator

Actual performance results (and reason for any variance)

Target

Maintenance of international certification (ISO 14001)

Certification

1(00%) Certification Surveillance survey will be done in November 2010. Currently the ELIDZ has maintained certification for the sixth consecutive year.

Develop new SMME enterprises

Number of new SMME enterprises developed per year

1 (one)

To be measured at the end of the financial year

Measure And ensure SMME enterprises participate in the ELIDZ activities

number of SMME’s participating in the ELIDZ activities

114

There are currently 125 SMME’s participating in the ELIDZ activities

Develop and run ELIDZ tenant industry employee re-skilling programmes

number of tenant industry employees re-skilled

0% This project did not take off this financial year due to an us-successful skills gap analysis conducted with tenant industries.

Facilitate and implement a Learnership programme for skills critical to the ELIDZ focus industries. (Automotive component manufacturing Welding, fitting and machining),

number of learners completed the programme and percentage of learners found competent

114 and 75% competent

The NSF programme has currently been suspended. However, the OTP has sourced funding to progress with the current ELIDZ programme for learners that were successful at both NQFL2 and 3 programme last year. The intake for the 2010/11 FY will start in July 2010 will be measured at the end of the financial year.

Facilitate the training of artisans

Number of artisans successfully trained and obtained trade tests certification.

A total of 74 artisans have been trained and only 16 have received trade test certificates. The remainder is yet to undergo certification.

Promote IDZ tenant BBEEE compliance

Encourage ELIDZ tenant industries to be BBBEE compliant

Level of BBBEE rating and % of tenant industries at that level

50% at Level 7

•

Generate Economic value and returns

Measure retained tenants turn-over

R’000

R1,556

To be measure at the end of the FY. .

Develop Opportunities for SMME enterprises

Develop and support strategic skills in the Region

50% of tenant industries have attained BBBEE level 7

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

Output/ Deliverable

ACTUAL PERFORMANCE AGAINST TARGET

Output performance measure/services delivery indicator

Target

Actual performance results (and reason for any variance)

Measure IDZ tenant industry employee levels

Number of employees

720

An average of 1371 tenant industry employees was recorded during this financial year

Measure ELIDZrelated employees (i.e. service providers)

Number of employees

There are 154 employees attached to several contract and service providers providing services to the ELIDZ. These exclude jobs recorded for construction projects.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

East London IDZ Waste Sorting Site EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Programme Performance Report SCIENCE & TECHNOLOGY PARK Sub-Programme Aims: Pilot Science Park Development and Science and Technology Park Planning

Other Program Budgets Science & Tech. Budget

The East London Science and Technology Park aims to be an accelerator and growth engine of the regional economy. To this end, it will when fully established: 99%

•

Support industrial research and development in the province.

•

Stimulate, organise, and manage transfer of knowledge and technology from the knowledge custodians (the Universities and R&D institutions) to companies and the market place.

•

Inspire a culture of excellence and innovation among its tenant or resident businesses and knowledge-based partners.

•

Encourage the establishment and growth of new, sustainable innovation-based companies through commercialization of innovative research outputs and products, incubation, and spin-off processes of incubation.

•

Assist in equipping students of science, engineering, and technology with industry-relevant skills.

Budget The pie graph below indicates the portion of the total ELIDZ budget that was allocated to the Science & Technology Park Programme for the financial year (April 2010 to March 2011).

Budget Vs Expenditure The table below indicates the budget allocation to the Science & Technology Park Programme for the financial year (April 2010 to March 2011) and the actual level of expenditure, which was attained resulting in a 31% variance, as reflected in the table below.

BUDGET PROVISION: Science & Technology Park PROGRAMME

Science & Technology Park TOTAL

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Budget

Expenditure

Variance

R’000

5 421

3 718

1 703

5 421

3 718

1 703

The Budget and actual expenditure are compared in the graph below to indicate the expenditure variance against budget.

Râ&#x20AC;&#x2122;000 6 000 5 500 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 -

Furthermore, it has developed a partnership arrangement with the Walter Sisulu University for collaboration in establishing the Park.

OPPORTUNITIES: The implementation of the New Growth Path policy and programmes, as well as the new national emphasis on the need to grow the knowledge economy and build economic competitiveness through innovation, represent an opportunity for the subprogramme which is currently aligning itself accordingly.

CHALLENGES: The main challenges facing the sub-programme have been scarcity of skills in the innovation field, as well as insufficient budgetary resources. Budget Yr to Date

Expenditure

BUDGET PROVISION AND EXPENDITURE VARIATION Budgetary Highlights Whereas the total budget for the sub-programme for the financial year (April 2010 to March 2011) was R5,421million, the actual expenditure for the period was only R3, 718 million, resulting in a 31% variance,

COMMENTS ON EXPENDITURE Although the variance is substantial, it has been due to a delay in filling a critical senior position. The delay is essentially a reflection of the dearth of skills in the innovation field.

ACHIEVEMENTS: The sub-programme has in the course of the financial year developed a business plan for the pilot Science and Technology Park, which includes its value proposition. The Pilot Park is now operational, although some key positions are yet to be filled. The sub-programme has also commenced the development of the business and master plans for the full operational Science and Technology Park, as well as two-value chain studies whose findings will used as inputs for the business plan development.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective Attraction of strategic targeted investment

Build ELIDZ brand awareness and reputation.

Output/ Deliverable

Output performance measure/services delivery indicator

ACTUAL PERFORMANCE AGAINST TARGET Target

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

Establish structure to guide development of Business Plan, Master Plan,

Timeliness and approval of guide document

By 28 July 10.

Completed by June 10

Completed before schedule to set the pace for Park development

Develop STP Community & Networking Plan

Timeliness and approval

By 31 January 11

Plan developed. Awaiting approval

Official responsible for this deliverable only joined the Unit in May 2011

Develop a brand & logo for the ELSTP

Timeliness and approval

By 15 Oct 10

Brand & logo developed. Awaiting approval

Official responsible for this deliverable only joined the Unit in May 2011

Completed before schedule for funding purpose

Establish STP Community reflecting all the stakeholder categories

Timeliness and approval

By 31 March 2011

Already WSU, Fort Hare, & Rhodes Universities have been engaged, and so have Johnson & Johnson, Eskom, and Siemens, and the East London Chamber of Business, but the Community is still being developed

Sector value proposition development

Develop Plan to offer value-adding services in the pilot phase of the STP

Timeliness and approval

By 30 Sept 2010

Plan developed by July 10

ELIDZ grant funding

Prepare and make presentation to MEC and other potential funders

Amount of funds raised

By 31 March 11

Raised R1m from the Department of Science & Technology

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

East London IDZ will have a state of the art science and technology centre EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Programme Performance Report INSTITUTIONAL DEVELOPMENT & CORPORATE ADMINISTRATION The activities that are combined within this composite programme relate to the provision of overall strategic direction and financial administration of the East London Industrial Development Zone organisation. The activities are managed within three sub-programme elements: • • •

Institutional and Public Relations (Office of the Chief Executive) Financial Management and Corporate Administration (Finance and Support Services) Human Resource Management (Finance and Support Services).

Sub-programme Aims: Communications and Public Relations • • • •

To entrench the ELIDZ corporate values by demonstrating these to both internal and external audiences To create a positive, distinctive, corporate identity that attracts investor and stakeholder support To create awareness about the Industrial Development Zone’s business objectives within the defined target market To ensure understanding, acceptance and endorsement of the ELIDZ vision by stakeholders and other target audiences.

Budget The pie graph below indicates the portion of the total ELIDZ budget that was allocated to the Institutional Development & Corporate Administration Programme for the financial year (April 2010 to March 2011). 2%

Budget Vs Expenditure The table below indicates the budget allocation to the Institutional Development & Corporate Administration Programme for the financial year (April 2010 to March 2011) and the actual level of expenditure, which reflects an over-spending variance. BUDGET PROVISION: Institutional Development & Corporate Administration Budget

Expenditure

Variance

R’000

Institutional Dev & Corporate Admin

11 082

11 570

-488

TOTAL

11 082

11 570

-488

PROGRAMME

The Budget and actual expenditure are compared in the graph below to indicate the expenditure variance against budget.

Budgetary Highlights As at the end 2010/11, the Institutional Development and PR budget stands at a -4 % over expenditure. The second and third quarters of the financial year is characterised by project implementation and delivery and sees the highest per quarter expenditure for the Institutional Development and PR Unit. The over expenditure is due to costs relating to the implementation of a organisational review and alignment exercise by the East London IDZ board.

Departmental Highlights Legal Compliance Other Program Budgets Inst Dev. & PR Budget

98%

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

The Legal Compliance Model was developed and was sent to Risk Committee together with the operator permit compliance matrix all of which have been updated as of July 2010. The legal register for 2010/11 financial year has been confirmed as at 2 August 2010. The legal compliance workshop and the manual and the matrix for the Manufacturing and Development Act and Regulation and Constitution have been

completed for last year and now the review process of these matrixes are being scheduled. PFMA is currently scheduled and being updated next.

Key to this was the development of multi-media collateral to support the ELIDZ’s branding initiatives. These included:

Revenue Contracts

Corporate Video Productions

The office lease and MOA P2/3 has been drafted, however it needs to be discussed with the Chief Executive before execution. Various attempts to finalise the MOA Part 1 for the water and electricity supply and Part 4 for sea water supply service has been made to finalise however various bottlenecks have been experienced.

•

Stakeholder video finalised

•

East London lifestyle video

•

Also set out time to take footage for the next six months both from a lifestyle and ELIDZ perspective to boost the videos.

•

First draft of ELIDZ’s new corporate video finalised – additional footage to be taken in the new Financial Year.

•

The new ELIDZ value proposition DVD, as well as the sectoral and socio-impact DVDs are reaching completion.

Current Awareness The current awareness has been on going with various handouts and e-mails to Executive Managers, highlighting development in legislation and case law. The continuous development workshops have also been underway starting with the Consumer Protection Act. King 3 and other current legislative developments are being engaged on with Legal and the Executive Committees. R’000 12 000 11 000 10 000 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 -

Branding of STP – Finalised work on proposed core-ideology and brand positioning of STP. Came up with a shortlist of four names and working on possible logos for the STP . Exhibitions Key to the ELIDZ’s branding activities was the exhibition of ELIDZ’s value offering. Some of the exhibitions that the ELIDZ participated in included: South African Property Owner’s Association Convention Budget Yr to Date

Expenditure

Public Relations and Marketing Communications The development of the Communications and Public Relations Plan for the 2010/11 FY, based on the 2009 – 2011 Communications Framework was finalised in the first quarter the implementation of this was actioned for the rest of the three quarters of the FY. Brand Management and Profiling As part of the Communications Framework, a number of Communication Activities with key stakeholders were implemented as key to the East London IDZ’s objective to grow its brand equity.

Media Relations 19 media releases released during the 2010/11 financial year. • • • • • •

284 ELIDZ media mentions during the period under review Coverage for this year has increased proportionally from R2,5m in the previous financial year (April 2009 – March 2010) to R4,4m (+76%) for the period April 2010 – March 2011. The most topical issue in this period was the announcement of the ELIDZ’s new investors: Matla Solar and Sunningdale Dairy, followed by the Joule. Another story which contributed to the coverage was the job creation capabilities which will result from the new generation C-Class being manufactured at the ELIDZ. The renewable energy sector was the largest contributor by sector followed by automotive and agriculture. Print media accounted for 52%; online – 46%; broadcast 2% of total AVE.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

• •

Tone of media coverage: 62% (R2,86m) of the total AVE was positive; followed by neutral (37%/R1,716m) and negative (1%/R53k). For the first 3 quarters of the year, the media coverage generated by the organisation was mainly operational, making the value driver: operational excellence the most affected with 55 articles/inserts accounting for R649k due to new investments secured by ELIDZ

Brand and Stakeholder Audit The ELIDZ is advanced in its brand and stakeholder satisfaction audit that aims to determine the growth of the ELIDZ brand equity over the last two financial years (2009/10 and 2010/11). Key reasons for delays in this regard include: • • •

Non responsiveness of targeted respondents Shifts from a manual one on one system to an electronic system (to ensure a wider distribution and participation) Need for the exercise to be in sych with the Customer value analysis exercise.

Results to be available early in the 2011/12 financial year due to the need for the exercise to be in synch with the value analysis exercise.

