ANNUAL RE PO RT 2013/14
VISION
MISSION
MANDATE
To contribute to the economic development by promoting the province of KwaZulu-Natal as the premier investment destination, and the leader in export trade.
• Identify and package investment opportunities in KwaZulu-Natal; • Brand and market KwaZulu-Natal as an investment destination; • Link opportunities to the developmental needs of the KwaZulu-Natal community; and • Ensure easy access to investment and export trade opportunities.
• Promote, brand and market the province of KwaZulu-Natal as an investment destination; • Facilitate trade by assisting local companies to access international markets; • Identify, develop and package investment opportunities in KwaZulu-Natal; • Provide a professional service to all clientele; • Retain and expand trade and export activities; and • Link opportunities to the developmental needs of the KwaZulu-Natal community.
Nelson Mandela Capture Site in the Midlands
Contents 1.
FOREWORD
2
2.
BOARD OF DIRECTORS
4
3.
CORPORATE PROFILE
5
4. Acting CHAIRPERSON’S STATEMENT 8 5.
CHIEF EXECUTIVE’S REVIEW
10
6.
OVERVIEW OF THE TRADE AND INVESTMENT ENVIRONMENT
13
7.
DEPARTMENTAL REPORTS
17
7.1 INVESTMENT PROMOTION
18
7.1.1 INVESTMENT FACILITATION
18
7.1.2 BUSINESS RETENTION AND EXPANSION
23
7.2 EXPORT DEVELOPMENT AND PROMOTION
25
7.3 KNOWLEDGE MANAGEMENT
32
7.4 CORPORATE SERVICES
34
7.4.1 HUMAN RESOURCES
35
7.4.2 MARKETING AND COMMUNICATIONS
37
8.
ANNUAL PERFORMANCE REPORTS
42
9.
ANNUAL FINANCIAL STATEMENTS
56
9.1 ADMINISTRATION
57
9.2 STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS
58
9.3 BOARD’S REPORT
60
9.4 SECRETARY’S CERTIFICATION
63
9.5 REPORT OF AUDITOR-GENERAL
64
9.6 CORPORATE GOVERNANCE STATEMENT
67
9.7 BALANCE SHEET
73
9.8 NOTES TO THE ANNUAL FINANCIAL STATEMENT
94
10. TABLE OF ACRONYMS
111
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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01 MEC’s Foreword Mr M Mabuyakhulu MEC for Economic Development, Tourism and Environmental Affairs
The last financial year bore witness to some interesting movements within the South African economy as the sensitive rand hit the spotlight again. The price of crude oil continued to rise resulting in petrol and diesel price increases. The World Bank revised South Africa’s economic growth outlook in 2014 to 2.7% from an earlier forecast of 3.2%. It also projected economic growth to improve to 3.4% in 2015. Despite the downward revision, according to the World Bank, the economic growth this year would be much better than the expected 1.9% growth in 2013 and would be boosted by an improvement in global demand and local exports. Factors such as the volatility of the Rand, decreased manufacturing output and labour uncertainty continue to plague South Africa (SA) and KwaZulu-Natal (KZN). This has added strain to our already complex challenge of attracting foreign direct investment (FDI), as we compete with over 250 like-minded Agencies globally. At a provincial level, Development Agencies are being set up in districts which enhance Trade & Investment KwaZulu-Natal’s (TIKZN) efforts of being the authority responsible for investment and trade promotion in the province. In order to direct the economy of South Africa, there has been a need for government-led intervention. This has led to government reviewing current strategies to drive economic development in South Africa. We have continued to develop the provincial strategies aligned to key national strategic policy frameworks such as New Growth Path, Industrial Policy Action Plan (IPAP2), the Provincial Growth and Development Plan (PGDS) and most importantly alignment with the country’s new long-term development blueprint, the National Development Plan (NDP). The KwaZulu-Natal Provincial Cabinet met at the end of this financial year to consolidate integrated systems of governance and to review service delivery programmes. The main outcome was that the PGDP was adopted and will continue to be implemented by the new administration with three main priorities: • • •
Managing the implementation of the HIV/AIDS programme; Improvement of living conditions of vulnerable people such as farm workers; and The total eradication of the bucket toilet system.
The planned multi-billion-rand government investment in infrastructure development will be the mainstay to steer the province to greater economic heights. Among innovative interventions we are introducing to instigate real growth across all regions in the province are the Special Economic Zones and Industrial Hubs; the Aerotropolis and the Maritime and Tourism sectors as key drivers of the KwaZulu-Natal economy. Our programmes and strategic public entities are positioned to play a pivotal role in ensuring our socio-economic objectives are achieved and feeds into to the overall outcomes of the NDP.
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The performance of Trade & Investment KwaZulu-Natal as an agency of the Department of Economic Development and Tourism has proved itself to be an important asset within the provincial economic cluster. This is done by means of driving the promotion of the province as a globally competitive trade and investment destination and as a formidable asset in nurturing and expanding our export sector. Two key priorities identified for immediate implementation by the organisation were to formulate concise strategies that will focus on the analysis and opportunity identification of doing business in Africa and the marketing, development and foreign direct investment recruitment from the Brazil, Russia, India, China (BRIC) countries. Throughout the past 20 years, our young democracy has shown resilience, equalled only by determination. We have remained true to our promise of delivering on our mandate of creating a better life for all. I therefore commend TIKZN for its commitment to creating an environment in the province conducive to business development and attractive to both local and international investors and traders.
Mr M Mabuyakhulu, MPP MEC for Economic Development, Tourism and Environmental Affairs
Durban Harbour
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02 BOARD OF DIRECTORS
•
4
Ms LCZ Cele Acting Chairperson
Mr MA Tarr Director
Dr JJ Van Zyl Director
Mr CS Gina Director
Cllr DCP Mazibuko Director
Dr VF Mahlati Director
Dr NS Msomi Director
Prof W Viviers Director
Dr MAI Velia Director
03 Corporate Profile
•
Trade & Investment KwaZulu-Natal (TIKZN) is a South African trade and inward investment promotion agency, established to specifically promote the province of KwaZulu-Natal as a premier investment destination and to facilitate trade by assisting locally-based business enterprises access international markets. KwaZulu-Natal is home to South Africa’s second largest economy with TIKZN geared to promote the province’s competitive advantages as a world-class business investment destination and encourage trade by assisting local companies identify new markets for their products locally and internationally. The organisation’s Chief Executive Officer is Mr Zamo Gwala who reports to a nine-member Board of Directors. The Board comprises individuals with the varied skills and collective expertise in the fields of trade and investment. They are responsible for providing TIKZN with its strategic business direction. In addition, TIKZN employs specialist members of staff whose task is to address opportunities in the areas of investment promotion, strategy, research, project management, finance, marketing and human resources, so generating inward investment to the province and developing trade links with international role-players. TIKZN is dedicated to creating an environment in the province conducive to business development and attractive to both local and international investors, as well as traders. In line with this, the organisation’s intent is to impact significantly on the socio-economic advancement of KwaZulu-Natal and its people. KwaZulu-Natal, a 94 361km2 region situated on the east coast of South Africa, is a significant hub for industrial development in sub-Saharan Africa and is a prime tourist destination. It boasts a number of competitive advantages. These include: • Superb natural resources; • Exceptional productive capacity; • Highly developed first-world infrastructure; • A valuable coastal location; • Both of South Africa’s primary harbours - Durban, one of the busiest in Africa, and Richards Bay, the deepest breakbulk in Africa; • The Dube Trade Port, home to the King Shaka International Airport; and • An enviable lifestyle complemented by an idyllic climate. The province offers an extensive range of economic activities, inclusive of capital-intensive manufacturing, transport, storage, communications, finance and business services, as well as highly productive agricultural, forestry, fishing and accommodation sectors. TIKZN actively promotes these advantages to leverage an increased share of the global investment market. Accordingly, the organisation facilitates the formation of new local and foreign investment, supports retention and expansion of businesses already operating in the province and provides professional after-care services in a concerted and ongoing bid to support sustainable economic growth in KwaZulu-Natal.
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Objectives To meet its shareholder and stakeholder expectations, TIKZN aims to deliver effective services and support to its clients and stakeholders through job creation, spatial development, sector development and rural development. This will be achieved through: • The attraction, development and retention of high performing employees who have the skills and competencies required to manage key internal business processes including the marketing of TIKZN as an investment promotion agency; • Enhancing the research and knowledge capabilities of TIKZN and making use of technology as an enabler for TIKZN’s business; • Ensuring compliance with corporate governance and financial reporting standards; and • Advocating for a conducive business environment in KZN and marketing the province as a premier business destination. This will be done on behalf of the province of KwaZulu-Natal with a view to: • Attract new fixed investments; • Facilitate export opportunities; and • Facilitate business retention and expansion programmes; thereby supporting sustainable economic growth in KwaZulu-Natal for the benefit of all its citizens. Key Activities Trade & Investment KwaZulu-Natal undertakes a diverse range of key activities, all designed to ensure the successful promotion of business investment and trade development. Such activities facilitated include: • Joint ventures; • Business linkages between small and big businesses; • The timely provision of relevant and reliable information to both potential and existing investors and traders; • Assistance to both existing and new investors regarding applications for both investment and export marketing incentives; • Applications for business permits for foreign investors; • Negotiation for local government incentives on behalf of investors; • The provision for project support and after-care services to investors; • The provision for assistance to emerging international traders; • International trade enquiry assistance; • Locating suitable premises for investors; and • Assisting in securing project and operational finance.
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Strategic Partners Trade & Investment KwaZulu-Natal has, through a number of strategic partnerships, aligned itself with like-minded stakeholders with a view to synergistically and consistently promote the province’s attributes. Such linkages have seen a number of effective collaborations on projects, inclusive of in and outbound missions, events and promotional activities, all designed to leverage the expansion of the agency’s overall business activities. Key strategic partners include: • Public entities; • Financial institutions; • Tertiary institutions; • Industry associations; • Economic development agencies; • The various chambers of commerce and industry; • The various municipalities in KwaZulu-Natal; • Other investment promotion agencies (national and international); and • Provincial and national government departments.
Trade & Investment KwaZulu-Natal House
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04
Acting Chairperson’s Statement Ms LCZ Cele
In October 2013 the Board Charter, which guides and assists the members of the board in discharging its duties, was reviewed inline with TIKZN becoming a Public Entity listed under Schedule 3C of the PFMA of 1999. The regulatory environment within which TIKZN functions is dynamic, particularly with regards to good corporate governance standards. The ongoing review of TIKZN’s Board Charter is essential to ensure the organisation maintains the highest corporate governance standards while developing ongoing strategic frameworks for investment promotion. Strategic Review As a young board, we assessed the deliverables of the organisation. To give strategic guidance, the organisation took stock of its performance and the strategy was reviewed to see how these deliverables can be accelerated. Consequently, the organisation had to be restructured to fit into the new streamlined focus of investor targeting and product development. The organisation also embarked on a skills audit to take stock of what competencies exist versus what is needed. This process sought to identify the gaps that exist between the skills possessed and the skills required. For the organisation to deliver on its objectives contained in the strategy, it was necessary to identify the talent to ensure any gaps identified are addressed. Trade & Investment KwaZulu-Natal Focus Another facet of the organisational strategy included the formulation of Africa and BRICS strategies, which were identified as priority areas stemming from the Board’s review of the corporate strategy. It has become critical for KwaZulu-Natal within South Africa’s role in BRICS, to gauge the tangible benefits for business and manage the benefits that can be leveraged. To succeed, a BRICS Trade and Investment Strategy for KZN elevating the business opportunities and economic development has been commissioned. This strategy will include a detailed analysis of trade and investment opportunities within the BRICS member states. KZN companies will be guided into doing business within the BRICS member states to create new targeted markets for KZN products and to attract potential investors.
8
Africa is facing an unprecedented opportunity for both trade in particular export trade and investment. TIKZN has responded to this need by developing a strategy for the province to assist industry and highlight the ease of doing business in Africa. This marks a significant focus in the way TIKZN encourages business to view Africa and its own role as a supporter of the continent’s economic development. TIKZN has participated in platforms such as the Swaziland International Trade Fair and Feira Agro-Pecuária, Comercial e Industrial De Moçambique (FACIM). The organisation’s work will now be taken to a new level with the development of specific country-focus strategies. Appreciation The members of the board express their thanks and appreciation to the former Chairperson H.E. Mr TO Mlaba who was appointed South African High Commissioner to the United Kingdom. In his tenure as chairperson Mr Mlaba provided sound, insightful leadership, the basis of which continues to help guide the organisation. On behalf of the members of the board I wish to thank the MEC for Economic Development and Tourism, the Honourable Mr Michael Mabuyakhulu for his ongoing support in leading TIKZN. I pay tribute to my fellow board members for the insightful guidance and wise counsel they each bring to the organisation. The immense experience and expertise of the board as a whole, has ensured that we have discharged our fiduciary responsibilities to the best of our efforts. Finally, the members of the board thank TIKZN’s Chief Executive Officer Mr Zamo Gwala for his inspired and steadfast leadership. You have created and sustained an organisational culture that encourages excellence across all levels. Conclusion Fostering an environment conducive to attracting and retaining foreign direct investment and export expansion is essential in our efforts to sustain economic growth and job creation. Within the broad trade and investment landscape, TIKZN is a critical catalyst in unlocking that growth.
Ms LCZ Cele Acting Chairperson of the Board
Drakensberg
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05
CHief Executive’s Review Mr ZA Gwala
Trade & Investment KwaZulu-Natal has delivered substantial achievements in the 2013/2014 period under review. Competition for foreign investment is robust as we compete against developed economies, the Asian giants and other emerging economies, including rapidly expanding economies in Africa such as Nigeria. Fortunately, TIKZN is well-positioned to leverage off KwaZulu-Natal’s comparative advantages to ensure we remain aggressively competitive. Review of operations The activities we engaged in for the year under review reflect this strategic approach. In terms of our performance, TIKZN has again exceeded its investment target of R1.2 billion by R100 million, realising R1.3 billion in this financial year. The investment in these new projects is expected to be the catalyst for 5361 potential jobs. The sectors to benefit from these jobs include the business process outsourcing (BPO) sector, film, agro-processing, clothing and textiles and synthetic fibres. In terms of export promotion, 109 companies were assisted with market development initiatives during the year and 77 new export markets opened for individual companies. Significantly, 24 of these were new export market leads from Angola and 12 from the east3ROUTE initiative. TIKZN has assisted 29 broad-based black economic empowerment (B-BBEE) companies with export readiness interventions and our ongoing monitoring and support of these interventions through our various development programmes will certainly play a key role in unlocking their potential. It has been a particularly busy year for our business retention unit with 13 companies provided with professional and technical assistance resulting in R786.9 million worth of expansion projects being committed. TIKZN’s knowledge management unit continues to ensure the organisation has at its disposal accurate, up-to-date data on local, national and global economic trends and that this data is packaged appropriately for both internal and external consumption. Specifically the unit compiled 17 macro-economic research reports and helped package eight new high-impact investment opportunities. A further 49 export opportunities were identified and these will be packaged to product-to-export level in the new financial year. Our policy advocacy unit has met its key deliverables including obtaining board approval for reviewing the terms of reference for policy advocacy.
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Particular highlights of the year under review east3ROUTE The 2013 edition of the east3ROUTE cross-border initiative involving South Africa, Swaziland, the Seychelles and Mozambique was a resounding success. The initiative is a collaborative partnership driven by the Department of Economic Development and Tourism (DEDT). In addition to its partnership obligations, TIKZN was additionally tasked with the execution of the one-day investment seminar and the trade exhibition in Swaziland on 16 October 2013. Flights into Africa In keeping with the province’s objective to position itself as a hub to create express links into Africa, this financial year witnessed the official launch of the direct flights by SA Express from King Shaka International Airport to Harare and Lusaka. These missions were led by the Honourable MEC Michael Mabuyakhulu, coordinated by the Dube Trade Port (DTP), SA Express, TIKZN and Tourism KwaZulu-Natal (TKZN). The purposes of these missions were to establish business and tourism linkages using the SA Express direct flight as an enabler. The partnership between SA Express and DTP has led to SA Express using Durban’s King Shaka International Airport as a hub for new routes into the Southern Africa Development Community (SADC) countries. The purpose of introducing the new services was to provide convenient access to and from all regions in the SA Express network particularly business and leisure travellers. Export Week The second annual Export Week was held in October 2013 which included the Export Summit. Export Week and, in particular, the Summit, were developed to boost the profile of KZN’s exporters. This is an essential way of contributing to the business community’s awareness of the crucial role those exporters play in KwaZulu-Natal’s and South Africa’s economy. New elements to the programme included a showcase of Women in Exports and the development of Halaal products for export in partnership with the South African National Halaal Industry Association. Seizing the low carbon investment opportunity TIKZN’s relationship with United Nations Conference on Trade and Development (UNCTAD) spans over the years in an ongoing basis with representatives through seminars, workshops and conferences. It was through this relationship TIKZN was requested by UNCTAD to host a regional workshop themed “Seizing the Low Carbon Investment Opportunity in Africa” which explored the economic benefits of greening existing industries and examining business opportunities in the renewable energy sector. It was attended by over 30 countries and included expert input from UNCTAD, the World Bank Group, EY, and IBM Plant Location International.
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Appreciation I take this opportunity to thank our MEC for Economic Development and Tourism, Mr Michael Mabuyakhulu for his leadership, guidance, and unwavering support. Your commitment to the people of KwaZulu-Natal and South Africa is demonstrated by your relentless efforts to unlock economic development opportunities in KwaZulu-Natal. The successful year under review would not have been possible without the strategic direction and oversight provided by our board of directors, under the leadership of the acting chairperson Ms LCZ Cele. Finally, my respect and heartfelt appreciation is extended to my management and staff at TIKZN. It is a privilege to work among a professional team who are passionate to grow our province’s economy. Conclusion Africa is poised for growth and so are we. With the organisational restructuring and various new strategies at hand, TIKZN will remain more focused than ever. Together we will work at unlocking our province’s potential to secure foreign direct investment and to increase exports from KwaZulu-Natal into outward markets in Africa and beyond.
Mr ZA Gwala Chief Executive Officer
The government panel discussing investment issues during the east3ROUTE Investment Seminar and Exhibition 2013
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06
overview of the trade and investment environment
•
The financial year provided a gradual improvement in the global economic arena. Similar to the European Union’s (EU) avoidance of the much feared double-dip recession in 2012, the United States (US) escaped the much-anticipated fiscal cliff and grew its economy by nearly 2% in 2013. Given the sheer size of the US economy, its continued rebound has renewed hope. Other economies, particularly developing economies, will benefit and hopefully exceed conservative growth estimates or in some cases, year-on-year negative growth will be arrested. Despite the growth in the US economy, the global economy remains volatile for emerging market economies that have experienced billions of dollars in capital outflows and consequential currency depreciations. The counter-balance is for these economies to exploit the favourable export opportunities created by the weakening of exchange rates. Global trade trends The World Trade Organisation (WTO) estimates the value of world trade in merchandise to have expanded 2% to $18.8 trillion in 2013. In real volume terms, world trade is estimated to have expanded 2.1% in 2013. This is expected to rebound further at 4.7% in 2014 and – while uncertain due to the long-term nature of the predictions and dependence on the pace of the global economic output – a further 5.3% in 2015. The WTO acknowledges the prevailing growth rates in trade volumes and values are still below the long-term trend we have come to know, around 8% per annum before the global economic crisis of 2009. Apart from the partial rebound of 14.5% in 2010 (particularly due to base effects), expansion has been greatly subdued. This is mainly owing to declining imports by the EU and Asia, which are the main trading partners for a number of economies, particularly the least developed ones. Another observation is the declining ratio of the world economic output growth rate and world trade growth from 2:1 since the mid-80s to 1:1 in the last two years. This could be the result of increasing intra-regional trade fuelled by bilateral trade agreements and protectionism among members of common blocs. According to the research article ‘Stimulating world trade in the decades ahead: driving forces and policy implications’, WTO economists expect these intra-regional trade shares to decline by 2035, giving way to more multilateral trade relationships, thereby benefiting economies currently on the periphery of international trade. Global investment trends According to the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report (2014), world foreign direct investment (FDI) inflows rebounded to $1.45 trillion in 2013, a 9% increase from $1.317 trillion in 2012. This was in line with the UNCTAD’s forecast and also comparable to the pre-crisis average of $1.494 (Figure 1). UNCTAD further predicts FDI flows will rise gradually to US$1.6 trillion in 2014 and US$1.8 trillion in 2015.
