ANNUAL REPORTANNUAL REPORT 2017/2018 KWAZULU-NATAL AGRIBUSINESS DEVELOPMENT AGENCY Tel: +27 33 347 8600 • Fax: +27 33 347 0913 Email: [email protected] • Web: Private Bag X01

ANNUAL REPORT2017/2018 KWAZULU-NATAL

AGRIBUSINESS DEVELOPMENT AGENCYTel: +27 33 347 8600 • Fax: +27 33 347 0913

Email: [email protected] • Web: www.ada-kzn.co.zaPrivate Bag X01 • Montrose • Pietermaritzburg • 3202

5 Cascades Crescent • Cascades Office Park Montrose • Pietermaritzburg • 3202

CPW Printers 20017039

A G R I B U S I N E S S D E V E L O P M E N T A G E N C Y A N N U A L R E P O R T 2 0 1 7 / 2 0 1 8

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TABLE OF CONTENTS1. PART A – GENERAL INFORMATION .......................................................................................... 21.1 Public Entity’s General Information ...........................................................................................31.2 List of abbreviations/acronyms .................................................................................................41.3 Foreword by the Executive Authority ........................................................................................51.4 Foreword by the Chairperson ....................................................................................................81.5 Acting Chief Executive Officer’s Overview ...............................................................................101.6 Statement of responsibility and confirmation of the accuracy of the annual report ..............12

• Board of Trustees ...............................................................................................................13• Executive and Management Committee ...........................................................................14

1.7 Strategic overview ...................................................................................................................151.8 Legislative and Other Mandates ..............................................................................................151.9 Organizational Structure ..........................................................................................................17

2. PART B – PERFORMANCE INFORMATION ............................................................................... 182.1 Auditor-General’s Report: Predetermined Objectives ............................................................192.2 Situational analysis .................................................................................................................192.3 Strategic Outcome-Oriented Goals ........................................................................................252.4 Performance information by programmes ..............................................................................272.5 Revenue collection ..................................................................................................................392.6 Capital investment ...................................................................................................................40

3. PART C – GOVERNANCE ......................................................................................................... 413.1 Introduction .............................................................................................................................423.2 Portfolio Committee ................................................................................................................423.3 Executive Authority .................................................................................................................423.4 The Accounting Authority/ The Board .....................................................................................433.5 Risk Management ....................................................................................................................493.6 Internal Control Unit ................................................................................................................493.7 Internal Audit and Audit Committees ......................................................................................503.8 Compliance with laws and regulations ....................................................................................513.9 Fraud and Corruption ..............................................................................................................513.10 Minimizing Conflict of Interest ................................................................................................52 3.11 Code of conduct ......................................................................................................................53 3.12 Health, Safety and Environmental Issues ................................................................................53 3.13 Company Secretary .................................................................................................................53 3.14 Social Responsibility ................................................................................................................54 3.15 Audit and Risk Committee Responsibility for the Financial Year ended 31 March 2018 ........54

4. PART D - HUMAN RESOURCE MANAGEMENT......................................................................... 594.1 Introduction .............................................................................................................................604.2 Human Resources oversight Statistics .....................................................................................61

5. PART E - ANNUAL FINANCIAL STATEMENTS ........................................................................... 655.1 Report of the Auditor General .................................................................................................665.2 Annual Financial Statements ...................................................................................................71


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PART AGENERAL INFORMATION


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1. PART A: GENERAL INFORMATION1.1 Public Entity’s General Information

REGISTERED NAME: AGRIBUSINESS DEVELOPMENT TRUST

REGISTERED NUMBER: IT 2041/1999

PHYSICAL ADDRESS

5 CASCADES CRESCENT

CASCADES OFFICE PARK

MONTROSE

PIETERMARITZBURG

3202

POSTAL ADDRESS

PRIVATE BAG X01

MONTROSE

PIETERMARITZBURG

3202

3202

TELEPHONE NUMBER: +27 33 347 8600

FAX NUMBER: +27 33 347 0913

EMAIL ADDRESS: [email protected]

WEBSITE ADDRESS: www.ada-kzn.co.za

EXTERNAL AUDITORS: OFFICE OF THE AUDITOR- GENERAL SA

BANKERS: ABSA BANK

COMPANY/BOARD SECRETARY: SIMANGELE MBATHA


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1.2 List of abbreviations/acronyms

ADA/The Agency/ Entity

Agribusiness Development Agency

AGSA Auditor-General of South AfricaAPAP Agricultural Policy Action PlanAPP Annual Performance PlanAU African UnionAUC African Union CommissionBBBEE Broad-Based Black Economic EmpowermentCAADP Comprehensive Africa Agriculture Development ProgrammeCASP Comprehensive Agricultural Support ProgrammeCOGTA Co-operative Governance and Traditional AffairsDAFF Department of Agriculture, Forestry and FisheriesDARD Department of Agriculture and Rural DevelopmentDDG Deputy Director GeneralDEDTEA Department of Economic Development, Tourism and Environmental AffairsDRDLR Department of Rural Development and Land ReformEXCO Executive CommitteeIPAP Industrial Policy Action PlanKZN KwaZulu-NatalMANCO Management CommitteeMEC Member of Executive CouncilMPL Member of ParliamentMTSF Medium-Term Strategic FrameworkNDP National Development PlanNEPAD New Partnership for Africa’s DevelopmentNGP New Growth PathOHS Occupational, Health and SafetyPEMP Poverty Eradication Master PlanPFM Public Finance Management ActPGDS Provincial Growth and Development StrategyPGDP Provincial Growth and Development PlanSABS South African Bureau of StandardsSCM Supply Chain ManagementSCOPA Standing Committee on Public AccountsWEP Women Empowerment Programme


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1.3 Foreword by the Executive Authority

The central objective and mission of government’s developmental agenda is to set the country on a higher and sustainable trajectory of economic growth. Agribusiness/Agro-processing is one of the main generators of employment and income worldwide. Agribusiness is characterized by a value chain approach that addresses constraints from “farm to shelf or feed to fork”. The implications of this approach for the Agribusiness Development Agency (ADA), which is still in its infancy stage, are vast. One of the challenges facing entrant commercial farmers in the country today is getting the farms to produce enough quantities at the level of quality demanded by the market. It is for this reason that ADA’s main strategic focus in the first two years had been on increasing productivity of farms.

In the year under review ADA has had to look at how best to pursue its mandate in view of the current realities on the ground in terms of funding and budget cuts, while ensuring its vision for agribusiness development in the Province is upheld. ADA has partnered with the New Partnership for Africa’s Development (NEPAD) and has used its agenda as a pivotal sector for resolving social ills in the Province. NEPAD, which was set up by the African Union (AU), views agriculture as the sector offering Africa the greatest potential for alleviation of poverty and inequality. NEPAD has valued the input which ADA has offered and the role which they have played in ensuring that communities are reached and funds distributed accordingly to alleviate poverty and hunger.

PartnershipsPartnerships are a fundamental driving force for increased agricultural investment. The year 2017/18 saw ADA strengthening and consolidating its partnerships with National and Provincial departments, sister public Entity’s and national and international organizations

Mr Themba Mthembu (MPL)

MEC: Department of Agriculture and Rural Development


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Projects and External InfluencesThe implementation of provincial catalytic projects and interventions will serve as a springboard towards the implementation of these revised business models. Currently in the majority of African countries agribusiness and agro-industrial sectors, demand outstrips supply. According to the African Union Commission (AUC) statistics on trade and markets, demand for agricultural commodities and high-value products from Africa is expected to grow from $50 billion in 2000 to $150 billion by 2030. In KwaZulu-Natal (KZN), in particular, the agricultural sector is of key strategic importance given its comparative advantage with regards to land and its labour resources.

The Provincial Growth and Development Strategy 2016 (PGDS) has identified key strategic interventions to facilitate the unleashing of agricultural potential in the Province, ADA is a key driver in realizing the objectives of the PGDS. However, achieving this requires strengthening of collaboration and partnerships with key stakeholders. We are encouraged by the level of support that ADA has received from a number of stakeholders and look forward to productive future engagements and interactions.

ChallengesThe Entity has faced many challenges during this year in terms of staff retention and recruitment. However, they have been able to deliver successes towards their goals and objectives during the 2017/18.

Mr. Carlos Boldogh, who is the Deputy Director General (DDG) at the KZN Department of Agriculture and Rural Development (DARD), was seconded to ADA in October 2017 to assist with these challenges. This secondment has been extremely challenging for the Acting Chief Executive Officer (ACEO) but I am proud to mention that he has certainly added strength to the Entity and has helped to reach its targets as well as improve staff morale. Another challenge was the resignation of the Chief Financial Officer in September 2017, however recruitment for this very important position has commenced and we hope to have it filled as soon as possible.

AchievementsAlbeit that the entity has faced so many challenges I am proud to announce that they have received an unqualified audit opinion for the year under review. This is a remarkable improvement from the qualified opinion received for the 2016/17 financial year. Corporate GovernanceIn September 2017, we saw the appointment of a new Board with a few of the old members continuing to serve as members. Dr. Ngidi, who has been a part of the ADA Board of Executive Members for 3 years, was appointed as the Chairperson.


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ConclusionMay I take this opportunity to thank Dr. Ngidi, as well as members of the Board and its committees, the Acting Chief Executive Officer, Mr. Boldogh and all staff of ADA for their unrelenting support and commitment towards the realization of our mandate.

I thank you,

………………………………...........… Mr Themba Mthembu (MPL)MEC: Department of Agriculture and Rural Development


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1.4 Foreword by the Chairperson

It is my pleasure to present the 2017/18 Annual Report for the Agribusiness Development Agency (ADA).

In 2017/18, ADA faced many challenges which had a direct link to the performance of the Entity in reaching its deliverables. One of the factors which contributed to this was the ongoing drought which saw many parts of our Province being crippled in terms of agriculture. ADA faced these drought challenges this year with enthusiasm, optimism and applied technical skills. One of ADA beneficiaries affected by the drought was the Ma Ande project, situated in the greater Kokstad area. Their main source of income is the production of milk which went down from 23 litres to 5 litres per day, per cow. With strategic focus and technical advice, ADA is now working with Ma Ande projects to increase production and ensure sustainability to survive the effects of the drought on the project.

Our FinancialsThe financial year 2017/18 again followed a year which faced major changes in the sector and brought about many challenges that hindered the Enity from reaching some of its set targets. This was mainly due to the cancellation of three very important funder contracts which impacted on the financial support for many of our projects and in turn affected production, income and ultimately, the economy as a whole.

The South African economy was negatively impacted by the global economic slowdown with our growth rate predicted to be as low as 1%, and interest rates on an increase cycle to stem inflationary pressures. There has also been a call by Treasury for financial prudence by State-Owned Enterprises and Agencies. Notwithstanding the above, the Entity again ensured that its beneficiaries had opportunities to, not only survive during the catastrophe but to thrive despite operating in a sector with unprecedented challenges of late and we are committed to making a mark in the rise of the Global GDP.

Agribusiness plays a vital role in economic development, contributing to a major portion of the GDP, employment, and foreign exchange earnings in many developing countries. This is particularly

Dr ME Ngidi

Chairperson of the Board


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true in Africa and KwaZulu-Natal in particular, where agriculture accounts for approximately 25 percent of the country’s GDP, and 70 percent of employment. ADA is proud to be part of helping the economic growth by contributing to the agribusiness sector in such an impactful way.

Our Accomplishments With regards to the impact that the Entity has had on Women and Youth support, ADA launched its very own forum for Women and Youth Programmes in 2017/18. This programme has developed to such that ADA sponsored 11 Women and Youth farmers last year to attend an investors conference, which opened doors for 3 of those projects to receive funding and obtain contracts to supply services.

Some of ADA’s achievements in the year under review is the completion of the industrial kitchen for Mthethwa Processing, which is a Women and Youth project which we are very proud of. This project now supplies companies like Woolworths and the local Spar, meeting all standards for service, Earth works at Celokuhle as precursor for the Dairy Parlour. We commenced with product analysis for beneficiaries to access retail markets and sent beneficiaries on an SABS Programme, Phase 2, of which they completed and passed, and are now market ready.