CSI ELIDZ CSI Committee currently implementing the following projects: • Flagstaff Trust Account finalised and ongoing • Facilitated partnership between Angels Opharnage in Scenery Park and Cotlands, a non-governmental organisation which helps community entities with nutrition, growth monitoring and basic education training. • Sponsorship of uniforms with Umso Construction (2010/11 FY) • Rally to Read Campaign • Walk a Mile in my shoe campaign (with Umso Construction) • UFH Bursary Scheme • Crime Reporting Centre • Kit sponsorship for Border Bears • Khanya Career Expo • Ulwazi ngu Ndoqo Educational Outreach to Engcobo

OPPORTUNITIES •

East London IDZ currently reviewing possible opportunities to grow the company’s public profile and create community buy in through the development of the “Know your IDZ campaign” a public campaign utilising electronic, print and broadcast media.

•

ELIDZ currently looking at the development of a new corporate video encompassing various sectoral videos.

•

Opportunities exist to explore and broaden the ELIDZ’s CSI policy to fully explore the use and impact of strategic partnerships in delivering CSI projects.

Publications The following publications were worked on and finalised in the period under review • • • •

Events

CHALLENGES

East London IDZ Events Comittee is still active and plans an annual events calendar. Key events on the 2010/11 FY included:

•

Continuing on the current momentum to rally for government support and leadership in lobbying for an improved institutional framework for the Industrial Development Zone project.

•

Ensuring continued balance between the ELIDZ’s branding activities and customer value delivery in order to truly increase the ELIDZ’s brand equity amongst its most important stakeholders – its customers.

•

Continuing to be on the cutting edge in terms of communication technology and practice as well Corporate Social Investment priorities.

• • • • • • •

InfoZone Annual Report is complete. ZoneBeat Print for Tenants is in the final layout stages ELIDZ website

Agro-processing Seminar Launch of Sunningdale Plant Launch of Matla Beficiation Company Lauch of Matla Solar Water Heating East London IDZ stakeholder Awards Trade and Promotion Exhibition Internal communication and information sharing events

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective Promote and attract investment from highpotential, high strategic value sectors, clusters and industries.

Promote and attract investment from highpotential, high strategic value sectors, clusters and industries

Output/ Deliverable

Targeted Investment Promotion Programme developed and implemented.

Output performance measure/services delivery indicator

ACTUAL PERFORMANCE AGAINST TARGET Target

Brand Management Programme developed and implemented.

Develop and manage a brand management and profiling programme.

Targeted Investment Promotion Programme developed and implemented

Brand measurement matrix developed. Brand audit undertaken with results targeting a 5% growth in the overall brand equity index.

Develop and implement a matrix to measure the impact of the brand management and profiling programme on the ELIDZ on the growth of the organisational brand equity.

Targeted Investment Promotion Programme developed and implemented

Communications Programme implemented with emphasis on interactions with : Business Community, academic institutions , rural development institutions

Develop and manage an internal and external stakeholder communication programme that is supportive of strategic Investment Attraction

Actual performance results (and reason for any variance)

Brand profiling and brand management plan developed and implemented through external corporate profiling in events, advertising , public relations and marketing communications.

Planning for East London IDZ brand audit underway and results will available in the first quarter . The reasons behind the delay in delivery include: â&#x20AC;˘ Non responsiveness of targeted respondents â&#x20AC;˘ Shifts from a manual one on one system to an electronic system (to ensure a wider distribution and participation) â&#x20AC;˘Need for the exercise to be in sych with the Customer value analysis exercise. Results to be available early in the 2011/12 financial year due to the need for the exercise to be in synch with the value analysis exercise.

Internal and external stakeholder communication programme supporting of internal communication and brand engagement as well as supportive of the strategic investment attraction initiatives of the East London IDZ undertaken.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

Promote and attract investment from highpotential, high strategic value sectors, clusters and industries.

Supplement and develop the ELIDZ organisational people capability to eliminate identified gaps and weaknesses in core knowledge, skills and behavioural competencies.

Output/ Deliverable

Targeted Investment Promotion Programme developed and implemented.

Output performance measure/services delivery indicator a) Media engagement programme implemented with a minimum of 2 media releases per month issued. B) Monitor ELIDZ media profile through quarterly media analysis. a) Divisional Business Unit strategic planning review process conducted:

Core Knowledge, Skills and Behavioural competencies Assessed and Aligned to ELIDZ core ideology.

b) Corporate strategic planning workshops facilitated to develop corporate strategy: c) Corporate Strategy and Destination Statement finalised Strategic planning output translated into suite of Divisionalspecific Operational Plan templates: a) Strategic Priorities (3yr) b) High level budget summary (3yr) c) Operational Plan (1yr).

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

ACTUAL PERFORMANCE AGAINST TARGET Actual performance results (and reason for any variance)

Target

Grow the ELIDZ's media profile in the regional and national media universe

19 media releases released during the 2010/11 financial year. •

284 ELIDZ media mentions during the period under review

•

Coverage for this year has increased proportionally from R2,5m in the previous financial year (April 2009 – March 2010) to R4,4m (+76%) for the period April 2010 – March 2011.

Facilitate internal deliberations leading to the formulation of appropriate and effective ELIDZ Corporate Strategic planning.

Planning for 2011/12 cycle to align with government submission requirements finalised and methodology and tools for strategic planning review prepared in conjunction with business units.

Facilitate internal cascading of corporate strategy and interpretation of strategic objectives to inform Business Unit Operational Planning and Budgeting process

An internal planning exercise to evaluate the status and merits of the current strategis agenda was initiated through an extensive consultative process with business unit management. This was paced to be in sync with the current organisational structuring re-design process that is underway and has resulted in revised scheduling for strategic planning outputs finalisation.

Strategic Objective

Output/ Deliverable

Resolve institutional arrangements necessary to allow continued receipt of grant funding to execute the ELIDZ's business plans

Institutional funding arrangements resolved and annual grant funding secured

Ensure that the ELIDZ operates within the mandate of its principals and relevant legislation by end of FY 2009/10

Output performance measure/services delivery indicator

Updated ELIDZ Business Plan issued and Summary Presentations produced

ACTUAL PERFORMANCE AGAINST TARGET Target

Update and deploy ELIDZ comprehensive business plan to lobby for funding

Actual performance results (and reason for any variance)

Planning for the update of the ELIDZ business model was initiated, but progress was constrained by unresolved issues pertaining to government commitment of sources of funding.

The Legal Compliance Model has been developed and approved by the Risk Committee. The operator permit compliance has been reviewed for the financial year by the Risk Committee. . ELIDZ Compliance with Statutory requirements facilitated and maintained

Compliance Matrix developed and internalised for various acts

Identified pieces of legislation work shopped and internalised.

The Legal register for the financial year 10/11 has been updateed . Legal compliance workshop has been presented to Risk Committee and the manuals and the matrixes for the Manufacturing and Development Act and Regulation and Constitution have been completed for last year. These however are pending the approval and adoption by the RISKCO.Current awareness has been on-going highlighting development in legislation and case law.

Review the conditions of the IDZ Operator Permit to identify gaps in performance and actions required

The comments on the IDZ Operator Pemrit has been Consolidated the comments and drafting the document.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective Ensure that the ELIDZ operates within the mandate of its principals and relevant legislation by end of FY 2009/10

Adapt and transform ELIDZ business practices to improve organisation's performance in terms of targeted procurement

Develop capacity and serve as an Implementing Agent for skills development initiatives

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Output/ Deliverable

ELIDZ Compliance with Statutory requirements facilitated and maintained

Institutional Development and PR procurement disbursements to achieve 2010/11 participation levels of 65% for broad based black empowerment, 30% for SMMEs, and 10% for womenowned enterprises.

Regional Skills capabilities and labour potential supported and enhanced

Output performance measure/services delivery indicator

ACTUAL PERFORMANCE AGAINST TARGET Target

Compliance Management Review Reports issued and recommendations actioned;

Initiate actions to ensure ELIDZ compliance with Operating Permit and applicable legislations

Monitor and manage ELIDZ targeted procurement contributions in line with agreed social transformation and empowerment objectives and targets by end of FY 2009/10

ii) Targeted improvements achieved: a) Improve BBBEE expenditure from 57% to 60% by end of FY 2009/10; b) Increase SMME procurement from 15% to 20% allocation of annual procurement expenditure; c) Improve procurement from women-owned enterprises to 7,5% of annual procurement expenditure;

CSI Skills Development and Entrepreneurship projects implemented and impact monitored

Develop and manage a CSI programme that is geared towards skills development and promotion of entrepreneurship with implementation of 6 new projects for the 2010/11 FY

Actual performance results (and reason for any variance)

Timeframes to be set by the Risk Committee. The intention is that the legal manual and the matrix be reviewed and reported on by the champion of the legislation at the Risk Committee. The review is completed. The bottleneck in the progress of this output is the lack of a resource to ensure the smooth technological transfer of information.

BBBEE Spend=118% SMME Spend=107% Women Owned Spend=4.5%.

CSI projects undertaken during the period under review include: • Flagstaff Trust Account finalised and ongoing • Facilitated partnership between Angels Opharnage in Scenery Park and Cotlands, a nongovernmental organisation which helps community entities with nutrition, growth monitoring and basic education training. • Wheelchair basketball team sponsorship • UFH bursary Scheme – 4 students awarded bursaries. • Walk a mile in my shoe campaign – partnership developed with Umso Construction. • Sponsor of crime reporting center building to West Bank Community.

Inside the State of the art Sunningdale Dairy Factory EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Programme Performance Report ACCOUNTING & ADMINISTRATION SUB-PROGRAMME AIM • • • •

To enhance the ELIDZ financial administration and reporting capability To develop and expand ELIDZ’s sources of funding and incrementally improve annual revenue generation in line with business planning forecast To ensure compliance of the ELIDZ with corporate governance best practices, the Public Finance Management Act, Companies Act and accounting standards To adapt and transform ELIDZ business practices to improve organisation’s contribution to BEE and SMMEs empowerment.

Budget The pie graph below indicates the portion of the total ELIDZ budget that was allocated to the Accounting & Administration Programme for the financial year (April 2010 to March 2011). 1%

Other Program Budgets Acc. & Admin Budget

99%

Budget Vs Expenditure The table below indicates the budget allocation to the Accounting & Administration Programme for the financial year (April 2010 to March 2011) and the actual level of expenditure, which was attained resulting in a 1% variance, as reflected in the table below.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

BUDGET PROVISION: Financial Management & Administration Budget

Expenditure

Variance

PROGRAMME

R’000

Accounting & Administration

6 966

6 925

TOTAL

6 966

6 925

The Budget and actual expenditure are compared in the graph below to indicate the expenditure variance against budget. R’000 7 500 7 000 6 500 6 000 5 500 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 -

Budget Yr to Date

Expenditure

COMMENTS ON EXPENDITURE The expenditure has been closely monitored throughout the reporting period and at year end the budget-expenditure variance is an overspending of R41 000 which constitutes less than 1% of the budget.

ACHIEVEMENTS:

Black Economic Empowerment

Financial Statements for the 2009/10 financial year were compiled and submitted to the external auditors before the 31st May 2010 in compliance with the Public Finance Management Act (PFMA). The ELIDZ also met the deadline set in the Budget cycle, for the strategic plan, annual performance and operational plan submissions.

During the period under review, April to March 2011, the ELIDZ continued to manage its procurements with a view to supporting Black Economic Empowerment (BEE) enterprises and SMMEs.

The ELIDZ internal auditors conducted the audit in accordance with the internal audit plan approved by the Audit and Risk Committee and reports were submitted to the Audit and Risk committee on quarterly basis. The same committee, at its meeting of the 30 April 2010, approved the external audit plan. The external audit was conducted and completed before 31 July 2010; and an “unqualified” audit opinion was achieved as reported. The procurement policy, the Exception to Open Tendering Policy and the Fraud Prevention Policy that were reviewed by the Board in the 2009 financial year, were implemented as amended and approved during the year under review. The implementation of these policies had been part of the enterprise wide risk management strategy of the ELIDZ and has facilitated the mitigation of the procurement and systems risk. The ELIDZ engaged PriceWaterhouseCoopers (PWC) Forensic Services to conduct verification of conflict of interest information and report findings to the Risk Management Committee. This is an exercise that is conducted on an annual basis that has contributed well to the risk management framework of the organisation. The above-mentioned policies were applied to the members of the Board, Board Committees, service providers and the ELIDZ staff. A fraud prevention toll- free line was advertised internally in the newsletter and all the notice boards and externally in local newspapers as a fraud response measure and is directly connected to PWC forensic services. An awareness session for the fraud prevention line was conducted as a reminder to all staff mainly targeting new employees that have joined the ELIDZ. Business Plan The East London IDZ’s business plan’s financial model has been reviewed to revise and extend forecasting to the new MTEF period ending 31/03/2013. Following the finalisation of the audit of financial statements for the 2009/10 financial year, the ELIDZ has also revised its Business Plan so as to facilitate the recording of the actual financial information for 2009/2010 Financial Year. It is ELIDZ standard practice to have Business Plan reviewed and updated as soon as the audited financial statements have been approved by the end of July every year.