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Regional contributions At the regional level, FDI flows to the developed countries are estimated to have remained at a historically low share of 39% of total global FDI inflows for the second consecutive year (or $566 billion), while flows to developing economies reached a new high of $778 billion, accounting for 54% of global FDI flows in 2013. This followed a trend started in 2011 when developing economies and economies-in-transition together attracted 51% of global FDI inflows and in 2012 when for the first time, developing economies alone attracted half of these FDI flows. FDI inflows to the Latin America and the Caribbean (LAC) improved significantly by 14.1% while inflows to Africa and Asia remained somewhat unchanged, growing only 3.6% and 2.7% respectively. Asia also remained the largest host region for FDI flows at 29% surpassing the EU’s 17%. However Asia’s FDI flows to transitional economies also recorded a new high of US$108 billion, 29% up from the previous year, accounting for 7% of global flows. African imports rise faster than exports In the same year, Africa is estimated to have increased its imports, even as its exports fell due to continued high prices of primary commodities. While oil prices have remained relatively steady, prices of metals, raw materials and beverages (including coffee, tea and cocoa) have fallen in the last two years. The decline in the prices of metals cannot be a clearer wake-up call for South Africa and KwaZulu-Natal to restructure the trade pattern and include in the basket more valueadded goods than raw materials, metals and steel. Economic and financial data provides estimates in 2013, the provincial trade was valued at R92 billion from R85 billion in 2012. At this level, the provincial trade was 11.7% of the South African total of R788.4 billion, a slight decrease from 12.1% in 2012 and 12.2% in 2011. Unmistakably, motor vehicles (14.1%), raw aluminium (11.5%), rolled stainless steel (6.6%), titanium ores (6.5%), niobium tantalum vanadium zirconium ores and aluminium plates, sheets and strips (4.7% each) were high on the province’s list of exports (Figure 1). Africa’s FDI inflow still the smallest FDI inflows to Africa still accounted for the smallest share of all regions, estimated at $57 billion or 3.9% of total. This was a consolatory 3.6% increase from US$55 billion recorded in 2012 and US$48 billion in 2011. At this level, the continent was the least recipient of global FDI inflows of all regional groupings. North Africa accounted for $15 billion, while the remaining $42 billion was rationed among the rest of the region. Developed economies attract bulk of FDI While at record low share of global flows, the developed economies’ FDI inflows reportedly recovered slightly. This group of economies attraction of $566 billion in 2013 a 9.5% jump from $517 billion in 2012 and an improvement from the 40% decline in 2012 compared to $880 billion in 2011. While their share as the recipients of global FDI inflows is at a record low (39%), the developed economies continued to be the main sources of global FDI, contributing a reciprocal 61% of global FDI outflows in 2013. However, this was also a continued decline from 88% in 1999.
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South Africa still regarded as one of the top prospective African host economies With those impressive strides, including annual growth of over 10% in the past 17 years, the developing economies accounted for 60% of the top 10 host economies and 50% of the top 20 countries and transitioning economies. These included China ($124bn), the Russian Federation ($79bn), British Virgin Islands ($92bn), Hong Kong SAR China ($77bn), Brazil ($64bn), Singapore ($64bn – equivalent of flows to the entire Africa), Mexico ($38bn), India ($28bn), Chile ($20bn) and Columbia ($17bn). For the first time, the Russian Federation leapfrogged five places to be the third largest FDI host country in 2013. Needless to say, not a single African country made the top 20 list, let alone top 10. However, in another research report (World Investment Prospects Survey 2013-15), the UNCTAD finds at least 7% of surveyed transnational companies (TNCs) still regard South Africa as one of the top potential investment destinations, placing it at position 15. Mergers and acquisitions versus greenfields While generally higher than mergers and acquisitions (M&A) - average $600 billion versus $349 billion respectively in 2013 – the value of greenfield projects declined slightly in 2013, while M&A took the opposite direction at 5% (from $349bn to nearly $368bn). Figure 1: Global FDI inflows, average 2005 - 2007, 2007 - 2015 (US$ billion) 2 500
2 002
2 000
1 819
1 800 1 691
1 500
1 494
1 600 1 451
1 412
1 317
1 221
1 000
500
Pre-Crisis Average 2005-2007
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: TIKZN using the UNCTAD statistics (2014)
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High youth population an asset for Africa Africa, South Africa and KwaZulu-Natal are doing relatively well on the international trade front only to the extent our goods and services make it to the international trade logbooks. However, on the investment front, the region is not performing optimally. According to the United Nations (UN), Africa is the world’s youngest continent, as the proportion of youth among the region’s total population is higher than in any other continent. In 2010 70% of Africa’s population were regarded as young (ages 30 and below). With this endowment, the region should gear towards change that will ensure significant participation on the global trade and investment arena. Trade restructuring and skills development should be prioritised. Figure 2: KwaZulu-Natal leading export products, 2013
Diphosphorus pentaoxide, phosphoric acids Uncoated kraft paper and paperboard Pig iron and spiegeleisen in primary forms Granulated slag (slag sand) form iron & steel industry Aluminum plates, sheets and strip, thickness > 0.2 mm Niobium tantalum vanadium zirconium ores, concentrates Titanium ores and concentrates Rolled stainless steel sheet, with > 600m Unwrought aluminum Motor vehicles for the transport of goods 0.0%
Source: TIKZN using Quantec (2014)
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2%
4%
6%
8%
10%
12%
14%
16%
07 Departmental reports
• Executive Office
Finance
Investment Promotion
Export Development & Promotion
Knowledge Management
Corporate Services
Given Trade & Investment KwaZulu-Natal’s need to promote the province as a leading investment destination and attract foreign direct investment while stimulating trade from within the province, the organisation has been structured into six departments, as follows: •
Executive Office
•
Finance
•
Investment Promotion - Pre-Investment - Post-Investment
•
Export Development & Promotion
•
Knowledge Management
•
Corporate Services - Human Resources - Marketing
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7.1 investment promotion
Investment promotion consists of the investment facilitation unit which promotes the province of KwaZulu-Natal as an investment destination. Additionally investment promotion includes the business retention and expansion unit (BREU) which maintains existing businesses throughout the province.
7.1.1 INVESTMENT FACILITATION
The financial year has delivered mixed results as far as attracting new investments in the province. The service sector continues to show resilience by returning cautiously good results while the sectors most negatively affected by the 2008 recession, particularly the manufacturing sector, are now starting to show signs of improvement. This is driven by the electronics and agro-processing sectors. Clearly, government’s commitment to infrastructure development, coupled with investment support interventions and incentives, is now paying dividends by supporting and attracting new investments. The overall success of the Investment Promotion and Facilitation Unit is measured by the value of investment committed in the province both foreign direct investment (FDI) and domestic direct investment (DDI) and by the number and quality of the jobs created by these investments. Our rand value target for the 2013/14 financial year was R1.2 billion and we achieved R1.3 billion, exceeding our target by R100 million. From these investments, the estimated potential number of jobs that can be created is 5361, with most of these coming from the services sector and the balance from manufacturing.
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Committed Projects PROJECT NAME
SECTOR
PROJECT VALUE
JOB CREATION
UNO Fibre
Chemicals (synthetic hair manufacturing)
R90 m
100
Ithala (The Reunion)
Creative Industries (film)
R6.1m
37 (permanent and temporary)
AEGIS
Call Centre
R25 m
1000
Distinctive Choice
Clothing and textiles
R55 m
1800
Cappeny Estates
Agriculture (strawberries)
R18.5 m
95
NAMEC
Manufacturing
R80 m
300
Outworx
BPO/S (call centre)
R117 m
1300
In Genius
BPO/S (call centre)
R102.6 m
500
Code Green
BPO/S (call centre)
R4 m
29
Bakhresa
Manufacturing
R800 m
200
TIKZN’s staff conducted a site visit to the Cappeny Estates strawberry farm
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Outbound missions TIKZN also embarked on outbound missions to attract FDI and promote KZN as a premier investment destination. This process targeted foreign capital, new skills and technologies needed to drive the economy. The organisation embarked on 20 focused outbound missions for the financial year 2012/2013. Examples of some of the outbound missions are listed below: • Turkey: Business Prospecting Mission. TIKZN hosted business round table sessions in Istanbul and Mersin with the assistance of the SA Embassy and chambers of commerce in each city; • United Kingdom: Finance Director Europe Mission. This included several meetings with potential UK stakeholders as well as a business breakfast in London in partnership with the Finance Director Europe publication; and • USA: Mission to Pan African Film Festival in Los Angeles. Three film screenings were attended; 10 meetings were conducted and six leads generated. Inbound missions During the financial year, TIKZN hosted 37 inbound business delegations. The inbound business delegations included the following: • Korean Orthopaedic Equipment Inbound Delegation: TIKZN arranged meetings for BL Tech, a Korean medical equipment company with the KZN Department of Health and Inkosi Albert Luthuli Hospital; • Ras al Khaimah Free Trade Zone Inbound Delegation (UAE): TIKZN hosted the RAKFTZ CEO in a session attended by local business chambers and KZN exporters; • US-Illinois: Music City South Africa. On 18 February 2014 the delegation signed a Memorandum of Understanding (MOU) with KZN Premier The Honourable Mr Senzo Mchunu agreeing to pursue the development of a Music City on the South Coast; • Nigeria: Abuja. This delegation discussed the implementation of the MOU signed with Dube Trade Port highlighting the need to share skills and services in the development of agri-zone and cargo airlines. A feasibility study will be conducted; • Federation of Gujarat Industries Inbound Delegation: Working with EDPU and BREU; • Miami-Dade County, Florida Inbound Delegation. Working with EDPU and BREU; • Japan Automotive Investment Mission. Working with Investment Promotion; • United States OPIC and TDA Inbound Visit. Focus on renewable energy projects; and • DIRCO Western Europe Secretariat Diplomat site visit. Destination Marketing Destination Marketing continued to develop and engage in relationships to ensure the province of KwaZulu-Natal’s visibility as a premium trade and investment destination. Promotion toolkits containing marketing material and information were mailed to the Department of Trade and Industry’s (dti) Foreign Economic Representatives based in South Africa’s missions in 45 key markets. The unit engaged further with foreign chambers of business in countries such as Turkey and Spain as well as with foreign chambers based in South Africa, such as the German South Africa Chamber and South Africa Netherlands Chambers. In addition, TIKZN plays a key role in the World Routes 2015 event which will focus on developing direct international flights to King Shaka International Airport.
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In the year under review, missions were undertaken to Zimbabwe, Zambia, Uganda, Russia and Swaziland as part of the east3ROUTE Investment Seminar & Exhibition that also engaged extensively with Mozambique. There was also an investment prospecting mission to Turkey. The province also played host to missions from Australia, the Democratic Republic of Congo, Korea, the United Arab Emirates (UAE), the State of Gujarat in India, the state of Florida (USA), Japan, Portugal and Thailand. The Gauteng Office Situated in South Africa’s financial capital, the Gauteng Office plays a pivotal role in generating investment leads by high level interactions with venture capitalists, fund managers, national government departments and other public sector entities, the diplomatic corps, foreign trade delegations, funding and donor agencies. From an export perspective, the Gauteng Office supports trade promotion and provides market intelligence for capacity building programmes and export-related market development programmes. Awareness is created for export trade promotion activities; providing country-specific market intelligence and information updates on bilateral and multi-lateral agreements. Export programmes presented by the various trade offices have been handed over to international buyers seeking to source from KwaZulu-Natal. Support is lobbied for outward selling missions, facilitating inward missions and hosting events with trade offices, buyers and wholesalers to refer inquiries to the relevant TIKZN departments.
The TIKZN exhibition stand at Tourism Indaba 2013
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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The year was a busy period for the Gauteng Office that yielded significant and tangible investment outcomes for KwaZulu-Natal. Some highlights include: Highlights: • Uno (Korea) was committed by the Investment Promotion Unit for a R90 million investment; • Successfully assisted in the securing of funding for the second phase of the Cappeny Estates project. Value: R18.5 million; • The Gauteng Office introduced specific programmes provided for exporters to the Export Development and Promotion Unit (EDPU) who hosted sessions for KZN companies to introduce the support programmes available e.g. the Swiss Import Promotion Programme; • Generated 125 qualified business opportunities for KwaZulu-Natal; • Created a series of high level events for business and international organisations now annual events where updates are provided on strategic development on KZN. The international organisation event for the diplomatic corps this financial year was attended by 135 representatives from 92 countries and has generated a significant amount of business; • Hosted 40 foreign delegations in Gauteng and developed relevant business opportunities from Italy, France and Korea; • Referred 22 foreign delegations to KwaZulu-Natal and assisted programme developments with relevant units in dedicated sectors; • Facilitated and participated in the mission to Germany in September 2013 and also to the China International Fair for Investment and Trade from which business opportunities are actively being pursued; • Participated in 84 stakeholder events from which business opportunities were generated; and • A successful programme was developed and implemented for 15 trade commissioners and the EU Ambassador in October in KwaZulu-Natal.
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7.1.2 Business Retention and Expansion
Investment Promotion - Business Retention & Expansion Unit The Business Retention and Expansion Unit (BREU) focuses on retaining and expanding foreign and domestic investments in KwaZulu-Natal developing business linkage opportunities encompassing a range of support services, opportunity and market identification analysis. In an increasingly competitive global foreign direct investment (FDI) market, the unit leverages TIKZN’s professional support services, networks and repository of cutting edge data to assist at-risk businesses explore the full spectrum of KwaZulu-Natal’s competitive advantages. This enables the businesses to improve profitability and reaffirm their commitment to remain invested in KwaZulu-Natal. Likewise, the unit provides high-level yet practical support to businesses wishing to further exploit the provincial competitive advantages by expanding their existing operations. Company Retention and Expansion Interventions During the financial year the BREU assisted 15 companies for both retention and expansion purposes. The assistance provided included facilitating access to finance; sectoral incentives’; business permits’; various municipality interventions’; matters relating to primary market research; broad based black economic empowerment ratings and interactions with business rescue practitioners. These companies committed R786.9 million in expansion investment which will yield 5966 jobs. Business Development Linkages BREU collaborated with the organisation’s strategic partners, stakeholders and industry associations and has implemented various business development programmes for companies. These include: •
•
•
Automechanika 2013 Exhibition held in Johannesburg in May 2013 that provided business development opportunities for Rapid Air Tools, Walter McNaughtan, Connectco, Thule Group, Rapid Truck Bodies, Crisp Air, KZN Oils, Hesto Harnesses, KwaSisonke Logistics and the KwaZulu-Natal Tooling Initiative. All companies provided positive feedback about this exhibition. Automechanika is considered the world’s leading brand on business-to-business automotive aftermarket trade fairs, according to independent research; The Durban Automotive Cluster presented the latest research findings into the KZN Provincial Automotive Benchmarking studies at the TIKZN offices in June 2013. The companies found the report informative and relevant to their operational and strategic planning; Durban Boat and Lifestyle Show held in June 2013 provided further business development linkages for the eThekwini Maritime Cluster, KZN Sharks Board, SA Shipyards, KwaSisonke Logistics, Royal Cape Catamarans, Stealth Performance, Feral Inflatables, Ace Boating and Daycol Engineering. The Durban Boat and Lifestyle Show provides exhibitors opportunities to showcase new offerings in the world of boating on and around the water to boating and outdoor lifestyle enthusiasts from around the country;
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•
•
•
Afrimold 2013 Exhibition held in Johannesburg provided business development linkages for the KZN Tooling Initiative, Rapid 3D Printing, HB Green Engineering, SOMTA Tools and Armoloy SA. All participating companies received potential business development opportunities. The Afrimold exhibition is specific to the tooling, mould-making, design and application development sub-sectors and an integral market development platform for the tooling industry; KZN Regional Economic Development Summit - The BREU formed part of the steering committee for the successful implementation of the Regional Local Economic Development Summit held in November 2013. This summit saw collaboration between all levels of government, private sector and communities to forge a common vision for promoting rising levels of growth, investment, job creation and people-centred development; and JSE information sharing sessions were held in October 2013 and were attended by 18 delegates. This initiative is aligned with the BREU key strategic objective of developing and retaining KZN businesses by assisting companies increase turnover and jobs; sustainability and growth through the facilitating expansion projects.
Municipality and company BRE programmes - TIKZN appointed Lazarus Developments in December 2013 to co-ordinate and facilitate implementing of the TIKZN Municipality BRE programme rolled out in 12 municipalities over two years. The municipalities participating in this programme include uMhlatuze, uMtshezi, Mpofana, uMngeni, Msunduzi, Newcastle, Endumeni, Ilembe, Hibiscus, uLundi, eMnambithi and the Harry Gwala District Municipality.
Rapid Air Tools participated in the Automechanika 2013 Exhibition held in Johannesburg.
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7.2 Export Development and Promotion
•
Through its Export Development and Promotion Unit (EDPU), Trade & Investment KwaZulu-Natal (TIKZN) assists local exporters increase their access to markets. Its operational activities include: • Planning and participating in outward selling missions; • Joint participation with KZN-based companies at exhibitions; • Implementing exporter trade programmes; and • Disseminating information. The EDPU had an extremely busy 2013/2014 embarking on several local and international initiatives covering a range of sectors across key international markets with a particular emphasis on increasing KZN exports into Africa. Highlights • The unit facilitated trade missions to Angola, Ghana, Zambia and Zimbabwe for 31 KZN companies; and • It was represented at the Zimbabwe International Trade Fair (ZITF), a multi-sectoral and multi-national trade exhibition encouraging firms to participate in the growing markets of Africa. TIKZN participated at ZITF for the first time under the Department of Trade and Industry (dti) Pavilion together with two KwaZulu-Natal companies who were approved by the dti through the Export Marketing and Investment Assistance (EMIA) Scheme. The EDPU facilitated TIKZN participation at the following: • Feira Internacional de Benguela (FIB). KwaZulu-Natal engagements with the province of Benguela was initiated within the trade MOU signed between Angola and South Africa providing a broad basis to vigorously facilitate an increased flow of investments and trade co-operation; • Feira Internacional de Luanda (FILDA). Feira Internacional de Luanda (FILDA) is the largest trade event representing international business in Angola; • Swaziland International Trade Fair 2013. The Swaziland International Trade Fair (SITF) is organised by the Ministry of Commerce, Industry and Trade through its trade and promotion unit as well as a management selected annually; • FACIM (Feira Agro-Pecuária, Comercial e Industrial De Moçambique). FACIM is an annual trade fair organised by the Mozambique Export Promotion Agency seeking to encourage trade between Mozambique and different countries; and • West & Central Africa Mining Show. EDPU successfully applied and facilitated applications to EMIA on behalf of nine KwaZulu-Natal entities to participate at the West & Central Africa Mining Summit & Expo (WaCA), held in Accra, Ghana.
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Asian and Middle Eastern market • Outward Selling Mission (OSM) to Indonesia. The unit participated in the OSM to Indonesia and visited Jakarta and Bandung. One KZN company Sancryl Chemicals participated in this trade event; • OSM to Saudi Arabia and Kuwait. Sancryl Chemicals, Global Bags, Elgin Engineering, Iqlaas Food participated in the above OSM and still following up on leads from this event. So far we have received an export enquiry to supply beef to Kuwait for both frozen and chilled packs; • India Engineering Sourcing Exhibition and Show. Organised by the Ministry of Commerce & Industry, Government of India, the India Engineering Sourcing Show (IESS) provides a platform for various manufacturing technology of the global industry to showcase their competence and strength; • European and Traditional Market Interpolitex (Russia). Interpolitex is a Russian Military Exhibition that attracts over 6000 delegates, buyers and visitors; and • Import Shop Berlin (Germany). A multi-sectored exhibition held in Berlin in November 2013. Now in its 51st year showing, it is regarded as the world’s biggest shopping fair where manufacturers and vendors of arts and lifestyle crafts from around the world meet enthusiastic buyers of high-quality ethnic and natural products. Other Trade Events Export Promotion successfully facilitated the applications to EMIA for individual participation at the Italian Rum Festival. These were Show Rum on behalf of Zulu Rum as well for Gator SA to participate at the Pool, Spa & Patio Show in Los Angeles, USA.