Finally, our biggest achievement was receiving an unqualified audit opinion for the year under review. I wish to congratulate all those which helped achieve this unqualified audit opinion and applaud you for the hard work and dedication given to achieve this opinion.

Our LeadershipI wish to extend thanks to the Honourable Minister Themba Mthembu, the Portfolio Committees on Agriculture, the team at the Department of Agriculture and Rural Development, and the organisation’s clients (our beneficiaries) for their continued support and assistance during the period under review.

I would furthermore like to thank the Board and the committees, who have recently joined ADA and have already shown such enthusiasm and vigour to serving as Members. Your unwavering support and dedication in ensuring that the Entity succeeds is truly appreciated.

All that remains for me to do is to extend my gratitude to the staff and management of ADA for their commitment and drive to ensure that ADA delivers on its mandate even during difficult times.

Sincerely,

………………………………......... Dr ME NgidiChairperson of the Board


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1.5 Acting Chief Executive Officer’s Overview

It gives me great pleasure to present the Annual Report for the Agribusiness Development Agency (ADA) for the 2017/18 financial year.

ADA was born out of the need to rescue a situation of unsatisfactory performances within the land reform Programme, to correct the wrongs of the past and is indeed required for socio-economic development particularly to pursue the Provincial Growth and Development Strategy (PGDS) goals and objectives.

With this mandate in hand, ADA has strived to achieve its targets and goals set out for the year under review. In 2016/17 we launched our new strategic plan as we changed directions from Primary production to that of focusing on Agro processing within our Province. This was a major challenge as we then realized that targets had to be adjusted to suit this new direction and operational performance plans aligned as such. This had a major effect on the ADA budget and Treasury budget cuts did not work in our favor.

ADA faced many challenges in 2017/18 due to these budget cuts which impacted directly on the achievements and service delivery for the year 2017/18. However, we were still able to see a bigger improvement towards achieving our targets during this financial year in comparison to 2016/17.

In October 2017, I was seconded by the Department of Agriculture and Rural Development to act as the Chief Executive Officer for ADA until a suitable candidate is sourced to take up the position. The secondment happened soon after the MEC for DARD appointed a new Board to serve for a term of 18 months. With these two major changes taking place simultaneously it left ADA with a “sink or swim” mindset.

Albeit that the Entity has faced so many changes and challenges we have continued to work hard and staff members have shown dedication to achieving our 2017/18 targets as indicated in our annual performance plan. At the epicenter of the Agribusiness Development Agency’s mandate is the development of farmers and entrepreneurs for agro processing in the Province in order to achieve a more competitive, equitable and sustainable agricultural sector. ADA has realized this mandate through input support, improved quality ensuring that standards are met and training done to achieve these standards, broadened participation in the value chain, developing a comprehensive Capacity

Mr Carlos Boldogh

Acting Chief Executive Officer


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Building Programme for farmers and a well financially supported Infrastructure Programme. ADA has demonstrated that it is possible to realize these objectives by making positive strides towards removing constraints facing the agro processing/agribusiness sector although we were faced with financial constraints.

The year 2017/18 has been a more productive year and this was due to the change in direction with a more focused and aligned strategic document. The Entity achieved in different areas viz. Women and Youth Programme, the continued training of both direct and non-direct beneficiaries in agro-processing and standards compliance through our partnership with Department of Agriculture, Forestry and Fisheries (DAFF) and the South African Bureau of Standards (SABS), the completion of the industrial kitchen for Mthethwa Processing and the commencement of the analyzing of products for access to retail market. These are but a few achievements to mention.

ADA received a qualified audit opinion for the 2016/17 financial year and it gives me great pleasure to announce that for the year under review we have received an unqualified audit opinion with the Auditor General taking considerable time to congratulate ADA for the achievement and also to point out that we are a step away from receiving a clean audit opinion. I would like to thank Management and staff members for their hard work and dedication which helped achieve this opinion.

Notwithstanding these achievements, more work still needs to be done towards achieving our mandate. We are continually positioning ourselves as agents for change by influencing the policy landscape of our country through our executive authority and by drawing on the lessons learnt during this time of implementation and development.

I wish to convey my sincere gratitude to the Board of Trustees for their continued support and leadership, my colleagues on the Executive Committee and most especially the Management and Staff of ADA for their relentless support and dedication towards assuring the realization of our mandate.

Lastly, I would like to thank our partner, the Department of Agriculture and Rural Development, under the leadership of honorable MEC, Mr Themba Mthembu, through your guidance we are able to thrust forward into greater heights.

With sincere thanks,

………………………………............... Mr Carlos BoldoghActing Chief Executive Officer


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1.6 Statement of responsibility and confirmation of the accuracy of the annual report

To the best of my knowledge and belief, I confirm the following:

All information and amounts disclosed in the annual report is consistent with the annual financial statements audited by the Auditor General.

The annual report is complete, accurate and is free from any omissions.

The annual report has been prepared in accordance with the annual report guidelines for Schedule 3C of 2017 as issued by National Treasury.

The Annual Financial Statements (Part E) have been prepared in the GRAP standards applicable to the Public Entity.

The Chief Executive Officer is responsible for the preparation of ADA’s performance information, annual financial statements and for the judgments made in this information.

The Chief Executive Officer is responsible for the establishing and implementing a system of internal control designed to provide reasonable assurance as to the integrity and reliability of performance information, the human resources information and the annual financial statements.

The external auditors are engaged to express an independent opinion on the annual financial statements. In our opinion, the annual report fairly reflects the operations, the performance information, the human resources information and the financial affairs of the Entity as per the strategic and annual performance plan of ADA for the financial year ended 31 March 2018.

Yours faithfully

…………………………………………….Acting Chief Executive OfficerName: Mr. Carlos BoldoghDate: 31 August 2018

…………………………………………….Chairperson of the BoardName: Dr. ME NgidiDate: 31 August 2018


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BOARD OF TRUSTEES

Dr Mnqobi Edwin NgidiChairperson of the Board

Advocate Khayelihle Prince Thango

▪ Board Member ▪ Human Resources & Remuneration

Committee Chairperson

Mr. Richard DladlaBoard Member

Ms Preetha DabideenBoard Member

Ms Thandeka Ntshangase ▪ Board Member ▪ Projects & Finance Committee

Chairperson

Mr Aubrey Greyling MthembuBoard Member

Mr Mthandeni Vitalis KhumaloBoard Member

Mr Nhlanhla KhambuleBoard Member

Ms Simangele MbathaCompany/Board Secretary

Ms Nonhlanhla Petronella Linda

Board Member


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MEMBERS OF THE EXECUTIVE COMMITTEE

MEMBERS OF THE MANAGEMENT COMMITTEE

Mr Carlos BoldoghActing Chief Executive Officer

Ms Noluthando Mkhathini

Acting Chief Financial Officer

Mr Themba DuzeSpecialist: Planning, Monitoring

and Evaluation

Ms Rechi DlaminiActing Chief of Operations

Mr Mustaq HoosenProject Manager

Cluster 2

Ms Zodwa MazibukoProject Manager

Cluster 3

Ms Sibongile MyakaSenior Internal Auditor

Ms Linda DladlaDeputy Supply Chain

Manager

Ms Marsha NelsonDeputy Human Resources

Manager

Mr Bongani NtimbaChief Information Officer

Mr Sthembiso Ngubane

Risk and Office Manager


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1.7 Strategic Overview

OUR VISION“A diverse, deracialized, prosperous, and sustainable agribusiness sector in KwaZulu-Natal.”

MISSION STATEMENTADA strives to promote, establish, facilitate and support the growth of black-owned and managed agricultural enterprises along agricultural value chains in KwaZulu-Natal through partnerships with individuals, communities, private sector and other public sector institutions in order to achieve a transformed Agribusiness Sector in KZN.

OUR VALUESOrganisational values define the key principles and associated behaviours that are required by employees when executing the strategy and functions of the organisation and state what the clients, customers and stakeholders can expect from the organisation.

The values of ADA are:-

• IntegrityWe commit ourselves to ensuring our purpose, practices and values are ethically sound, at all times.

• AccountabilityWe take accountability for all our actions in dealing with our clients and stakeholders and are mindful of possible consequences emanating from our decisions

• ExcellenceWe commit to providing quality services and products to all our clients at all times consistent with the spirit of Batho-Pele.

• InnovationWe commit to strive for continuous improvements through innovation and promoting learning.

ADA will embed these values through demonstrated leadership, programmes and systems that develop, recognize and reward the supporting behaviours.

1.8 Legislative and Other Mandates

ADA derives its mandates from the following policy and legislative imperatives:

• Cabinet Resolution No. 79 of 29 July 2009 authorizing the establishment of an Entity to support entrant commercial black farmers

• The National Policy Governing the Comprehensive Agricultural Support Programme (CASP)

• Land Reform Policy Guidelines and the Department of Rural Development and Land Reforms, Land Reform Recapitalization Programme


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• Amended Deed of Trust for the KwaZulu-Natal Agricultural Development Trust (trading as the Agribusiness Development Agency)

• Cabinet Resolution No. 245 of 11 November 2009 transferring the KwaZulu-Natal Development Trust from the Department of Agriculture, Environmental Affairs and Rural Development to the Department of Economic Development

Therefore, ADA’s mandate in this regard is “To provide agri-business support services to entrant black commercial farmers who have acquired land through the Government’s Land Reform Programme and on a private basis”.

Further to the above, ADA is guided by the following other legislations, strategic documents and policies in implementing its mandate:

• The Constitution of the Republic of South Africa, Act No. 108 of 1996

• Public Finance Management Act, No. 1 of 1999

• National Treasury Regulations Gazette 23463

• Labour Relations Act, No. 66 of 1995

• Companies Act, No. 3 of 2011

• Occupational Health and Safety Act, No. 85 of 1999

• The National Development Plan (NDP) , 2030 – “Chapter 6: An integrated inclusive rural economy”

• Medium-Term Strategic Framework (MTSF) – “Outcome 7: Vibrant, equitable and sustainable rural communities and food security for all”

• Nine Point Plan – “Number 2: Revitalization of Agriculture and Agro-processing value chain”

• New Growth Path (NGP)

• Industrial Policy Action Plan (IPAP)

• Agricultural Policy Action Plan (APAP)

• Poverty Eradication Master Plan (PEMP)

• Provincial Growth and Development Plan (PGDP)

◦ Strategic Objective 1.1 of Goal 1: Develop and promote the agricultural potential of KZN

◦ Strategic Objective 2.2 of Goal 2: Support skills development to economic growth

◦ Strategic Objective 6.4 of Goal 6: Promote participative, facilitative and accountable governance


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1.9 Organizational Structure


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PART BPERFORMANCE INFORMATION


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2. PART B: PERFORMANCE INFORMATION2.1 Auditor-General’s Report: Predetermined Objectives

The AGSA currently performs the necessary audit processes on the performance information to provide a limited assurance in the form of an audit conclusion. The audit conclusion on the performance against predetermined objectives is included in the audit report.

Refer to page 66 to 70 of the Auditors report, published in section 5.1 which forms part of Part E of this report.

2.2 Situational analysis

2.2.1 Service delivery environmentThe South African agricultural and agro-processing industries as a whole are currently facing a mixed bag in terms of current and future prospects. Following the severe drought of 2015 and 2016, it is clear that despite the all-time record harvests being achieved for maize and soybeans in the current season, the recovery from the drought in the summer rainfall region will take more than one season. This is especially true in the livestock sector, where herd numbers will have to be rebuilt and a recovery in pasture quality takes time. While the summer rainfall regions are at different stages of recovery, the situation in the Western Cape remains dire with major long-term impacts due to severe restrictions on the availability of water for irrigation of high-value export industries.