On the basis of the gazetted CoGP, the ELIDZ reviewed the BBBEE status of all service providers in the database to determine their status in three categories, these being EMEs (Exempted Micro Enterprise) suppliers with annual turnover less than R5 million, QSEs (Qualified Small Enterprises) suppliers with annual turnover between R5 million & R35 million and, thirdly, suppliers that have an annual turnover more than R35 million (these Companies (GSC) were evaluated on the basis of the Generic Scorecard. The ELIDZ had implemented its BBBEE Programme in awarding of major contracts for the construction of infrastructure, as part of the Zone Development programme and other projects. During the period, actual cash flow of R251.7 million was directed into major infrastructure contracts and consultants and 98.86% of this, (an amount valued at R248.8 million) was placed with BBBEE Service Providers. This is equivalent to a 29.24% allocation (valued at R73.6million) when measured in terms of Black equity component. An amount of R37.9 million was spent on SMME procurements making 15.06% of total spend, while 6.21% (amounting to R15, 6 million) spent with women-empowered companies. The following table show organisational performance in BEE as against strategic targets. Organisational achievement % has improved in B-BBEE and dropped in the SMME and women empowerment. The compliance of ELIDZ with the Government Gazette notice no.32467 published 31st July 2009 that instructs the use of verified B-BBEE Certificates as from the 1st of February 2010 saw a lot of SMMME’s graduating to B-BBEE status resulted in reduced performance in SMMEs and women empowerment.

BBBEE & SMME Report - March 2011 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

98.86% 80.61%

BBBEE

GSC

8.10%

7.12%

QSE

EME

16.06%

SMME

29.24% 6.21% Equity Equity Ownership Ownership

(Black people) (Black women)

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

BLACK ECONOMIC EMPOWERMENT

The East London IDZ attended a career expo where young future Entrepreneurs had a chance to interact with the ELIDZ staff.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

BBBEE

Black Owned Entities

SMME (QSEs + EMEs)

Women Owned

Zone Development & Infrastructure

98.73%

27.66%

6.83%

5.64%

Communications & PR

118.85%

6.42%

107.79%

4.53%

Accounting and Administration

105.22%

22.28%

39.57%

7.47%

Information & Communication Technology

86.68%

42.44%

31.93%

3.04%

Human Resources

81.87%

18.58%

66.65%

17.78%

Zone Management & Investor Services

108.76%

59.75%

91.69%

16.16%

Business Development

86.97%

16.08%

49.54%

11.27%

ORGANISATIONAL PERFORMANCE %

98.86%

29.24%

15.06%

6.21%

ORGANISATIONAL TARGETS %

90%

15%

10%

Strategic Objective Secure ELIDZ grant funding requirements

Output/ Deliverable Adequate financial resources secured and available for capital and operational requirements

Target

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

Value of grant funding secured

R391 million secured from grant funding

R457 million secured from grant funding

The target was exceeded as additional funding was sourced and secured for the Optimal Energy project

Value of income collection from own operations and investment income

R33,5 million ( During the financial year ,this target was increased to R56 million due to anticipated higher billing as a result of electricity usage and interest from investments)

R62 million was collected

The target was exceeded due to an amount of R7,7 million received from BCM as copayment for a capital project.

Effective implementation of the debtors policy

Average age analysis ( days for collection of billed income)

30 days average collection period

37 days was achieved

7 days above target was as a result of two investors who experienced cash flow challenges and an incomplete liquidation process of one investor.

Profit derived from services delivered.

Gross margin percentage

45%

No variance

An effective and efficient system of internal control with compliance with legislator framework.

Unqualified audit opinion

Unqualified Audit Report (for 2009/10) financial year)

No variance

Audit plan developed and approved by the Audit Committee

Implement internal audit recommendations (creditors and payments cycle audited)

Internal audit reports submitted to audit committee

Quarterly reporting

Manage income receipts from own operations

Secure favourable status of annual audit opinion

ACTUAL PERFORMANCE AGAINST TARGET

Output performance measure/services delivery indicator

100% complete (no deviations: implementation of recommendations in progress)

Submitted for consideration in quarterly audit committee meetings

No variance

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

To ensure compliance of the ELIDZ with corporate governance best practices, the Public Finance Management Act, Companies Act and accounting standards

Output/ Deliverable

Meaningful reports that are compliant with GAAP, the Companies Act and the PFMA are produced timeously for management, the Board, the Shareholders and the Funding authorities

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Output performance measure/services delivery indicator

ACTUAL PERFORMANCE AGAINST TARGET Target

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

Quarterly cash requisitions and monthly bank reconciliations

Quarterly reporting

No deviations â&#x20AC;&#x201C; submission and reconciliations are done as required and on scheduled dates

No variance

Audit trail approved for each transaction before payment

Unqualified financial reports

Unqualified Audit Report (for 2009/2010 financial year)

No variance

Reviewed Asset management policy approved by the Board

Unqualified financial reports with no matters relating to asset management

Unqualified Audit Report (in 2009/2010 financial year)

No variance

quality reports produced

Audited annual financial statements for the financial year ending 31 March 2010 to be submitted to the Audit Committee for approval.

Complied with reporting requirements of the PFMA

No variance

Financial Statements that comply with GAAP and applicable legislation included in the annual report

Annual report approved by the Board to be submitted to Treasury, the Executive Authority and the Auditor General before 31 August 2010

Annual report submitted to Treasury, the Executive Authority and the Auditor General before 31 August 2010.

No variance

Strategic Objective

Output/ Deliverable

Output performance measure/services delivery indicator Internal & external financial reports for the management, the Board and other stakeholders

To adapt and transform ELIDZ business practices to improve organisation’s BBBEE rating To adapt and transform ELIDZ business practices to improve organisation's performance in terms of targeted procurement.

ACTUAL PERFORMANCE AGAINST TARGET Target

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

Quality monthly variance and management reports prepared and submitted to management

Management Reports are being produced monthly to facilitate sound decision making

No variance

Reports on performance against the strategic plan and operational plan submitted to DEDEA and DTI Quarterly

Quarterly Reports are produced and submitted to DEDEA, ECDC and DTI to facilitate financial oversight process

No variance

Audit on PFMA and Treasury Regulations compliance was conducted in the second quarter. Findings reflected no material non-compliances Recommended housekeeping findings are implemented

Effectiveness in Performance – all programs spend properly

A clean internal Audit report indicating full compliance with PFMA and Treasury Regulations

Fully compliant with PFMA and Treasury regulations

ELIDZ BBBEE status improved

Level 3 achieved by 31 March 2011

ELIDZ is at 101.60 BBBEE points level 1 by end of the financial year 2010/11

Exceeded the target by 2 levels

Monthly BBBEE status reports issued and reviewed internally

Raise the priority of the internal focus on BBBEE compliance within the ELIDZ.

BBBEE reports issued as an insert of monthly management reports and are reviewed internally by Executive Management Committee.

No variance

ELIDZ targeted procurement contributions in line with agreed social transformation and empowerment objectives and targets achieved by end of financial year

BBBEE procurement target is 90% at end of financial year 2010/11( The earlier target of 65% was increased during the financial year)

BBBEE spend as at end the financial year is 98.86% (valued –R248.8 million )

Over performed the target by 8.86%

ELIDZ targeted procurement practices enhanced and performance targets attained

No variance except recommendations on housekeeping issues

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

To adapt and transform ELIDZ business practices to improve organisation's performance in terms of targeted procurement.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Output/ Deliverable

ELIDZ targeted procurement practices enhanced and performance targets attained

Output performance measure/services delivery indicator

Effective, transparent and efficient application of procurement policy

ACTUAL PERFORMANCE AGAINST TARGET Target

Actual performance results (and reason for any variance)

30% target of procurement spends for SMMEâ&#x20AC;&#x2122;s at end of financial year 2010/11( This target was reduced to 15% during the financial year)

SMME spend is at 15.06% as at end of the financial year (valued- R37.9 million)

10% target of procurement spend for black women-owned enterprises at end of financial year 2010/11

Spend on Black women-owned enterprises as at end of the financial year is 6.21% (R15.6 million)

Variance ( and reason for variance )

The revised target was achieved

Underperformed by 3.76% This is caused by the low participation of women in construction

The East London IDZ supports young entrepreneurs EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Programme Performance Report INFORMATION & COMMUNICATION TECHNOLOGY (ICT) SUB-PROGRAMME AIM To develop; implement and support Information and Communications Technology (ICT) capabilities that will enhance the business strategy and business objectives of the ELIDZ; • • • •

To position ICT as an enabler of key strategic business processes within the ELIDZ; To develop and implement world-class ICT systems and processes that will support a sustainable competitive advantage for the ELIDZ; To foster a culture of learning and understanding of how ICT can contribute to increased staff productivity, improved organizational performance and also assist the exploitation of new development opportunities; To see to it that the ELIDZ plays a critical role in ensuring that the objectives of the ICT charter are realised.

Budget The pie graph below indicates the portion of the total ELIDZ budget that was allocated to the Information & Communication Technology (ICT) Programme for the financial year (April 2010 to March 2011). 4%

Other Program Budgets

BUDGET PROVISION: Information & Communication Technology Budget

Expenditure

Variance

PROGRAMME

R’000

Information & Communication Technology

24 167

15 503

8 664

TOTAL

24 167

15 503

8 664

The Budget and Expenditure are compared in the graph below to indicate the expenditure variance against budget. R’000 26 000 24 000 22 000 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 -

ICT Budget

96%

Budget Vs Expenditure The table below indicates the budget allocation to the Information & Communication Technology (ICT) Programme for the financial year (April 2010 to March 2011) and the actual level off expenditure, which results in a variance of 36%.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Budget Yr to Date

Expenditure

ACHIEVEMENTS The ELIDZ new Head Office building was fully ICT enabled with provisioning of appropriate equipment within the boardrooms, public areas and staff offices. The building has provision for a dedicated computer room with a backup facility located separately within the zone. Provincial archives have approved the Records Management File Plan and implementation has started within the organisation. The implementation of the

e-Londoloza records management system compliments the File Plan and the conformance to system and Records Management policy is growing within the organisation. The Investor Converged project, primarily focused on the delivery of a Telephony Management system for both ELIDZ and Investors is operational for 6 months. The new CISCO telephony system implemented is working well with a greater adoption by Investors. ELIDZ ICT core security and storage systems were revamped with the implementation of additional virtualisation capacity and enhancement to B-BBEE security by installing the Blue Coat Intrusion Prevention System. The Intrusion Prevention System and Proxy Implementation are fully complete within a good working environment with up to date reporting.

Strategic Objective

Output/ Deliverable

Output performance measure/services delivery indicator Enabled collaboration platforms to ease communication amongst ELIDZ staff

Enhance organisational ICT systems enablement

Knowledge Sharing and Enhanced Knowledge Application

ACTUAL PERFORMANCE AGAINST TARGET Target Achieve 50% more functionality on collaboration and communication systems

Improved and Streamlined Business Processes

All mapped Business processes reviewed and integration at 60% by end March 2011.

Rapid and Effective Customer service delivery.

Fully implemented and operationalised Document Management Centre.

Enhanced Performance Management System

Automated performance Management system implemented by December 2010.

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

Enhanced functionality on the telecommunications, Unified messaging by at least 30%.

Did not achieve at least 20% more functionality as planned due to delay in the BI and SharePoint project.

Integration of business processes is below target due to specialised systems deployed.

Processes in place, but system integration requirements not well defined yet.

e-Londoloza system implemented with the approval and adoption of the File Plan.

Performance management system was fully implemented with adoption and usage by all ELIDZ staff.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Strategic Objective

Develop, Manage world class , Infrastructure, Utilities and Services

Output/ Deliverable

Develop competitive and Innovative product offering

Deliver Customer Value Promise

Output performance measure/services delivery indicator Strategic leadership in deploying communications and data services to Investors

ACTUAL PERFORMANCE AGAINST TARGET Target

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

Ensure redundancy of Telco service provider to the ELIDZ Zones

Existing telecommunications systems still in place, no changes effected.

RFI being initiated to ensure redundancy.

Provision of a fully equipped Node Room for all Telco services by 31 March 2011.

Tender was awarded in the financial period with committed costing. Node Room will be fully operational by end August 2011

Delay caused due to extensive planning and tender process.