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Key Achievements The Export Promotion section successfully accessed 76 new export markets for KZN companies. In terms of market development, TIKZN unlocked key markets in Asia, the Middle East, Russia and the SADC region. The following are some of the companies that benefitted: COMPANY
REGION/ COUNTRY
SECTOR
Leather Touch
Leather accessories
SADC
Dumabezwe Leather
Leather accessories
South Africa and SADC
Mzansi Mobile
Steel fabrication
South Africa and SADC
Badumile Beads
Jewellery
South Africa
Free Flow Design
Bags and accessories
South Africa
Tones Platinum
Pharmaceutical
Botswana
Dawn Haddon
Arts and crafts
South Africa
KZN Oils
Chemicals
Zambia
Durban School of Fashion
Clothing
South Africa and SADC
Global Vision Trading
Custom-made bags
Australia
Lee Chem
Chemicals
Zambia
Ricinz Constructions
Construction and related services
Angola / BRICS
Gedore Tools
Tooling
Angola
Elangeni Oils
Food and beverage
Angola
Kulu Civils
Construction and related services, IT, industrial workwear, clothing and textiles
Angola
Wanscan Consulting TPT Workwear Kingsgate Clothing Astel Systems
Angola / BRICS Angola Angola
IT, chemicals, food and beverage
Angola
Gold Reef Chemicals
Angola
Mpilende Foods
Angola
Maccaferri SA
Angola
Megaphase
IT, tooling and machinery, SADC manufacturing, industrial workwear, Cathexis Africa SADC engineering services Land Resource International SADC Kaytech
SADC
Magnum Machine Tools
SADC
Mzanzi Mobile Units
BRICS/ SADC
Leo Garments
SADC
AL Engineering
BRICS/ SADC
Amanda May Designs
Clothing and textiles
SADC / EURO ZONE
Jaraff Mocs
Footwear
SADC
Saddler Belts
Leather apparel
US
Academic Apparel
Clothing and textile
SADC / US
Ruutz Art & Creations
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Figure 1: Number of market development programmes 80
76
70 58
No. of Programmes
60 50 40
37
30 20
16 12
10 0
17
17
15
12 8
Q1
Q2
Q3
Q4
Annual
Target
12
12
17
17
58
Achieved
8
16
37
15
76
Source: EDPU, 2014 The graph above illustrates the successful market development programmes facilitated for KwaZulu-Natal companies by TIKZN. Export development programmes As its mandate dictates, Export Development focuses on developing emerging and existing exporters in KZN. This assistance includes providing support that will help them achieve export-readiness status and/or creating platforms to enhance their skills and capabilities to become better exporters. Below is an overview of the activities carried out during the year: Awareness initiatives In line with Africa being identified as a key market, the Export Development and Promotion Unit celebrated Africa Day by hosting the Doing Business in Africa seminar, where practical experience from industry was shared with businesses interested in doing business in the continent. Key markets focused on included Nigeria, Ghana, Kenya and the SADC region. TIKZN also participated in two domestic exhibitions, the South Africa Trade Exhibition (SAITEX) and the East Coast Radio House and Garden Exhibition – for which the TIKZN Pavilion was chosen as one of the best stands and awarded gold status. The purpose was to create exposure for emerging and existing manufacturers, to help them gear up for the world of international exports. Training and enterprise development initiatives In conjunction with the Programma Uitzending Managers (PUM) – in Dutch meaning ‘Manager Deployment Programme’ - the unit hosted a senior expert from The Netherlands to conduct a two-week mentorship programme. TIKZN together with the Department of Trade and Industry (the dti) facilitated export training for companies in the cosmetic manufacturing sector. As part of our Memorandum of Understanding (MOU) with the Department of Agriculture and Environmental Affairs, the export development unit hosted a two-day workshop on export orientation and support for farmers. Approximately 50 delegates participated. The sessions focused on incentive support, funding and market development issues.
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Export development training programme Two export development training sessions were rolled out in March 2014. The sessions comprised classroom lectures and on-site visits with mentorship and advice. Figure 2: Value of KwaZulu-Natal exports R 90 R 80
75.0
77.4
R 70 63.5 R 60
58.9 50.4
56.7
Billions
R 50 R 40 R 30 R 20 R 10 R0 2006
June 2006
2007
June 2007
2008
June 2008
2009
June 2009
2010
June 2010
2011
Source: Mthente, 2013 using Quantec data
Zulu Rum participated successfully at the Italian Rum Festival
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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KwaZulu-Natal top 15 export product categories (HS-2 Digit) VALUE OF EXPORTS (2011)
AVERAGE ANNUAL GROWTH RATE 2006-2011
VALUE OF EXPORTS (2012)
AVERAGE ANNUAL GROWTH RATE 2006-2012
Aluminium and articles thereof (H76)
R15.4bn
5.4%
R13.2bn
1.45%
Vehicles other than railway, tramway (H87)
R12.7bn
10.6%
R15.2bn
14.04%
Iron and steel (H72)
R11.4bn
115.2%
R12.5bn
107.71%
Ores, slag and ash (H26)
R10.bn
39.9%
R15.7bn
Inorganic chemicals, precious metal compound, isotope (H28)
R337.1m
27.0%
R2.8bn
Nuclear reactors, boilers, machinery (H84)
R322.4m
1.0%
R3.4bn
Paper and paperboard, articles of pulp, paper and board (H48)
R231.1m
3.5%
R2.6bn
Copper and articles thereof (H74)
R194.7m
69.5%
R2.6bn
Mineral fuels, oils, distillation products etc (H27)
R148.6m
-8.9%
R2.0bn
Miscellaneous chemical products (H38)
R135.4m
31.7%
R1.3bn
Wood and articles of wood, wood charcoal (H44)
R131.2m
-6.2%
R979m
Pulp of wood, fibrous cellulosic material, waste etc (H47)
R131.0m
-11.2%
R801m
Electrical, electronic equipment (H85)
R118.6m
6.7%
R1.7bn
Articles of iron or steel (H73)
R81.4m
8.6%
R1.2bn
Plastics and articles thereof (H39)
R70.9m
13.1%
R818m
PRODUCT
60.51% 15.45% 1.68% 5.41% 60.22% -7.96% 40.64% 11.82% -8.07% -12.20% 14.42% 15.20%
Source: Mthente, 2013 using Quantec Data KZN Exporter Directory and Export Information Portal In the first quarter of 2014, the Export Development Unit launched the KZN Exporter Directory and Export Information Portal both of which were funded by the Department of Economic Development and Tourism. The KZN Exporter Directory is the compilation of KZN-based export companies. The scope of service involves researching and sourcing relevant information to compile a detailed directory of export products and services available from KZN. Confidential information gathered during this exercise will be for the sole use of TIKZN. The other information will be published as part of the directory.
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TMENT KWA S ZU E V L IN
O
RT
01
EX P
3
TRA DE
AL AT -N U
&
Export Week The second annual Export Week was held from 28 October to 1 November 2013. This included the Export Summit that attracted more than 200 export businesses per day. The week included a showcase of Women in Exports as well as the development of Halaal products for Export in partnership with South African National Halaal Industry Association.
W EEK
2
The Women in Export session held during Export Week 2013
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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7.3 knowledge management
• Knowledge Management (KM) refers to the multi-disciplined approach of effectively generating, preserving and using organisational knowledge to achieve organisational objectives. As “Your Knowledge Partner in Business”, Trade & Investment KwaZulu-Natal (TIKZN) has elevated KM as part of its core business strategy. As such, the business unit provides professional support services to sister departments; researches and manages data and databases, information technology systems and organisational learning. The unit plays a direct role in shaping policy; packaging new investment opportunities and using KM as a tool to gain competitive advantage. Research is a central factor of the interactive learning space useful in defining general and contextual barriers to inclusive development. TIKZN collaborates with provincial partners who contribute to breaking these barriers and creating opportunities for development. Research and information The anchor booklet Doing Business in KwaZulu-Natal was reviewed and updated. Research on potential export opportunities from KZN to Africa and the rest of the world was commissioned and completed. The University of North West was also contracted to identify specific markets and realistic export opportunities for the province. Knowledge Management collaborated with the Department of Economic Development and Tourism on the production and publication of Ezomnotho, the quarterly economic review of the province. KM also produced a reference book on KwaZulu-Natal’s (and South Africa’s) trade and investment performance. An electronic copy of this publication is available on the TIKZN website. KwaZulu-Natal is the only province www.economists.co.za regularly measures investment activity with this data appearing in the KZN Business Barometer. TIKZN has maintained subscription to this service thus ensuring client businesses have up-to-date data on economic trends in the province. The unit also participated in TIKZN’s road shows and brand activation sessions spearheaded by the marketing department in three of the province’s districts, namely uThukela, uMgungundlovu and uThungulu. Policy advocacy Twelve research papers were produced and presented. The Green Technical Assistance Fund was awarded to various projects to facilitate renewable energy initiatives. KwaZulu-Natal is one of two provinces in South Africa to develop an interactive online renewable energy zone tool, providing a clearer indication of potential areas of renewable energy investment.
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The Funding Fair generated R344 million worth of funding for projects in the province. The success of this funding fair is now replicated in other provinces. The inaugural Industrial Symbiosis workshop generated interest from over 60 companies and consequently funding has been secured to roll out this project provincially. Packaged investment opportunities TIKZN has identified and packaged investment and export opportunities in line with the Provincial Growth and Development Strategy and in collaboration with municipalities and other key stakeholders. High impact investment opportunities packaged were categorised as follows: Projects with strategic partners • Drakensberg cable car; • Technology hub; and • Business processing and outsourcing hubs. Projects initiated by promoters • Pipeline security and monitoring systems; and • Edwaleni Guest House. Research development projects undertaken by TIKZN • Integrated diamond and jewellery hub; and • Production of castor oil. Information technology During the year under review, TIKZN’s information technology (IT) systems achieved 99% uptime, exceeding the expected level of 95%. Various system upgrades were performed, aligning with the latest software releases. The organisation enhanced the use of SharePoint as its document management system by upgrading to Microsoft SharePoint 2010. IT audit An audit intervention plan facilitated the clearing of audit findings. The remaining findings are work-in-progress and will be cleared in the new fiscal period. The review of the IT Strategy and Governance Framework and the review of the Business Continuity Plan has commenced in earnest. The IT general controls were found to be at satisfactory levels.
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7.4 Corporate Services Business Unit
•
The major area of focus has been implementing corporate strategy following the approval of such strategy by the Board. Some of the areas that received attention include the new organogram comprising changes in certain positions and merging certain business units. The amalgamation of the human resources and marketing and communications business units, formed the new business unit corporate services. This report therefore seeks to cover those areas that needed attention to support implementing the corporate strategy.
The corporate services unit strives to build a strong team within the organisation.
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7.4.1 human resources
The organisation faces a variety of complex challenges as discussed in the Corporate Strategic Review document. To address these, the Human Resource Business Unit (HRBU) developed the HR Strategy to address some of the challenges. The HR Strategic plan for a culture of excellence is the evolved plan started in 2008 and reviewed in 2011 and 2013. The 2013 review included developing a SWOT analysis, a gap analysis, an evaluation of the organisational diagnosis and organisational effectiveness reports, an environmental scan and focus group discussions. Through this strategy, the business unit reaffirms its commitment and desire to serve as a strategic partner and continue to build a strong, united team serving the strengths of one organisation. The plan reflects a comprehensive approach to developing and sustaining an organisation that values employee contributions. Special projects Skills audit Many changes such as implementing the new corporate strategy required for the organisation to be adequately empowered, have occurred, since the skills audit was conducted in 2010. Skills management is an indispensable element of an organisation’s performance. The skills audit provided the organisation a snapshot of its existing skills by identifying deficiencies and recommending strategies to improve skills levels, thus preventing potential loss of critical skills. This process helps ensure all existing skills and competencies are used to its benefit. It was conducted to ensure TIKZN and its people are adequately competent to deliver on the mandate and the timing of this initiative was aimed at aligning our training initiatives with our new corporate strategy. The gaps identified will now be addressed through training. The facilitation process sought to ensure participation by all through the interviews and discussions. Job profiling and grading An intensive job profiling and grading exercise was conducted for all the roles in the organisation. Job evaluation, profiling and grading systematically determines the relative worth of a job and ranks these in a logical hierarchy. TIKZN regards this process as key to ensuring fairness and consistency in evaluating and grading jobs. As per the Public Finance Management Act and as a way of keeping performance competitive and up-todate, job profiles are reviewed in line with the renewal of the Corporate Strategy.
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Human resources planning The long-term success of any organisation depends on having the right people in the right jobs at the right time. The key to the desired result is effective HR planning, otherwise referred to as workforce or manpower planning. Successfully implemented the corporate strategy required reviewing the organisational structure. This was done to ensure the entity has the required talent to deliver on its mandate. To this effect, some movements were made, resulting in some staff members migrating to new positions, while external recruitment appointed new talent. The creation of the executive layer provided the Executive Office with necessary support to achieve the organisational objectives. Training and development Organisational performance is directly linked to staff development and TIKZN invests substantial resources for training and career development. These ensure staff operate at optimal levels within the competitive global FDI environment. During the financial year under review, all staff members received training in various aspects of their roles as informed by the training plan. The highlight of these training initiatives included emotional intelligence, conflict management and change management aimed at all members of staff. Another highlight was involving TIKZN host and facilitate the Green FDI Regional workshop themed “Seizing the low carbon investment opportunity in Africa� organised by the United Nations Conference for Trade and Development (UNCTAD). The workshop was attended by experts such as the World Bank Group, EY, IBM Plant Location International and some of the best practice IPA’s in the region. Employee wellness programme Our improved wellness programme continued enhancing the lives of our staff members. Introducing executive medicals was well received with all senior managers participating in comprehensive tests and getting the full breakdown of their health status through personalised reports. The number of staff using the services of the Employee Assistance Programme (EAP) continued to increase to about 71.4%, indicating an increased trust and confidentiality. It is also a good indicator of the acceptance of the value and trust attached to the EAP by employees. Promotion of the industry skills In an endeavour to promote industry skills within the investment promotion agency (IPA) environment, discussions on establishing the executive programme reached a turning point with Wits Business School agreeing on the content.
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7.4.2 Marketing and Communications
The Marketing and Communications Unit (MCU), provides support to organisational marketing needs such as corporate branding, media and public relations, event management, stakeholder engagement and general marketing. The unit supports platforms for branding and positioning TIKZN domestically and internationally. The unit promotes the organisation and its services to improve market visibility and brand awareness. Stakeholder sessions During the period, the CEO met with the heads of key KZN companies: Bell Equipment, KZN Oils, Tongaat Hulett and Hulamin. These meetings showcased TIKZN’s services. The meetings also provided the opportunity to discuss the current trade and investment environment; identify challenges and reflect possible ways to overcome any barriers to trade and investment. From these meetings, the CEO also recruited companies as goodwill ambassadors for promoting of the province as an investment destination and TIKZN’s services. Provincial road shows TIKZN held a breakfast session in the Western Cape in March 2014 to promote KZN as an investment destination and explore trade partnerships between the two provinces. TIKZN will further initiate taking partner agencies from KZN to promote their services to the Western Cape market. District municipal road shows TIKZN completed three district municipal road shows as part of the stakeholder engagement and general awareness campaign. The first road show was hosted in uThukela followed by uMgungundlovu and uThungulu. These initiatives received the support of local municipalities and business representatives within the regions. These road shows provide a single messaging platform that improves the quality of awareness of TIKZN’s service, thus strengthening relationships and the flow of communication between TIKZN and the municipalities (both district and local). Media monitoring and liaison Media is vital during the build-up and recruitment phase of any major event. It is equally important in achieving the communication objectives of the event, showcasing participants and their projects and highlighting the success of such initiatives. The media engagement for the organisation was pro-actively managed and leveraged to ensure the successful execution of TIKZN projects. During the period under review TIKZN received R7,737 million worth of unpaid publicity via TIKZN media mentions though print, broadcast and online media platforms.
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Frontier Advisory thought leadership sponsored events TIKZN sponsored events organised by Frontier Advisory themed “Africa Outlook�, held in Johannesburg and Durban respectively. The Durban event was co-sponsored with Dube Trade Port (DTP) and Durban Investment Promotion Agency (DIPA) to expose KZN companies to opportunities of doing business in Africa. east3ROUTE Investment Seminar & Exhibition 2013 TIKZN organised the east3ROUTE Seminar & Exhibition in October 2013 as part of the third edition of the east3ROUTE expedition. The expedition started in Mozambique ending after seven days and six nights in KwaZulu-Natal. The east3ROUTE Investment Seminar was hosted for the second year as a dedicated investment and trade promotion platform. This event, which had an exhibition component for the first time, was the leading cross-border platform to engage on investment in Swaziland, Mozambique and KwaZulu-Natal. The seminar included panel discussions that unpacked key issues facing the region including cross-border finance and perspectives on private and public sector development funders. The exhibition provided a platform for select exhibitors to showcase food, fashion, accommodation and support services available in the three regions. Each region showcased innovations in cuisine and culinary delicacies. Other aspects of the exhibition included showcased successful tourism products and packaged development projects for prospective investors. Development projects such as the Tembe Heritage Route, a community project and similar projects from Swaziland and Mozambique were also on display. Media engagement was pro-actively managed and leveraged. Activities designed to boost delegate participation were hosted in Ezulwini, Maputo, Mkuze, Richards Bay and Durban. TIKZN DVD TIKZN produced a generic DVD focussing on promoting KZN as an investment destination. This is a promotional tool to create marketing awareness for the province as a business destination. The DVD can be used by any KZN stakeholder for these promotional purposes. The DVD highlights the infrastructural strengths of the province and the facilities at hand that make living in KZN attractive to potential investors. Coffee-table book: The Exceptional KZN The TIKZN coffee-table book forms part of the corporate gifting items required by the organisation. This hard cover book is designed to inspire conversation on KwaZulu-Natal as a business destination and intended to sit on a coffee table or similar surface in an area where clients are seated.
The Royal Tembe Development Foundation were exhibitors at the east3ROUTE Investment Seminar & Exhibition 2013
38
Events Calendar EVENT
Source Africa Trade Exhibition
Export Training
Afrimold 2013 exhibition and conference
South African International Trade and Exhibition (SAITEX)
10th Durban Boat and Lifestyle show
Wastex
Vodacom Durban July
AREA OF FOCUS
OUTCOMES
EXPORT/TRADE
The two main objectives of the trade show are to promote African-made textiles, garments and footwear to International and African buyers as well as boosting intra-regional trade between African countries. The trade show encourages African buyers and manufacturers to do business with each other and capitalise on tariff advantages and shorter distances to market.
EXPORT/TRADE / MINARA
TIKZN provided export capacity building for specially selected members of the Minara Chamber to upgrade their skills in exporting their products.
BREU
The leading exhibition for Precision Machining, Tooling, Mouldmaking, Design and Application Development in Africa.
EXPORT/TRADE
Africa’s largest business opportunities showcase provides a successful platform for international companies wanting to enter the increasingly lucrative African market and for African businessmen looking to establish viable businesses targeting the disposable incomes of Africa’s rapidly expanding middle-class population.
MANUFACTURING/ EXPORT/TRADE/ MARKETING
The show takes place in Durban around the harbour and products are exhibited to boating and outdoor lifestyle enthusiasts from around the country.
RENEWABLE ENERGY
The conference and expo unpacked issues on waste management and recycling.
MARKETING
KZN hosts Africa’s Greatest Horseracing Event which is an essential networking tool for business
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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EVENT
Africa Infrastructure
East Coast Radio House and Garden Show
TIKZN International Stakeholder dinner
uThukela municipality Roadshow
Joint event with KZN Growth Fund
Africa Dialogue Conference
International Entrepreneurship & Investment Conference
40
AREA OF FOCUS
OUTCOMES
GAUTENG OFFICE
Africa Infrastructure provides a biennial global platform, for conferences, summits and workshops focused on infrastructure themes.
EXPORT/TRADE
TIKZN hosted KZN companies who exhibited their products at the show
GAUTENG OFFICE AND ALL
135 representatives from international organisations attended with representation from 92 countries. Strategic update on developments were provided.
MARKETING
GAUTENG OFFICE
A series of TIKZN road shows sought to unlock investment and economic opportunities across KwaZulu-Natal DTP, RBIDZ, KZNGF provided an overview of the services and opportunities available.
MARKETING
The event drives direct attention to the abundant lucrative business prospects in South Africa and the rest of Africa. It also provides an opportunity for South African and international organisations to forge relationships and form business linkages with key players and decision makers in the various sectors globally.