In the informal sector, there has been a general increase in economic activity, with approximately 300 000 more households that are involved in crop farming on less than 20 hectares since 2010. This translates to an additional 75 000 hectares added in rural areas, boosting supplies into informal value chains. However, these households have also been severely affected by the drought and apart from the farmers who are linked to well-structured support programs, the recovery from the drought will take some time. KZN had a percentage dam level of 61.3% in 2015 with storage capacity of 2 862 million cubic meters; which further declined to 42.8% in September 2016 with less than half storage capacity. This dwindling water supply had a serious effect for consumption purposes as well as crop and animal production.

Looking ahead, one has to consider the outlook for the South African agricultural sector in the global context. The world is awash in grain and oilseed stocks. The USA, along with South America, produced above average crop volumes on the back of higher acreage, but also above average yields. This resulted in soft commodity prices, with global prices hovering near 10-year lows for most of 2015 and 2017. In South Africa, during 2016, the impact of low global soft commodity prices was negated by the combination of drought impact and a rapidly weakening and highly volatile Rand. During 2017, however, reality set in with much improved weather conditions in the summer rainfall areas along with a rapidly strengthening Rand. The result is a return to export parity levels and South Africa catching up with the global lower price cycle.


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Agribusiness is regarded as the sector with the most commercial potential in Africa. Since 2003 agriculture has been on the New Partnership for Africa’s Development (NEPAD) agenda as a pivotal sector for resolving social ills in the continent. NEPAD, which was set up by the African Union (AU), views agriculture as the sector offering Africa the greatest potential towards alleviation of poverty and inequality. Africa’s main agricultural policy, the Comprehensive Africa Agriculture Development Programme (CAADP), provides a set of principles and broadly-defined strategies to help countries review their agricultural sector and identify investment opportunities which have the best impact on returns. The future of agriculture in Africa remains positive and it is therefore vital that the sector constantly look for opportunities to unlock and drive growth into the rest of Africa. The majority of African countries are heavily dependent on agriculture, as it accounts for more than 30% of GDP and 60% of employment in Africa.

In South Africa, the Western and Eastern Cape in particular, producers of all agricultural products are holding their breath to see whether the current season will provide sufficient rains. This, however, could have high potential for areas like KwaZulu-Natal where exports to places like the Western and Eastern Cape will be on the rise. The effects of drought in the Province was severely felt with the major contraction of 14% in 2015 which contributed to the decline on annual growth rate of the primary sector in KZN.

Given the continuation of the drought in these areas, grain, livestock, fruit, vegetable and dairy producers are facing severe pressure and the risk of significant production failures. Even though most horticulture crops as well as other long terms crops showed significant growth over the past decade, it is expected that these industries will face severe pressure in the short-term due to the lack of water, but also the costs associated with water and electricity. Expectations are therefore, that growth is set to slow down in these industries, at least until water availability has returned to normal.

Despite various challenges such as drought, land reforms and global economic uncertainty, it is fortunate that South Africa still remains the most advanced agricultural economy in Africa. In the 2016 Budget Speech, Minister Pravin Gordhan mentioned that South Arica would be focusing on increasing productivity in the agricultural sector in order to create greater economic participation. This was followed by the Land Bank setting aside R15 billion over three years to expand and develop agro-processing opportunities. The South African government is committed to support both the established and emerging agribusinesses in order to fully exploit the competitive strength of the agricultural sector. The creation of “agricultural hubs” will also enhance food security while investing in infrastructure, storage and distribution, while in a long run mitigate the effects of future droughts.


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The farmers in the Province need to take advantage and fully utilize the existing government funded market infrastructure as indicated in the table below:

Existing Government Funded Market Infrastructure

Facility Nature District

uThungulu Fresh Produce market Fresh Produce (Vegetables) King Cetshwayo

Nkandla Packhouse Fresh Produce (Vegetables) and storage King Cetshwayo

Ixopo Farmers Market Fresh Produce (Vegetables) and storage Harry Gwala

Mkhondeni Fresh Produce Market Fresh Produce (Fruits and Vegetables) and storage and related activities in the fresh produce value chain Umgungundlovu

Mpendle Maize Mill Processing of Maize Mill and storage facilities Umgungundlovu

Jozini Value Adding Centre (JVAC) Fresh Produce (Vegetables) and storage and related activities Umkhanyakude

Mnothophansi Ndumo B Maize Mill Processing of Maize Mill and storage facilities Umkhanyakude

Empangisweni Citrus Fruit Packhouse Citrus Fruit Value Adding Zululand

Ingogo Fresh Produce Market Fresh Produce (Vegetables) and storage and related activities Amajuba

Ilembe Agrihub Vegetable production Ilembe

Asisukume Maize Mill Processing of Maize Mill and storage facilities uMzinyathi

Imbabazane Packhouse Fresh Produce (Vegetables) and storage and related activities uThukela

Bergville Fresh Produce Market Fresh Produce (Vegetables) and storage uThukela

Ugu Fresh Produce Market Fresh Produce (Vegetables) and storage Ugu

Agricultural Potential The agriculture, forestry and fishery sectors are regarded as important to SA’s socio-economic environment.

The agricultural sector is recognised as key to addressing poverty in the Province since the poorest people from KZN live in the rural areas. In spatially locating areas of agricultural potential in the Province emphasis is placed on the need to release latent potential which exists in the land under custodianship of the Ingonyama Trust Board, and the resolution of the land reform initiatives in the Province.

In KZN, agriculture is based on a wide variety of crops; horticulture, forestry as well as animal husbandry. Field crops such as sugarcane and maize are scattered from the southern border of KZN to its northern border. Maize is the most widely grown crop in the country and in the Province. Horticulture sub-tropical fruits, mainly bananas, are produced in the south-coast (Port Shepstone and Port Edward) and pineapples in the north-coast (Hluhluwe). The forestry subsector is one of the strategic economic sectors in South Africa with a significant contribution towards economic growth and job creation.


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The 2015 Strategy for Agrarian Transformation in KwaZulu-Natal (DARD, 2015) reports that the rural population in the Province accounts for 54% of the total provincial population, and therefore makes it one of the most rural Provinces in the country. The mid-year population estimates for 2017 by Statistics South Africa reported KwaZulu-Natal population to be about R11Mil. As a result, there is considerable pressure on the provision of services and infrastructure to the rural parts of the Province. The agricultural sector is seen as a primary driver of the KZN economy, given the strategic advantage that the Province has in terms of land and its natural resources. The Strategy for Agrarian Transformation sets out a detailed approach for the transformation of the agricultural sector in KwaZulu-Natal. The mission statement of DARD is “To promote, through partnerships, sound agricultural practices that promotes to economic growth, food security and advancement of rural communities in KwaZulu-Natal.”

The Department of Rural Development and Land Reform is championing the implementation of the Rural Economic Transformation model which identifies districts as having the highest economic potential to establish agro-processing facilities. The strategic thrust of the model is to develop agri-parks in all the districts in South Africa. This is part of the government’s “Nine Point Plan” that focus on “Revitalizing Agriculture and the Agro-processing Value Chain” through the Agri-parks programme. South Africa refers to Agri-park as a “network innovation system of agro-production, processing, logistics, marketing, training and extension services, located in a District Municipality”.

The Agri-parks comprises of three distinct but interrelated basic components: • The Farmer Production Support Unit• The Agri-hub• The Rural Urban Market Centre

The existence and optimal functioning of the Agri-parks will present great opportunities for the farmers in the Province. The focus will be to create new small-scale producers, create jobs in agro-processing and to develop critical economic infrastructure such as roads, energy, water, technology infrastructure and transportation corridors that will support the agribusiness value chain.

The table below indicates the status of the planned provincial selected Agri-hub sites and identified commodities to benefit KZN, relevant District Municipalities and rural communities:

District Agri-Hubs Commodity

Amajuba Dannhauser Maize, Soya, Groundnuts and Livestock (Poultry, Piggeries, Dairy & Beef)

Ilembe KwaDukuza Vegetables, Sub-tropical fruits and Sugar

Umkhanyakude Umkhuze/Jozini Vegetables, Sugar cane, Groundnuts, Amarula, Cotton and Beef

Umgungundlovu Howick Maize grain/soybeans, vegetables, beef, Poultry (broilers and layers)

Umzinyathi Dundee Beef, Soya, Maize, Vegetables and livestock (goats)

Zululand Vryheid/ Coronation Livestock (Beef & Piggery), Grains (Maize/Soya) & Vegetables


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District Agri-Hubs Commodity

Ugu Port Shepstone Vegetables, Macadamia, Subtropical fruit, Essential oils and Timber

Harry Gwala Ixopo Maize, Timber, Dairy, Vegetables, Sheep and Beef

King Cetshwayo Eshowe Vegetables and Livestock (Poultry & Beef)

uThukela Bergville Maize, Dry Beans, Soya Beans and Vegetables

The agricultural sector is expected to create employment opportunities, increase the area under production, increase the value of agricultural contribution to the provincial economy, and provide a support programme for commercial farmer development. According to the Provincial Economic Review and Outlook Report (2016/17). In 2015 the primary sector (agriculture and mining) was the lowest contributor to KZN’s Growth Domestic Product (GDP) at 6.2% compared to the secondary sector (manufacturing, electricity and construction) at 22.8% and the tertiary sector (trade, transport, finance and community services) at 62.1%. It further projected that the primary sector will maintain the same contribution of 4.3% in 2016, 2017 and 2018. According to the Statistics South Africa Community Survey (2016), KZN contributed by 6.3% decline on national agricultural households of 19.1% compared to 2011 figures. The dualistic nature of agriculture in South Africa and KZN implies that it encompasses the subsistence agricultural sector and commercial farming which is still regarded as a major challenge.

Despite the challenges, KZN still has great potential in agriculture production with primary commercial forests in South Africa found in the Province (Sappi and Mondi). On the other hand, the dairy farming based in Dundee is known to have the largest jersey stud in South Africa. Although government is intervening through its programmes in unleashing potential in KZN as one of the goals in the Provincial Growth and Development Plan (PGDP), there is still more to be done. The Action Working Group focusing on agriculture would, however, need to work with commercial agricultural in order to realize the full potential of the sector.

2.2.2 Organizational environment ADA is a Public Entity established by the Provincial Government to provide agribusiness support services to black commercial farmers who have acquired land through the government’s land reform programme and on a private basis. It is geared to the delivery of appropriate services to enable the agribusiness/agro-processing sector to achieve sustainable success through partnerships and innovative knowledge. The Entity applies a client-centred approach, whereby beneficiaries are identified through a process of participation and consultation with government, the private sector and other stakeholders. This leads to the development of support to black commercial farmers, including those who have fallen into financial distress, and manages the delivery of a comprehensive range of services in response to target the farmers’ needs. The Entity provides development support to enterprises involved in large scale agribusiness operations from farming, processing, distribution, manufacturing, packaging and distribution of products.


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ADA recorded some remarkable successes during the year under review, notwithstanding numerous challenges that faced the Entity with regard to lower than usual staff employed. In 2016/17 ADA and DARD finalised the clarification of roles which led the Entity to better position itself to be able to deliver on its mandate. ADA decided to focus more on agribusiness development which added to the success in the performance of the entity. This further gave a clear direction on project choices and project implementation.

The year 2017/18 has been a more productive year due to the change in direction with the full support of the board and its committees. ADA achieved in different areas viz. Women and Youth Programme, the continued training of both direct and non-direct beneficiaries in agro-processing and standards compliance through our partnership with the Department of Agriculture, Forestry and Fisheries (DAFF) and the South African Bureau of Standards (SABS), the completion of the industrial kitchen for Mthethwa Processing, the analysis of products for access to retail market and starting of the new infrastructure projects. These are but a few achievements to mention.