98% systems availability achieved with no security breaches.

Enhance network and systems security by implementing appropriate solutions

98% systems availability achieved, implemented Intrusion Prevention and Proxy systems.

Appropriately built telecommunications facilities that supports ICT service offering to Investors

Investor Converged Communications project 100% implemented by 31 October 2010.

Telephony system implemented and fully operational to Investors.

65% procurement from BBBEE companies achieved Maximising the developmental contribution of ELIDZ

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Ensure ELIDZ achievement of strategic empowerment procurement targets

Pro actively Manage the empowerment procurement to achieve the targeted goals

30% procurement of ICT services from SMME’s achieved 10% Procurement from Women owned companies achieved

Current target: BBBEE – 86, 68% SMME’s – 31, 93% Women – 3, 04%

Under performed due to insufficient women owned companies within the province.

To improve ICT efficiency the East London IDZ now boasts the world renowned Cisco Telephone equipment EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Sub-Programme Performance Report HUMAN RESOURCES DEVELOPMENT SUB- PROGRAMME AIM

BUDGET PROVISION: Human Resources

The Human Resource Management function’s aim is to render a professional service aligned with the company’s strategic plan. This is achieved through: • • • • •

Formulation of policies which are consistent with the overall strategic plan of the ELIDZ; Human resource development; Compensation of employees; Formulation and implementation a labour relations strategy that creates an atmosphere conducive to productive and of cordial employer-employee relationships; Provision of management support on organisational imperatives such as leadership, employee motivation, organisational development and design, diversity management and performance management.

Budget The pie graph below indicates the portion of the total ELIDZ budget that was allocated to the Human Resources Development Programme for the financial year (April 2010 – March 2011) 1%

Other Program Budgets

Budget

Expenditure

Variance

R’000

Human Resources

5 843

6 251

-408

TOTAL

5 843

6 251

-408

PROGRAMME

The Budget and Expenditure are compared in the graph below to indicate the expenditure variance against the budget. R’000 6 500 6 000 5 500 5 000 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 -

HR Budget

99%

Budget Vs Expenditure The table below indicates the budget allocation to the Human Resources Development Programme for the financial year (April 2010 to March 2011) and the actual level of expenditure, which reflected an over-spending variance of -7%. 81

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Budget Yr to Date

Expenditure

ACHIEVEMENTS BEST EMPLOYER RATING Corporate Social Research Foundation confirmed that ELIDZ made it to the benchmark of the Best Employers and was amongst the top ten best employers in South Africa: the ELIDZ made it as the number 6 company in the small category of the Top Ten Best Companies to work for in the country. The reason ELIDZ went down from number 5 to number 6 is because other companies raised the bar by introducing employee benefits like Sabbatical Leave, Nursery for Mom Employees as well the

employee fitness centre. Moving forward the ELIDZ will also explore the possibility of introducing some of these benefits bit by bit due to affordability.

PERFORMANCE MANAGEMENT DEVELOPMENT SYSTEM An automated performance management system was developed implemented and is now operational. All employee performance contracts for 2010/2011 performance year were captured into the system. The third and the fourth quarterly assessments were done by employees using the system. The introduction of the automated system has made the lives of ELIDZ employees simple, as they are now able to log on and conduct the assessment individually. The automated system has not removed the original intent of making the two parties talk in the form of a performance meeting.

EMPLOYEE DEVELOPMENT Employee Competency Audit was conducted. The professional psychologist gave individual employees their reports where the shortcomings of employee personality capabilities were explained. The competence audit report was incorporated as part of employee development plans within their Performance Contracts. The sourcing of a training provider to assist in closing the gap in the areas identified through the competency audit has commenced. Employees are already being exposed to training because of the competency audit conducted. Employee Wellness Program A very successful employee wellness day was held during the year. Motivational speakers were also engaged to motivate staff . Employees also were taken through diabetic, HIV, pressure and BMI assessments. A team building session was held for all employees at Katberg in March 2011. The team-building resolutions have been taken forward to the next financial year as areas of action. Employee Satisfaction and Stay Survey: The employee satisfaction survey was conducted. 44 out of 56 employees participated in the survey that represents about 79% of the staff population. The results of the survey were presented to both the Executive Management team as well as to the employees during the team building session.

INTERNSHIP PROGRAM Twelve (12) Interns were appointed under the Internship Programme attached to various disciplines within the organisation, which are:

• • • • • • • • •

Financial Management Supply Chain Management Human Resource Management ICT Business Development, with specific reference to Agricultural Sector and Marketing 2 x Project Management Property Management Safety and Health Environment Public Relations and Communications

The interns from the following disciplines got employed outside ELIDZ even before the end of their internship. These are Safety and Health Environment; 2x Project Management Interns. Meaning we were left with 9 interns to finish the whole internship program .ELIDZ was pleased with this as this was a sign indicating that the internship program is working. The SHE intern is now employed at the Department of Defence in Kimberly as a Safety Officer. Two different Engineering Companies here have employed the other two interns in the Eastern Cape Province.

RECRUITMENT The following posts were created during the financial year under review. Community Network and Marketing Manager under Industrial Innovation Programme. The Manager Renewable Energy under Business Development; Investment Project Analyst also became vacant as the post incumbent resigned end of September 2011. The process of recruitment to fill the post was concluded during 2010/2011 financial but the candidates assumed duty during the beginning of the new financial year 2011 /2012. Labour Relations Matter During the financial 2010/2011, there were four disciplinary cases dealt with and these were 1) Alleged Sexual Harassment 2) Alleged Insubordination 3) Alleged Financial Mismanagement 4) Alleged Poor Performance Of the four, two were concluded during the Financial 2010/2011 in December, and these were n Poor Performance and Sexual Harassment .The other two could not be finished during the year under review due to their nature as well as the complexity and degree of involvement as the parties doing the prosecution and presiding where coming outside the organisation

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Positions in the Organisational Structure

Vacant Budgeted Posts

Vacant Un-Budgeted Posts

Vacancies

Number of Posts Filled

Vacancy Rate %

EMPLOYMENT ANALYSIS (as at 31 March 2011)

Executive Management

Management

30%

Specialists

Professionals

23%

Admin. & Secretarial Supp.

12%

Critical Occupations

TOTAL

17%

EMPLOYMENT EQUITY ANALYSIS (as at 31 March 2011)

White

Sub Total

African

Coloured

Indian

White

Management

Specialists

Professionals

Admin. & Secretarial Support

TOTAL

There are three (3) contract employees: • One black female as: Procurement Assistant; • One black male as: Head: Innovation and Industrial Competitiveness • One black male as: Head: Eastern Cape Innovation Hub 83

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Grand Total

Indian

Executive Management

Occupational Bands

Sub Total

Coloured

FEMALE

African

MALE

70 65 60 55 50 45 40 35 30 25 20 15 10 5 -

20 18 16 14 12 10 8 6 4 2 0

Positions in the Vacant Organizational budgeted Structure posts

Vacant unbudgeted posts

Vacancies

Number of posts filled

FEMALE

African

Coloured

Indian

White

Indian

White

MALE

African

Coloured

ACTUAL PERFORMANCE AGAINST TARGET

Output performance measure/services delivery indicator

Target

Core Knowledge, Skills and Behavioural competencies Assessed and Aligned to ELIDZ core ideology

Competent employees recruited

58 staff complement

55 permanent staff members and 3 contract staff members were recruited to achieve the 58 staff complement.

No variance

Rate of employee turnover per annum

Key Organisational Skills secured and retained, through Skills Retention Initiatives, Job Enrichment

5% translating into 3 exits

Only one employee has resigned during the 2010/2011 Financial year which translate into 1.7%

No variance , within the target

Conduct Employee Satisfaction and Stay Audit

A satisfaction performance score of not less than 75% be obtained

Employee Satisfaction Survey has been conducted and the results presented to the Executive Management Team as a well as to the Team Building Session

The overall satisfaction rate was 57%. The difference is 18%. This is because of staff increase and the fact that we were in different offices before we were in one head office. That had a negative factor in term of how employees perceive team collaboration

Average days annual sick leave taken

Analysis of vacation leave and sick leave trends conducted

A report on Sick Leave taken trends. Average days taken should not be more than 3 per annum

Sick Leave analysis and vacation leave analysis has been conducted and the report is now available. For the year under review the trends have shown an average leave of 3.8

The variance is 0.8, which has been caused by long illness of two employees.

Build Employee Capacity to perform

Average performance rating

Have an automated system in place and ensure employees perform to their optimal levels

Annual average performance rating of 3.55/5

An automated performance management system is in place. The actual performance average performance rating of employees during the performance year under review is 3.6

The difference is 0.1 which is a positive difference and a reflection of continued performance towards excellence

Maximize ELIDZ Targeted Procurement impact

Improve ELIDZ targeted transformation spending

% value of BBBEE spending

81.7%

Below the target by 8.3%

Strategic Objective Develop Business Unit Competency Levels.

Output/ Deliverable

Build Employee Satisfaction and Wellness

90% Spending on BBBEE Quarterly

Actual performance results (and reason for any variance)

Variance ( and reason for variance )

% value of SMME spending

15% spending on SMME Quarterly

66.65%

Exceeded the target by 51.65%

% value of women owned enterprise spending.

10% Spending Women Owned Business

17.78%

Exceeded the target by 7.78%

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Additional Statutory Reporting: Precautionary Suspensions: 01 April 2010 to 31 March 2011 No employees were suspended during the year under review Injury on Duty: 01 April 2010 to 31 March 2011 • No injuries on duty were reported during the year under review Disputes lodged with Councils: 01 April 2010 to 31 March 2011 • No disputes were lodged during the year under review Strike Actions: 01 April 2010 to 31 March 2011 • No industrial action took place within the EL IDZ during the year under review Service Delivery: Service Delivery Access Strategy Access strategy

Actual achievements

Policies placed on the network common drive

100%

Employees and management work-shopped on the policies

100%

Consultation and advice on a one-on-one basis

100%

Service Delivery: Service Information Tool Types of information tool

Actual achievements

Network common drive

100%

Workshops

100%

One-on-ones

100%

Service Delivery: Complaints Mechanism

Mechanism

Actual achievements

Grievance Procedure embodied in the Labour Relations Policy

100%

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

EXPENDITURE: Personnel Costs By Programme: 2010/11 Expenditure (R’000) Total

Personnel cost per employee (R’000) Average

Institutional Development and Corporate Administration

18 308 244

610 275

Business Development and Investment Promotion

6 361 630

706 848

Zone Development (Infrastructure / Operations)

7 257 315

725 732

Zone Management and Investor Servicing

5 982 184

664 687

37 909 374

2 707 541

Internships

607 954

75 994

Grand Total

38 517 328

2 783 535

Personnel Expenditure (R’000) Total

Average Personnel cost per employee (R’000)

Senior Management

8 995 275

1 799 055

Management

6 957 097

993 871

Contract Management (Special Projects)

1 307 193

653 596

Specialists

7 519 108

751 911

Professionals

8 946 986

599 187

4 183 714

232 428

37 909 374

4 260 836

Internships

607 954

75 994

Grand Total

38 517 328

4 336 830

Programme

Total

EXPENDITURE: Personnel Costs By Salary Bands: 2010/11 Salary Bands

Admin & Secretarial Total

Salaries, overtime, home-owners allowance and medical assistance by programme •

The ELIDZ does not pay a homeowners allowance

•

R1 785.04 in overtime was paid during the Financial Year ended 31 March 2011

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Salaries, overtime, home-owners allowance and medical assistance by salary bands •

The ELIDZ does not pay a homeowners allowance

•

R1 785.04 in overtime was paid during the Financial Year ended 31 March 2011

Employment and Vacancies By Critical Occupations: 31 March 2011 Critical occupations Executive Management

Number of budgeted posts

Number of posts filled

% Vacancy rate

Number of posts filled additional to the establishment

Management

Specialists

Professionals

Admin & secretarial

Total

Internships

Number of employees whose salary positions were upgraded due to their posts being upgraded •

No positions within the approved ELIDZ organisational structure were upgraded during the year under review

Employees whose salary level exceed the grade determined by job evaluation

•

All employee salary levels are within the prescribed grades as determined by the company job evaluation system

•

There were no employees whose salaries exceeded the grade determined by the job evaluation system during the period under review

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Employment and Vacancies By Programme: 31 March 2011 Number of posts in the organisational structure

Number of posts filled

Rate of filled positions

Number of posts filled additional to the establishment

Institutional Development and Corporate Administration

93.75%

Business Development and Investment Promotion

81.81%

Zone Development (Infrastructure / Operations)

76.92%

Zone Management and Investor Servicing

64.28%

Total

82.86%

Programme

Internships

Job Evaluation: 01 April 2010 to 31 March 2011 Posts upgraded

Posts downgraded

Number of posts filled

Number of jobs evaluated

% of posts evaluated by salary bands

No.