MARKETING
The International Entrepreneurship and Investment Conference targets the international community, mainly the Southern African Development Community region, team of experts and captains of industries as the province develops economic strategies that positions KZN in the global arena with other trading regions.
EVENT
19th Amateur World Golf Championship
Export Week KwaZuluNatal
uMgungundlovu District Municipal Roadshow
Hospitality Investment Conference Africa (HICA)
East Coast Radio /Gibbs Executive Breakfast
AREA OF FOCUS
OUTCOMES
MARKETING
The World Amateur Golfers Championship takes place in Durban from the last week of October till the first week of November. WGC gives amateurs the experience and proud feeling of representing their country in a world championship final, individually and in a team.
EXPORT/TRADE, MARKETING
The event recognises, promotes and assists growing KwaZulu-Natal’s export businesses and industries. Through a comprehensive programme of activities, it provides professional development and information on growth sectors and market opportunities to KwaZulu-Natal’s new and existing exporters and internationally focused businesses.
MARKETING
A series of TIKZN road shows seek to unlock investment and economic opportunities across KwaZulu-Natal
MARKETING/TOURISM
HICA brings together regional and international hoteliers, investors, developers and senior public sector leadership for networking, constructive debate and deal-making.
MARKETING
The executive breakfast was sponsored by Trade & Investment KwaZulu-Natal. This partnership between TIKZN, GIBS and East Coast Radio comprised speakers who shared key insights under the theme Strategy, Transformation and Branding.
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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08 Annual PERFORMANCE reports
• 2013/14 Performance Information Programme 1:
Board and the Office of the CEO
Programme 2:
Marketing and Communications
Programme 3:
Human Resources
Programme 4:
Knowledge Management Programme 4.1: Information, communications and technology Programme 4.2: Policy advocacy Programme 4.3: Research and information
Programme 5:
Investment Promotion Programme 5.1: Facilitation of pre-investment opportunities Programme 5.2: Facilitation of post-investment opportunities
Programme 6:
Export development and promotion Programme 6.1: Export promotion Programme 6.2: Export development
42
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Number of high level stakeholder engagements undertaken.
Corporate strategy development and leadership.
b
c
Corporate Strategy.
4
Strategy Plan & APP.
12
Compliance to corporate Assessment Board governance standards. Report. Charter & Audit Committee TORs.
4
OUTPUT
a
4
TARGET
Promote effective and inclusive stakeholder engagements.
PERFORMANCE INDICATORS
1.1
NO
Programme 1: Board and the Office of the CEO
During Quarter 3 and beginning of Q4, board and management convened to develop new targets and a five strategy plan according to the requirements of the PFMA. The APP was tabled at Board on 14 March for Approval and submitted to DEDT.
Target met.
Due to the increase in TIKZN’s stakeholder profile, the number of stakeholder sessions with partners increased in the financial year.
TIKZN ensured the relevant legislation has been reviewed and closely aligned to best practice.
During the year, TIKZN developed a Risk Management Policy in line with Chapter 4 of King III Code of Good Governance. As a result the Board Charter and Audit Committee Terms of Reference were revised to include risk as part of the board’s key activities. 12 stakeholder engagements: Municipal Road Shows to Pietermaritzburg, uThukela, uThungulu; KZN ICT Summit, Export Week, 19th Golf Championships, UNCTAD, east3ROUTE, Durban Harare Launch, In-Conversation with CEO (CPT), GIBS Executive Breakfast and Tongaat Hulett and Hulamin.
Target met.
REASON FOR VARIANCE
Three municipal road shows conducted in the uThukela, uThungulu and uMgungundlovu District Municipalities. TIKZN in partnership with MEC of Economic Development and Tourism launched the SA Express Durban to Harare route. These activities were pitched at high level stakeholder engagements.
COMMENTS ON OUTPUT ACHIEVED
44
Comply with national and provincial treasury regulatory reporting standards. (Office of the Chief Financial Officer).
Obtain unqualified audit reports.
Percentage of material supply chain management audit findings resolved.
Percentage of BEE Suppliers in procurement spending.
a
b
c
PERFORMANCE INDICATORS
1.2
NO
OUTPUT
COMMENTS ON OUTPUT ACHIEVED
70%
100%
100%
100%
To ascertain the BEE percentage spends, TIKZN compile a procurement schedule every quarter outlining all BEE spending of procured goods and services. The schedule is presented by the CEO and CFO to the Audit Committee every quarter. Findings from the SCM internal audit were all addressed.
The supply chain management (SCM) internal audit report was presented to the Audit Committee on 21 February 2014 and key findings were cleared during the 2013/14 financial year.
Unqualified Unqualified TIKZN received an unqualified audit report for 2012/13 audit report. audit report. financial year.
Unqualified Clean audit. TIKZN received an unqualified audit report for 2012/13 audit report. financial year.
TARGET
Focus was placed on doing business on BEE compliant companies.
None to report.
We ensured compliance in line with the relevant legislation prescribed governing and implementation of any recommendations emanating from AG, Internal Audit, TIKZN Audit Committee, and the Board of Directors.
We ensured compliance in line with the relevant legislation prescribed governing and implementation of any recommendations emanating from AG, Internal Audit, TIKZN Audit Committee, and the Board of Directors.
REASON FOR VARIANCE
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Number of public relations 4 (media and communications initiatives) conducted.
c
21
2 (local and 14 international).
Number of advertising and brand awareness programmes undertaken.
b
3
5(3)
Number of municipal stakeholder engagements undertaken. (Investment promotion with municipality and road shows).
a
17
OUTPUT
11
TARGET
Promote effective and inclusive stakeholder engagements.
PERFORMANCE INDICATORS
2.1
NO
Programme 2: Marketing and Communications
TIKZN’s strategy was to increase the engagements with its stakeholders. The uptake by the stakeholders was higher than the anticipated target.
REASON FOR VARIANCE
Media initiatives include: SA Express Durban Harare Launch, Tourism Indaba, HICA, Global African Network, KZN Business, Frontier Market Network Online, Hosting UNCTAD Green FDI, KZN Export Week, BBQ Awards, KZN ICT Summit, South Coast Development Agency Launch, Umdoni Business Chamber, Brand SA Journalist Delegation, Gujerat Inward Delegation, SAOGA Business Breakfast, uThungulu District Municipality Road Show, Zululand Fever and launch of NAMEC Digital Set-Top Box Manufacturers.
14 advertising and brand awareness programmes were undertaken: SA @ a Glance, African Trader, BBQ Awards, BBQ Magazine Advert, Provincial DVD, Exceptional KZN Booklet, FDE London, Frontier Advisory Desk Outlook, ECR/GIBS Executive Breakfast, Brand Activation in Cape Town, African Decisions, uThungulu local newspaper and Zululand (Fever and Observer).
TIKZN relies on ensuring there is visibility and knowledge of its services. The increase in the brand awareness programmes was evident in the continued efforts to reach out to its stakeholders.
TIKZN relies on ensuring there is visibility and knowledge of its services. The increase in the brand awareness programmes was evident in the continued efforts to reach out to its stakeholders.
This was mainly due to budget constraints. Three municipal Target met. road shows have been conducted for uMgungundlovu, uThukela and uThungulu Districts.
38 marketing and communication activities were facilitated during the year as part of promoting effective and inclusive stakeholder engagements of which 17 were stakeholder engagements.
COMMENTS ON OUTPUT ACHIEVED
46
Average staff performance rating.
Number of staff training programmes implemented.
b
c
5
70%
Review the current Report retention and succession policies and develop implementation plans.
a
70%
TARGET
Improve staff performance.
PERFORMANCE INDICATORS
3.1
NO
Programme 3: Human Resources
5
67.5
Policies revised
67.5
OUTPUT
Five organisational programmes were facilitated: Change Management, Emotional Intelligence, Performance Management System, Conflict Management and Patterson Grading System and Salary Structuring.
Annual average staff performance rating was lower than the anticipated target.
The policies on succession planing and retention were reviewed and the plan to implement the succession policy developed.
Annual average staff performance rating was lower than the anticipated target.
COMMENTS ON OUTPUT ACHIEVED
Target met.
Changes in the organisation impacted on performance.
Target met.
Changes in the organisation impacted on performance.
REASON FOR VARIANCE
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Percentage of IT audit findings resolved.
Percentage of IT systems uptime and availability.
b
c
Percentage of IT system uptime.
80%
99%
87.5%
By year-end, 14 of the audit findings were attended to, with the IT strategy review and the Business Continuity Plan still outstanding.
To satisfy SCM processes, there was a delay in appointing a service provider to review the IT strategy and governance. The service provider was appointed shortly before the end of the financial year and the review is underway.
87.5% of the findings had been cleared. The balance will be addressed in the new financial year.
REASON FOR VARIANCE
Target met. The IT system availability was 99% achieved during the year under review. Certification of system uptime as well as back-up tapes of all the data is provided by First Technology who maintains a register of all back up data.
14 out of 16 IT Audit Findings have been cleared.
Service This indicator was partially achieved during the year under review with the IT Governance Framework provider appointed. having been developed. However it will be carried forward to the new financial year. The IT Strategy and IT Governance Framework is underway.
Review IT strategy.
Review information technology strategy.
14 out of 16 IT audit findings have been cleared.
COMMENTS ON OUTPUT ACHIEVED
a
OUTPUT 87.5%
TARGET
80%
PERFORMANCE INDICATORS
4.1.1 Comply with national and provincial treasury regulatory reporting standards.
NO
Programme 4.1: Information, communications and technology
Programme 4: Knowledge Management
48
9(8)
Number of policy advocacy reports compiled.
c
10
Advocacy reports include: 1) Draft Licensing bill, 2) Waste to Energy Article for Network, 3) Trade and Export Options for internal stakeholders, 4) Rands and Sense of Renewable, 5) Carbon Tax, 6) Making Renewable a Reality in KZN, 7) Fracking (Network Publication), 8) SA-EU Trade issue, 9) Presentation to Economic Council and 10) Investor Policy.
Interventions facilitated include: 1) Provincial Funding Fair, 2) Position Paper on Green Procurement, 3) Input at SANEDI on Waste to Energy, 4) Presented paper to ESID Cluster, 5) Presented paper on Greening Government at the launch of KZN Climate Change Council and 6) A letter of Intervention crafted by TIKZN on behalf of the MEC for Economic Development regarding crisis in the Sugar Industry to Minister Mr. Ben Martins, 7) Tai Yuen Textiles, 8) Investor Policy and 9) Air Quality Emission Standards.
9
8
Actively involve board members in policy advocacy interventions to leverage on their expertise and knowledge.
b
A paper on the role and function of Policy Advocacy at TIKZN was presented and approved by board on 11 October 2013.
Approved by board.
Advocacy value proposition.
Review the terms of reference for policy advocacy.
a
COMMENTS ON OUTPUT ACHIEVED Advocacy initiatives include: 1) Provincial Funding Fair, 2) Position Paper on Green Procurement, 3) Input at SANEDI on Waste to Energy, 4) Presented paper to ESID Cluster, 5) Presentation to Economic Council, 6) Tai Yuen Textiles Intervention, 7) Investor Policy and 8) Air Quality Emission Standards.
OUTPUT 8
TARGET
8
PERFORMANCE INDICATORS
4.2.1 Create a conducive business environment for trade and investment.
NO
Programme 4.2: Policy advocacy
The target was exceeded due to the new developments in the green economy that required intervention.
The target was exceeded due to emerging issues in the green economy and the inputs were required at various forums. This included engagements with companies such as Tai Yuen Textiles.
The target was met.
The target was met.
REASON FOR VARIANCE
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Number of new high impact investment opportunities packaged with relevant stakeholders.
Number of sector analysis reports developed.
Number of new export opportunities packaged.
b
c
d
48
8
6
16
Number of macroeconomic research reports developed.
a
TARGET
16
PERFORMANCE INDICATORS
4.3.1 Generate and disseminate business information to key stakeholders.
NO
Programme 4.3: Research and information
49
9
8
17
17
OUTPUT
Responses to research into possible products for export led to additional output.
REASON FOR VARIANCE
Two additional projects were packaged with strategic partners in this financial year.
49 potential export products and relevant sectors/markets were identified by the Knowledge Management business unit. These opportunities will be unpacked further during the 2014/15 financial year to promote exports and develop KZN businesses.
The EDPU identified products for KM to package, thus 49 products identified. The export opportunities were packaged in collaboration with the EDPU.
The aluminium beverage can study was done Nine sector studies compiled include: Software Sector Study, SA Shipping, Clothing and Textiles, collaboratively with investment promotion unit to Infrastructure and SA Energy, Furniture, Fashion, take the project to market. Aluminium Beverage Cans, Automotive and Liquid Fuels.
Eight high impact projects packaged include: Drakensberg Cable Car, Castor Oil Production, Technology Hub, BPO Park, Pipeline Security and Monitoring, Integrated Diamond and Jewellery Hub, Edwaleni Lodge and Port Dunford.
Quarterly publications include Ezomnotho, KZN Responses to research into possible products for BB, KZN PIM, Research on KZN Potential Export export led to additional output. products and markets finalised. Country targeting Strategy Volume 1: Trade Produce/Update.
Quarterly publications include Ezomnotho, KZN BB, KZN PIM, Research on KZN Potential Export products and markets finalised and Trade Chapter Volume 1.
COMMENTS ON OUTPUT ACHIEVED
50
Rand value of new investment projects committed.
Number of potential jobs created through new projects.
c
d
1700
5361
R1,3bn
10
18 (12)
Number of new investment projects committed.
b
R1,2bn
20
20
Number of international destination marketing initiatives in strategic markets.
a
Exceeded by 3661. The majority of high impact jobs created were in the BPO sector and two investments were committed in this sector. Other sectors include: film, agro-processing, clothing and textiles and synthetic fibres.
10 projects committed to the rand value of R1,3 billion. These are: 1) Distinctive Choice (R55m), 2) Ithala (R5,8m), 3) Uno Fibre (R90m), 4) AEIGIS (R25m), 5) InGenius (R102,6m), 6) Bakhresa (R800m), 7) Code Green (R4m), 8) Cappeny Estate (R18,5), 9) NAMEC (R90m), 10) Outworx (R117m).
Although the annual target for the number of investments committed was not met, the rand value was however exceeded. In quarter 4, 3 projects were committed - NAMEC, Cappeny Estates and Outworx.
20 outbound missions facilitated include: US (4 visits), South Korea (3 visits), China (2 visits), Germany (2 visits), Malaysia, Australia, France, UK (2 visits), Turkey, China, Zimbabwe, Hong Kong.
10 projects committed to the rand value of R1,3 billion. These are: 1) Distinctive Choice (R55m), 2) Ithala (R5,8m), 3) Uno Fibre (R90m), 4) AEIGIS (R25m), 5) InGenius (R102,6m), 6) Bakhresa (R800m), 7) Code Green (R4m), 8) Cappeny Estate (R18,5), 9) NAMEC (R90m), 10) Outworx (R117 m).
TARGET OUTPUT COMMENTS ON OUTPUT ACHIEVED R1,3bn
PERFORMANCE INDICATORS
5.1.1 Promote the KZN R1,2bn province as an investment destination of choice.
NO
Programme 5.1: Facilitation of pre-investment opportunities
Programme 5: Investment Promotion
The services sector has been the generator of more jobs than any other sector.
Target exceeded by R100m. The biggest contributor was Bakhresa, a manufacturing project. All of these projects are coming from our existing pipeline and are projects that were eminent from the previous year.
Unfortunately not all of the projects we were hoping to be committed were funded by the financial institutions. Some projects were delayed due issues regarding EIA’s.
Target met.
Target exceeded by R100m. The biggest contributor was Bakhresa, a manufacturing project. All of these projects are coming from our existing pipeline and are projects were eminent from the previous year.
REASON FOR VARIANCE
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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e
NO 7
Investments opportunities packaged include: Samsung Electronics (Dube Trade), NAMEC (Set of Boxes) Dube Trade, CAN Manufacturing (Richards Bay), and Drakensberg Cable Car, Cellulose Plant, Eureka Capital, Great North Agri Park.
TARGET OUTPUT COMMENTS ON OUTPUT ACHIEVED
Number of new packaged 12 investment opportunities facilitated for SEZs and industrial hubs.
PERFORMANCE INDICATORS
Projects were packaged for SEZ and industrial hubs and currently there are no proclaimed SEZs and industrial hubs, that had an impact on packaging projects for these hubs. Focus was on Dube Trade Port and Richards Bay IDZ.
REASON FOR VARIANCE
52
Number of company expansion projects.
c
13
5966
700
Number of jobs created from company expansion investments and retained company operations.
b
10
9858
Reported Jobs.
Accumulated jobs from previously committed investments.
a
Although the annual target was exceeded, this was as a result of one project namely CCI Call Centre having a very significant expansion value.
REASON FOR VARIANCE
13 Companies were assisted with expansions: 1) Distinctive Choice, 2) Footwear Giants, 3) General Cables, 4) Zikiza Joinery, 5) YIB Consortium, 6) Nhloso Development Consultants, 7) Tilt Up Systems, 8) Bears Projects, 9) Injo-Enhle Manufacturers, 10) Laser Junction, 11) Thekwini Wire and Fastners, 12) CCI Call Centre and 13) Xtreme Rubber Industry.
15 companies were assisted by TIKZN with business retention and expansion. The annual target of 700 was far exceeded when 5964 jobs were claimed during 2013/14 financial year.
There were more company expansion inquiries received for incentives and development finance resulting in the target being exceeded.
There were more company expansion projects facilitated when compared to company retention projects. This resulted in more jobs being created.
None to report. As part of providing aftercare services and ensuring that investor confidence remains with TIKZN investment promotion agency, the entity conducted a visit to previously committed investments to ensure they are still in business and to provide assistance where required. One of the key initiatives was to track job creation. It was reported during 2013/14 financial year, 9858 jobs were created.
15 companies were assisted and include: 1) Distinctive Choice 675, 2) Footwear Giants, 3) Spell Industries and Compunders, 4) General Cables, 5) Zikiza Joinery, 6) YIB Consortium, 7) Nhloso Development Consultants, 8) Tilt-Up, 9) Bears Project, 10) Gold-Shu Lin Clothing, 11) Injo-Enhle Manufacturers, 12) Laser Junction, 13) Thekwini Wire and Fasteners, 14) CCI Call Centre and 15) Xtreme Rubber Industry.
OUTPUT COMMENTS ON OUTPUT ACHIEVED R786.9m
TARGET
R300m
PERFORMANCE INDICATORS
5.2.1 Develop and retain KwaZulu-Natal’s businesses.
NO
Programme 5.2: Facilitation of post-investment opportunities
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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9 Number of company/ municipality business retention and expansion programmes.
e
R300m
TARGET
Rand value of company expansion projects.
PERFORMANCE INDICATORS
d
NO
15
R786.9m
15 BRE programmes were facilitated during the year: municipalities (4), information sharing sessions (5), business development linkages programmes (6).
13 Companies were assisted with expansion: 1) Distinctive Choice, 2) Footwear Giants, 3) General Cables, 4) Zikiza Joinery, 5) YIB Consortium, 6) Nhloso Development Consultants, 7) Tilt Up Systems, 8) Bears Projects, 9) Injo-Enhle Manufacturers, 10) Laser Junction, 11) Thekwini Wire and Fastners, 12) CCI Call Centre and 13) Xtreme Rubber Industry.
OUTPUT COMMENTS ON OUTPUT ACHIEVED
There has been significant interest from KZN municipalities and industry associations to partner with TIKZN. This resulted in the target being exceeded from implementing various business development programmes.
The annual target was exceeded from one project namely CCI Call Centre, having a very significant expansion value.
REASON FOR VARIANCE
54
Promote exports from KZN (Export Promotion).
Number of new export markets for individual companies.
Number of companies assisted with market development initiatives.
Develop and implement an export sales tracking measurement tool/ system.
a
b
c
PERFORMANCE INDICATORS
6.1.1
NO
Tool to measure export sales.
TIKZN facilitated 109 market development initiatives for KZN companies: Benguela Fair (6), Harare Route Launch (3), UK (3), Swaziland (1), DRC (1), Zambia (1), SAITEX (10), Lusaka (17), Ghana (9), ECR House and Garden (8), OSM (4), Berlin (13), east3ROUTE (12), Russia (5), UAE (5), India (6) and Mozambique (5).