However, ADA continues to suffer from uncertainties in terms of having stable leadership; with the effects of not having a permanent CEO, since the exit of the former CEO in 2013. Despite the efforts made to appoint a permanent CEO since 2014, to date the Entity has still been unable to fill the position. In September 2017, the Entity also experienced the resignation of the Chief Financial Officer. However, they were able to continue to function as normal with the appointment of the current Finance Manager, Ms. Noluthando Mkhathini, to act as CFO in the interim. In October 2017, Mr. Carlos Boldogh, DDG at DARD, was seconded to ADA to act as Chief Executive Officer until the position of CEO is filled. This decision has ensured the smooth running and continuation of the Entity.

The appointment of the new Board came with a boost to staff moral and a sense of certainty of the longevity of the Entity. With the appointment of Project Managers in January 2018, increased hopes for improved service delivery and the achievement of the goals is imminent, come 2020. In the 2017/18 financial year, the Entity experienced budget cuts with the budget being reduced substantially. The funding model used continues to pose a challenge for ADA and projects’ sustainability.

However, as a result of continuous effort and hard work, even while facing these challenges, we are proud to announce that ADA has received a unqualified audit opinion for the year under review.

The Entity continues to focus on implementing the following key focus/Programme areas:

Key Focus Areas/Programmes of ADAThe main thrusts of ADA are the following key services or programmes:• Finance and Administration• Comprehensive Capacity building• Enterprise and Value Chain Development• Infrastructure Development


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Training or Bursaries offered by ADA• We are proud to mention that in the 2017/18 financial year ADA offered bursaries to 2 Master’s

students to complete their studies in the Agricultural/Agro processing fields.

Key policy developments and legislative changesNo policy developments and legislative changes occurred during the 2017/18 financial year

2.3 Strategic Outcome-Oriented Goals

Strategic Outcome-orientated Goal 1 Financially productive and self–sustaining black agribusiness enterprises in the Province

Goal Statement: To expedite the development of 100 successful business oriented Black-owned enterprises throughout the value chain in order to transform and improve the agribusiness sector in the Province by 2020. Progress Made: ADA has achieved 46 of the target of 100 for the development of black-owned enterprises set to be achieved by 2020 twenty five were achieved in 2016/17 and twenty one were achieved in 2017/18 financial years.

Strategic Outcome-orientated Goal 2: Increased incomes along the agribusiness value chain

Goal Statement: To promote and support the development of agribusiness along value chain through investing 70% of the total budget of ADA in income (i.e. turnover, wages, jobs opportunities) inducing developments by 2020.

Progress Made: ADA has achieved 52.1% (R128 451M of R246 394M) of the total budget invested in agribusiness value chain between 2016/17 and 2017/18 financial years to benefit the black-owned enterprises.

Strategic Outcome-orientated Goal 3:Improved market access in the agribusiness sector

Goal Statement: To invest 60% of the total budget of ADA incrementally in the provision of market development and logistics supportive infrastructure in rural KZN by year 2020.

Progress Made: ADA has invested an amount of R96 501 801M between 2016/17 and 2017/18 financial years in the provision of market development and logistics supportive infrastructure. This amounts to 39.1% of the budget of R246 394M to date.


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Strategic Outcome-Orientated Goal 4: Strengthen the capacity of the entrepreneurs, institutions and the agribusiness sector to perform optimally

Goal Statement: To develop a comprehensive capacity building programme with the involvement of stakeholders in the sector for adoption by year 2016

Progress Made: The goal was not reached in 2016/17, however ADA has ensured that capacity building for beneficiaries continues through targeted training programmes and with the support from the existing partnerships

Strategic Outcome-orientated Goal 5: An effective and efficient administration that promotes sound corporate governance and responsive service delivery

Goal Statement: An effective and efficient administration that promotes sound corporate governance and responsive service delivery to achieve 100% of its service delivery targets and consistent clean audit annually

Progress Made: In the financial year 2016/17 ADA received a qualified audit based on the poor reporting processes and oversight of the recording of evidence to show expenditure on projects. In 2017/18 financial year, ADA has placed stringent methods of reporting to ensure evidence is recorded and stored. The service delivery indicators and targets were reviewed for the financial year 2018/19 to ensure that they are realistic and relevant towards achieving the strategic goals and objectives


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2.4 Performance information by programmes

PROGRAMME 1: FINANCE AND ADMINISTRATION

STRATEGIC OBJECTIVES AND ACTUAL ACHIEVEMENTS:

Strategic objectives

Performance Indicator

Actual Achievement

2016/2017

Planned Target

2017/2018

Actual Achievement

2017/2018

Deviation from planned

target to Actual

Achievement for 2017/2018

Comment on deviations

1.1 A fully capacitated human resources able to deliver on its mandate

Number of staff trained 41 30 37 +7

Overachievement was due to the interns who joined ADA during the year who were also trained.

1.3 Promote good governance and legally sound organisation

ADA Bill Promulgated Nil By 31 March

2018 Nil On Hold

The promulgation of the bill was put on hold pending the amalgamation process to be finalized.

Operational Risk register

approved- 30 June 2017 30 June 2017 None Achieved

Strategic risk register approved

- September 2017 Nil Developed

The change of the Board led to the delay until the new Board was appointed in September 2017. The Register was presented to the committees and awaiting the Board’s approval in the next Board meeting.

IT Strategy approved - 30 June 2017 Nil Developed

The change of the Board led to the delay until the new Board was appointed in September 2017. The strategy was presented to the committees and awaiting the Board’s approval in the next Board meeting.

B-BBEE verification - 15 December

201723 October

2017 Developed Achieved

1.2 Sound and stringent financial management control

Clean audit opinion Qualified Clean Audit Unqualified None With specific findings to

be addressed in 2018/19.


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PROGRAMME 1: KEY PERFORMANCE INDICATORS, PLANNED AND ACTUAL ACHIEVEMENTPROGRAMME 1: FINANCE AND ADMINISTRATION


ActualAchieve-

ment 2014/15

ActualAchieve-

ment 2015/16

ActualAchieve-

ment2016/17

Planned Target

2017/18

ActualAchieve-

ment 2017/18

Deviation from for 2017/18


Number of staff trained

27 18 41 30 37 +7

Overachievement was due to the interns who joined ADA during the year who were also trained.

ADA Bill promulgated

- - 0 31 March 2018 Nil On hold

The promulgation of the bill was put on hold pending the amalgamation process to be finalized.

Operational risk register approved - - - 30 June

201730 June

2017 None Achieved

Strategic risk register approved

- - -30

September 2017

Nil Developed

The change of the Board led to the delay until the new Board was appointed in September 2017. The Register was presented to the committees and awaiting the Board’s approval in the next Board meeting.

IT strategy approved

- - - 30 June 2017 Nil Developed

The change of the Board led to the delay until the new Board was appointed in September 2017. The strategy was presented to the committees and awaiting the Board’s approval in the next Board meeting.

B-BBEE verification of ADA

- - -15

December 2017

23 October 2017 Developed Achieved

Clean Audit Opinion Unqualified Unqualified Qualified Clean Audit Unqualified None With specific findings to be

addressed in 2018/19.

PROGRAMME 1: FINANCE AND ADMINISTRATION NARRATIVE

Purpose of the programme:This programme is dedicated to providing core support services to ensure good governance, effective management and administration of the institution. This is done through developing and implementing effective management systems on Finance, Human Resources, Monitoring and Evaluation, Internal Audit, Marketing & Communications and Information Technology. This programme also plays a pivotal role in supporting other existing programmes within the institution to enable them to render quality service to our clients.


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The programme aims to achieve the following objectives:• A fully capacitated human resources able to deliver on its mandate• Sound and stringent financial management and control to achieve a clean audit opinion annually • Promote good governance and a legally sound organization

AchievementsIn terms of operations, ADA has continued to develop its staff through training. ADA had a B-BBEE verification conducted and was declared as compliant with the B-BBEE standards. ADA implemented an audit improvement plan to address the AG findings which led to the Entity obtaining a qualified audit opinion in the 2016/17 financial year. The Entity has received a unqualified audit opinion for the year under review.

ChallengesADA Bill has still not been promulgated due to various reasons and has now been put on hold pending the finalization of the process of amalgamation with other public Entities in the Province. The end of the term for the previous Board and the start of the new Board delayed the achievement of some of the targets with documents that required the their approval not being approved on time, such as the developed strategic risk register and reviewed IT strategy.

PROGRAMME 2: COMPREHENSIVE CAPACITY BUILDING


Strategic objectives Performance Indicator

Actual Achieve-

ment 2016/2017

Planned Target

2017/2018

Actual Achieve-

ment 2017/2018


target to Actual



Improve the knowledge and skills base of commercial farmers, agribusiness entrepreneurs, professionals and other stakeholders within the sector

Number of individuals trained in projects

348 95 101 +6

The over achievement is due to the demand for the individuals trained on projects to enhance their skill.

Number of prospective clients trained

14 27 46 +19The over achievement is due to the demand to capacitate the prospective clients.

Number of study tours completed

3 2 2 0Achieved

Number of workshops and seminars conducted

2 3 3 0

Achieved

No. of projects with management services

3 3 3 0

Achieved


3 0


Actual Achieve-

ment 2016/2017

Planned Target

2017/2018

Actual Achieve-

ment 2017/2018


target to Actual



Lobbying and providing evidence-based policy briefing to policy makers through research

No. of research papers published and presented

- 2 1 -1

The 2nd research paper was not produced due to the change of focus in relation to ADA in conducting research and the indicator had to be reviewed in the new APP for 2018/19.

Number of Masters students funded

0 2 2 0 Achieved

PROGRAMME 2: KEY PERFORMANCE INDICATORS, PLANNED AND ACTUAL ACHIEVEMENTSPROGRAMME 2: COMPREHENSIVE CAPACITY BUILDING


ActualAchieve-

ment 2014/15

ActualAchieve-

ment 2015/16

ActualAchieve-

ment2016/17

Planned Target

2017/18

ActualAchieve-

ment 2017/18



No. of individuals trained in projects

457 629 348 95 101 +6

The over achievement is due to the demand for the individuals trained on projects to enhance their skill.

No. of prospective clients trained - - 14 27 46 +19

The over achievement is due to the demand to capacitate the prospective clients.

No. of study tours completed - - 3 2 2 0 Achieved

No. of workshops and seminars conducted

- - 2 3 3 0 Achieved

No. of projects with Management Services

6 2 3 3 3 0 Achieved

No. of research papers published and presented

- - - 2 1 -1

The 2nd research paper was not produced due to the change of focus in relation to ADA in conducting research and the indicator had to be reviewed in the new APP for 2018/19.

No. of Masters students funded - - - 2 2 0 Achieved


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PROGRAMME 2: COMPREHENSIVE CAPACITY BUILDING NARRATIVE

Purpose of the programme:This programme seeks to avail capacity building support to projects that lack adequate allocation to fund capacity building of their staff. It also seeks to allow for the provision of “after funding support” to projects that may be gaining market share but could benefit from training initiatives funded by ADA. It opens the opportunity for ADA to respond to prospective clients whilst they await inclusion on the project list. It further provides a mechanism for extending capacity to projects whose growth is currently limited by lack of human capital. Training may be extended to address direct production capacity needs for existing ventures or building the capacity of the project members ahead of diversification into a new industry or enhanced participation along the value chain. The trainings may also be provided to groups who require the training to help build their businesses.

The programme aims to achieve the following objectives:• To improve the knowledge and skills base of commercial farmers, agribusiness entrepreneurs,

professionals and other stakeholders within the sector

• Lobbying and providing evidence-based policy briefing to policy makers through research

AchievementsThe Entity trained about 101 project beneficiaries, 46 prospective entrepreneurs and funded 2 Masters Students towards their studies within the Agribusiness sector.

ChallengesThe Entity committed itself to publish and present two research papers. During the financial year, ADA reviewed its focus and necessity of conducting research in relation to its mandate. It became clear that research should not be the focus but work with the research unit at DARD if there is a need for the research services. As a result, only one of the planned two research papers was published.