% of posts evaluated

No.

% of posts evaluated

Executive Management

100%

Management

100%

Specialists

100%

Professionals

100%

Admin & secretarial

100%

Total

100%

Internships

Salary band

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Employment Changes: Annual turnover rates by salary band & critical occupation for the period 01 April 2010 to 31 March 2011 Number of employees per band as on 31 March 2010

Appointments and transfers into the company

Terminations and transfers out of the company

Executive Management

Management

Specialist

Professionals

Admin & secretarial

Total

Internships

Salary band

Employment Changes: Reasons why staff are leaving Termination Type

Number

% of total

Death

Resignation

1.7%

Expiry of contract

Dismissal – operational changes

Dismissal – misconduct

Dismissal – inefficiency

Discharged due to ill-health

Retirement

Transfers to other public service departments

Other

Total

1.7%

Total number of employees who left as a % of the total employment

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Promotions by Critical Occupation •

The ELIDZ has adopted a practice of advertising all vacant positions and if there are employees internally that qualify, they are appointed to those senior positions

Promotions by Salary Band •

The ELIDZ has adopted a practice of advertising all vacant positions and if there are employees internally that qualify, they are appointed to those senior positions

Foreign Workers •

No foreign workers were appointed during the year under review

HIV and AIDS & Health Promotion Programmes HIV AND AIDS: Steps taken to reduce the risk of occupational exposure •

Units/categories of employees identified to be at high risk of contracting HIV & related diseases (if any) - Key steps taken to reduce the risk

Leave Utilisation: 01 April 2010 to 31 March 2011 SICK LEAVE Total days

Number of Employees using sick leave

% of total employees using sick leave

Average days per employee

Management

44%

5.75

Specialists

0.02%

Professionals

50%

2.25

Admin & secretarial

44%

4.25

Total

38%

3.86

Salary Band Executive Management

Internships

Estimated Cost (R’000)

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

Disability leave (temporary and permanent) April 2010 to March 2011 â&#x20AC;˘

No employee was involved in a disabling accident and as such, no Disability Leave was applied for or granted

Capped leave, April 2010 to March 2011 â&#x20AC;˘

Capped leave does not apply to the ELIDZ

Leave Utilisation: 01 April 2010 to 31 March 2011 ANNUAL LEAVE

Total days

Average days per employee

Management

5.75

Specialists

Professionals

2.25

Admin & secretarial

4.25

Total

17.25

Salary Band Executive Management

Internships

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

LEAVE PAYOUTS for the period: April 2010 to March 2011 Total Amount (Râ&#x20AC;&#x2122;000)

Number of Employees

Average payment per employee (Râ&#x20AC;&#x2122;000)

Leave payout for 2010/2011 due to non-utilisation of leave for the previous cycle

Capped leave payouts on termination of service for 2010/2011

Current leave payout on termination of service for 2010/2011

8 167.05

Total

8 167.05

REASON

Service Delivery: Consultation Arrangements Type of arrangement

Actual customers

Stakeholders

Actual achievements

Developed Human Resource Policies

Management and all Staff

ELIDZ Board

100% on a needs basis

Human Resource Planning

Management and all Staff

ELIDZ Board

100% on a needs basis

Organisational Development

Management and all Staff

ELIDZ BOARD

100% on a needs basis

Labour Relations

Management and all Staff

Department of Labour and ELIDZ Board

100% on a needs basis

Human resource Development

Management and all Staff

ELIDZ Board

100% on a needs basis

Development of Human Resource Administrative Systems

Management and all Staff

ELIDZ Board

100% on a needs basis

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

HIV AND AIDS: Details of health promotion and HIV and AIDS programmes (tick the applicable boxes and provide required information) Question

Yes

Details, if yes

Has the entity designated a member of the management to implement the policy?

Yes

The HR Manager is responsible for the Management

Does the entity have a dedicated unit or has it designated specific staff members to promote the health and well-being of your employees? If so, indicate the number of employees who are involved in this task and the annual budget that is available for this purpose.

Yes

R200 000

Has the entity introduced an employee assistance or health promotion programme for your employees? If so, indicate the key elements / services of this programme.

Yes

Vitality Program, Breast Cancer Awareness Programs, TB awareness

Has the department established (a) committee(s) as contemplated in Part VI E.5 (e) of Chapter 1 of the Public Service Regulations, 2001? If so, please provide the names of the members of the committee and the stakeholder(s) that they represent.

Yes

We are not Public Service Department although we have a unit dealing with issues of wellness no committee has been established as such

Has the entity reviewed its employment policies and practices to ensure that these do not unfairly discriminate against employees based on their HIV status? If so, list the employment policies/practices so reviewed.

Yes

All our policies have been reviewed and approved as such and are not discriminatory in nature

Has the entity introduced measures to protect HIV-positive employees or those perceived to be HIV positive from discrimination? If so, list the key elements of thezse measures.

Yes

Awareness Programs , The HIV and Aids Policy is part of our Integrated Employee Health Policy . On recruitment applicants are not subjected to health inspection

Does the entity encourage its employees to undergo voluntary counselling and testing? If so, list the results that you have you achieved.

Yes

Out of 40 employees about 34 went through the voluntary testing and none of them have been found to be HIV positive . The tests were done by professional nurses through Discovery Medical Aid

Has the entity developed measures/indicators to monitor & evaluate the impact of its health promotion programme? If so, list these measures/indicators.

Yes

Health Audit , has been introduced we have done it once and moving forward we will be doing the health audits twice a year.

EAST LONDON IDZ - ANNUAL REPORT Programme Performance & Trend Reports

FINANCIAL

STATEMENTS for the period ended 31 March 2011

EL Industrial Development Zone (Pty) Ltd (Registration number 2003/012647/07) Trading as East London Industrial Development Zone (Pty) Ltd

Financial Statements for the period ended 31 March 2011 General Information

Country of incorporation and domicile South Africa Nature of business and principal activities

The development of East Londonâ&#x20AC;&#x2122;s industrial development zone

Non - Executive Directors N.I. Anderson J.H. Badenhorst M.D. Matika M. Saziwa J. Brown Z.M. Tini D.H. Batidzirai S.E. Mase Registered office Acacia House Palm Square Bonza Bay Road BEACON BAY 5241 Business address Lower Chester Road Sunnyridge EAST LONDON 5201 Postal address P O Box 5458 Greenfields EAST LONDON 5208 Bankers Standard Bank Auditors Auditor General Secretary PriceWaterhouseCoopers Inc Company registration number 2003/012647/07 Type of entity Scheduled 3D Business Enterprise

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

Index

The reports and statements set out below comprise the financial statements presented to the shareholders: Index Page Approval of Financial Statements 97 Statement of Financial Position 99 Statement of Comprehensive Income 100 Statement of Changes in Equity 101 Statement of Cash Flows 102 Notes to the Financial Statements 103 - 124 The following supplementary information does not form part of the financial statements and is unaudited: Detailed Income Statement 125 - 126

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

Directors’ Responsibilities and Approval

The directors are required by the Companies Act of South Africa, 1973 and the Public Finance Management Act, to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of the company as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with South African Statements of Generally Accepted Accounting Practice. The external auditors are engaged to express an independent opinion on the financial statements. The financial statements are prepared in accordance with South African Statements of Generally Accepted Accounting Practice and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors sets standards for internal control aimed at reducing the risk of error or loss 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 company and all employees are required to maintain the highest ethical standards in ensuring the company’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are 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 financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The directors have reviewed the company’s cash flow forecast for the year to 31 March 2011 and, in the light of this review and the funding commitment by the Department of Trade and Industry and Department of Economic Development and

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

Environment Affairs , they are satisfied that the company has 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 company’s financial statements. The financial statements set out on pages 6 to 26, which have been prepared on the going concern basis, were approved by the board of directors on 30 May 2011 and were signed on its behalf by:

Director: Z Tini

Director: N Anderson

Directors’ REPORT

The directors submit their report for the year ended 31 March 2011.

1. Incorporation

The company was incorporated on 03 June 2003 and obtained its certificate to commence business on the same day. 2. Review of activities Main business and operations The company is engaged in the development of East London’s industrial development zone and operates principally in South Africa. The operating results and state of affairs of the company are fully set out in the attached financial statements and do not in our opinion require any further comment. 3. Post balance sheet events The directors are not aware of any matter or circumstance arising since the end of the financial year. 4. Authorised and issued share capital There were no changes in the authorised or issued share capital of the company during the year under review. 5. Dividends No dividends were declared or paid to shareholder during the year. Since the year end, an ordinary dividend of - cents was declared on date payable to the shareholder registered on that date.

6. Directors

The directors of the company during the year and to the date of this report are as follows: Name Nationality

Changes

N.I. Anderson

South African

J.H. Badenhorst

South African

M.D. Matika

South African

Z. M. Tini

South African

J. Brown

South African

M. Saziwa

South African

D.H. Batidzirai

South African

S.E. Mase South African - 7. Secretary The secretary of the company is PriceWaterHouseCoopers Inc of: Business and Postal Address Acacia House Palm Square Bonza Bay Road BEACON BAY 5241

8. Holding company

The company’s holding company is Eastern Cape Development Corporation. 9. Auditors Auditor General is the auditor of the company in terms of section 4(1) of the Public Audit Act 2004 as amended.

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

Statement of Financial Position Figures in Rand Note(s) 2011 2010 2009 Assets Investment property 4 817,928,917 821,645,410 373,481,162 Property, plant and equipment 5 355,949,110 336,704,680 532,127,274 Deferred tax 6 76,994 64,706 63,118 1,173,955,021 1,158,414,796 905,671,554 Current Assets Other Financial Assets 7 1,917,334 1,917,334 Current tax receivable 541,377 1,883,537 1,883,537 Trade and other receivables 8 12,207,198 10,669,048 20,485,093 Cash and cash equivalents 9 383,496,173 334,065,013 189,154,408 398,162,082 348,534,931 211,523,038 Total Assets 1,572,117,103 1,506,949,728 1,117,194,592 Equity and Liabilities Equity Share capital 10 1,000 1,000 1,000 Reserves 11 8,306,368 8,123,307 8,123,307 Accumulated profit 3 32,194,706 115,877,305 61,015,789 40,502,075 124,001,612 69,140,096 Liabilities Non-current Liabilities Deferred income 12 1,110,732,398 1,025,596,371 496,833,367 Current Liabilities Trade and other payables 13 32,118,684 66,083,930 58,027,142 Deferred income 12 380,297,182 283,664,725 489,877,408 Provisions 14 8,466,764 7,603,089 3,316,579 420,882,630 357,351,744 551,221,129 Total Liabilities 1,531,615,028 1,382,948,115 1,048,054,496 Total Equity and Liabilities 1,572,117,102 1,506,949,727 1,117,194,592

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

Statement of Comprehensive Income Figures in Rand Note(s) 2011 2010 Revenue 15 14,673,333 8,310,912 Rental Income 15 23,398,380 18,209,735 Cost of sales (20,851,727) (16,205,395) Gross profit 17,219,985 10,315,252 Other income 130,271,868 128,135,412 Operating expenses (111,700,210) (88,634,020) Operating Profit / (Loss) 35,791,643 49,816,644 Finance income 17 175,472 97,273 Fair value adjustment (119,662,002) 4,946,011 Profit / (loss) before taxation (83,694,887) 54,859,928 Taxation 18 (12,288) (1,588) Profit / (Loss) for the period

(83,682,598)

54,861,515

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100

Statement of Changes in Equity Changes in equity Figures in Rand Share capital Other NDR Accumulated profit Total equity Balance at 01 April 2009 1,000 8,123,307 5,580,724 13,705,031 Prior Period Adjustment 55,435,065 55,435,065 Restated Balance at 01 April 2009 1,000 8,123,307 61,015,789 69,140,096 Changes in equity Profit as previously stated (190,460,663) (190,460,663) Prior Period Adjustment 245,322,184 245,322,184 Profit for the year restated - - 54,861,515 54,861,515 Balance as at 31 March 2010 1,000 8,123,307 115,877,305 124,001,612 Balance at 01 April 2010 1,000 8,123,307 (184,879,939) (176,755,632) Prior Period Adjustment 300,757,244 300,757,244 Restated Balance at 01 April 2010 1,000 8,123,307 115,877,305 124,001,612 Changes in equity 183,061 183,061 Profit for the year - - (83,682,598) (83,682,598) Total changes - 183,061 (83,682,598) (83,499,537) Balance at 31 March 2011 1,000 8,306,368 32,194,706 40,502,075 Note(s) 10 11 3