New markets developed in Botswana, Cape Town, Zimbabwe, US, Gauteng, Mozambique, Mauritius, Angola (24), OSM (4), Berlin (13), east3ROUTE (12), Ghana (1), Italy (1), Russia (5), UAE (5), India (6) and Mozambique (1).
93 KZN companies were assisted during 2013/14 financial year with trade opportunities. These were in: OSM, Berlin, east3ROUTE, Ghana, USA, Italy, Russia, UAE, India, Mozambique, Botswana, Gauteng, Cape Town, Mauritius, Angola, Zimbabwe and Lusaka. Exhibition shows include: SAITEX and the House & Garden Show.
COMMENTS ON OUTPUT ACHIEVED
Tool Tracking tool available and in use. developed.
109
77
48 (58)
50
93
OUTPUT
48 (58)
TARGET
Programme 6.1: Export promotion
Programme 6: Export Development and Promotion
Target achieved.
The number for this indicator was exceeded due to assistance provided to KZN companies information granted on particular markets, participating on national pavilions, outward selling missions or hosting incoming delegations.
The target was exceed by 14 in terms of new markets for individual companies as we accommodated more companies on some of the platforms offered and funded by the dti. More incentive applications were approved by the dti creating opportunities for more KZN companies.
Great interest was shown by KZN companies in participating in platforms arranged by TIKZN to promote export opportunities. Although the target was based on the previous year’s performances, TIKZN accommodated the increased number of companies through the year in question.
REASON FOR VARIANCE
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Number of accredited export enterprise development programmes facilitated for emerging exporters.
Number of 24 (30) successful SARS exporters applications facilitated for KZN companies.
b
c
15
10
Number of BBBEE companies assisted with export readiness interventions.
a
10 (15)
TARGET
Develop and retain KZN businesses (Export development).
PERFORMANCE INDICATORS
6.2.1
NO
Programme 6.2: Export development
19
14
29
18
The Export Development Unit exceeded its target due to an increased uptake of the number of sessions and assistance granted to KZN companies in conjunction with local and international partners.
REASON FOR VARIANCE
19 exporter applications were facilitated for Golden Rewards, Tease Your Tastebuds, Unofibre, Atlanta Mining, Bakhresa Miling, DBN School of Fashion, Jakad Dimensions, Academy, Pholokgolo, Rocket Workz, Ibuyile Africa, Aquila Metal, Metro Caterers, Safety & Allied Products and VN Industrial.
Although the annual target was not met, the programmes facilitated during the year have yielded positive results in terms of distinguishing categories of exporters from emerging exporters, exporter readiness and key interventions required prior to trading with other countries or locally. TIKZN worked with strategic partners including Minara Chambers, SETA and TETA.
This target was not met as it was a difficult year for manufacturers - this thus had an impact on the number of companies that came forward to be registered as exporters.
In Quarters 1 and 3 we were unable to host sufficient enterprise development programmes. The 1st Quarter we only managed two as we were putting plans in place to roll out our operational plan for the year and it is generally a slow period for companies as well.
During Q2, four companies were assisted for export The target was exceed as a result of the increased participation of BEE companies in the Export Week readiness. These include Sure Line, Ten Tridge, initiative during the 3rd Quarter of 2013/14. Zaza Agencies and Line Investments in Q2. In Q3 20 companies attended the Food Packaging facilitated by JETRO. In Q4, Cubbie Solutions, Fibertex, Sealtron, Rock Solid Industries and Utility Systems were assisted.
Export development programmes facilitated were: Export Orientation Course (Minara Chamber), Export Product Marketing and Branding, Export Financial Management, Introduction to Export and Marketing, Export Cycle and Process and Technical Aspects, Methods of Payment, Export Administration, Grand Funding, Doing Business (Indonesia and Kenya), Food Packaging (JETRO).
OUTPUT COMMENTS ON OUTPUT ACHIEVED
09
annual financial statements for the year ended march 2014
•
The reports and statements set out below comprise the Annual Financial Statements presented to the provincial legislature: 9.1 ADMINISTRATION
56
9.2
STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS
9.3
BOARD’S REPORT
9.4
SECRETARY’S CERTIFICATION
9.5
REPORT OF THE AUDITOR-GENERAL
9.6
CORPORATE GOVERNANCE STATEMENT
9.7
BALANCE SHEET
9.8
NOTES TO THE ANNUAL FINANCIAL STATEMENT
9.1 administration
Country of incorporation and domicile
South Africa
Legal form of entity
Public Entity
Nature of business and principal activities Trade and investment promotion agency Members
Ms LCZ Cele (Acting Chairperson) Mr MA Tarr Dr JJ Van Zyl Mr CS Gina Cllr DCP Mazibuko Dr VF Mahlati Dr NS Msomi Prof W Viviers Dr MAI Velia Mr TO Mlaba (resigned)
Registered office Trade and Investment House 1 Arundel Close Kingsmead Office Park Durban 4001 Business address Trade and Investment House 1 Arundel Close Kingsmead Office Park Durban 4001 Postal address Trade & Investment KwaZulu-Natal PO Box 4245 Durban 4000 Bankers
Standard Bank of SA Limited
Auditors
Auditor-General of South Africa
Secretary
Ms P Tabile
Company registration number Trade and Investment Act No.5 of 2010 Preparer
The financial statements were internally compiled by: Ms L Nyamade Chief Financial Officer
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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9.2 statement of Responsibility by the board of directors The members are required by the Public Finance Management Act (Act 1 of 1999), 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 the responsibility of the members to ensure the financial statements fairly present the state of affairs of the entity as at the end of the financial year and the results of its operations and cash flows for the period. The external auditors are engaged to express an independent opinion on the financial statements and are to be given unrestricted access to all financial records and related data. The financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The financial statements are based on appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The members acknowledge they are ultimately responsible for the system of internal financial controls established by the entity and place considerable importance on maintaining a strong control environment. To enable the members to meet these responsibilities, they ensure the entity complies with the set standards for internal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the entity and all employees are required to maintain the highest ethical standards in ensuring the entity’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the entity is on identifying, assessing, managing and monitoring all known forms of risk across the entity. While operating risk cannot be fully eliminated, the entity endeavours to minimise it by ensuring appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The members believe, based on the information and explanations given by management, 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 deficit. The members have reviewed the entity’s cash flow forecast for the period ended 31 March 2014 and, are satisfied the entity has access to adequate resources to continue in operational existence for the foreseeable future. The entity is wholly dependent on the Department of Economy Development and Tourism (DEDT) for continued funding of operations. The financial statements are prepared on the basis the entity is a going concern and the provincial government has neither the intention nor the need to liquidate or curtail materially the scale of the entity.
58
Although the board of members are primarily responsible for the financial affairs of the entity, they are supported by the entity’s internal auditors. The external auditors are responsible for independently reviewing and reporting on the entity’s financial statements. The financial statements have been examined by the entity’s external auditors and their report is presented on page 66. The financial statements set out on pages 73 to 110, prepared on the going concern basis, were approved by the board of members on and signed on its behalf by:
Ms LCZ Cele
Mr ZA Gwala
(Acting Chairperson)
(Chief Executive Officer)
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9.3 Board’s report
The members submit their report for the period ended 31 March 2014. 1. Incorporation TIKZN was a Section 21 Company established under the provincial Department of Economic Development and Tourism (DEDT). The intention was always to convert this company to a Public Entity. The TIKZN Act was passed in 2010 and on 1 June 2011, TIKZN was finally listed as a provincial Public Entity under Schedule 3C of the PFMA of 1999. The entity converted to a PFMA Schedule 3C Public Entity in September 2012 and commenced trading as a public entity on 1 October 2013. The entity reported as a public entity for the six months ended 31 March 2013. The entity will be reporting as a public entity for the entire year for the 2013/2014 financial period. 2.
Review of activities Main business and operations The entity posted a net deficit of R1,813,852 for the period under review.
3.
Going concern We draw attention to the fact that at 31 March 2014, the entity had an accumulated surplus of R159,792 and the entity’s total assets exceed its liabilities by R159,792. The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes funds will be available to finance future operations and the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The ability of the entity to continue as a going concern is dependent on several factors. The most significant of these is the members continue to exercise their duties and responsibilities of ensuring the entity fulfils its mandate in terms of its enabling legislation (TIKZN Act No. 5 of 2010) and in terms of its MOU with DEDT. This will ensure funding is guaranteed and entity continues as a going concern.
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4.
Subsequent events The members of the board are not aware of any matters or circumstances arising which can impact on the organisation since the end of the financial period concerned.
5.
Members’ interest in contracts Members of the board declared any conflict of interest during the meetings. As at the 31 March 2014, no interest or conflict of interests were recorded.
6.
Accounting policies The financial statements were prepared in accordance with the South African Standards of Generally Recognised Accounting Practice (GRAP), including any interpretations of such Standards issued by the Accounting Practices Board, and in accordance with the prescribed Standards of GRAP issued by the Accounting Standards Board as the prescribed framework by the National Treasury.
7.
Members of the Board The members of the entity as at the date of this report are as follows: Name Nationality Ms LCZ Cele (Acting Chairperson) South African Mr MA Tarr South African Dr JJ Van Zyl South African Mr CS Gina South African Cllr DCP Mazibuko South African Dr VF Mahlati South African Dr NS Msomi South African Prof W Viviers South African Dr MAI Velia South African
8. Secretary The secretary of the entity is Ms P Tabile. Business address: Trade & Investment House 1 Arundel Close Kingsmead Office Park Durban 4001 Postal address: Trade & Investment KwaZulu-Natal PO Box 4245 Durban 4000 9.
Corporate Governance General The board is committed to business integrity, transparency and professionalism in all its activities. As part of this commitment, the members of the board supports the highest standards of corporate governance and the ongoing development of best practice. The entity subscribes to the notion of Good Corporate Governance and therefore aligns itself to the Code of Corporate Practices and is on its way to fully adopt the King Code as laid out in the King Report. The members of the board discuss the responsibilities of management in this respect, at board meetings and monitor the entity’s compliance with the code on a quarterly basis.
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The salient features of the entity’s alignment with the Code include: Members of the Board • Retains full control over the entity, its plans and strategy; • Acknowledges its responsibilities as to strategy, compliance with internal policies, external laws and regulations, effective risk management and performance measurement, transparency and effective communication both internally and externally by the entity; • Is of a unitary structure comprising: - non-executive directors, all of whom are independent directors as defined in the Code; and - executive members. • Has established a board directorship continuity programme. Chairperson and Chief Executive The chairperson is a non-executive and independent director as defined by the PFMA, TIKZN Act and the Code of Good Corporate Governance. The roles of chairperson and chief executive are separate with responsibilities divided between them so no individual has unfettered powers of discretion. Remuneration Trade & Investment KwaZulu-Natal underwent a restructuring programme in 2013. This was informed by the new corporate strategy implemented by the entity. The new structure required the appointment of new executive members. For this reason the entity now has seven executive managers including the CEO and the CFO. The upper limits of the remuneration of the executive managers of the entity, are determined by the Human Resources Committee in consultation with the members of the board. Executive meetings The members of the board have met on four separate occasions during the financial period. The Board schedules to meet at least four times per annum. Non-executive directors have access to all members of management of the entity. Audit Committee The Acting Chairperson for the period ended 31 March 2014 was Dr NS Msomi. The committee met four times during the financial period to review matters necessary to fulfil its role. Dr NS Msomi is an independent board member. The members of the board were satisfied the audit committee of the entity then, constituted by the non-executive directors was properly constituted to fulfil its role and advise the board of its responsibilities as provided in the PFMA Act of 1999. Internal audit The entity has outsourced its Internal Audit function to KwaZulu-Natal Provincial Treasury Internal Audit who provided the service in the previous year at no cost. 10. Bankers Standard Bank of South Africa Limited. 11. Auditors Auditors-General of South Africa will continue in office for the next financial period.
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9.4 declaration by the company secretary in respect of section 88(2) (E) of the companies act.
During the year under review, Trade & Investment KwaZulu-Natal received a Notice of Deregistration from the Companies Intellectual Property Commission Office (CIPC). The notice served to confirm that TIKZN is now a provincial Public Entity listed under Schedule 3C of the PFMA of 1999. TIKZN has since filed a Notice of Incorporation as well as adopted a standard Memorandum of Incorporation according to section 14 (1)(a)(b)(i-iii) of the Companies Act 2008. TIKZN has prepared its Annual Financial Statements on the basis of Generally Acceptable Accounting Practice (GAAP). I certify, in accordance with section 88(2)(e) of the Companies Act 71 of 2008, that for the period ended 31 March 2014, the entity has lodged with the Companies Intellectual Property Commission all such returns as required by a public company in terms of the Act and that all such returns are true, correct and up to date.
Ms P Tabile Company Secretary
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9.5 Report of the Auditor-General
Report of the Auditor-General to the KwaZulu-Natal provincial legislature on Trade & Investment KwaZulu-Natal report on the financial statements. Introduction 1. I have audited the financial statements of the Trade & Investment KwaZulu-Natal set out on pages 73 to 110, which comprise the statement of financial position as at 31 March 2014, the statement of financial performance, statement of changes in net assets, cash flow statement and the statement of comparison of budget with actual information for the year then ended, as well as the notes comprising a summary of significant accounting policies and other explanatory information. Accounting authority’s responsibility for the financial statements 2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements free from material misstatement, whether due to fraud or error. Auditor-General’s responsibility 3. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), the general notice issued in terms thereof and International Standards on Auditing. Those standards require I comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 4. 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 judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements to design audit procedures 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. 5. I believe the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
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Opinion 6. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Trade & Investment KwaZulu-Natal as at 31 March 2014 and its financial performance and cash flows for the year then ended in accordance with SA Standards of GRAD and the requirements of the PFMA. Report on other legal and regulatory requirements 7. In accordance with the PAA and the general notice issued in terms thereof, I report the following findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report, noncompliance with legislation as well as internal control. The objective of my tests was to identify reportable findings as described under each subheading, but not to gather evidence to express assurance on these matters. Accordingly, I do not express an opinion or conclusion on these matters. Predetermined objectives 8. I performed procedures to obtain evidence about the usefulness and reliability of the reported performance information for the following selected programmes presented in the annual performance report of the public entity for the year ended 31 March 2014: Programme 2: Investment Promotion and Facilitation on pages 50 to 53 Programme 3: Export Development and Promotion on pages 54 to 55 Programme 4: Advocacy and Knowledge Management on pages 47 to 49 9. I evaluated the reported performance information against the overall criteria of usefulness and reliability. 10. I evaluated the usefulness of the reported performance information to determine whether it was presented in accordance with the National Treasury’s annual reporting principles and whether the reported performance was consistent with the planned objectives. I further performed tests to determine whether indicators and targets were well defined, verifiable, specific, measurable, time bound and relevant, as required by the National Treasury’s Framework for Managing Programme Performance Information (FMPPI). 11. I assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. 12. I did not raise any material findings on the usefulness and reliability of the reported performance information for the selected programmes. Additional matters 13. Although I raised no material findings on the usefulness and reliability of the reported performance information for the selected programmes, I draw attention to the following matters: Achievement of planned targets 14. Refer to the annual performance report on pages 42 to 55 for information on the achievement of planned targets for the year. Adjustment of material misstatements 15. I identified material misstatements in the annual performance report submitted for auditing on the reported performance information for the selected programmes. As management subsequently corrected the misstatements, I did not raise any material findings on the usefulness and reliability of the reported performance information.
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Compliance with legislation 16. I performed procedures to obtain evidence the public entity had complied with applicable legislation regarding financial matters, financial management and other related matters. My findings on material non-compliance with specific matters in key legislation, as set out in the general notice issued in terms of the PAA, are as follows: Annual financial statements 17. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework, as required by section 55 (1) (b) of the PFMA. Material misstatements of commitments, cash flow statement, employee costs, related parties, budget statement and supply chain management deviations identified by the auditors in the submitted financial statement were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion. Internal control 18. I considered internal control relevant to my audit of the financial statements, annual performance report and compliance with legislation. The matters reported below are limited to the significant internal control deficiencies resulting in the findings on non-compliance with legislation. Leadership 19. The accounting authority and management did not ensure the financial reporting framework was fully complied with before submitting the AFS for auditing. Financial and performance management 20. The financial statements contained numerous misstatements that were corrected. This was mainly due to staff members not fully understanding the requirements of the financial reporting framework. 21. The annual performance report contained material misstatements that was corrected. This was mainly due to staff members not following the National Treasury’s framework for reporting on performance information.
Auditor-General Pietermaritzburg 31 July 2014
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9.6 Corporate Governance Statement How We Govern Our Business Trade & Investment KwaZulu-Natal (TIKZN) is a South African trade and inward investment promotion agency, established to promote KwaZulu-Natal as an investment destination and facilitate trade by assisting local companies access local and international markets. TIKZN is governed by the TIKZN Act, No. 5 of 2010. During the year under review, TIKZN received Notice of Deregistration of the Section 21 Company in November 2013 from the Companies Intellectual Property Commission and is now operating as a listed Schedule 3C Public Entity under the Public Finance Management Act of 1999. The TIKZN Board has endorsed the Notice of Incorporation which will be filed with the Memorandum of Incorporation in its prescribed manner according to section 15 of the Companies Act 71 of 2008. TIKZN is fully committed to sound and effective corporate governance standards. Governance of TIKZN stems from the shareholder and other stakeholders, members of the board of directors, the chief executive officer assisted by the company secretary on governance issues as well as the board committees. The members of the board adopted a board charter which was reviewed in October 2013. The board charter provides guidance as well as assists in ensuring all responsibilities of the board are discharged as required by the TIKZN Act, the PFMA as well as King III standards of Good Corporate Governance. Members of the board are responsible for establishing a risk management process, effectiveness of the Audit, Risk and Compliance Committee and Remuneration Committee, as well as other corporate governance structures. The members of the board are accountable to the shareholder and owe a duty of care and diligence to the company. They act in the best interest of the company and consequently its shareholder. The board is also responsible for the following: • • • • •
Strategy and strategic decision-making and execution; The company’s performance and regular assessments; Ensuring full and timely disclosures of material matters affecting the company; Ensuring the implementation of an effective compliance framework; and The implementation of a Code of Conduct, as well as safety, health and environmental issues that may impact on the organisation.
Management is responsible and accountable to the board for designing, implementing and monitoring the processes outlined above and integrating them into the day-to-day operational activities.
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The Board of Directors Composition In terms of the TIKZN Act, Section 5 (1) (a) of No. 05 of 2010, the appointment of executive directors is the responsibility of the Executive Authority, i.e. the MEC of DEDT. 11 members were initially appointed as members of the board and who assumed office on 1 June 2012. Since then two members have resigned and have not yet been replaced. The members of the board are as follows: NAME
GENDER
TERM
BOARD MEMBER QUALIFICATIONS
Ms LCZ Cele (acting chairperson)
F
1
MAcc Taxation
Mr MA Tarr
M
1
MSc, Agricultural Economics
Dr MAI Velia
F
1
PhD, Economics
Dr JJ van Zyl
M
2
DCom, Economics
Mr CS Gina
M
1
Executive Development Programme
Prof W Viviers
F
1
DCom, Economics
Cllr DCP Mazibuko
F
3
Hon, BEd Management and Administration
Dr VF Mahlati
F
1
PhD, Policy Speciality
Dr NS Msomi
M
3
PhD, Molecular Genetics
Board Committees Audit Risk and Compliance Committee The committee comprises a minimum three members nominated from the board. The members are Dr NS Msomi (acting chairperson), Ms LCZ Cele and Mr MA Tarr. During the year under review, the chairperson Mr TO Mlaba resigned as he had been appointed as South Africa’s High Commissioner to the United Kingdom. As a result the chairperson of the Audit Committee, Ms LCZ Cele was appointed the acting chairperson of the board. The Audit, Risk and Compliance Committee adopted the Terms of Reference (TOR) and the Audit Charter reviewed annually. During the year under review, the Audit Committee recommended to the board the approval of the Risk Management Policy which gave effect to the review of the Audit Committee’s TOR and Board Charter respectively. The primary role of the Audit Risk and Compliance Committee is to ensure the integrity of financial reporting and the audit process and maintain sound risk management and internal control systems. In pursuing these objectives, the committee oversees relations with the external auditors, the scope of work, the annual audit and the applicable levels of materiality. The committee monitors development in corporate governance to ensure TIKZN continues to apply high and appropriate standards. Thereafter, the Audit, Risk and Compliance Committee’s recommendations are submitted to the board for approval. Primary functions of the committee are as follows:
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Financial Statements: • The committee examines and reviews the annual financial statements with management and external auditors to ensure they are complete and consistent with information provided prior to submitting to the regulators; • Review with management and external auditors the results of the audit including any difficulties encountered; • Review the annual financial statements and consider the appropriateness of accounting policies used; and • Review with management and external auditors all matters required to be communicated to stakeholders under relevant accounting framework Generally Recognised Accounting Practice (GRAP). Internal controls and risk management: The Audit Risk and Compliance Committee has overall responsibility for risk management, while management is accountable for designing, implementing and monitoring this process. The committee defines acceptable risk tolerance levels and determines the continuous monitoring and control processes required across business-specific risk areas to provide the basis for regular and exceptional reporting to business management and the Management Committee and board. The effectiveness of internal controls and risk management mechanisms is regular management reporting. The CFO reports every quarter on the operation of the financial and accounting control frameworks and the board also receives assurance from the Audit, Risk and Compliance Committee, which derives its information from regular audit reports on risk and internal control throughout the organisation. The mechanisms to ensure the effectiveness of internal controls include reviewing the: • • • • • •
Effectiveness of the organisation’s internal control system and information technology security and control; Control procedures followed by management and assessing their effectiveness; Controls designed to ensure assets are safeguarded; Fraud and prevention plan implemented to detect fraud; Risk management and related policies; and Compliance with prescribed accounting framework. As part of this task, the majority of finance policies were reviewed and updated to ensure alignment with the new accounting framework as well as to tighten the internal control environment.