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PROGRAMME 3: ENTERPRISE AND VALUE CHAIN DEVELOPMENT


Strategic objectivesPerfor-mance

Indicator

Actual Achievement

2016/2017

Planned Target

2017/2018

Actual Achieve-

ment 2017/2018

Devia-tion from planned target to Actual

Achieve-ment for

2017/2018


Promote the development and investment in strategic value chain where the province has potential comparative advantage

No. of projects supported

25 21 21 0 Achieved

Value of investment in black-owned agribusiness enterprises

R68 501 801Mil R85 222Mil R28 987Mil R56 235Mil

Expenditure was affected by the 3 cancelled projects. Annual target was only supposed to include investments on infrastructure and the definition had to be revised for 2017/18 to be reported correctly. Total Expenditure by 31 March was about R66 million.

No. of business Entity’s established

2 2 2 0 Achieved

To create and sustain jobs directly and indirectly along the agricultural value chain

No. of jobs created 283 723 432 -291 Target was affected by the 3

cancelled contracts.


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PROGRAMME 3: KEY PERFORMANCE INDICATORS, PLANNED AND ACTUAL ACHIEVEMENTSPROGRAMME 3: ENTERPRISE AND VALUE CHAIN DEVELOPMENT


ActualAchievement

2014/15

ActualAchieve-

ment 2015/16

ActualAchievement

2016/17

Planned Target

2017/18

ActualAchieve-

ment 2017/18



No. of projects supported

- - 25 21 21 0 Achieved

Value of investment in black-owned agribusiness enterprises

R121 889 155Mil - R68 501 801Mil R85 222Mil R28 987 Mil R56 235Mil

Expenditure was affected by the 3 cancelled projects. Annual target was only supposed to include investments on infrastructure and the definition had to be revised for 2017/18 to be reported correctly. Total Expenditure by 31 March was about R66 million.

No. of business Entity’s established


No. of jobs created 757 731 283 723 432 -291

Target was affected by the 3 cancelled contracts.

PROGRAMME 3: ENTERPRISE AND VALUE CHAIN DEVELOPMENT NARRATIVE

Purpose of the programme:This programme focuses on improving the value chain and to create an enabling environment for the black commercial farmers and agribusiness entrepreneurs to unlock business opportunities upstream and downstream the value chain and to access markets. This programme was also developed to promote the responsiveness of ADA to the capacity needs of the businesses belonging to the targeted groups.

In promoting responsiveness, the programme seeks to address needs as they arise during the financial year for initiatives that warrant a prompt response and where the intervention will have a multiplier effect. The programme seeks to address the non-tangible capacity needs of the business ranging from product testing to securing exhibition space at events that are attended by possible clients of the finished product.


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The programme aims to achieve the following objectives:• Promote the development and investment in strategic value chains where the Province has

potential comparative advantage• To create and sustain jobs directly and indirectly along the agricultural value chain• Develop and attract youth entrepreneurship to the agribusiness sector to foster sustainability

AchievementsWith the total number of 21 projects that were assisted and implemented by ADA, it further brought about the job creation of 432 jobs and transformed two projects into business Entity’s. The total of R28, 987 million, out of the R66 million total, was invested in black-owned agribusiness enterprises infrastructure during the financial year under review. ChallengesThe allocated budget was not fully spent in the financial year and this was due to the cancellation of three major projects which did not follow proper SCM processes.

PROGRAMME 4: INFRASTRUCTURE DEVELOPMENT STRATEGIC OBJECTIVES AND ACTUAL ACHIEVEMENTS:


Actual Achievement

2016/2017

Planned Target

2017/2018

Actual Achievement

2017/2018


target to Actual Achievement for

2017/2018


Facilitate the provision of market development and logistic supportive infrastructure

No. of projects supported with logistics support

6 3 3 0 Achieved

Improved access to markets and export capacities, import substitution and linkages across priority value chains

No. of enterprises linked to markets 1 1 1 0 Achieved

Provide technical support to all infrastructure development projects

No. of projects supported with infrastructure planning

11 14 14 0 Achieved

No. of feasibility studies completed

2 3 2 -1

The target of 3 was mistakenly included in the APP instead of 2.

No. of abattoirs established

0 2 0 -2

There were changes in the funding approval guidelines; feasibility studies to be done in 2018/19 prior to implementation.


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Actual Achievement

2016/2017

Planned Target

2017/2018

Actual Achievement

2017/2018



2017/2018


No. of Tanneries established

- 1 0 -1

The project was delayed due to the appeal on the first tender. The contractor was later appointed and was onsite as from the 09th of April 2018. Work has commenced and is planned to be completed in 2018/19.

To facilitate investment in agribusiness infrastructure and development

No. of agro processing facilities equipped

1 4 1 -3

The target was affected by one of the cancelled contracts. The target of 4 was mistakenly included in the APP instead of 3.To be implemented in 2018/19.

Ha of maize silage developed

82 82 28.5 -53.5

28,5ha was planted with maize silage. Approximately 53,5ha was planted with maize for SAB programme.

To diversify the agribusiness industry in KZN through establishing industrial crops and new industries

Ha of essential oils planted

0 38 0 -38

The Project was affected by one of the cancelled contracts. To be implemented in 2018/19.

To facilitate investment in agribusiness infrastructure and development

No. of Silos established

1 1 0 -1

The contractor absconded and abandoned the project.A new contractor was appointed in March 2018. To be completed in 2018/19.

Ha of vine established

- 15 0 -15

Preparations were done and awaiting for the correct planting season in August/September 2018.To be implemented in 2018/19.


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Actual Achievement

2016/2017

Planned Target

2017/2018

Actual Achievement

2017/2018



2017/2018


No. of vegetable pack houses developed

0 2 0 -2

One Pack house is complete but completion certificate is expected during the 1st quarter of 2018/19.One Project was affected by one of the cancelled contracts.To be implemented in 2018/19.

PROGRAMME 4: KEY PERFORMANCE INDICATORS, PLANNED AND ACTUAL ACHIEVEMENTSPROGRAMME 4: INFRASTRUCTURE DEVELOPMENT


ActualAchieve-

ment 2014/15

ActualAchieve-

ment 2015/16

ActualAchieve-

ment2016/17

Planned Target

2017/18

ActualAchieve-

ment2017/18



No. of projects supported with logistics support


No. of enterprises linked to markets - - 1 1 1 0 Achieved

No. of projects supported with infrastructure planning

20 8 11 14 14 0 Achieved

No. of feasibility studies completed 2 2 2 3 2 -1 The target of 3 was mistakenly included

in the APP instead of 2. No. of abattoirs established - - 0 2 0 -2

There were changes in the funding approval guidelines; feasibility studies to be done in 2018/19 prior to implementation.

No. of tanneries established

- - - 1 0 -1

The project was delayed due to the appeal on the first tender. The contractor was later appointed and was onsite as from the 09th of April 2018. Work has commenced and is planned to be completed in 2018/19.

No. of agro processing facilities equipped - - 1 4 1 -3

The target was affected by one of the cancelled contracts. The target of 4 was mistakenly included in the APP instead of 3.To be implemented in 2018/19.

Ha of maize silage developed - - 82 82 28.5 -53.5

28,5ha was planted with maize silage. Approximately 53,5ha was planted with maize for SAB programme.


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PROGRAMME 4: INFRASTRUCTURE DEVELOPMENT


ActualAchieve-

ment 2014/15

ActualAchieve-

ment 2015/16

ActualAchieve-

ment2016/17

Planned Target

2017/18

ActualAchieve-

ment2017/18



Ha of essential oils planted - 0 0 38 0 -38

The Project was affected by one of the cancelled contracts. To be implemented in 2018/19.

No. of Silos established

- - 1 1 0 -1

The contractor absconded and abandoned the project.A new contractor was appointed in March 2018. To be completed in 2018/19.

Ha of vine established - - - 15 0 -15

Preparations were done and awaiting for the correct planting season in August/September 2018.To be implemented in 2018/19.

No. of vegetable pack houses developed - - 0 2 0 -2

One Pack house is complete but completion certificate is expected during the 1st quarter of 2018/19.One Project was affected by one of the cancelled contracts.To be implemented in 2018/19.

PROGRAMME 4: INFRASTUCTURE DEVELOPMENT NARRATIVE

Purpose of the programme:The programme seeks to support agribusiness enterprises with related infrastructure to remove the physical constraints that are faced by their agribusinesses. The origins of the programme lie in the Comprehensive Agricultural Support Programme (CASP) funding mechanism of the National Department of Agriculture. Agribusiness infrastructure are assessed and funding unlocked to address the infrastructure needs of the agribusinesses. Once assessments are finalized, they are normally followed by agricultural engineering designs that are informed by the needs of the business and available funding.

The programme aims to achieve the following objectives:• Facilitate the provision to market development and logistic supportive infrastructure

• Provide technical support to all infrastructure development projects

• To facilitate investment in agribusiness infrastructure and development

• To diversify the agribusiness industry in KZN through establishing industrial crops and new industries

AchievementsThe Entity supported 14 projects with infrastructure planning such as engineering designs and feasibility studies. One of the successful youth projects situated in Ethekwini; Mthethwa Processing which processes vegetables and fruits, was assisted with construction of the Vegetable Manufacturing


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Food Factory. ADA procured three refrigerated trucks which were delivered to Mthethwa Processing, Model Butchery and Siyaphambili Tannery projects as part of logistic support (one per project). About 15ha of vine was established at Amazizi Community in the Bergville area with fencing and land preparation completed and they are currently in the process of finalizing the construction of a dam. The planting of 15ha of vine will commence in the new financial year. ADA has also facilitated the signing of new off-take agreements and sustained existing agreements between Nkunzana (now registered as Nitro Foods) and potential markets/clients. ChallengesSome of the barriers which hindered achieving the set annual targets during the 2017/18 financial year have been insufficient budget for certain projects for implementation and the cancellation of three major contracts.

The following indicators were incorrectly included in the annual performance table for 2017/18 with specific targets but were not planned for and have not been reported on in this report.

They are: Number of dairies established, Number of youth projects supported and tons of Chicory roasted. These projects were not ready to be part of Infrastructure Development as they were still in the initial phase of the project cycle.

Another challenge was experienced within the Mkhumbana Maize project. ADA had planned to plant 82ha of maize silage and the seedlings were purchased to that effect, however 28.5ha of land were planted with maize silage with the support from ADA. The project beneficiaries decided to lease the balance of the land to the SAB Programme without consulting ADA. A total of 82ha was planted of which 52.3ha were planted by the SAB Programme.

Strategy to overcome areas of under performance

No Areas of underperformance and reasons Strategies to overcome them

1 The promulgation of the Bill being put on hold pending the merger.

The promulgation of the Bill is the responsibility of the legislature. The Entity has no control of having the Bill promulgated. ADA was only responsible for the development of the draft Bill.

The Entity will ensure that it has control to implement the targets that are set to be achieved in the Annual Performance Plan.

The promulgation should not have been set as one of ADA’s annual targets.

This project is now being managed by the office of the MEC and the legislature and is not part of the Annual Performance Plan for ADA for 2018/19.

2 Approval of IT strategy and strategic risk register -

There was a transition from the previous Board to the new Board and the approval of these documents were delayed in the process.

ADA will ensure that the strategies and registers are developed and submitted early for Board’s approval.

All documents that require the approval from the Board will be prioritized to be on the Board meetings agenda.

The IT strategy and strategic rick register will be tabled to the Board for approval in the next Board meeting.


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3 Late approval of the project list -

The projects list for the Entity was previously approved by DARD and often approved after the financial year has commenced, which is late as the annual targets were already finalized and submitted. This led to misalignment on the performance targets with the approved project list and the budget. There were instances where performance targets were set higher than the approved project list and the budget.

The project list will now be approved by the Board. This will be done before the start of the new financial year.

This will allow enough space to plan and start implementation of the approved projects during the beginning of the new financial year. This will ensure alignment between the set targets in the Annual Performance Plan, approved project list and the approved budget.

4 Cancellation of contracts with service providers -

A challenge was experienced with the SCM processes regarding three contracts and unfortunately they had to be cancelled. This impacted to on some of the performance targets not being achieved.