101

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Statement of Cash Flow Figures in Rand Note(s) 2011 2010 Cash flows from operating activities Cash generated from operations 21 201,280,220 407,822,983 Interest income 175,472 97,273 Tax Received 22 1,342,160 Net cash from operating activities 202,797,852 407,920,257 Cash flows from investing activities Purchase of property, plant and equipment 5 (65,389,136) (184,064,839) Completion of Investment Property 4 (88,592,155.18) (77,048,738) Proceeds from sale of property, plant and equipment 5 431,540 21,259 Proceeds from sale of financial assets - Decrease (Increase) in Loans 7 - (1,917,333) Net cash from investing activities (153,549,751) (263,009,651) Cash flows from financing activities Loans to ELIDZ -VAT relating S21 company 183,061 Net cash from financing activities 183,061 Total cash movement for the year 49,431,160 144,910,605 Cash at the beginning of the year 334,065,013 189,154,408 Total cash at end of the year 9 383,496,173 334,065,013

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102

Notes to the Financial Statements 1. Accounting Policies 1.1 Presentation of Financial Statements

The financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice, and the Companies Act of South Africa, 1973 and the Public Finance Management Act. The financial statements have been prepared on the historical cost basis except for certain financial instruments recognised at fair value as stated below: - Financial instruments at fair value through profit or loss are measured at fair value - Investment property is measured at fair value. The annual financial statements incorporate the principal accounting policies set out below, which are consistent with those adopted in the previous financial year. 1.2 Significant Judgements

In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts represented in the financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Estimates and underlying assumptions are reviewed on an ongoing basis and revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Actual results in the future could differ from these estimates which may be material to the financial statements. Significant judgements include:

Loans and Receivables The company assesses its trade receivables / held to maturity investments and/or loans and receivables for impairment at each balance sheet date. In determining whether an impairment loss should be recorded in the income statement, the company makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The impairment for trade receivables / held to maturity investments and/ or loans and receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions

103

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and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 15 - Provisions.

Expected manner of realisation for deferred tax Deferred tax is provided for on the fair value adjustments of investment properties based on the expected manner of recovery, i.e. sale or use. This manner of recovery affects the rate used to determine the deferred tax liability. Refer note 6 - Deferred tax liability.

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 company 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 company 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 company 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 company to realise the net deferred tax assets recorded at the balance sheet date could be impacted.

1.3 Investment Property Investment property is property held either to earn rental income or for capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

Investment property is recognised as an asset when, and only when, it is probable that the future economic benefits that are associated with the investment property will flow to the enterprise and the cost of the investment property can be measured reliably. Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. Investment property is initially recognised at cost. Transaction costs are included in the initial measurement.

Costs include costs incurred initially and costs incurred subsequently to add to, or to replace a part of, or service a property. If a replacement part is recognised in the carrying amount of the investment property, the carrying amount of the replaced part is derecognised.

Property that is being constructed or developed for future use as investment property is recognised at cost as investment property. Fair Value Subsequent to initial measurement investment property is measured at fair value. Fair value is determined by independent valuers annually. A gain or loss arising from a change in fair value is included in profit or loss for the period in which it arises. Re-classification When the use of investment property changes such that it is reclassified as property, plant and equipment (PPE), assets reclassified as held for sale and inventory, its fair value at the date of reclassification as property becomes its cost for subsequent accounting.

1.4 Property, Plant and Equipment

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment. The cost of an item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. All other costs are recognised in the income statement as an expense as incurred.

The 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. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. The depreciation of an asset begins when it is available for use; the depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised. Therefore, depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. Land and buildings are separable assets and are accounted for separately, even when they are acquired together. Land has an unlimited useful life and therefore is not depreciated. Buildings have a limited useful life and therefore are depreciable assets. The carrying amount of an item of property, plant and equipment shall be derecognised: on disposal; or when no future economic benefits are expected from its use or disposal. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows: Item Average useful life Land Indefinite Infrastructure / Buildings 25 years Furniture and fixtures 10 years Motor vehicles 5 years Office equipment 5 years Plant and machinery 5 years Other property, plant and equipment 3 years IT equipment 3 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. The gain or loss from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposable proceeds, if any, and the carrying amount of the item.

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104

When the use of property changes from owner-occupied to investment property, the property is re-measured to fair value and reclassified as investment property. Any gain arising on re-measurement is recognised in profit or loss to the extent the gain reverses a previous impairment loss on the specific property, with any remaining gain recognised in the revaluation reserve directly in equity. Any loss is recognised in the revaluation reserve directly in equity to the extent that an amount is included in equity relating to the specific property, with any remaining loss recognised immediately in profit or loss.

1.5 Financial Instruments

Initial recognition and measurement The company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the transaction. Trade and other receivables Trade receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the assetâ&#x20AC;&#x2122;s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in the income statement. Trade and other receivables are classified as loans and receivables. Trade and other payables Trade payables are classified as financial liabilities initially measured at fair value and are subsequently measured at amortised cost, using the effective interest method.

105

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Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. Bank overdraft and borrowings Bank overdrafts and borrowings are classified as financial liabilities initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method. Any differences between the proceeds (net of transaction cost) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the companyâ&#x20AC;&#x2122;s accounting policy for borrowing costs. Other financial liabilities are measured initially at fair value and subsequently at amortised cost, using the effective interest rate method. 1.6 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. 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 profit 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 profit 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 profit nor taxable profit (tax loss). A deferred tax asset is recognised for the carry forward of unused tax losses and unused STC credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused STC credits can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability

is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

Tax expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: - a transaction or event which is recognised, in the same or a different period, directly in equity. 1.7 Impairment of Assets

The company assesses at end of each financial year whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. In assessing whether there is any indication that an asset may be impaired, the company shall consider as a minimum, the following indications; External Sources: Asset market value, technological changes, changes in economic and legal environment, fluctuations in investment rates of return and market interest. Internal Sources: Evidence of obsolence or physical damage, possibility of idleness of the asset, plans to discontinue the operations of the asset or plans to dispose. The company may engage an independent valuer to assess the assets for impairment. The main classes of assets for which impairment is assessed are: Plant and machinery; other property, plant and equipment; infrastructure and buildings; IT equipment; furniture and fittings; motor vehicles; and office equipment.

The recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset to the extent that there is a revaluation reserve is treated as a revaluation decrease. An entity assesses at each reporting date whether there is any indication that

an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exits, the recoverable amounts of those assets are estimated. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase to the extent that it does not reverse a previous writedown recognised in profit and loss.

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. All impairment losses are recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event accruing after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss.

1.8 Employee Benefits Defined contribution plans The companyâ&#x20AC;&#x2122;s employees belong to a defined contribution benefit plan. Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. 1.9 Provisions and Contingencies Provisions are recognised when: - the company has a present obligation as a result of a past event; - it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - a reliable estimate can be made of the obligation. The amount of a provision is the present value of the expenditure expected to be required to settle the obligation.

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106

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

A provision for onerous contracts is recognised when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the company recognises any impairment loss on the assets associated with that contract.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 23. 1.10 Government Grants

Government grants are recognised as income over the periods necessary to match them with the related costs that they are intended to compensate. Grants that compensate the ELIDZ for expenses incurred are recognised in profit or loss on a systematic basis in the same period in which the expense is recognised. Government grants related to Investment property shall be released from deferred income systematically over their useful life using the income method, whereas government grants related to PPE shall be released to profit and loss systematically over the useful life, using the straight line depreciation method. A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable.

Government grants related to assets, including non-monetary grants at fair value, are presented in the statement of financial position by recognising the grant as deferred income. Repayment of a grant related to income is applied first against any unamortised deferred credit recognised in respect of the grant. To the extent that the

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repayment exceeds any such deferred credit, or where no deferred credit exists, the repayment is recognised immediately as an expense. Repayment of a grant related to an asset is recorded by reducing the deferred income balance by the amount repayable. The cumulative additional depreciation that would have been recognised to date as an expense in the absence of the grant is recognised immediately as an expense. Government assistance that is received as an incentive in the form of a rebate on bulk water supply tariff and bulk electricity tariff, from Buffalo City Municipality is disclosed as a related party transaction. 1.11 Revenue Revenue comprises of services rendered to customers. Revenue is stated at the invoice amount and is exclusive of value added taxation. Revenue from rendering of services is recognised when all the following conditions have been satisfied:

- the amount of revenue can be measured reliably; - the stage of completion of the transaction at the end of the reporting period can be measured reliably, - it is probable that the economic benefits associated with the transaction will flow to the company; and - the costs incurred or to be incurred in respect of the transaction can be measured reliably. When the outcome of the transaction involving the rendering of services can be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable. 1.12 Research and Development Costs All research costs are charged to expenses. Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established. This means that the entity must intend and be able to complete the intangible asset and either use it or sell it and be able to demonstrate how the asset will generate future economic benefits. If an entity cannot distinguish the research phase of an internal project to create an intangible asset from the development phase, the entity treats the expenditure for that project as if it were incurred in the research phase only.

1.13 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. The company evaluates leases on substance rather than form. Operating leases - lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.

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Notes to the Financial Statements - (CONT) 2. New standards and interpretations The following new standards have not been early-adopted by the ELIDZ: IFRS 9 Financial Instruments The IASB has issued IFRS 9 Financial Instruments, which is the first step in its project to replace IAS 39 Financial Instruments: Recognition and measurement, in its entirety. The project has three main phases: • Phase I: Classification and measurement of financial instruments; • Phase II: amortised cost and impairment of financial assets; and • Phase III: Hedge accounting. IFRS 9, as currently issued, includes requirements for the classification and measurement of financial assets and liabilities derecognition requirements and additional disclosure requirements. The main requirements include the following: • Financial assets are to be classified and measured based on the business model for managing the financial asset and the cash flow characteristics of the financial asset. There are two measurement approaches, namely fair value and amortised cost. • The financial asset is carried at amortised cost if it is the business model of the entity to hold that asset for the purpose of collecting contractual cash flows and if those cash flows comprise principal repayments and interest. All other financial assets are carried at fair value.

• A financial asset that would otherwise be at amortised cost may only be designated as at fair value through profit or loss if such a designation reduces an accounting mismatch. • The classification and measurement of financial liabilities include requirments similar to those contained in the existing standard IAS 39 Financial Instruments: recognition and measurement. • For financial liabilities designated as at fair value through profit or loss, a further requirement is that all changes in the fair value of financial liabilities attributable to credit risk be transferred to other comprehensive income with no recycling through profit or loss on disposal. 109

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

•

The requirements for derecognition are similar to those contained in the existing standard IAS 39 Financial Instruments: recognition and measurement, with certain additional disclosure requirements. Management does not anticipate these requirements to have a significant impact on the ELIDZ financial statements. IFRS 9 is effective for the ELIDZ for the year commencing 1 April 2013. However, the IASB adopted a phased approach for the release of IFRS 9, with the requirements for the classification and measurement of financial assets having been released in 2009 and the requirements for the classification and measurement of financial liabilities and derecognition having been released in 2010. Accordingly, the requirements released in 2010 cannot be early-adopted without the simultaneous adoption of the 2009 requirements. However, the requirements released in 2009 may be separately early adopted. The IASB intends to expand IFRS 9 in 2011 to address the requirements for the offsetting of financial assets and financial liabilities, impairment of financial assets carried at amortised cost and hedge accounting. The implementation of IFRS 9 is anticipated to have a significant impact on the ELIDZ financial statements. The ELIDZ is evaluating the impact of the standard.

Revised standards The following revisions to IFRS have not been early-adopted by the ELIDZ: IFRS 7 financial instruments: disclosures The following amendments were made to this standard during the year: • Clarification of certain qualitative and quantitative disclosures relating to the nature and extent of risks. The amendment is effective for the ELIDZ for the year commencing 1 April 2011. • Additional disclosure requirements relating to the transfer of financial assets. This amendment is effective for the ELIDZ for the year commencing 1 April 2012. These amendments address disclosure in the annual financial statements and will therefore not affect the financial position of the ELIDZ. IAS 12 income taxes The amendment provides a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair-value model in IAS 40 Investment property. The amendment is effective for the ELIDZ for the year commencing on or after 1 April 2012 and is expected to have a significant impact on the ELIDZ.