Internal audit An important role of the Audit, Risk and Compliance Committee is to monitor, guide and supervise the functioning of internal audit to ensure that the services of the internal audit and external audit are sufficiently clarified and coordinated to provide an objective overview of the organisation’s operating systems of internal control and reporting. These include the following; • Annual approval of the internal Audit Charter to ensure adherence to best practices; • Reviewing the adequacy of corrective action taken in response to significant internal audit findings; • Reviewing the internal audit plans to ensure high risk areas have been identified and mitigation strategies have been identified and adopted; • Reviewing significant matters reported by the internal audit function; • Assessing the adequacy of performance of the internal audit function; • Reviewing the co-operation and co-ordination between the internal and external audit functions; and • Evaluating the independence and effectiveness of the internal audit function, including compliance with the institute of Internal Auditors International Standards for the Professional Practice of Internal Audit.
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External audit and compliance • Reviewing the external auditor’s proposed audit scope, approach and co-ordination of audit effort with internal audit; • Reviewing and confirming the independence of the external auditors; • Reviewing the external auditor’s observations as presented in the management reports and the adequacy of the management responses; • On a regular basis, meet separately with the external auditor’s to discuss any matters that the committee or auditors feel should be discussed in private; • Reviewing the effectiveness of systems of monitoring compliance with laws and regulations and the results of management’s investigation and follow-up of any instances of non-compliance; and • Reviewing processes for communicating the Code of Conduct to TIKZN personnel. Sustainability reporting and other responsibility • Regular reporting to the board about Audit, Risk and Compliance Committee activities, issues and related recommendations; • Facilitating communication between internal audit, external audit and the executive management; • Performing any other activities as requested by the Accounting Authority; • Instituting and overseeing special investigations as needed; • Reviewing and assessing the adequacy of the Audit Charter on an annual basis; • Ensuring all responsibilities as outlined in the charter are carried out; and • Evaluating the committee’s and individual member’s performance on a regular basis.
Dr NS Msomi (Acting chairperson of the Audit, Risk and Compliance Committee)
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Human Resources and Remuneration Committee The committee comprises a minimum of three members nominated by members of the board namely; Mr CS Gina (chairperson), Dr VF Mahlati and Dr MAI Velia. The committee’s objectives include ensuring continuous improvement and excellence in performance of TIKZN staff members, increasing capacity by addressing areas of personal development and ensuring staffing requirements are addressed adequately. The committee has provided the necessary guidance on human resource related issues affecting the organisation in line with its mandate as prescribed in the TOR for the Human Resources and Remuneration Committee. During the year, two policies were reviewed. These include a staff retention and succession plan complementing the review of the organisational structure following the development of a five-year strategic plan. The committee provided the much-needed insight into issues affecting TIKZN staff members and was also part of the panel recruiting executive management. Some of the initiatives implemented during the year include; • Employment equity and skills plans submitted and implemented; • Review of staff retention and succession policies; • Review of the organisational structure; and • Change management.
Mr CS Gina (Chairperson of Human Resources and Remuneration Committee)
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Meetings A minimum of four board meetings are held annually. In this way, the members of the board provide proper strategic direction to the management of Trade & Investment KwaZulu-Natal. Membership of and attendance at board meetings during the 2013/2014 financial year is illustrated in the table below: Board and sub-committee meetings Board Directors
TOTAL MEETINGS
HR Committee
Audit Committee
Other
19 July, 11 Oct, 02 Dec, 14 March
04 June, 01 Oct, 17 Feb
24 May, 12 July, 06 Sept, 21 Feb
17 Feb 14
4
3
4
1
Number of meetings attended for the period April 2013 - March 2014 Ms LCZ Cele Acting Chairperson
4
4
0
Mr MA Tarr
4
4
1
Dr JJ Van Zyl
2
Mr CS Gina
4
Cllr DCP Mazibuko
2
Dr V Mahlati
4
Dr NS Msomi
4
Prof W Viviers
4
Dr M Velia
3
Other:
72
Strategy Review Meeting
0 3
1 0
3
1 4
1 1
3
1
9.7 Statement of financial position as at 31 march 2014
Figures in rand
Note(s)
2014
2013
Assets Current assets Receivables from exchange transactions
4
718,784
519,856
Cash and cash equivalents
5
11,611,985
13,460,234
12,330,769
13,980,090
956,317
787,918
Non-current assets Property, plant and equipment
2
Intangible assets
3
Total Assets
141,859
639,063
1,098,176
1,426,981
13,428,945
15,407,071
Liabilities Current liabilities Finance lease obligation
6
170,091
58,036
Payables from exchange transactions
7
6,583,335
7,486,441
6,753,426
7,544,477
Non-current liabilities Finance lease obligation
6
45,525
241,323
Unspent conditional grants and receipts
8
6,470,202
1,147,627
6,515,727
1,388,950
13,269,153
8,933,427
159,792
6,473,644
Total Liabilities Net Assets Accumulated surplus
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Statement of financial performance as at 31 march 2014
Figures in rand
Note(s)
2014
2013
Revenue Other income
29
103,297
1,771
Government grants (conditional)
10
2,551,187
1,176,324
145,717
46,070
72,333,617
27,573,915
75,133,818
28,798,080
Interest received - investment Public contributions (main grant)
10
Total revenue Expenditure Employee related costs
12
(33,758,043)
(14,564,944)
Administration
30
(30,698)
(6,238)
(978,485)
(483,394)
14
(137,877)
(40,855)
(443,786)
(189,181)
(41,620,841)
(20,491,876)
Total expenditure
(76,969,730)
(35,776,488)
Operating deficit
(1,835,912)
(6,978,408)
22,060
-
-
(4,551)
22,060
(4,551)
(1,813,852)
(6,982,959)
Depreciation and amortisation Finance costs Repairs and maintenance General expenses
Gain on disposal of assets and liabilities Loss on foreign exchange Deficit for the year
74
11
Statement of Changes in Net Assets as at 31 march 2014
Figures in rand
Accumulated surplus
Total net assets
13,456,603
13,456,603
Deficit for the year
(6,982,959)
(6,982,959)
Total changes
(6,982,959)
(6,982,959)
6,473,644
6,473,644
Deficit for the year
(1,813,852)
(1,813,852)
Transfer to Technical Assistance Fund (TAF)
(4,500,000)
(4,500,000)
Total changes
(6,313,852)
(6,313,852)
159,792
159,792
Balance at 01 April 2012 Changes in net assets
Balance at 01 April 2013 Changes in net assets
Balance at 31 March 2014
R4,500,000 was transferred from TIKZN accumulated funds to the Technical Assistance Fund (TAF) during the period under review. The transfer was approved by Department of Economy Development and Tourism (DEDT) to assist in small businesses.
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Statement of cash flow as at 31 march 2014
Figures in rand
Note(s)
2014
2013
Cash flows from operating activities Receipts Public contributions (grant) Interest income Other receipts
80,207,379
27,573,915
145,717
47,833
103,297
267,518
80,456,393
27,889,266
(32,540,349)
(14,564,944)
(137,877)
(40,855)
(44,302,998)
(14,697,514)
(76,981,224)
(29,303,313)
16
(3,475,169)
(1,414,047)
Purchase of property, plant and equipment
2
(649,679)
(159,681)
Proceeds from sale of property, plant and equipment
2
22,060
-
Purchase of other intangible assets
3
-
(185,221)
(627,619)
(344,902)
Movement in lease liability non-current portion
(195,798)
65,029
Transfer to Technical Assistance Fund (TAF)
(4,500,000)
-
-
(40,854)
Net cash flows from financing activities
(4,695,798)
24,175
Net increase/(decrease) in cash and cash equivalents
(1,848,248)
(1,734,774)
Cash and cash equivalents at the beginning of the year
13,460,233
14,047,380
Payments Employee costs Finance costs Other payments Net cash flows from operating activities Cash flows from investing activities
Net cash flows from investing activities Cash flows from financing activities
Finance costs
76
Cash and cash equivalents at the beginning of the year (prior year adjustment)
28
-
1,147,627
Cash and cash equivalents at the end of the year
5
11,611,985
13,460,233
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-
Interest received - investment
Total revenue from exchange transactions
Europe promotion - conditional
Government grants - Eastern
-
-
Conditional
-
Government grants (TAF) -
Approved budget
Other income - (roll-up)
Revenue from exchange transactions
Revenue from exchange transactions
Statement of financial performance
Figures in rand
Budget on cash basis
-
-
5,500,000
-
5,500,000
Adjustments
5,500,000
-
5,500,000
10,872,776
145,717
5,500,000
103,297 5,123,762
-
Actual amounts on comparable basis
-
Final budget
as at 31 march 2014
Statement of comparison of budget and actual amounts
5,372,776
145,717
-
5,123,762
103,297
Difference between final budget and actual
10
10
29
Reference
78
67,240,000
Total revenue
(32,840,392) (13,864,662)
Personnel
Administration
Expenditure
67,240,000
-
67,240,000
Approved budget
Total revenue from non-exchange transactions
Total revenue from exchange transactions
Public contributions - (main grant)
Transfer revenue
Figures in rand Revenue from non-exchange transactions
Budget on cash basis
-
-
7,843,617
2,343,617
5,500,000
2,343,617
Adjustments
69,583,617
69,583,617
(33,758,043) (10,733,856)
(32,840,392) (13,864,662)
80,456,393
10,872,776
5,500,000
75,083,617
69,583,617
Actual amounts on comparable basis
69,583,617
Final budget
as at 31 march 2014
Statement of comparison of budget and actual amounts
3,130,806
(917,651)
5,372,776
-
5,372,776
-
Difference between final budget and actual
35.2
35.1
10
Reference
Trade & Investment KwaZulu-Natal Annual Report 2013/14
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Total expenditure
(67,240,000)
-
(5,259,556)
Marketing and communication
Eastern Europe promotion - conditional grant
(1,653,578)
Export promotion
(747,286)
(6,382,322)
International marketing
Inward mission
(2,749,578)
Professional fees
(377,000)
Repairs and maintenance
-
-
(3,365,626)
Approved budget
Travel and accommodation
Finance costs
grant
TAF expenses - conditional
Figures in rand
Budget on cash basis
-
-
-
-
-
-
-
-
(7,843,617)
(5,500,000)
(2,343,617)
Adjustments
(2,750,000)
(5,500,000)
(75,991,244)
(8,633,902)
(7,603,173)
(75,083,617)
(621,389)
(6,786,812)
(6,382,322)
(2,901,698)
(3,384,413)
(2,749,578) (747,286)
(443,786)
(377,000)
(1,653,578)
(137,877) (3,288,281)
-
(2,551,187)
Actual amounts on comparable basis
(3,365,626)
-
Final budget
as at 31 march 2014
Statement of comparison of budget and actual amounts
(907,627)
2,750,000
(1,030,729)
(1,248,120)
125,897
(404,490)
(634,835)
(66,786)
77,345
(137,877)
(2,551,187)
Difference between final budget and actual
9
35.10
35.9
35.8
35.7
35.6
35.5
35.4
35.3
10
Reference
80
Reconciliation
Actual amount on comparable basis as presented in the budget and actual comparative statement
Taxation
Deficit before taxation
Gain on disposal of assets and liabilities
Figures in rand Operating deficit
Budget on cash basis
-
-
(67,240,000)
(7,843,617)
-
(7,843,617)
(7,843,617)
(67,240,000) (67,240,000)
-
(7,843,617)
Adjustments
-
(67,240,000)
Approved budget
(75,083,617)
(835,366)
-
22,060
-
-
(857,426)
(75,083,617)
(835,366)
22,060
-
(75,083,617)
(857,426)
Actual amounts on comparable basis
(75,083,617)
Final budget
as at 31 march 2014
Statement of comparison of budget and actual amounts
4,487,209
-
4,487,209
22,060
4,465,149
22,060
4,465,149
Difference between final budget and actual
Reference
Accounting policies as at 31 march 2014
1. Presentation of financial statements The financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) issued by the Accounting Standards Board in accordance with Section 55 of the Public Finance Management Act (Act 29 of 1999) and the Public Management Act (Act No. 1 of 1999 as amended). Accrual basis These financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention unless specified otherwise. The principal accounting policies adopted in the preparation of these financial statements are set out below: Offsetting Assets and liabilities, revenue and expenses have not been offset, except where offsetting is required or permitted by GRAP. Comparability Comparative information represents the results of the six months ended 31 March 2013 presented on the same basis as the previous year. In the preparation of the Financial Statements the entity has taken into consideration the guidelines from Directive 5 of the ASB and no new GRAP Standards were adopted by the entity. The following applicable standards which came into effect on 1 April 2013 were considered; Grap 20 - Related party disclosures Grap 25 - Employees benefits Grap 31 - Intangible assets IGRAP 16 - Website costs The amendments to the above listed standards did not have any bearing on the accounting policies adopted in the preparation of the Annual Financial Statements. The entity adopted the following GRAP standard on 01 April 2014. GRAP 24 - Presentation of budget information in Financial Statement. A summary of the significant accounting policies applied, are disclosed below. 1.1. Property, plant and equipment Property, plant and equipment are tangible non-current assets held for use in the production or supply of goods or services, rental to others or for administrative purposes and are expected to be used during more than one period.
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Initial recognition The cost of an item of property, plant and equipment is recognised as an asset when: • •
It is probable future economic benefits or service potential associated with the item will flow to the entity; and The cost of the item can be measured reliably.
Initial measurement Property, plant and equipment is initially measured at cost. The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost. Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at date of acquisition. Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquired item’s fair value was not determinable, its deemed cost is the carrying amount of the asset(s) given up. When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. 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. Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. No assets were revalued at the reporting date. Subsequent measurement Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The useful life of all categories of property, plant and equipment are assessed annually. The useful lives of items of property, plant and equipment have been assessed as follows:
82
Item
Average useful life
Furniture and fixtures Office equipment IT equipment Computer software Other property, plant and equipment
5 - 8 years 5 - 12 years 3 - 6 years 2 - 3 years 5 years
The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. Each part of an item of property, plant and equipment with a significant cost in relation to the total cost of the item is depreciated separately. The depreciation charge for each period is recognised in surplus or deficit unless included in the carrying amount of another asset. Derecognition Items of the property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. 1.2. Intangible assets An asset is identified as an intangible asset when it: • •
Is capable of being separated or divided from an entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, assets or liability; or Arises from contractual rights or other legal rights, regardless whether those rights are transferable or separate from the entity or from other rights and obligations.
Initial recognition An intangible asset is recognised when: • •
It is probable that future economic benefits or service potential attributable to the asset will flow to the entity; and The cost or fair value of the asset can be measured reliably.
Intangible assets are initially recognised at cost. Measurement An intangible asset acquired through a non-exchange transaction, the cost will be its fair value as at the date of acquisition. Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.
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An intangible asset arising from development (or from the development phase of an internal project) is recognised when: • • • • • •
It is technically feasible to complete the asset so it will be available for use or sale; There is an intention to complete and use or sell it; There is an ability to use or sell it; It will generate probable future economic benefits or service potential; There are available technical, financial and other resources to complete the development and to use or sell the asset; or The expenditure attributable to the asset during its development can be measured reliably.
An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life. The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date. Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount amortised over its useful life. Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets. Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows: Computer software, other than three years. Intangible assets are derecognised: • •
On disposal; or When no future economic benefits or service potential are expected from its use or disposal.
1.3. Financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity. Initial recognition and measurement The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility. A concessionary loan is a loan granted to or received by an entity on terms not market related.
84
Credit risk is the risk one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Currency risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Derecognition Derecognition is the removal of a previously-recognised financial asset or financial liability from an entity’s statement of financial position. A derivative is a financial instrument or other contract with all three of the following characteristics: •
• •
Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable provided in the case of a non-financial variable, the variable is not specific to a party to the contract (sometimes called the ‘underlying’); It requires no initial net investment or an initial net investment smaller than would be required for other types of contracts expected to have a similar response to changes in market factors; and It is settled at a future date.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. A financial asset is: • • •
Cash; A residual interest of another entity; or A contractual right to: - receive cash or another financial asset from another entity; or - exchange financial assets or financial liabilities with another entity under conditions potentially favourable to the entity. A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial liability is any liability that is a contractual obligation to: • •
Deliver cash or another financial asset to another entity; or Exchange financial assets or financial liabilities under conditions potentially unfavourable to the entity.
Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Liquidity risk is the risk encountered by an entity in the event of difficulty in meeting obligations associated with financial liabilities settled by delivering cash or another financial asset. Loan commitment is a firm commitment to provide credit under pre-specified terms and conditions. Loans payable are financial liabilities, other than short-term payables on normal credit terms.
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Market risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. Other price risk is the risk fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. Financial instruments at amortised cost are non-derivative financial assets or non-derivative financial liabilities that have fixed or determinable payments, excluding those instruments: • •
The entity designates at fair value at initial recognition; or Are held for trading.
Financial instruments at cost are investments in residual interests that do not have a quoted market price in an active market and whose fair value cannot be reliably measured. Financial instruments at fair value comprise financial assets or financial liabilities that are: • • •
Derivatives; Combined instruments designated at fair value; Instruments held for trading. A financial instrument is held for trading if: - it is acquired or incurred principally for the purpose of selling or repurchasing it in the near-term; or - on initial recognition it is part of a portfolio of identified financial instruments managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; - non-derivative financial assets or financial liabilities with fixed or determinable payments designated at fair value at initial recognition; and - financial instruments not meeting the definition of financial instruments at amortised cost or financial instruments at cost.
Classification The entity has the following types of financial assets (classes and category) as reflected on the face of the statement of financial position or in the notes: Class Category Employees costs in advance Employees costs in advance were not amortised Prepayments Prepayments were not amortised Deposits Deposits were not amortised Other receivables Receivables were not amortised
86
The entity has the following types of financial liabilities (classes and category) as reflected on the face of the statement of financial position or in the notes: Class Trade payables Staff control account staff Accrued expenses Long-term finance lease cost
Category Trade payables were not discounted Control accounts were not discounted Accrued expenses were not amortised Financial liability measured at amortised
Financial liabilities and financial assets are initially measured at fair value and subsequently at: • • •
Fair value; Amortised cost; and Cost depending on their nature.
The entity’s financial liabilities and financial assets required to be amortised (except for financial leases) were not amortised due to the following reasons: Receivables The major part of receivables are prepayments of which there would not be settled in cash and therefore do not meet the definition of financial asset. Other receivables Other receivables include a combination of deposits for rentals and municipal rates as well as staff advances. Staff advances will be settled within the initial credit period which is one month. The deposit amount is insignificant and not amortised. Liabilities Leases - these are included at amortised costs as per the amortisation table. Trade liabilities - these are expected to settled within the initial credit period in line with the government sector norm. Leave - these costs are expected to be settled at fair value. Initial recognition The entity recognises a financial asset or a financial liability in its statement of financial position when the entity becomes a party to the contractual provisions of the instrument. The entity recognises financial assets using trade date accounting. Initial measurement of financial assets and financial liabilities The entity measures a financial asset and financial liability initially at its fair value plus transaction costs directly attributable to the acquisition or issue of the financial asset or financial liability. The entity measures a financial asset and financial liability initially at its fair value (if subsequently measured at fair value).