The bid committees and SCM section will ensure that all processes are followed in the tender processes.

ADA will employ a legal person who will be responsible for contract management.

Changes to planned targetsNo in-year changes were made on the performance indicators and targets during the financial year.

Linking performance with budgets Expenditure 2017/18 2016/17

Programme Name Actual Over/Under Actual Over/Under

Budget Expenditure Expenditure Budget Expenditure Expenditure R’000 R’000 R’000 R’000 R’000 R’000Finance & Administration 47 480 41 456 -6 024 50 609 37 332 -13 277Capacity Building & Mentorship 3150 2776 -374 3000 949 -2 051Enterprise Value Chain 525 227 -298 500 400 -100Infrastructure Development 84 234 60 545 -24 189 78 402 63 554 -14 848Total 135 389 105 004 -30 885 132 511 102 235 -30 276

2.5 Revenue collection

2017/18 2016/17

Source of revenue Actual

Amount Over/Under Actual Amount Over/Under

Estimate Collected Collection Estimate Collected Collection R’000 R’000 R’000 R’000 R’000 R’000DEDTEA 0 0 0 0 0 0DRDLR 0 0 0 0 0 0DARD 133 023 133 023 0 115 601 115 601 0COGTA 0 0 0 14 550 14 550 0Other Income 58 82,5 25 75 59,6 -15,4Interest Revenue 1 223 1 396,29 173 1 500 1 813,70 313,7Project management fees 1 085 958,9 -126 785 0 -785Total 135 389 135 437 72 132 511 132 024 -487

The relevant narratives will be presented and discussed under Annual Financial Statements section.


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2.6 Capital investment

2017/2018 2016/2017

Infrastructure Actual

ExpenditureOver/Under Expenditure Budget Actual

ExpenditureOver/ Under ExpenditureBudget

R’000 R’000 R’000 R’000 R’000 R’000Computer equipment 134 0 -134 231 231 0Motor Vehicles 1 250 0 -1 250 0 0 0Computer software 1 466 1 466 0 35 157 122Repairs and Maintenance 213 129 -84 110 42 -68


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PART CGOVERNANCE


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3. PART C: GOVERNANCE3.1 Introduction

In terms of King IV, Corporate Governance is defined as the exercise of ethical and effective leadership by the governing body, in our case, the Board of Trustees, towards the achievement of:

• Ethical culture

• Good performance

• Effective control

• Legitimacy

Over and above the legislative requirements based on ADA’s Trust Deed and to some extent the Companies Act, corporate governance with regard to public Entity’s in general is applied through the precepts of the Public Finance Management Act (PFMA) in conjunction with the principles contained in the King Report on Corporate Governance.

3.2 Portfolio Committees

ADA reports to the Agriculture and Rural Development Portfolio Committee, the Finance Portfolio Committee and the Standing Committee on Public Accounts (SCOPA). Five meetings were held with Agriculture Portfolio Committee during the 2017/18 financial year to present budgets, performance plans and progress reports. The issues leading to the qualified audit opinion from the Auditor General, plans to improve and filling of critical vacant posts were raised. Two meetings were held with the Finance and Budget portfolio Committee to present the progress report on expenditure and budget for 2018/19 financial year. The issues of under expenditure and irregular expenditure were raised and expected improvements going forward. The meeting with SCOPA was held on the 6th of February 2018 and the issues related to the irregular expenditure, outcome of the investigation and steps taken on the implementation of the Audit findings were discussed.

3.3 Executive Authority

The MEC for Agriculture and Rural Development is responsible for providing oversight over ADA, which includes the appointment and dismissal of the Board of Trustees.


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3.4 The Accounting Authority/The Board

The roles and functions of ADA BoardThe Board of Trustees of ADA is the Accounting Authority for the Entity. All non-executive members of the Board are appointed in accordance with Chapter 4 of the Amended Trust Deed of the Agribusiness Development Agency and are accountable to the shareholder.

In fulfilling its function, the Board exercises its leadership role by:

• Steering the Entity and setting its strategic direction;

• Approving policies and planning that give effect to the direction provided;

• Overseeing and monitoring of implementation and execution by management; and

• Ensuring accountability for organisational performance by means of among others, reporting and disclosure.

Delegation:Through the different well-structured Board Committees, the Board delegates certain functions but without abdicating its own responsibilities. Delegation is formal and involves:

• Formal terms of reference which are established and approved and reviewed annually for each committee of the Board,

• The committees are appropriately constituted with due regard to the skills required by each committee and

• a framework for delegating authority to management has been established and approved by the Board

Commentary on the Board charterThe purpose of the Charter is to regulate the parameters within which the Board operates and to ensure the application of the principles of good corporate governance in all dealings by, in respect of and on behalf of ADA.

In keeping with the principles of good corporate governance, the Board Charter is reviewed annually. Under the current year of review, the Charter was reviewed and approved.


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Composition of the Board

Composition of the Board which was appointed on 01 November 2013 – 31 August 2016 with further extensions until 31 August 2017

Name Designation Date appointed

Date resigned Qualifications

No. of Meetings

held

No. of Meetings attended

Dr MS Mbatha Chairperson 01/11/13 31/08/17

Post-Doctoral Studies on Social and Economic Policies; PhD in Social Welfare Policy, Master of City Planning; Master of Social Sciences; B.A. Honours in Social Work

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Dr ME Ngidi Deputy Chairperson

01/11/13Reappointed

in 2017

PhD in Poultry Science, Master’s Degree in Dairy Science; Bachelor of Science in Agriculture; Diploma in Animal Health and Extension

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Adv. RR Nirghin Member 01/11/13 31/08/17 Bachelor of Arts; Bachelor of Laws LLB 3 2

Mr WR Dladla Member01/11/13

Reappointed in 2017

Diploma in Agriculture; Bachelor of Agriculture; Hon. Bachelor of Agricultural Economics

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Mr ZI Ngcobo Member 01/11/13 31/08/17 Bachelor of Business Administration 3 3

Mrs P Dabideen Member

01/11/13Reappointed

in 2017

Bachelor of Procuration’s (B. Proc); AIPSA Dip in Insolvency Law; Adv. Diploma in Insolvency Litigation ; Diploma in Business Rescue

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Ms N Zwane Member 01/11/13 31/08/17M.Sc. Agricultural Science; Diploma in Agricultural Science; B.Sc. Chemistry/ Botany.

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Composition of the Board which was appointed on 1 September 2017

Name Designation Date appointed

Date of resignation Qualifications

No. of Meetings

held

No. of Meetings attended

Dr ME Ngidi Chairperson

01/11/2013Reappointed

in August 2017

-PhD in Poultry Science; Master’s Degree in Dairy Science; Bachelor of Science in Agriculture; Diploma in Animal Health and Extension

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Mrs P Dabideen Deputy Chairperson


in August 2017

-Bachelor of Procuration’s (B. Proc); AIPSA Dip in Insolvency Law; Adv. Diploma in Insolvency Litigation; Diploma in Business Rescue

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Adv. KP Thango Member August 2017 -B Proc; LLB; Diploma in Project Management 6 6

Ms T Ntshangase Member August 2017

-B Com Degree in Supply Chain Management and Economics, Post Graduate Diploma in Project Management; Certificate in Leadership; Currently completing an MBA in Sustainable Business

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Mrs NP Linda Member August 2017 -B. Paed degree; B.ED. degree 6 6

Mr WR Dladla


in August 2017

-Diploma in Agriculture; Bachelor of Agriculture; Hon. Bachelor of Agricultural Economics

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Mr N Khambule August 2017 -MSc Dev. Finance; Currently enrolled for PHD in Development Finance 6 6

Mr AG Mthembu August 2017

-Bachelor of Arts in Education, Bachelor of Education; Secondary Teachers Diploma; Masters of Arts in History

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Mr MV Khumalo August 2017

-Diploma in Project Management; Post-Graduate Diploma in Business Management; Currently registered for Masters in Business Administration

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CommitteesAs per the Trust Deed read together with the Board Charter, the Board is authorized to delegate certain functions to the different well-structured Board Committees.

Delegation is formal and involves:

• Formal terms of reference which are established and approved and reviewed annually for each committee of the Board,

• The committees are appropriately constituted with due regard to the skills required by each committee

Board Committees report on their quarterly activities at every Board meeting, thereby assisting the Board to perform its duties and taking effective decisions. All committees meet at least four times a year.


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BOARD COMMITTEES – from 01 April 2017 to 31 August 2017

Member Name Board DesignationProjects & Finance

Committee Designation

Human Resource & Remuneration


Audit & Risk Committee Designation

1. Dr MS Mbatha Chairperson - - -2. Dr ME Ngidi Deputy Chairperson Member - Member3. Mrs P Dabideen Member Member Chairperson -4. Ms N Zwane Member Chairperson Member -5. Adv. RR Nirghin Member - Member Member6. Mr WR Dladla Member Member - -7. Mr ZI Ngcobo Member - Member Member

BOARD COMMITTEES – from 01 September 2017 to 31 March 2018

Member Name Board DesignationProjects & Finance


Human Resource & Remuneration


Audit & Risk Committee Designation

1. Dr ME Ngidi Chairperson - - -2. Mrs P Dabideen Deputy Chairperson - Member Member3. Adv. KP Thango Member - Chairperson Member4. Ms T Ntshangase Member Chairperson - -5. Mrs NP Linda Member Member Member -6. Mr WR Dladla Member Member - Member7. Mr N Khambule Member Member - Member8. Mr AG Mthembu Member Member Member -9. Mr MV Khumalo Member Member Member -

BOARD COMMITTEES – from 01 April 2017 to 31 August 2017Committee No. of meetings held No. of members Name of members

Human Resource and Remuneration Committee 2 4 Mrs P Dabideen ; Ms N Zwane

Adv. RR Nirghin; Mr ZI Ngcobo

Projects and Finance Committee 2 4 Ms N Zwane ; Mrs P DabideenMr WR Dladla; Dr ME Ngidi

Audit and Risk Committee 3 6Mr I Simjee ; Mr BA NgcoboMr SL Ndlovu; Mr ZI NgcoboAdv. RR Nirghin; Dr ME Ngidi

AGSA - Engagements 2 2 AGSA Team; Dr ME NgidiMr I Simjee; ADA EXCO


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BOARD COMMITTEES – from 01 September 2017 to 31 March 2018

Committee No. of meetings held No. of members Name of members

Human Resource and Remuneration Committee 2 5

Adv. KP Thango ; Mrs P Dabideen; Mrs NP Linda; Mr MV Khumalo; Mr AG Mthembu

Projects and Finance Committee 4 6Ms T Ntshangase ; Mrs NP Linda; Mr WR Dladla; Mr N Khambule; Mr MV Khumalo; Mr AG Mthembu

Audit and Risk Committee 2 6Mr V Mtshali ; Mr N Sifumba; Mr N Khambule; Mr WR Dladla; Mrs P Dabideen; Adv. KP Thango

Remuneration of Board Members

Name Remuneration (R 000) Committee Other

allowanceOther re-

imbursements Total (R 000)