IAS 24 Related parties The amendment provides exemptions from certain disclosure requirements in respect of government-related entities and clarifies the definition of a related party. The amendment is effective for the ELIDZ for the year commencing 1 April 2011. This amendment addresses disclosure in the annual financial statements and will therefore not affect the financial position of the ELIDZ. Furthermore, the revisions to the disclosures are not expected to have a significant effect on the ELIDZ. IAS 32 Classification of rights issues’ issued in October 2009. The amendment applies to annual periods beginning on or after 1 February 2010. Earlier application is permitted. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be accounted for as derivative liabilities. The amendment applies retrospectively in accordance with IAS 8. Accounting policies, changes in accounting estimates and errors’. The amendment will have no significant impact to the ELIDZ. Annual improvement project As part of its third annual improvement project the IASB has issued its 2010 edition of annual improvements. The annual improvement project aims to clarify and improve the accounting standards. The improvements include those involving terminology or editorial changes, with minimal effect on recognition and measurement. There are no significant changes in the improvement of the current year that will affect the ELIDZ and the improvement is effective for the ELIDZ commencing 1 April 2011.

IFRIC 19 extinguishing financial liabilities with equity instruments The interpretation addresses divergent accounting by entities issuing equity instruments to extinguish all or part of a financial financial statements. The standard is effective for the ELIDZ for the year commencing 1 April 2011. liability (often referred to as ‘debt for equity swaps’). The interpretation concludes that the issue of equity instruments to extinguish an obligation constitutes consideration paid. The consideration should be measured at the fair value of the equity instruments issued, unless that fair value is not readily determinable, in which case the equity instruments should be measured at the fair value of the obligation extinguished. Any difference between the fair value of the equity instruments issued and the carrying value of the liability extinguished is recognised in profit or loss. If the issue of equity instruments is to settle a portion of a financial liability, the entity should assess whether a part of the consideration relates to a renegotiation of the portion of the liability that remains outstanding. The adoption of this standard is not expected to have a material impact on the ELIDZ’s annual financial statements. The standard is effective for the ELIDZ for the

year commencing 1 April 2011. IAS 1 (amendment), ‘Presentation of financial statements’. The amendment clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or noncurrent. By amending the definition of current liability, the amendment permits a liability to be classified as noncurrent (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. IAS 36 (amendment), ‘Impairment of assets’, effective 1 January 2010 The amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment, as defined by paragraph 5 of IFRS 8, ‘Operating segments’ (that is, before the aggregation of segments with similar economic characteristics). The amendments are not relevant to the ELIDZ. Annual improvement project As part of its second annual improvement project, the IASB issued its 2009 edition of annual improvements. The annual improvement project aimed to clarify and improve the accounting standards. These improvements included those involving terminology or editorial changes with minimal effect on recognition and measurement. No significant changes were made to the ELIDZ’s financial statements for the revisions that were effective for the year commencing 1 April 2010. IFRIC 9, ‘Reassessment of embedded derivatives and IAS 39, Financial instruments: Recognition and measurement’, effective 1 July 2009 This amendment to IFRIC 9 requires an entity to assess whether an embedded derivative should be separated from a hostcontract when the entity reclassifies a hybrid financial asset out of the ‘fair value through profit or loss’ category. This assessment is to be made based on circumstances that existed on the later of the date the entity first became a party to the contract and the date of any contract amendments that significantly change the cash flows of the contract. If the entity is unable to make this assessment, the hybrid instrument must remain classified as at fair value through profit or loss in its entirety. The amendments are not relevant to the ELIDZ.

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110

Notes to the Financial Statements FIGURES IN RAND

3. Prior Period Adjustment

The financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice on a basis consistent with the prior year except for the changes in disclosure of land which was previously disclosed as Property, Plant and Equipment (PPE) in prior years and is now disclosed as Investment Property as a result of interpretation of IAS 40. Depreciation charged in the prior years has been reversed, however fair valuation was available as at 31 March 2010, therefore fair value adjustments have been accounted for at this date.

The aggregate effect of the prior period adjustment on the financial statements for the year ended 31 March 2010 is as follows Statement of financial position Investment property Previously stated 364,455,000 Adjustment 457,190,410 821,645,410 Property, plant and equipment Previously stated 573,165,099 Adjustment (236,460,419) 336,704,680 Receivables Previously stated 11,873,850 Adjustment (1,204,802) 10,669,048 Accumulated loss Previously stated 184,879,939 Adjustment (300,757,244) (115,877,305) Deferred income - long term Previously stated (559,746,090) Adjustment (465,850,281) (1,025,596,371) Payables Previously stated (66,895,535) Adjustment 811,605 (66,083,930) Deferred income - short term Previously stated (828,616,754) Adjustment 544,952,029 (283,664,725) 111

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Provisions Previously stated (8,921,792) Adjustment 1,318,703 (7,603,089) Profit/ loss Revenue IAS 39 Previously stated Adjustment 250,286 250,286 Grant income - investment properties Previously stated Adjustment (49,004,205) (49,004,205) Finance income IAS 39 Previously stated Adjustment 4,727,294 4,727,294 Fair value adjustments Previously stated 190,446,458 Adjustment (195,392,469) (4,946,011) Expenditure IAS 39 Previously stated Adjustment (5,903,086) (5,903,086) Total change on profit/loss - 2010 (245,322,180) Grant income investment property 2007 (7,648,818) 2008 (7,648,818) 2009 (14,799,907) (30,097,543) Depreciation 2007- 2009 (25,337,521) Total change on profit/loss - 2007-09 (55,435,064) Total change on profit/loss - 2007-10 (300,757,244)

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112

Notes to the Financial Statements FIGURES IN RAND

2011

2010

4. Investment Property 2011 2010 Cost / Valuation Accumulated Carrying Value Cost / Valuation Accumulated Depreciation Depreciation Investment property 817,928,917 - 817,928,917 821,645,410 - Reconciliation of investment property ‑ 2011 Opening Balance Additions Transfers Fair Value Total Adjustments Investment property 821,645,410 88,592,155 27,353,353 (119,662,002) 817,928,917 Reconciliation of investment property ‑ 2010 Opening Balance Additions Transfers Fair Value Total Adjustments Investment property 373,481,162 77,048,738 366,169,500 4,946,011 821,645,410

Carrying Value 821,645,410

The valuation of investment property resulted into a loss of R 170,346,191 for the current financial year, as reflected by the above reconciliation. A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is available for inspection at the registered office of the company. Details of valuation The effective date of the revaluations was 31 March 2011. Revaluations were performed by an independent valuer, Mr Johan Henry Boshoff (MIVSA) (NDPV), of MessrsJH Boshoff Valuations. JH Boshoff Valuations are not connected to the company and have recent experience in location and category of the investment property being valued. The method used by the company to valuate the investment property are; the income capitalisation valuation method which was used for all income producing properties, and the comparative method of valuation which was applied to all vacant properties. Rental income from investment property 22,065,500 17,975,405 Direct operating expenses from rental generating property 20,851,727 16,205,395 Direct operating expenses from non‑rental generating property 96,117,115 83,858,502

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Notes to the Financial Statements FIGURES IN RAND

5. Property, Plant and Equipment 2011 Cost / Valuation Accumulated Carrying Value Cost / Valuation Depreciation Land 407,229 - 407,229 487,362 Plant and machinery 356,358 (196,455) 159,903 356,358 Furniture and fixtures 3,598,243 (639,812) 2,958,431 982,031 Motor vehicles 1,263,896 (315,803) 948,093 1,263,896 Office equipment 1,095,121 (318,546) 776,575 304,326 IT equipment 16,805,226 (9,155,749) 7,649,477 8,668,021 Infrastructure: Owner Occupied 378,376,452 (47,406,148) 330,970,305 312,645,478 Infrastructure: Work in Progress 12,040,660 - 12,040,660 51,340,882 Other property, plant & equipment 873,641 (835,205) 38,437 873,641 Total 414,816,826 (58,867,716) 355,949,110 376,921,995

Accumulated Depreciation - (131,953) (452,389) (496,856) (220,907) (5,768,763) (32,330,433) - (816,014) (40,217,314)

5. Property, Plant and Equipment - Prior Year 2009

Cost / Valuation Land 17,649,411 Plant and machinery 311,280 Furniture and fixtures 931,454 Motor vehicles 1,233,330 Office equipment 284,025 IT equipment 7,046,505 Infrastructure: Owner Occupied 271,389,374 Infrastructure: Work in Progress 237,754,902 Other property, plant & equipment 873,641 Total 537,473,922

Accumulated Depreciation - (67,444) (349,365) (283,886) (179,221) (3,670,971) 77,880 - (873,641) (5,346,648)

2010 Carrying Value 487,362 224,405 529,642 767,040 83,419 2,899,259 280,315,045 51,340,882 57,627 336,704,680

2009 Carrying Value 17,649,411 243,836 582,089 949,444 104,804 3,375,534 271,467,254 237,754,902 532,127,274

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114

Notes to the Financial Statements FIGURES IN RAND

5. Property, Plant and Equipment - (continued) Reconciliation of property, plant and equipment ‑ 2011 Opening Balance Additions Disposal Transfers Revaluations Depreciation Impairment (Loss) / Gain Land 487,361 - (80,129) - - Plant and machinery 224,404 - (64,510) - Furniture and fixtures 529,641 2,616,214 (183,948) (3,475) Motor vehicles 767,039 - (133,429) 314,484 Office equipment 83,418 790,796 (97,635) - IT equipment 2,899,257 8,198,025 (34,400) (3,430,914) 17,504 Infrastructure: Owner Occupied 280,315,045 13,441,447 52,289,530 (15,075,715) Infrastructure: Work in Progress 51,340,882 40,342,654 (79,642,875) - Other property, plant & equipment 57,626 - (19,189) - 336,704,674 65,389,136 (114,529) (27,353,345) - (19,005,340) 328,514

Total 407,232 159,894 2,958,432 948,094 776,579 7,649,473 330,970,307 12,040,661 38,438 355,949,110

Reconciliation of property, plant and equipment ‑ 2010 Opening Balance Additions Transfers Revaluations Depreciation Impairment (Loss) / Gain Land 17,649,411 - (17,162,050) - - Plant and machinery 243,836 45,077.80 (64,510) - Furniture and fixtures 582,089 50,577 (96,216) (6,809) Motor vehicles 949,444 30,566 17,357 (230,328) - Office equipment 104,804 20,300.92 1,040 (42,727) - IT equipment 3,375,534 1,621,516 (2,090,967) (6,825) Infrastructure: Owner Occupied 271,467,254 2,842,199.36 16,861,167 (10,855,572) - Infrastructure: Work in Progress 237,754,902 179,454,601.61 (365,868,622) - - Other property, plant & equipment - - 57,626 - 532,127,274 184,064,839 (366,169,504) 76,023 (13,380,320) (13,634)

115

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Total 487,361 224,404 529,641 767,039 83,418 2,899,257 280,315,049 51,340,882 57,626 336,704,678

Notes to the Financial Statements FIGURES IN RAND

2011

2010

6. Deferred Tax Deferred tax asset (liability) Accelerated capital allowances for tax purposes Reconciliation of deferred tax asset (liability) At beginning of the year Originating temporary differences on tangible fixed assets

76,994

64,706

64,706 12,288 76,994

64,706 64,706

7. Other Financial Assets Loans and receivables Capitalised Debt 1,917,334

1,917,334

his is a result of the companyâ&#x20AC;&#x2122;s customer rescue program, where-in the company has assisted to sustain the operations of its logistics tenant, Co-ordinated Material Handling T (Pty) Ltd t/a UTi Material Handling, on 01 March 2010, by Capitalising its Debt of R 1 917 334. This is a result of the tenantsâ&#x20AC;&#x2122; proven business underperformance directly linked to economic recession.The amount is the consolidated rental account owed by UTi.

8. Trade and Other Receivables Trade receivables VAT Other receivable BCM Advance Prepayments

4,083,304 2,251,960 2,450,675 2,791,569 629,689 12,207,198

2,707,198 7,740,156 221,693 10,669,048

At year end the carrying amounts of accounts receivables approximated their fair values due to the short-term maturities of these assets.

9. Cash and Cash Equivalents Cash and cash equivalents consist of: Cash on hand 1,997 Bank balances 1,581,212 Short-term deposits 381,912,964 383,496,173 At year end the carrying amounts of cash and cash equivalents approximated their fair values due to the short-term maturities of these assets.