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The entity first assesses whether the substance of a concessionary loan is a loan. On initial recognition, the entity analyses a concessionary loan into its component parts and accounts for each component separately. The entity accounts for that part of a concessionary loan that is: • •
A social benefit in accordance with the Framework for the Preparation and Presentation of Financial Statements, where it is the issuer of the loan; or Non-exchange revenue, in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers), where it is the recipient of the loan.
Subsequent measurement of financial assets and financial liabilities The entity measures all financial assets and financial liabilities after initial recognition using the following categories: • • •
Financial instruments at fair value; Financial instruments at amortised cost; and Financial instruments at cost.
All financial assets measured at amortised cost or cost are subject to an impairment review. Impairment and uncollectibility of financial assets The entity assess at the end of each reporting period whether there is any objective evidence financial asset or group of financial assets is impaired. Financial assets measured at amortised cost: If there is objective evidence an impairment loss on financial assets measured at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced directly or through the use of an allowance account. The amount of the loss is recognised in surplus or deficit. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed directly or by adjusting an allowance account. The reversal does not result in a carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in surplus or deficit. Financial assets measured at cost: If there is objective evidence an impairment loss has been incurred on an investment in a residual interest not measured at fair value because its fair value cannot be measured reliably, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.
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Derecognition Financial assets The entity derecognises financial assets using trade date accounting. The entity derecognises a financial asset only when: • • •
The contractual rights to the cash flows from the financial asset expire, are settled or waived; The entity transfers to another party substantially all of the risks and rewards of ownership of the financial asset; or The entity, despite having retained some significant risks and rewards of ownership of the financial asset, has transferred control of the asset to another party and the other party has the practical ability to sell the asset in its entirety to an unrelated third party and can exercise that ability unilaterally and without needing to impose additional restrictions on the transfer. In this case, the entity: - derecognises the asset; and - recognises separately any rights and obligations created or retained in the transfer.
Financial liabilities The entity removes a financial liability (or a part of a financial liability) from its statement of financial position when it is extinguished - i.e. when the obligation specified in the contract is discharged, cancelled, expires or waived. The difference between the carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in surplus or deficit. Any liabilities waived, forgiven or assumed by another entity by way of a non-exchange transaction are accounted for in accordance with the Standard of GRAP on Revenue from Non-exchange Transactions (Taxes and Transfers). Presentation Interest relating to a financial instrument or a component that is a financial liability is recognised as revenue or expense in surplus or deficit. Dividends or similar distributions relating to a financial instrument or a component that is a financial liability is recognised as revenue or expense in surplus or deficit. Losses and gains relating to a financial instrument or a component that is a financial liability is recognised as revenue or expense in surplus or deficit. 1.4. 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. When a lease includes both land and buildings elements, the entity assesses the classification of each element separately.
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Finance leases – lessee Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. The discount rate used in calculating the present value of the minimum lease payments is the effective interest rate implicit in the lease. Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term to produce a constant periodic rate of on the remaining balance of the liability. Any contingent rents are expensed in the period in which they are incurred. 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 or liability. 1.5. Employee benefits Employee benefits are all forms of consideration given by an entity in exchange for service rendered by employees. A qualifying insurance policy is an insurance policy issued by an insurer not a related party (as defined in the Standard of GRAP on Related Party Disclosures) of the reporting entity, if the proceeds of the policy can be used only to pay or fund employee benefits under a defined benefit plan and are not available to the reporting entity’s own creditors (even in liquidation) and cannot be paid to the reporting entity, unless either: • •
The proceeds represent surplus assets not needed for the policy to meet all the related employee benefit obligations; or The proceeds are returned to the reporting entity to reimburse it for employee benefits already paid.
Termination benefits are employee benefits payable as a result of either: • •
An entity’s decision to terminate an employee’s employment before the normal retirement date; or An employee’s decision to accept voluntary redundancy in exchange for those benefits.
Other long-term employee benefits are employee benefits (other than postemployment benefits and termination benefits) not due to be settled within 12 months after the end of the period in which the employees render the related service. 1.6. Investment income Investment income is recognised on a time-proportion basis using the effective interest method. Investment income comprises of interest from deposits placed with a reputable financial institution.
90
1.7. Translation of foreign currencies Foreign currency transactions A foreign currency transaction is recorded, on initial recognition in rands, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At each reporting date: • • •
Foreign currency monetary items are translated using the closing rate; Non-monetary items are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction; and Non-monetary items are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognised in surplus or deficit in the period in which they arise. When a gain or loss on a non-monetary item is recognised directly in net assets, any exchange component of that gain or loss is recognised directly in net assets. When a gain or loss on a non-monetary item is recognised in surplus or deficit, any exchange component of that gain or loss is recognised in surplus or deficit. Cash flows arising from transactions in a foreign currency are recorded in rands by applying to the foreign currency amount the exchange rate between the rand and the foreign currency at the date of the cash flow. 1.8. Fruitless and wasteful expenditure Fruitless expenditure means expenditure made in vain and would have been avoided had reasonable care been exercised. All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial performance in the year the expenditure incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance. 1.9. Irregular expenditure • Irregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including – (a) (b) (c)
This Act; or The State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or Any provincial legislation providing for procurement procedures in that provincial government.
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National Treasury practice note no. 4 of 2008/2009 issued in terms of sections 76(1) to 76(4) of the PFMA requires the following (effective from 1 April 2008): •
•
•
Irregular expenditure incurred and identified during the current financial and condoned before year-end and/or before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure register. In such an instance, no further action is required with the exception of updating the note to the financial statements; Irregular expenditure incurred and identified during the current financial year and for which condonement is being awaited at year-end must be recorded in the irregular expenditure register. No further action is required with the exception of updating the note to the financial statements; and Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned.
1.10. Conditional grants and receipts Revenue received from conditional grants, donations and funding are recognised as revenue to the extent the entity has complied with any of the criteria, conditions or obligations embodied in the agreement. To the extent the criteria, conditions or obligations have not been met a liability is recognised. The entity has the following conditional grants: • •
Technical Assistance Fund (TAF); and Eastern Europe Promotion.
1.11. Budget information The entity is typically subject to budgetary limits in the form of appropriations or budget authorisations (or equivalent), given effect through authorising legislation, appropriation or similar. General purpose financial reporting by the entity will provide information on whether resources were obtained and used in accordance with the legally adopted budget. The approved budget is prepared on an accrual basis and presented by economic classification linked to performance outcome objectives. The approved budget covers the fiscal period from 2013/04/01 to 2014/03/31. The financial statements and the budget are on the same basis of accounting therefore a comparison with the budgeted amounts for the reporting period has been included in the statement of comparison of budget and actual amounts.
92
1.12. Related parties The entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African government. Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions. Close members of the family of a person are considered to be those family members who may be expected to influence, or be influenced by, that management in their dealings with the entity. Related parties are disclosed in terms of GRAP 20.
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notes to the financial statements as at 31 march 2014
Figures in rand 2014/2013 2.
2014
2013
Property, plant and equipment 2014 Cost / Valuation
2013
Accumulat- Carrying ed deprecivalue ation and accumulated impairment
Cost / Valuation
Accumulat- Carrying ed deprecivalue ation and accumulated impairment
Furniture and fixtures
760,036
(602,065)
157,971
726,977
(522,620)
204,357
Office equipment
905,233
(620,582)
284,651
788,033
(479,480)
308,553
IT equipment
1,435,071
(921,376)
513,695
1,051,500
(776,492)
275,008
Total
3,100,340
(2,144,023)
956,317
2,566,510
(1,778,592)
787,918
Reconciliation of property, plant and equipment - 2014 Opening balance
Additions Depreciation
Total
Furniture and fixtures
204,357
37,259
(83,645)
157,971
Office equipment
308,553
126,368
(150,270)
284,651
IT equipment
275,008
486,052
(247,365)
513,695
787,918
649,679
(481,280)
956,317
The management of TIKZN assessed the useful life of assets for the period ended March 2014. Most of the assets in the organisation were inherited from the previous tenant in 2008. The assets were brought into books at marginal values. These assets are fully depreciated and their economic lives are not expected beyond one year and will be disposed of during the course of 2014/2015 financial year. Table A depicts classes and the total value of assets written off during the period. These assets were fully depreciated at the time they were disposed of by means of the staff bidding process and others are in the process of being donated (mainly computer equipment) as part of the organisation’s Corporate Social Responsibility initiative. Table B depicts classes and total value of assets inherited from the previous tenant in 2008. Most of these assets were taken into books at low values and have since reached the end of their economic lives and fully depreciated. Table C depicts the value of the pledged asset against the finance lease liabilities. Table D depicts the estimated value of assets brought at zero values. The economic value of these assets is immaterial from the materiality set by the entity. These assets form part of the exclusion list for items to be disposed of in 2014/2015. 94
Figures in rand 2014/2013
2014
2013
Table A - Value of fully depreciated assets disposed of Furniture and fixtures Office equipment
4,200
-
9,168
-
102,481
-
115,849
-
402,824
-
73,781
-
476,605
-
HP Color Laserjet MFP Multi Function
70,643
-
Hewlett Packard Colour Laserjet CM6049
41,410
-
Hewlett Packard Colour Laserjet CM6049
41,410
-
153,463
-
Computer equipment
Table B - Value of inherited and fully depreciated assets Furniture and fixtures Office equipment
Table C - Value of pledged assets
Table D - Estimated initial value of assets brought at zero value
Estimated original cost
Estimated original cost
Estimated economic value
124,004
-
-
21,220
124,004
21,220
Estimated economic value
Reconciliation of property, plant and equipment - 2013 Opening Additions balance
Other changes, movements
Depreciation
Total
Furniture and fixtures
-
10,978
320,718
(127,339)
204,357
Office equipment
-
98,999
297,797
(88,243)
308,553
IT equipment
-
49,704
281,470
(56,166)
275,008
-
159,681
899,985
(271,748)
787,918
2.
Intangible assets 2014 Cost / Valuation
Computer software, other
2,004,408
2013
Accumulat- Carrying Cost / ed amortivalue Valuation sation and accumulated impairment (1,862,549)
141,859 2,004,408
Accumulated amortisation and accumulated impairment
Carrying value
(1,365,345)
639,063
Trade & Investment KwaZulu-Natal Annual Report 2013/14
95
Figures in rand 2014/2013
2014
2013
Reconciliation of intangible assets - 2014 Opening balance Computer software, other
639,063
Amortisation
Total
(497,204)
141,859
Reconciliation of intangible assets - 2013 Opening balance
Computer software, other 4.
Additions
-
Other changes, movements
185,221
665,487
Amortisation
(211,645)
Total
639,063
Receivables from exchange transactions
Employee costs in advance
59,693
5,596
574,914
430,542
Deposits
46,882
40,320
Other receivables
37,295
43,398
718,784
519,856
Prepayments
5.
Cash and cash equivalents
Cash and cash equivalents consist of: Standard Bank Account (Main bank)
5,141,783
12,312,607
Standard Bank Account (Main bank - Eastern Europe promotion)
2,750,000
-
Standard Bank Account (TAF)
3,720,202
1,147,627
11,611,985
13,460,234
Opening Balances (Cash and Cash Equivalents)
12,312,607
-
Receipts for the year
75,354,691
-
Standard Bank Main Accounts
Payments for the year including transfers
(79,775,515)
-
-
12,312,607
7,891,783
12,312,607
Opening Balances (Cash and Cash Equivalents)
1,147,627
-
Receipts for the year
5,100,000
-
Payments for the year
(2,527,425)
-
-
1,147,627
3,720,202
1,147,627
Previous year closing balance Standard Bank (Technical Assistance Fund)
Previous year closing balance
Standard Bank Main Accounts consist of two accounts mainly used for payments of the preliminary transactions of the entity including payment of staff salaries. No bank balances were pledged as security at year-end.
96
Figures in rand 2014/2013 6.
2014
2013
Finance lease obligation
Minimum lease payments due - Within one year
112,055
85,870
- In second to fifth year inclusive
96,980
363,590
209,035
449,460
Less: future finance charges
(89,386)
(171,050)
Present value of minimum lease payments
119,649
278,410
112,055
85,870
7,594
192,540
119,649
278,410
45,525
241,323
170,091
58,036
215,616
299,359
Present value of minimum lease payments due - Within one year - In second to fifth year inclusive
Non-current liabilities Current liabilities
It is entity policy to lease certain equipment under finance leases. The average lease term was four years and the average effective borrowing rate was 10% -20% (2013:10%-15%). Interest rates are linked to prime at the contract date. All leases escalate between 10% and 15%. The entity’s obligations under finance leases are secured by the lessor’s charge over the leased assets. 7.
Payables from exchange transactions
Trade payables
1,872,040
Staff control account
4,024,591
17,031
19,175
4,694,264
3,442,675
6,583,335
7,486,441
Technical Assistance Fund (TAF)
3,720,202
1,147,627
Eastern Europe Promotion
2,750,000
-
6,470,202
1,147,627
Accrued expense
8.
Unspent Conditional Grant and Receipts
Technical Assistance Fund (TAF) is a fund originally managed through KZN Growth Fund and transferred to Trade & Investment KwaZulu-Natal (TIKZN) in 2009. Its purpose is to assist project promoters prepare and package their projects to the level of quality that will allow them to access funding from main financial institutions. The fund has proved beneficial as some of the projects funded have moved closer to operational stages and some are already operational. The fund was depleted in 2013, however, due to the benefits perceived. TIKZN applied to KZN Provincial Treasury to transfer R4,5 million from the main account to replenish this fund.
Trade & Investment KwaZulu-Natal Annual Report 2013/14
97
Figures in rand 2014/2013
2014
2013
Eastern Europe Promotion - The Department of Economic Development and Tourism (DEDT) though the MEC engaged Trade & Investment KwaZulu-Natal and Tourism KZN regarding the opportunity of marketing KwaZulu-Natal in Eastern Europe. A company known as Makhaya Arts and Culture was appointed to oversee this project as they had been involved in similar projects before. An agreement was signed with all parties involved. A total of R5,5 million was provided by DEDT of which R5 million was to be utilised in the project and R500 000 was to be shared equally between TIKZN and Tourism KZN to cover implementation costs. Both funds are accounted for as conditional grants. 9.
TAF and Eastern Europe Promotion Grants
Grants received in respect of Technical Assistance Fund and Eastern Europe Promotion projects are accounted for as conditional grants. The revenue was recognised to the extent of expenses incurred. These are indicated in the table below. Technical Assistance Fund Technical Assistance Fund (TAF)
2,551,187
1,176,324
5,500,000
-
(2,500,000)
-
Eastern Europe Promotion Grant received from DEDT Expenses incurred Tourism KZN portion for implementation
(250,000)
-
2,750,000
-
103,297
-
2,551,187
1,176,324
145,717
46,070
72,333,617
27,573,915
75,133,818
28,796,309
103,297
-
2,551,187
1,176,324
145,717
46,070
2,800,201
1,222,394
72,333,617
27,573,915
10. Revenue Other income Government grants - conditional grant Interest received - investment Public contributions - main grant
The amount included in revenue arising from exchanges of goods or services are as follows: Other income Government grants (TAF) Interest received - investment
The amount included in revenue arising from non-exchange transactions is as follows: Transfer revenue Public contributions - main grant
98
Figures in rand 2014/2013 11.
2014
2013
General expenses
Advertising Auditor’s remuneration Bank charges
2,777,690
1,254,120
582,586
335,094
33,101
18,043
Cleaning
248,713
124,949
Computer expenses
242,073
108,141
3,525,778
3,052,997
Consumables
116,484
112,395
Entertainment
197,741
138,164
Insurance
253,869
105,570
Conferences and seminars
914,589
224,191
IT expenses
470,365
376,289
Lease rentals on operating lease
4,432,746
2,231,276
Marketing
2,901,698
648,350
Promotions and sponsorships
1,665,212
823,085
BEE Financial Assistance
543,144
64,811
Postage and courier
251,423
174,666
Consulting and professional fees
Printing and stationery
279,604
72,692
1,438,272
1,444,295
Security for office premises
287,310
158,446
Staff welfare
236,726
53,417
Promotions
1,311,223
798,012
Telephone and fax
Subscriptions and membership fees
874,109
569,032
Training
748,750
366,053
Travel - local
2,373,692
1,597,774
Travel - overseas
6,243,668
3,687,066
Electricity
251,528
113,369
Inward missions
621,389
663,255
east3ROUTE
2,496,171
-
Eastern Europe promotion - expenses
2,750,000
-
Technical Assistance Fund (TAF) expenses
2,551,187
1,176,324
41,620,841
20,491,876
Trade & Investment KwaZulu-Natal Annual Report 2013/14
99
Figures in rand 2014/2013 12.
2014
2013
Employee related costs
Basic
18,540,817
8,960,670
Bonus
1,551,260
-
Medical aid - company contributions
869,825
393,728
UIF
166,858
84,853
WCA
140,000
144,557
SDL
276,116
-
Leave pay provision charge
129,622
(346,837)
Post-employment benefits - Pension - Defined contribution plan
4,219,572
1,983,559
PAYE
7,229,297
3,271,961
634,676
72,453
33,758,092
14,564,993
49
49
Recruitment cost Average number of employees
For the financial year ending 31 March 2014 Trade & Investment KwaZulu-Natal made contributions for employees as follows: Employees contributions Pension contributions
3,775,048
1,983,559
Group life and disability
236,028
-
Other
208,496
-
4,219,572
1,983,559
Trade & Investment KwaZulu-Natal made pension contributions for its executive directors for the financial year ending 31 March 2014 as follows: Executive directors’ contributions Contributions
ZA Gwala
Pension contribution
Group life and disability
Other
Total
271,488
17,001
15,009
303,498
83,727
5,184
3,632
92,543
152,905
9,516
7,456
169,877
IM Manyakanyaka (appointed 01/10/2013)
83,727
5,184
3,632
92,543
K Ntloko-Gasa (appointed 01/10/2013)
54,190
3,355
2,350
59,895
LG Bouah (appointed 01/10/2013)
83,727
5,184
3,632
92,543
LBU Sibanyoni (appointed 01/01/2014)
29,072
1,800
1,261
32,133
758,836
47,224
36,972
843,032
NST Matjie (appointed 01/10/2013) L Nyamande
13.
Investment revenue
Interest revenue Bank
100
145,717
46,070
Figures in rand 2014/2013 14.
2014
2013
Finance costs
Finance lease costs
137,877
40,855
582,586
335,094
(1,813,852)
(6,982,966)
Depreciation and amortisation
978,485
483,394
Loss on sale of assets and liabilities
(22,060)
-
-
40,854
15.
Auditors’ Fees
Fees 16.
Cash generated from (used in) operations
Deficit Adjustments for:
Finance costs Changes in working capital: Receivables from exchange transactions
(198,928)
267,518
Payables from exchange transactions
(903,106)
4,777,153
5,322,575
-
112,055
-
3,475,169
(1,414,047)
- Within one year
4,447,221
4,198,330
- In second to fifth year inclusive
9,619,943
14,976,361
14,067,164
19,174,691
Unspent conditional grants and receipts Lease liability current portion
17.
Operating lease
Operating leases - as lessee (expense) Minimum lease payments due
Operating lease payments represent rentals payable by the entity for office space. Leases are negotiated for an average term of five years. No contingent rent is payable. 18.
Commitments - Trade & Investment KwaZulu-Natal main activities
Main Activities
2014
Approved and contracted
16,970,894
17,105,795
244,583
427,479
17,215,477
17,533,274
Approved and not contracted
2013
The entity also has commitments for operating lease agreements for both its KwaZulu-Natal and Gauteng administration offices. Operating lease commitments Minimum lease payments due
-
-
- Within one year
4,447,221
4,198,330
- In second to fifth year inclusive
9,619,943
14,976,361
14,067,164
19,174,691
Trade & Investment KwaZulu-Natal Annual Report 2013/14
101
Figures in rand 2014/2013 19.
2014
Commitments - Technical Assistance Funds
16 projects were approved for funding worth R5,209,000 R2,551,187 has been disbursed and the balance of R2,717,813 committed. 20.