Dr Martha Mbatha-Chairperson 208 731 Board Committee - - 208 731,00Dr Edwin Ngidi – Chairperson 298 104 Board Committee - - 298 104,00Adv. Khayelihle Thango 50 155 Board Committee - - 50 155,00Ms Thandeka Ntshangase 48 915 Board Committee - - 48 915,00Mrs Nonhlanhla Linda 50 155 Board Committee - 16254 50 155,00Mr Nhlanhla Khambule 47 675 Board Committee - - 47 675,00Mr Mthandeni Khumalo 50 155 Board Committee - - 50 155,00Mr Aubrey Mthembu 50 155 Board Committee - 53408 50 155,00Adv. Ranjiv Nirghin 25 441 Board Committee - - 25 441,00Ms.N Zwane 25 441 Board Committee - - 25 441,00Ms.Preetha Dabideen - Deputy chairperson 132 360 Board Committee - - 132 360,00Mr Zama Ngcobo 25 441 Board Committee - - 25 441,00Mr Wakhe Richard Dladla 50 155 Board Committee 50 155,00Mr Ismail Simjee-Chairperson 36 017 Audit Committee - - 36 017,00Mr V Mtshali – Chairperson 38 578 Audit Committee - - 38 578,00Mr Aubrey Ngcobo 15 900 Audit Committee - - 15 900,00Mr Sihle Ndlovu 9 540 Audit Committee - - 9 540,00Adv.R Nirghin 9 540 Audit Committee - - 9 540,00Mr Nkosana Sifumba 24 900 Audit Committee - - 24 900,00Mr Nhlanhla Khambule 2 480 Audit Committee - - 2 480,00Adv. Khayelihle Thango 9 540 Audit Committee - - 9 540,00Mrs Preetha Dabideen 12020 Audit Committee - - 12 020,00Mr Zama Israel Ngcobo 15 900 Audit Committee - - 15 900,00Dr Edwin Ngidi – Chairperson 15 900 Audit Committee - - 15 900,00

Mrs Preetha Dabideen 32 507 Human Resource Committee - - 32 507,00


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Name Remuneration (R 000) Committee Other

allowanceOther re-

imbursements Total (R 000)

Adv. Khayelihle Thango – Chairperson 16 778 Human Resource Committee - - 16 778,00

Mr Mthandeni Khumalo 7 950 Human Resource Committee - - 7 950,00

Mrs Nonhlanhla Linda 7 950 Human Resource Committee - - 7 950,00

Mr Aubrey Mthembu 7 950 Human Resource Committee - - 7 950,00

Ms Njabulo Zwane 11 183 Human Resource Committee - - 11 183,00

Adv. Ranjiv Nirghin 11 183 Human Resource Committee - - 11 183,00

Mr Zama Israel Ngcobo 11 183 Human Resource Committee - - 11 183,00

Ms Njabulo Zwane – Chairperson 24 557 Project and Finance Committee - - 24 557,00

Mr Wakhe Richard Dladla 16 143 Project and Finance Committee - - 24 557,00

Ms Thandeka Ntshangase – Chairperson 8 176 Project and Finance Committee - - 16 143,00

Mr Aubrey Mthembu 14 150 Project and Finance Committee - - 8 176,00

Mr Mthandeni Khumalo 11 670 Project and Finance Committee - - 14 150,00

Mr Nhlanhla Khambule 14 150 Project and Finance Committee - - 11 670,00

Mrs Nonhlanhla Linda 7 440 Project and Finance Committee - - 14 150,00

Dr Edwin Ngidi –Chairperson 4 473 Project and Finance Committee - - 7 440,00

Mrs Preetha Dabideen 11 183 Project and Finance Committee - - 4 473,00

1 471 824,00 0,00 69 662,00 1 485 198,00


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3.5 Risk Management

ADA has a functional risk management unit that reports to the Chief Executive Officer and is overseen by the Audit & Risk Committee. As a Public Entity, the institution implements the public sector risk management framework. At the beginning of the financial year, this guiding document is reviewed and approved to ensure its relevance for effective management of risk in the Entity.

During the 2017/2018 financial year the Entity performed the Operational, Organizational Health and Safety and Projects’ risk assessments in line with the Entity’s risk management policy. These assessments were able to identify areas within the Entity that had inadequate controls and predisposed to fraudulent activities, and to assist our projects team to anticipate possible hindrances in the implementation of projects and respond accordingly.

The approach used is defined in the Entity’s Risk Management Strategy which requires regular follow-ups and reporting on the implementation of action plans identified to reinforce the existing controls during the risk assessments.

The Occupational, Health and Safety (OHS) risk assessment was able to identify the need for the Entity to formulate and implement an action plan aimed at making the Entity fully compliant with the OHS Act 85 of 1993. Some deliverables in the plan were, however, not completed due to budget constraints in the financial year.

The implementation of action plans as contained in the risk register are monitored by the Audit & Risk Committee through the reports that are tabled in its quarterly meetings by ADA Risk Officer.

3.6 Internal Control Unit

Risk based audits were conducted as per the internal audit plan as follows:

• Supply Chain Management

• Human Resource Management

Legislated/Compliance Audit

• Audit of performance information (Quarterly)

• Annual Performance Information

• Review of the Half year Financial Statements

• Annual Financial Statements Review


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Follow-up audits

• Supply Chain Management

• Human Resource Management

• Follow-up audit on management implementation of AGSA’s findings

3.7 Internal Audit and Audit Committees

Key activities and objectives of the internal audit• To be an independent, objective, assurance and consulting activity that is designed to add value

and improve the operations of ADA.

• To assist the management of ADA to accomplish their objectives by bringing a systematic and disciplined approach in evaluating and improving the effectiveness of internal controls, governance and risk management processes.

Key activities and objectives of the audit committee• The Audit Committee serves as an independent governance structure whose function is to

provide an oversight role on the systems of internal control, risk management and governance.

• The Audit Committee assists the Accounting Officer in the effective execution of his responsibilities with the ultimate aim of the achievement of the organisation’s objectives.


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Attendance of Audit Committee meetings by members

Committee Member Qualifications 16/05/17(AFS Review) 28/06/17 24/08/17 04/12/17 23/02/18

Previous Committee1. Mr I Simjee CA(SA) and CIA √ √ √ N/A N/A2. Mr A Ngcobo BSc. and LLB √ √ √ N/A N/A3. Mr S Ndlovu MBA and CIMA Advanced Diploma √ √ × N/A N/A4. Adv. R Nirghin BA and LLB degree √ X X N/A N/A

5. Dr ME Ngidi PhD in Poultry Science; Master’s Degree in Dairy Science √ √ √ N/A N/A

6. Mr Z Ngcobo BBA √ X X N/A N/ANew Committee with effect from 04 December 2017

1. Mr V Mtshali CA (SA); Registered Auditor (IRBA) N/A N/A N/A √ √2. Mr N Sifumba MBL (Governance); B.Com N/A N/A N/A √ √3. Mr N Khambule MSc Dev. Finance N/A N/A N/A × √

4. Adv. KP Thango -B Proc.; LLB and Diploma in Project Management N/A N/A N/A √ X

5. Mrs P DabideenB Proc; AIPSA Dip in Insolvency Law; Adv. Diploma in Insolvency Litigation and Diploma in Business Rescue

N/A N/A N/A √ √

6. Mr WR DladlaDiploma in Agriculture; Bachelor of Agriculture andHon. Bachelor of Agricultural Economics

N/A N/A N/A X X

3.8 Compliance with laws and regulations

Compliance with legislation is one of the prioritized management areas within ADA and in all its activities. ADA management strives to ensure that proper procedures are followed and that the policies are adhered to.

The Manager for legal services is tasked with the responsibility to monitor compliance with applicable prescripts and report to the CEO on the status of compliance across the institution. During the period under review the position of Legal Manager remained vacant, however in their absence the Entity’s legal matters were referred to DARD Legal Services for necessary support.

3.9 Fraud and Corruption

ADA actions in the combat of fraud and corruption are guided by its Fraud and Anti-Corruption Policy which is in line with the public sector risk management framework. During its operational risk assessment, ADA tried to develop scenarios in relation to various internal processes in order to test the effectiveness of the existing controls relating to those processes in the business units.


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The Internal Audit Unit also assists with the identification of areas that need to be strengthened during the performance of internal audits. The Entity had planned to fully utilize its fraud hotline during the financial year, however due to budget constraints, as the line needs to be accessible at all times and calls be appropriately monitored, this was not achieved due to the costs involved. ADA plans to negotiate with DARD to establish if all its hotline calls cannot be routed to the already existing facility that handles such calls at DARD. ADA Fraud and Anti-Corruption Policy clearly defines the procedures of reporting fraudulent activities and staff are aware of it as it was workshopped to them.

3.10 Minimizing Conflict of Interest

In order to minimise conflict of interest, ADA has enforced that all its senior officials and those that sit at its bid committees signs declaration of business interest forms annually and at each Bid meeting. In instances where a member has identified possible area of conflict, they have to recues themselves from the meeting.

a. SCM officials and other role players in SCM are familiarized with the code of conduct; of which conflict of interest is mentioned as one of the pillars. The officials are required to acknowledge by signing the code of conduct and also declaration of interest forms on each and every bid committee meetings/ any ad hoc meetings intended for deliberating on SCM issues. Whenever there is a conflict of interest, the individual will disclose and be recused from the deliberations.

b. With regards to conflict of interest – service providers/ suppliers; the issue of conflict of interest is contained as one of the special conditions of bid. The clause states that bidders should not perform any assignment that would be in conflict with their prior or current obligations to other clients, or that may place them in a position of not being able to carry out the assignment in the best interest of the Entity.

In addition, the service providers/ suppliers are required to disclose information by signing the following declarations;

- SBD 4 Form “Declaration of Interest”; - SBD 9 Form “Certificate of Independent Bid Determination”, and - SBD 8 Form “Declaration of Bidders’ past SCM practices.

In all of the above, the onus to disclose lies with the individual/ service provider.

Currently, the Entity does not have an automated system in place for identifying issues of conflict of interest. However, if it is found that there was a misrepresentation of information; the bidder is notified and the company and its directors gets listed on National Treasury’s list of restricted suppliers for a certain period.


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3.11 Code of Conduct

The conduct of board members and employees of the organisation is governed by ADA Code of Ethics and Conduct, which has been approved by the board and circulated to all employees. ADA Code of Ethics outlines ethical values that underpin ethical behaviour across ADA.

Declarations of interest are completed by ADA officials during all interviews, bid adjudication, bid evaluation and other management meetings.

3.12 Health, Safety and Environmental Issues

During the 2017/2018 financial year, ADA delegated the issues of Health and Safety to its Office Manager, as there was no OHS Officer in the past. The Entity developed and approved the OHS Policy in line with the OHS Act 85 of 1993.

A risk assessment of the entire ADA environment was conducted to establish the level of compliance with the Act. This risk assessment was able to identify the gaps within the Entity in terms of compliance with the Act, and an action plan with time frames was developed to rectify the situation. The Entity made significant progress towards the achievement of the identified action plans.

The deliverables that could be classified as quick wins were instantly achieved. The issue of budget, however became a factor in the non-achievement of other action plans that had a cost factor attached to them. These will be finalized during the 2018/2019 financial year and it is hoped by the end of the 2018/2019 financial year, the Entity will be fully compliant with the Act.

3.13 Company Secretary

The Company Secretary or the Board Secretary is responsible for the secretariat function of the Board and its Committees by ensuring compliance with statutory and regulatory requirements as well as ensuring that the decisions of the Board of Trustees are implemented.

The Company Secretary is further responsible for the induction of new Board members and on-going training of Board Members as well as the scheduling, preparation and administration of Board and Committee meetings. The Company Secretary attends all Board and Committee meetings.

Reports and returns as per the Companies Act are not applicable for ADA due to the Entity being a Schedule 3C.


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3.14 Social Responsibility

The South African National Policy Framework for Women’s Empowerment and Gender Equality ensures gender equality is at the centre of the country’s transformation process. In an effort to transform the lives of ordinary women, ADA established a Women Empowerment Programme (WEP). The programme seeks to address a number of challenges that women in particular face in the agribusiness sector. The WEP will be driven by ADA but it will have a committee that will coordinate activities such as access to land and finance, infrastructure and enterprise development, training and capacity building, to mention but a few. According the WEP draft strategy, which was commissioned by ADA, these areas need to be addressed in order for women to participate meaningfully in the agribusiness value chain.

