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Presentation to the Select Committee on Public Services

By

Lindikhaya Mpambani

Michael Rakgogo

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1.1. IntroductionIntroduction

• Servcon has stopped operations in September 2009 as it is closing down.

• Since the cessation of operations, there were closure dedicated quality control activities that have been undertaken up until August 2010.

• To date most of the operations relate to the portfolio management of the original Servcon Mandate.

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Annual Report for 2009/10 Financial Annual Report for 2009/10 Financial PeriodPeriod

Presentation Structure

1. Audit Opinion

2. Emphasis of Matters.

3. Annual Financial Statements.

4. Performance Information

5. Original Portfolio Management.

6. Closure Report.

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Audit OpinionAudit Opinion

• Our Financial statements remain unqualified since formation of the company in 1996.

• There were only eight items raised in our management letter and were all resolved by end of 2010 financial period.

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Emphasis of MattersEmphasis of Matters

• Matter were raised by the auditors include:

– Going Concern Aspect– Prior Period error

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Going Concern

– We note that as per the instruction of the Office of the Minister the Servcon board of directors ceased operations and proceeded to close the company.

– We are thus finalizing the closure of Servcon and therefore the auditors needed to draw to the attention of users of Financial Statements this fact.

Periodic Error

- The entity was declare a income tax paying entity by SARS, and then the adjustments for prior years were

done accordingly

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Performance Original Portfolio Performance Original Portfolio

• Over a period of 13 years 33 276 properties were satisfactorily resolved/normalized, leaving only 61 to be finalized.

• Should the some of the 61 properties remain outstanding at the time of closure, they same shall be transferred to National Human Settlements Department for management at that level.

Performance InformationPerformance Information

PROVINCE TOTAL NEDBANK SAAMBOU / FNB

ABSA

Eastern Cape 1 1 0 0

KZN 4 1 3 0

FREE STATE 2 0 2 0

MPUMALANGA 0 0 0 0

GAUTENG 42 23 17 2

WESTERN CAPE 12 12 0 0

TOTAL 61 37 22 2

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Performance InformationPerformance InformationGOAL KEY

PERFORMANCE INDICATOR

TARGET PERFORMANCE RESULTS

REASONS FOR VARIANCE

Normalization/regularization of Gauteng Housing Portfolio post 1994

Number of properties visited to determine ownership

0 9 580 Target exceeded

Number of houses rectified

1 800 34 608 Target exceeded

Number of properties revisited for regularization

80 000 12 097 The Project was stopped due to company closure

Number of properties regularization

120 000 0 The Project was stopped due to company closure

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GOAL KEY INDICATOR

TARGET PERFORMANCE RESULTS

REASON FOR VARIANCE

NORMALIZATION/REGULARIZATION FOR EASTERN CAPE HOUSING PORTFOLIO POST 1994

NUMBER OF PROPERTIES VISITED TO DETERMINE OWNERSHIP

0 8 457 The project was stopped due to Company closure

Number of properties visited for regularization

33 739 23 637 The project was stopped due to Company closure

Number of properties rectified

67 876 0 The project was stopped due to company closure

Normalization NDPW properties

Number of properties visited-testing ownership and compliance lease agreements

24 000 0 The project was stopped due to company closure

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Annual Financial StatementsAnnual Financial StatementsBALANCE SHEET 2010

ASSETS 325 898 683Property Plant and Equipment 2,138,255

Other Financial Assets 127,025,464

Deferred Tax 4,586,086

Trade and other receivables 178,434,948

Prepaid Expenses 283,646

Cash and cash equivalents 13,430,284

LIABILITIES 164,480,609Tax Payable 44,540,447

Trade Payables 80,176,839

Financial Liability and Provisions 39,763,323

ASSETS EXCEED LIABILITIES BY 161,418,074

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Annual Financial StatementsAnnual Financial StatementsINCOME STATEMENT 2010

Revenue 194,783,955

Other Income 2,318,817

Operating Expenses (194,925,863)

Operating Loss 2,176,909

Investment Revenue 3,014,437

Finance costs (5,039,899)

Profit before Tax 151,447

Tax Expense (1,256,506)

LOSS FOR THE YEAR (1,105,059)

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Status of closureStatus of closure• As indicated above, we have ceased

operations at the end of September 2009.

• We remain in possession of land parcels and one building which will be sold to the public through the competitive bids as guided by Treasury Regulations

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• We have given notice to our landlord terminating our lease as at the end of November 2011.

• With effect from the 1st December 2011, we moved to the NDHS offices to finalise outstanding issues.

• We continue to receive queries/complaints from communities who either were never part of the original portfolio and/or if they were in the portfolio they were rehabilitated and then taken off the portfolio.

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• We still have less than 300 title deeds that need to be handed over to the beneficiaries, we thus are waiting for the conveyancers to complete the process.

• Once our liabilities are settled we will then follow the PFMA guidelines to delist the entity from Treasury and apply to the court - through the Minister to liquidate the company - then would de-register Servcon with Companies and Intellectual Property Commission (CIPC)

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• We thereafter would apply to the court - through the Minister to liquidate the company.

• We then would de-register Servcon with Companies and Intellectual Property Commission (CIPC).

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Thank You