2013
of
these
Related parties
2014
Income
Expenditure
1. DEDT
75,083,617
(74,418,543)
665,074
2. Durban Chamber of Commerce and Industry
-
(186,014)
(186,014)
3. KwaZulu-Natal Tourism
-
(871,773)
(871,773)
4. SEDA eThekwini Business Centre
-
(1,117,000)
(1,117,000)
Subtotal
75,083,617
(76,593,330)
(1,509,713)
2013
Income
1. DEDT
27,573,915
(33,441,046)
(5,867,131)
3. Durban Chamber of Commerce and Industry
-
(75,120)
(75,120)
4. KwaZulu-Natal Tourism Authority
-
(564,300)
(564,300)
27,573,915
(34,080,466)
(6,506,551)
Expenditure
Total
Total
- Department of Economy Development and Tourism (DEDT) DEDT is the sole shareholder of Trade & Investment KwaZulu-Natal (TIKZN). The entity receives two funds in the form of grants conditional on the terms stipulated in the Memorandum of Understanding (MOU) signed with DEDT. The grants are received for the purposes of supporting the delivery of services as set out in the MOU. Conditions stipulated in the main grant were met hence the grant was recognised as revenue. TAF and Eastern Europe Promotion funds were recognised as revenue to the extent the conditions were met. - Durban Chamber of Commerce and Industry The Chief Financial Officer (CFO) and the executive manager of Corporate Services for Trade & Investment KwaZulu-Natal are both members of the Durban Chamber of Commerce and Industry. Expenditure is in respect of membership subscription and sponsorship for events hosted by the Durban Chamber of Commerce and Industry such as sponsorship towards Exporter of the Year. Other expenditures relate to workshops and conferences facilitated by the Durban Chamber of Commerce and Industry. - KwaZulu-Natal Tourism Authority (Tourism KZN) Tourism KZN is the sister entity with Trade & Investment KwaZulu-Natal. Both entities are funded by DEDT and belong to one cluster. The entities would normally form partnerships through MOUs in certain strategic initiatives. The expenditure is in respect of expenses incurred for HICA 2013/2014, a partnership agreement between DEDT, Tourism KZN and TIKZN to organise the annual Hotel Investment Conference Africa in KwaZulu-Natal. Expenditure also relates to the shared costs of the annual Vodacom July Handicap and Indaba Tourism events.
102
Figures in rand 2014/2013
2014
2013
- SEDA eThekwini Business Centre SEDA eThekwini Business Centre is strategic partner with TIKZN through an MOU and joint effort to develop and promote export markets and create a platform for emerging exporters. The executive manager for Export Development and Promotion of TIKZN takes part in strategic meetings of SEDA aimed at promoting export. The expenditure is in connection with annual contributions TIKZN make to SEDA for creating a platform for emerging exporters. - Key management personnel Transactions with key management personnel are disclosed in note 21 to the financial statements. 21.
Members’ emoluments
Non-Executive 2014
Emoluments
Ms LCZ Cele (Acting Chairperson)
430,260
Mr MA Tarr Mr TO Mlaba (resigned)
Other benefits*
Total
51,906
482,166
119,927
1,190
121,117
113,406
43,103
156,509
Dr JJ Van Zyl
104,322
8,116
112,438
Mr CS Gina
120,705
18,512
139,217
Cllr DCP Mazibuko
58,337
1,128
59,465
Dr VF Mahlati
105,965
30,559
136,524
Dr NS Msomi
142,257
-
142,257
Prof W Viviers
116,089
12,004
128,093
82,431
-
82,431
1,393,699
166,518
1,560,217
Dr MAI Velia
2013 Mr TO Mlaba
Emoluments
Other benefits*
Total
221,044
213,373
434,417
Dr EJ Dorward-King (resigned)
55,261
1,295
56,556
Mr MA Tarr
61,740
-
61,740
Ms LCZ Cele
60,593
-
60,593
Dr JJ Van Zyl
22,451
8,540
30,991
Mr CS Gina
57,905
30,334
88,239
Cllr DCP Mazibuko
44,902
13,726
58,628
Dr VF Mahlati
50,824
19,011
69,835
Dr NS Msomi
61,740
-
61,740
Prof W Viviers
22,451
19,166
41,617
Dr MAI Velia
50,824
6,530
57,354
709,735
311,975
1,021,710
Trade & Investment KwaZulu-Natal Annual Report 2013/14
103
Figures in rand 2014/2013
2014
2013
Executives remuneration is on a total cost to company basis such as travel allowance and medical contributions. Defined contribution plan for the executive members amounted to: Executive Managers - 2014
Salary
Medical Aid
Allowance and Travel
Performance
Total
Travel Bonus ZA Gwala - CEO
1,454,985
70,101
96,000
239,070 1,860,156
L Nyamande - CFO
896,755
-
12,000
103,092 1,011,847
NST Matjie (appointed 01/10/2013)
520,208
-
21,000
-
541,208
LBU Sibanyoni (appointed 01/01/2014)
236,547
-
31,500
-
268,047
K Ntloko-Gasa (appointed 01/10/2013)
532,486
-
-
-
532,486
LG Bouah (appointed 01/10/2013)
520,679
19,257
-
-
539,936
IM Manyakanyaka (appointed 01/10/2013)
512,189
28,855
-
-
541,044
4,673,849
118,213
160,500
Executive Managers 2013
Salary
CEO ZA Gwala CFO L Nyamande
342,162 5,294,724
Pension and Medical Aid
Allowance and Travel
Performance Other Bonus
Total
675,005
125,763
48,000
-
-
848,768
380,637
45,917
6,000
-
-
432,554
1,055,642
171,680
54,000
-
- 1,281,322
* The remuneration for executive managers disclosed is for six months ie. from 1 October to 31 March 2014. This is the first period the entity operated as a Public Entity.
22.
Fruitless and wasteful expenditure
Fruitless and wasteful expenditure for the year Less : Expenditure condoned by board
62,686
-
(62,686)
-
-
-
The main item for fruitless and wasteful expenditure of R52,859 is attributed to the main penalty from SARS for late payment of May 2013 PAYE account. The other payment relate to cancellation of catering services as meetings were cancelled at short notice.
104
Figures in rand 2014/2013 23.
2014
2013
Deviation from supply chain management regulations
Paragraph 12(1)(d)(i) of Government gazette No. 27636 issued on 30 May 2005 states a supply chain management policy must provide for the procurement of goods and services by way of a competitive bidding process. Paragraph 36 of the same gazette states the accounting officer may dispense with the official procurement process in certain circumstances, provided he records the reasons for any deviations and reports them to the next meeting of the board of members and includes a note to the financial statements. Deviations amounting to R5,332,541 were documented and reported to the board of members who considered them and subsequently approved them in terms of the normal supply chain management regulations. The deviations relate to the acquisition of services acquired from sole suppliers. Category of Deviations Previous year Deviations
179,604
4,896,571
Sole Supplier Approvals
4,104,865
-
Training and Conference
626,141
-
Sponsorships
421,931
-
5,332,541
4,896,571
24.
Budget differences
Material differences between budget and actual amounts There are differences between budget and actual expenditure in some of the expenditure categories. These are as mainly due to changes in prices, additional expenditure on conversion-related costs as well as exchange rate differences. The changes were noted mainly in the following items: international travel, consultancy fees (legal and financial) and increases in subscriptions. Differences between budget and actual amounts basis of preparation and presentation The budget and the accounting bases differ. The financial statements for the whole of government are prepared on the accrual basis using a classification based on the nature of expenses in the statement of financial performance. Details of the differences between actuals and approved budget are indicated in the Statement of Comparisons of Budget and Actual Amounts. Detailed explanations have been included under note 35. Changes from the approved budget to the final budget The changes between the approved and final budget are a consequence of reallocations within the approved budget parameters. The changes between the approved and final budget are a consequence of changes in the overall budget parameters. 2014
Trade & Investment KwaZulu-Natal Public Entity
Original Budget 67,240,000
Final Budget Actual (Adjusted Expenditure Budget) 75,083,617
74,418,543
Trade & Investment KwaZulu-Natal Annual Report 2013/14
105
Figures in rand 2014/2013 2013
2014 Original Budget
2013
Final Budget Actual (Adjusted Expenditure Budget)
Trade & Investment KwaZulu-Natal Section 21
31,018,795
31,257,408
31,234,441
Trade & Investment KwaZulu-Natal Public Entity
33,594,205
34,795,592
34,604,714
64,613,000
66,053,000
65,839,155
25.
Financial statements preparation
Trade & Investment KwaZulu-Natal commenced operations as a Schedule 3C Public Entity on the 1st of October 2012. As a public entity listed under Schedule 3C of the PFMA, TIKZN is required to report on the basis of GRAP. The Annual Financial Statements for the period ended 31 March 2014 were therefore prepared on these basis. 26.
Contingent liability
The Public Entity has guaranteed a rental deposit to the maximum value of R439,677 in favour of Crescendo Management Services (Pty) Ltd. The entity has not defaulted on its rental payment as at the year-end. 27.
Reporting period
The current reporting period for 2013/2014 is 12 months while the previous year reporting period for 2012/2013 was six months. 28.
Correction of prior-year error
Cash Flow Statement Cash and cash equivalent at the beginning of the year Correction of prior-year period error
13,460,225
12,312,598
-
1,147,627
13,460,225
13,460,225
The adjustment arose as cash flows relating to the TAF account were not included in the main cash flows. A recommendation was made to the effect these cash flows be reported together as they were managed by the same entity. The correction does not carry tax implications. 29.
Other income
Other income
103,297
-
Other income is in respect of the refund in the form of a discount from the International Convention Centre (ICC) for Export Week venue hire. Part of other income was received from NRB Bank liquidated years ago. The entity used to hold short-term investment funds with the bank. The payment to the entity was made after the NRB Bank estate was approved by the liquidator to pay the contribution to the bank’s previous creditors. There are no funds expected in the future. 30.
Administrative expenditure
Administration and management fees - related party
106
30,698
6,238
Figures in rand 2014/2013 31.
2014
2013
Going concern
We draw attention to the fact that at 31 March 2014, the entity had accumulated deficits of R159,792 and total liabilities exceed its assets by R159,792. The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes funds will be available to finance future operations and the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. 32.
Events after the reporting date
Events after reporting date are classified into two categories, adjusting and non-adjusting. Adjusting These are events that happened before the reporting date that may have an impact on the AFS. Non-adjusting These will be events that have taken place after the reporting date, but before the AFS are issued. At this stage the management has assessed the events that have taken since the reporting date and nothing has come up that will require the adjustment of the AFS. In making this assessment, management has looked at the following: • • • •
Any legal claims lodged; Any publicity that may have taken place since the reporting date that may have an impact on the organisation; Minutes of the last management meetings to see whether anything was discussed that may require disclosure in terms of this standard; and Whether there are any significant assets bought or disposed of after the reporting date.
Disclose for each material category of non-adjusting events after the reporting date: • •
Nature of the event; and Estimation of its financial effect or a statement that such an estimation cannot be made.
The only change that happened after the reporting date is the resignation of the company secretary, Ms P Tabile.
Trade & Investment KwaZulu-Natal Annual Report 2013/14
107
Figures in rand 2014/2013 33.
2014
2013
Financial instruments
Current period - Total financial assets
one year or less
1 to 5 years
Total
TAF cash and cash equivalent
3,720,202
-
3,720,202
TIKZN cash and cash equivalents
7,891,783
-
7,891,783
718,784
-
718,784
12,330,769
-
12,330,769
Receivables
Current period - Total financial liabilities Accruals and payables Finance lease liability
Prior year - Total financial asset TAF cash and cash equivalents TIKZN cash and cash equivalents Receivables
Prior year - Total financial liabilities Accruals and payables Finance lease liability
one year or less
1 to 5 years
Total
6,583,335
-
6,583,335
170,091
45,525
215,616
6,753,426
45,525
6,798,951
one year or less
1 to 5 years
Total
1,147,627
-
1,147,627
12,312,606
-
12,312,606
519,856
-
519,856
13,980,089
-
13,980,089
one year or less 7,486,441
1 to 5 years
Total -
7,486,441
58,036 241,323
299,359
7,544,477 241,323
7,785,800
Credit risk The entity does not have a huge debtors’ book. Its exposure to credit risk is minimal. The items indicated under trade and other receivables refer to rental prepayments in the operating leases for the Durban and Gauteng offices and advance payments to employees for travelling costs. The cash and cash equivalents are deposits placed with high credit financial institutions. The deposits comprise of grants received from the Department of Economic Development and Tourism and these are deposited as draw-downs every quarter. The entity limits its exposure by dealing with well-established financial institutions. The entity does not have significant exposure to an individual debtor or counter party. Liquidity risk The entity’s exposure to liquidity risk is minimal as it is 100% funded by the Department of Economic Development and Tourism. The annual budgets are approved at the beginning of each fiscal year and draw-downs are requested at the beginning of each quarter. Cash flows are monitored monthly against budgets and adjustments are made where necessary. Risk management assessments are conducted bi-annually to assist with identifying any possible cash flows, liquidity or other risks. Interest rate risk Although the entity’s funds are subject to interest rate risk, these funds are placed with reputable financial institutions. The entity does not hedge any of its funds, but monitors the fluctuations in interest rates and obtains advice from bank officials on a regular basis.
108
Figures in rand 2014/2013 34.
2014
2013
Reconciliation of amounts in terms of GRAP 24 Operating Activities
Financing Activities
Investing Activities
Total
Actual amounts on comparable basis in the budget and actual comparative statement
76,981,224
4,695,798
627,619 82,304,641
Actual amount in the cash flow statement
76,981,224
4,695,798
627,619 82,304,641
35. Actual operating expenditure versus budgeted operating expenditure Refer to Appendix A for the comparison of actual operating expenditure versus budgeted expenditure. (1)
Personnel - Over-expenditure in employees’ costs is mainly attributable to newly appointed executive personnel and temporary staff employees as additional capacity in other sections. The over-expenditure was funded through savings in other budgeted items.
(2)
Administration and operational costs - The main contributing factor to the savings realised in the board expenditure was due to the fact that board assessments and evaluations scheduled were deferred to the next financial year.
(3)
Finance costs - Finance costs are relating to interest charged on finance lease liability against the office equipment. Part of the finance costs relate to interest and penalty levied by SARS on late payment of May 2013 PAYE account.
(4)
Travel and accommodation - Savings in travel and accommodation is due to the cost-cutting measures the entity implemented in line with the Treasury directive. These included reduced local trips, car hire and booking less expensive classes of flights.
(5)
Repairs and maintenance - The significant part of expenditure results from the required office alterations to accommodate additional staff members and pressure cleaning of the basement.
(6)
Professional fees - The main reason for the over-expenditure in the professional fees was caused by the fashion and furniture sector studies conducted, but not budgeted for the current financial year.
(7)
International marketing - The over-expenditure mainly resulted from the participation of the entity in activities and events at the invitation of the Office of the MEC and Premier. It was essential for the entity to participate as these activities were aligned to its strategic initiatives. These also presented the entity with the opportunity of marketing KwaZulu-Natal as a premier destination for investments. Examples include Russia missions, German, Zimbabwe at subsidised costs.
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Figures in rand 2014/2013
2014
2013
(8)
Inward mission - The inward mission costs were not fully used as other events for hosting of foreign investors were done in-house hence savings were recorded.
(9)
Export promotion - The increase in costs for export promotion was attributable to the demand in international and local export exhibitions. Additional costs incurred by EDPU were a result of the increased prices of exhibition stands and designs.
(10) Marketing and communication - The over-expenditure in the marketing and communications budget is due the costs relating to entity’s participation in the Hotel Investment Conference in Africa (HICA) as well as increased costs in hosting the Durban July and the East Coast Radio Gibbs Breakfast. All three activities are huge marketing platforms for the province.
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Table of Acronyms
AFS
Annual Financial Statements
AG
Auditor-General
AIDS
Acquired Immune Deficiency Syndrome
APP
Annual Performance Plan
ASB
Accounting Standards Board
BAC
Bid Adjudication Committee
BBBEE
Broad-Based Black Economic Empowerment
BBQ
Black Business Quarterly
BEC
Bid Evaluation Committee
BEE
Black Economic Empowerment
BPO
Business Process Outsourcing
BREU
Business Retention and Expansion Unit
BRIC
Brazil, Russia, India and China
BRICS
Brazil, Russia, India, China and South Africa
BSC
Bid Specification Committee
CEO
Chief Executive Officer
CFO
Chief Financial Officer
CPT
Cape Town
DDI
Domestic Direct Investment
DEDT
Department of Economic Development and Tourism
DIPA
Durban Investment Promotion Agency
DIRCO
Department of International Relations and Co-operation
DRC
Democratic Republic of Congo
DTI
Department of Trade and Industry
DTP
Dube Trade Port
EAP
Employee Assistance Programme
ECR
East Coast Radio
EDPU
Export Promotion and Development Unit
EIA
Environmental Impact Assessment
EMIA
Export Marketing and Investment Assistance
ESID
Effective States and Inclusive Development
EU
European Union
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112
FACIM
Feira Agro-Pecuaria, Comercial e Industrial de Mocambique
FDE
Finance Director Europe
FDI
Foreign Direct Investment
FIB
Feira Internaรงional de Benguela
FILDA
Feira Internaรงional de Luanda
FMPPI
Framework for Managing Programme Performance Information
GAAP
Generally Accepted Accounting Practice
GDP
Gross Domestic Product
GRAP
Generally Recognised Accounting Practice
HICA
Hotel Investment Conference Africa
HIV
Human Immunodeficiency Virus
HR
Human Resources
HRBU
Human Resources Business Unit
ICT
Information Communications Technology
IDZ
Industrial Development Zone
IEH
Industrial Economic Hub
IESS
India Engineering Sourcing Show
IGRAP
Interpretations of the Standards of Generally Recognised Accounting
Practice
IPA
Investment Promotion Agency
IPAP2
Industrial Action Policy Plan 2
IT
Information Technology
JETRO
Japan External Trade Organisation
JHB
Johannesburg
JSE
Johannesburg Stock Exchange
KM
Knowledge Management
KSIA
King Shaka International Airport
KZN
KwaZulu-Natal
KZNTI
KwaZulu-Natal Tooling Initiative
LAC
Latin America and the Caribbean
M&A
Mergers and Acquisitions
MCU
Marketing and Communications Unit
MEC
Member of the Executive Committee
MOU
Memorandum of Understanding
MSc
Masters in Science
NAMEC
National Association of Manufacturers in Electronic Components
NDP
National Development Plan
NGP
National Growth Plan
OPIC
Overseas Private Investment Corporation
OSM
Outward Selling Mission
PAA
Public Audit Act
PFMA
Public Finance Management Act
PGDP
Provincial Growth and Development Plan
PGDS
Provincial Growth and Development Strategy
PhD
Doctor of Philosophy
(Pty) Ltd
Proprietary Limited
PUM
Programma Uitzending Managers
RAKFTZ
Ras al Khaimah Free Trade Zone
RBIDZ
Richards Bay Industrial Development Zone
ROI
Return on Investment
SA
South Africa
SADC
Southern African Development Community
SAITEX
South African Trade Exhibition
SANEDI
South African National Energy Development Institute
SAOGA
South African Oil and Gas Association
SARS
South African Revenue Service
SCM
Supply Chain Management
SETA
Sector Education and Training Authority
SEZ
Special Economic Zone
SITF
Swaziland Trade Fair
SWOT
Strengths, Weakness, Opportunities, Threats
TAF
Technical Assistance Fund
TETA
Transport Education and Training Authority
TIKZN
Trade & Investment KwaZulu-Natal
TKZN
Tourism KwaZulu-Natal
TNCs
Trans National Companies
TOR
Terms of Reference
UAE
United Arab Emirates
UK
United Kingdom
UNCTAD
United Nations Conference for Trade and Development
USA
United States of America
WGC
World Golfers Championship
WTO
World Trade Organisation
ZITF
Zimbabwe International Trade Fair
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Notes
114
Notes
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Notes
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Trade & Investment KwaZulu-Natal Annual Report 2013/14
Durban Office Trade & Investment House, 1 Arundel Close Kingsmead Office Park Durban, 4001, South Africa PO Box 4245, Durban, 4000 +27 (0) 31 368 9600 +27 (0) 31 368 5888 info@tikzn.co.za www.tikzn.co.za Gauteng Office 99 George Storrar Avenue Groenkloof, Pretoria +27 (0) 12 346 4386/6763 +27 (0) 86 501 0848/1788 info@tikzn.co.za www.tikzn.co.za