2,012 127,225,235 206,837,765 334,065,013

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116

Notes to the Financial Statements FIGURES IN RAND

2011

2010

10. Share Capital Authorised 1 000 000 Ordinary shares of R0.01 each or par value of 1 cent 10,000 Reconciliation of number of shares issued: Reported as at 31 March 2011 100,000 Issued Ordinary 1,000

10,000 100,000 1,000

11. Other NDR Revaluation at acquisition Balance beginning of period 8,123,307 Changes during the year 183,061 Balance end of period 8,306,368

8,123,307 8,123,307

ther NDR represent the net book value of asset and liabilities transferred from East London Industrial Development Corporation, that was changed to ELIDZ (Pty) Ltd, adjusted O for cash received from SARS during the current year.

12. Deferred Income

Balance at beginning of year 1,309,261,097 Grant Received - Eastern Cape Development Corporation 135,257,000 - Department of Trade and Industry 198,000,000 - Interest on Grant funding 14,939,051 South African Revenue Services - Output Vat on Grants (40,926,298) Total Grant Income 1,616,530,849 Released to income (89,132,335) Investment property released from grants (36,368,933) -125,501,268 Balance at end of Period 1,491,029,581 Nonâ&#x20AC;&#x2018;current liabilities 1,110,732,398 Current liabilities 380,297,182 1,491,029,580

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986,710,775 127,601,000 373,373,000 14,120,946 (59,987,255) 1,441,818,466 (83,553,165) (49,004,205) -132,557,369 1,309,261,097 1,025,596,371 283,664,725 1,309,261,096

Notes to the Financial Statements FIGURES IN RAND 2011 2010 The nature and extent of government grants recognised in the financial statements and an indication of other forms of government assistance from which the entity has directly benefited

13. Trade and Other Payables Trade payables 25,026,346 VAT - Payables - IAS 39 (IFRS 7) (261,762) Other payables 5,506,751 Other accrued expenses 113,183 Deposits received 1,734,166 32,118,684 At year end the carrying amounts of accounts payable approximated their fair values due to the short-term maturities of these liabilities.

14. Provisions Reconciliation of provisions - 2011 Opening Balance Additions Utilised during Unused amounts the year reversed during the year Leave pay 2,114,359 1,552,973 (1,376,872) - Retentions 5,488,730 2,691,562 (2,003,989) - 7,603,089 4,244,535 (3,380,861) - Reconciliation of provisions - 2010 Opening Balance Additions Utilised during Unused amounts the year reversed during the year Leave pay 1,701,608 3,105,356 (2,692,605) - Retentions 1,047,961 5,488,728 (1,047,959) - 2,749,569 8,594,084 (3,740,564) -

52,135,186 8,373,651 (925,506) 4,587,557 676,990 1,236,053 66,083,930

Total

2,290,461 6,176,303 8,466,764 Total

2,114,359 5,488,730 7,603,089

15. REVENUE Rendering of services 14,779,984 Rental Income 23,398,380

8,561,198 18,209,735

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

118

Notes to the Financial Statements FIGURES IN RAND

2011

2010

16. Operating Profit Operating profit for the year is stated after accounting for the following: Operating Lease Charges Premises - Contractual amounts Equipment - Contractual amounts Profit on sale of property, plant and equipment Impairment on property, plant and equipment Depreciation on property, plant and equipment Employee costs Research and development 17. Finance Income Interest revenue Bank

1,135,244 1,135,244

1,143,029 1,143,029

317,011 328,519 19,005,340 36,895,363 74,560

21,259 (13,634) 13,380,320 32,179,050 24,000

175,472 175,472

97,273 97,273

(12,288)

(1,588)

199,027 66,880 265,907

122,350 132,862 255,212

18. Taxation Major components of the tax income Deferred Originating and reversing temporary differences The assessed loss carried foward for year 2011 is estimated at R 1 424 578 (2010: R2 344 212)

19. Auditorsâ&#x20AC;&#x2122; remuneration Audit Fees Other 119

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

Notes to the Financial Statements FIGURES IN RAND

2011

2010

20. Cash generated from operations Profit / (loss) before taxation Adjustments for: Depreciation and amortisation Profit on sale of non-current assets Interest received Fair value adjustments Impairment reversals Movements in provisions Changes in working capital: Trade and other receivables Trade and other payables Deferred income 21. Tax funded

(83,694,887)

54,859,928

19,005,340 (317,011) (175,472) 119,662,002 (328,514) 863,675

13,380,323 (21,259) (97,273) (4,946,011) (62,389) 5,605,213

(1,538,151) (33,965,246) 181,768,484 201,280,220

8,611,243 7,942,887 322,550,321 407,822,983

Balance at beginning of the year SARS Refunds Balance at end of period

1,883,537 (1,342,160) - 541,377

1,883,537 (1,883,537) -

22. Commitments

Authorised capital expenditure Balance on contract work in progress 315,618,347 214,785,880 This commitment expenditure relates to infrastructure and will be financed by grants from the Department of Trade and Industry as well as the Department of Economic Affairs and Tourism - Eastern Cape. The commitments amounts are exclusive of vat.

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

120

Notes to the Financial Statements FIGURES IN RAND

2011

2010

23. Contingencies 2011 (i) The performance bonus li ability is estimated at R4 507 865 2010 (i) A bid by the company for a security contract has been challenged which might result in a possible loss of R450 000. The companyâ&#x20AC;&#x2122;s attorneys are estimating the probality of this loss occuring to be zero (ii) The performance bonus liability is estimated at R4 328 628

24. Related parties Relationships Holding company Eastern Cape Development Corporation Associates Buffalo City Municipality Members of key management Mr. S. Kondlo Mrs. N.V. Madyibi Mr. T. Zweni Mr. J. Burger Mr. T. Gwintsa Related party balances Amounts included in Trade receivables Buffalo City Municipality 2,791,569 Amounts included in Trade payables regarding related parties Buffalo City Municipality (916,322) Related party transactions Buffalo City Municipality Rates and taxes 2,298,632 Electricity 8,849,289 Water 1,320,918 Sewerage Eastern Cape Development Corporation Total grants received for the year 135,257,000 Compensation to directors and other key management Key management remuneration 8,990,406 121

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

7,740,156 (856,820)

2,682,483 6,217,053 486,827 297,708 127,601,000 7,468,903

Notes to the Financial Statements FIGURES IN RAND

2011

2010

25. Directorâ&#x20AC;&#x2122;s emoluments Non-executive 2011 For services as directors 2010 For services as directors 26. Operating leases

Emoluments 323,423

Total 323,423

Emoluments 263,732

Total 263,732

Operating leases - as lessor (revenue) Leasing arrangements Operating leases relate to the investment property owned by the ELIDZ with lease terms of between 5 to 10 years, with an option to extend for a further 10 years. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. The lessee does not have an option to purchase the property at the expiry of the lease period. Rental income earned by the ELIDZ from its investment properties and direct operating expenses arising on the investment properties for the year are set out in note 4. Minimum lease receipts due - no later than one year 21,844,353 20,389,633 - later than one year and not later than five years 61,581,019 65,000,408 - later than five years 8,876,998 4,517,721 92,302,370 89,907,762 Operating leases - as lessee (expenses) Leasing arrangements Operating leases relate to leases of equipment with lease terms of between 0 and 1 year. The ELIDZ does not have an option to purchase the leased equipment at the expiry of the lease periods. Minimum lease payments due - no later than one year - later than one year and not later than five years

75,324 - 75,324

108,226 17,978 126,204

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122

Notes to the Financial Statements FIGURES IN RAND

27. Risk management Market risk The company has no market risk exposure for the year, as there has been no foreign exchange transactions and financial borrowing during the current financial year. Liquidity risk The companyâ&#x20AC;&#x2122;s risk to liquidity is a result of the funds available to cover future commitments. The company manages liquidity risk through an ongoing review of future commitments and funding agreements. Interest rate risk Cash flow interest rate risk Financial instrument Current Due in less Due in one Due in two Due in three Due after Intrest rate than a year or two years or three years or four years five years Cash in current banking institutions 5.0% 383,494,176 - - - Credit risk Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. Trade receivables consist of a large number of customers, spread across diverse industries . Ongoing credit evaluation is performed on the financial condition of accounts receivables. Management evaluated credit risk relating to customers on an ongoing basis. The company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party. Financial assets exposed to credit risk at year end were as follows. Financial instrument 2011 2010 Standard Bank 383,494,176 334,065,013 Trade receivables 4,083,304 2,707,198

123

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Notes to the Financial Statements FIGURES IN RAND

28. Compensation to directors and executive management Executive Management Basic Salary Allowances

Employer Contribution to funds

Total Bonus Total Guaranteed Remuneration Pay

Mr. S. Kondlo 1,081,565 645,318 245,737 1,972,620 454,811 2,427,431 Mrs. N.V. Madyibi 832,080 496,464 194,587 1,523,131 379,053 1,902,184 Mr. T. Zweni 719,155 429,060 166,247 1,314,462 246,856 1,561,318 Mr. J. Burger 704,296 420,216 144,395 1,268,907 261,962 1,530,869 Mr. T. Gwintsa 713,212 425,544 170,214 1,308,970 259,634 1,568,604 4,050,308 2,416,602 921,180 7,388,090 1,602,316 8,990,406 Directors Fees Allowances Total ZM Tini 67,635 19,131 86,766 J Badenhorst 59,450 5,870 65,320 N Anderson 48,910 5,646 54,556 DM Matika 64,808 11,079 75,887 M Saziwa 27,790 13,007 40,797 268,593 54,733 323,326

29. Unauthorised, fruitless and wasteful expenditure There was no unauthorised, fruitless and wasteful expenditure. 30. Capital The company manages its capital to ensure that the entity will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the assets and equity balance. The companyâ&#x20AC;&#x2122;s overall strategy remains unchanged. The company is not subject to any externally imposed capital requirements.

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

124

Detailed Income Statement Figures in Rand Note(s) Revenue Rendering of services 15 Other revenue - IAS 39 (IFRS 7) Rental Income 15 Cost of sales Purchases Gross profit Other income Other income Finance income 17 Finance income - IAS 39 (IFRS 7) Gains on disposal of assets Government grants Grants released - Investment property Expenses (Refer to page 126) Operating (loss) profit Fair value adjustments (Loss) profit before taxation Taxation 18 Profit/(loss) for the period

125

EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

2011

2010

14,779,984 (106,651) 14,673,333

8,561,198 (250,286) 8,310,912

23,398,380

18,209,735

(20,851,727) 17,219,985

(16,205,395) 10,315,252

1,973,170 175,472 2,480,418 317,011 89,132,335 36,368,933 130,447,340

284,078 97,273 (4,727,294) 21,259 83,553,165 49,004,205 128,232,685

(111,700,210)

(88,634,020)

35,967,115

49,913,917

(119,662,002) (83,694,887) (12,288)

4,946,011 54,859,928 (1,588)

(83,682,598)

54,861,515

Detailed Income Statement Figures in Rand Note(s) Operating expenses Advertising-marketing Auditors remuneration Bad debts Bank charges Board expenses Cell phones Cleaning Computer expenses Consulting and professional fees Depreciation Amortisation and impairments Development planning and related costs Donations Employees costs Expenditure IAS 39 (IFRS 7) Entertainment Hire of Facilities & Services Insurance Internship IT expenses Legal expenses Marketing- Brand Management Miscellaneous expenses Non-capitalised equipment Petrol, Oil and Repairs - MV Placement fees Postage Printing and stationary Project costs Marketing Communications Repairs and maintenance Research and development costs Security Subscriptions Telephone and fax Tendering costs Training Travel - local Travel - overseas Utilities - Operating Costs

2011

2010

(4,030,593) (265,907) (57,105) (59,026) (323,423) (572,356) (560,143) (363,184) (14,148,667) (19,005,340) 328,519 (1,490,510) (90,979) (36,895,363) (3,037,511) (408,127) (1,135,244) (1,382,780) (621,707) (604,054) (672,361) (1,293,783) (61,532) (799,456) (48,183) (556,801) (25,533) (211,600) (10,667,402) (490,028) (2,013,041) (74,564) (3,620,331) (267,463) (252,389) - (1,640,240) (1,441,268) (1,857,681) (983,051) (111,700,210)

(1,974,843) (255,212) (749,054) (61,973) (263,732) (539,731) (184,334) (179,394) (8,718,299) (13,380,323) 62,389 (205,114) (105,673) (32,179,050) 5,903,086 (404,766) (1,143,029) (754,945) (461,602) (365,146) (610,682) (71,721) (322,542) (33,667) (203,377) (61,311) (216,424) (22,233,917) (10,271) (1,584,805) (24,000) (2,033,031) (409,247) (283,741) (222,177) (814,466) (2,278,813) (1,259,084) (88,634,020) EAST LONDON IDZ - ANNUAL REPORT Annual Financial Statments

126