The WEP has already hosted activities to kick-start the programme. In February 2017, beneficiaries of the programme participated in a consultative sessions to discuss the WEP strategy. Various stakeholders in government and private sector attended this session to pledge their support on the establishment of this much needed programme, including representatives from Commission for Gender Equality, Department of Agriculture and Rural Development (DARD), Department of Trade and Industry’s Agro Processing Unit, Women of Africa, National Empowerment Fund (NEF), and Rural Development and Land Reform. Another follow-up activity which took place in April 2017 was the Funding Workshop which was hosted and facilitated by Advocate Pria Hassan. Advocate Hassan is a women’s activist and successful business Woman who is passionate about seeing women succeed. Upon realising the amount of work that WEP members are doing in their communities, she took it upon herself that she will be part of her mentorship programme.

The mentorship programme focuses on ensuring that women are in the right businesses, have necessary skills, they are competent and have networking capabilities. With the right partnerships and knowledge, ADA is positive about the success of this programme. A lot of work lies ahead for the Entity which has been entrusted with the responsibility of driving and transforming the agribusiness sector in the Province of KwaZulu-Natal.

3.15 Audit and Risk Committee Report for the Financial Year ended 31 March 2018

REPORT OF THE AUDIT AND RISK COMMITTEE FOR THE YEAR ENDED 31 MARCH 2018We are pleased to present our report for the financial year ended 31 March 2018.

OBJECTIVEThe audit and risk committee serves as an independent body to assist the Board with its responsibility for safeguarding assets, maintaining effective and efficient internal controls, risk management, reviewing the financial information and overseeing the preparation of the financial statements.


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AUDIT COMMITTEE RESPONSIBILITIESThe Audit Committee reports that it has complied with its responsibilities arising from Section 38 (1)(a) of the PFMA and Treasury Regulations 3.1.13. The Audit Committee also reports that it has adopted formal terms of reference as its audit committee charter and has regulated its affairs in compliance with this charter. The audit committee has reviewed its charter during the year and has made amendments which were subsequently approved by the Board of Trustees. The Committee has discharged its responsibilities as contained in the Charter.

EFFICIENCY AND EFFECTIVENESS OF INTERNAL CONTROLSThe system of internal control employed by the Entity to financial and risk management is partially effective, efficient and transparent. In line with the PFMA and the recommendations from the King IV Report on Corporate Governance requirements, Internal Audit provides the Audit Committee and management with assurance that the internal controls are appropriate and effective. This is achieved by means of the risk management process, as well as the identification of corrective actions and suggested enhancements to the controls and processes.

From the various reports of Internal Audit, the Audit Report on the annual financial statements and the management report of the Auditor-General South Africa (AGSA), it was noted that certain matters were reported indicating deficiencies in the system of internal control. It is of crucial importance that the issues reported should receive ongoing attention and focus by management in order to effect qualitative administration and financial management within the Entity. Management have committed to implement corrective action and this will be closely monitored by the Audit Committee.

IN-YEAR MANAGEMENT-AND MONTHLY/QUARTERLY REPORTThe Entity has been reporting monthly and quarterly to the Treasury as is required by the PFMA, and the said reports were presented to the Audit Committee for reviews and comments.

INTERNAL AUDITThe Audit Committee considers the internal audit function to be under-resourced and unable to operate optimally, given its current resources and budget, in order to adequately fulfill its mandate and address the risks pertinent to the Entity.

REVIEW OF ANNUAL FINANCIAL STATEMENTSThe Audit Committee has noted with concern the qualified opinion expressed by the Auditor-General in his report on the Annual Financial Statements. The Audit Committee has emphasized the need for management to implement corrective actions to address the issues which form the basis for the qualified opinion. These include:

• adequate oversight, monitoring and reconciliation of project expenditure incurred by implementing agents;


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• the correct accounting and recording of project expenditure to avoid any material misstatements in the annual financial statements;

• Corrective measures to improve the usefulness and reliability of reported performance information.

The audit committee has also;

• Reviewed and discussed the unaudited Annual Financial Statements, to be included in the annual report, with the Auditor General, management and the accounting officer;

• The Audit Committee has noted that the unaudited Annual Financial Statements submitted to AGSA might not be free of misstatements due to the challenges within management which resulted in the Audit Committee having a limited time to adequately review Annual Financial Statements before submission to AGSA;

• Reviewed the Entity’s compliance with legal and regulatory provisions where internal audit reports were discussed with the Audit Committee and Management in which corrective action was identified in instances where weakness in the systems of internal controls were identified;

• Reviewed the information on predetermined objectives in which Internal Audit presented the annual performance report to the Audit Committee;

• Reviewed the quality and timeliness of the financial information availed to the audit committee for oversight purposes during the year such as interim financial statements.

WORK DONE BY INTERNAL AUDITRisk Based Audit as per internal audit plan for 2017/18• Supply Chain Management• Human Resource Management

Legislated/Compliance Audit• Audit of performance information (Quarterly)• Annual Performance Information• Review of the Half year Financial Statements• Annual Financial Statements Review

Follow-up audits• Supply Chain Management• Human Resource Management• Follow-up audit on management implementation of AGSA’s findings

CHALLENGESThe Audit Committee would also like to point out that there were planned audits which were not performed by Internal Audit because of staff constraints. The Audit Committee has noted that not performing these audits has resulted in several unassured risks within the Entity. Such audits have since been integrated into a plan for the first quarter of the new financial year.


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INVESTIGATIONThe Acting CEO has referred the Empangisweni project for forensic investigation by the main shareholder, the KZN Department of Agriculture and Rural Development (DARD), because of serious accusations made by the project leader.

The Entity’s Chief Operations Officer (COO) has been suspended for alleged misconduct relating to attendance, bringing the Entity into disrepute, poor work ethic and abuse of power.

EXTERNAL AUDITThe following were the main issues raised by Auditor General for 2016/17 and management has developed corrective action to address and Internal Audit has performed the follow-up audits to ensure such was implemented:

• Financial Management: All issues raised were resolved by management

• Performance Management: Out of all issues raised only 10% were not resolved but in progress

• Procurement and contract management: Out of all issues raised only 10% are still in progress

• Compliance Management: Out of all issues raised only 10% are still in progress

• Human Resource Management: All issues raised were resolved by management

RISK MANAGEMENT• Annual operational risk assessment exercise is performed with Management, MANCO and EXCO,

in which weaknesses in the system of internal control were identified, management will then develop action plan and date on to how to address those weaknesses.

• The progress report is presented quarterly on all the Audit and Risk Committee meetings throughout the year.

• Internal Audit Plan is risk based where Internal Audit tests the effectiveness of internal controls where they have been identified as strong, and reports are presented to the quarterly Audit and Risk Committee meetings.

PERFORMANCE MANAGEMENTThe Committee has urged management to develop a comprehensive plan to address the issues of usefulness and reliability of reported performance information. The committee shall further commit to guiding management in developing effective structures and mechanisms to mitigate a future re-occurrence of the issues as reported by the office of the Auditor General.

CONCLUSIONThe audit committee recommends that the unaudited Annual Financial Statements be adopted by the Board for submission to AGSA.


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I would like to take this opportunity to thank the members of the Audit Committee for their support and dedication in fulfilling their responsibilities. Furthermore, I would like to thank the Board of Trustees for their continued support through the year.

……………………………….........Nkosana SifumbaChairperson of the Audit CommitteeAgribusiness Development AgencyDate: 31 August 2018


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PART DHuman Resources Management


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4. Part D: Human Resources Management4.1 Introduction

The Human Resources Management unit of ADA has the primary role to provide an efficient and effective support to the Entity. We aim to achieve this through ensuring a fully capacitated workforce which is able to deliver on the mandates of ADA. The Human Resources Unit is tasked with allocating appropriate guidance for the achievement of organisational deliverables by ensuring that we have skilled workforce by providing training and development initiatives which are aligned to the ADA mandate.

TrainingIt is vital that we ensure that all employees maintain their skills through appropriate current learning opportunities which ensure their ability to meet the needs of the ever transforming agricultural environment. When conducting recruitment, candidates must be selected according to the skills and competencies required to function effectively and meet the strategic objective of the Entity. When skills gaps are identified, the appropriate training interventions are sort to facilitate and bridge the gaps.

During the course of the 2017/18 financial year, the Human Resources Unit was successful with providing all employees with prioritized training interventions identified to ensure their competencies are maintained. The Unit was also successful with recruiting numerous positions for ADA.

Recruitment – Attracting and recruiting a skilled and capable workforceWhilst ADA continues to operate without a permanently appointed Chief Executive Officer, the recruitment process has commenced and is in the process which is currently handled by the MEC for Department of Agriculture and Rural Development. A few positions have proven to be a challenge to fill and therefore we have made considerable changes that will assist in attracting and recruiting the suitable candidates.

Employee Performance ManagementThe Employee Performance Management Development System has been successfully implemented with minor challenges. There has been good co-operation from all employees and the results are fast becoming useful tools for the identification of skills gaps and personal development plans.

Challenges faced by the EntityADA is still experiencing uncertainty with the pending merger of the Entity’s due to take place, timeline for this to happen is still uncertain. With the organisation having all employees on contract it has created instability for the Entity and we have experienced a large number of resignations and we are unable to retain senior managers who want to leave the ADA as we do not have any bargaining ability to make them stay. We have attempted to rectify the situation with the acting appointments, whilst recruitment continues; however, with a two year contract being offered it becomes challenging to attract good quality and experienced candidates. The Entity is working closely with DARD to make progress with this process and is hopeful that the combined efforts will produce an effective and efficient outcome.


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Employee Wellness ProgrammeThe Care-Ways Group was appointed as a service provider to assists the Entity by conducting wellness programmes to enhance the well-being of employees and create a conducive working environment. Care-Ways successfully conducted an Employee Wellness day. The Wellness day gave participants an opportunity to measure their cholesterol, glucose and blood pressure through medical screening. The opportunity for HIV Voluntary Counselling and testing as well as TB screening and cancer screening for employees was also available. Regular updates and newsletters of health related topics are shared with employees to create awareness. Senior Managers have been contacted for executive medicals to be conducted.

4.2 Human Resources Oversight Statistics

4.2.1 Personnel Cost by Programme

ProgrammeTotal Expenditure

for the Entity (R’000)

Personnel Expenditure

(R’000)

Personnel exp. as a % of total exp.

(R’000) No. of employees

Average personnel cost per employee

(R’000)Finance & Administration 108 415 514,00 23 805 039,00 22% 52 457 789,21Total 108 415 514,00 23 805 039,00 22% 52,00 457 789,21

4.2.2 Personnel cost by salary band

Level Personnel Expenditure (R’000)

% of personnel exp. to total personnel cost

(R’000)No. of employees

Average personnel cost per employee

(R’000)Top Management 2 921 647,00 12% 3 973 882,33Senior Management 2 750 329,00 12% 3 916 776,33Professional qualified 10 342 882,43 43% 11 940 262,04Skilled 5 435 009,70 23% 13 418 077,67Semi-skilled 2 355 170,87 10% 22 107 053,22Unskilled - 0% 0 -TOTAL 23 805 039,00 100% 52 457 789,21

4.2.3 Performance Rewards

Programme Performance rewards Personnel Expenditure (R’000) % of performance rewards to total personnel cost (R’000)

Top Management

Not applicable. ADA does not pay performance bonuses

Senior ManagementProfessional qualifiedSkilledSemi-skilledUnskilledTOTAL


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4.2.4 Training costs

Directorate/Business Unit

Personnel Expenditure

(R’000)

Training Expenditure

(R’000)

Training Expenditure as a % of training

Cost.

No. of employees trained

Avg training cost per employee

Top Management 2 921 647,00 15 284,00 1% 1 R15 284,00Senior Management 2 750 329,00 5 402,21 0% 2 R 2 701,11Professional qualified 10 342 882,43 93 814,18 1% 8 R11 726,77Skilled 5 435 009,70 127 979,74 2% 12 R10 664,98Semi-skilled 2 355 170,87 150 556,42 6% 18 R8 364,25Unskilled - Total 23 805 039,00 393 036,55 2% 41 9586,26

4.2.5 Employment and vacancies

Programme2017/2018 2017/2018 2017/2018

No. of Employees Approved Posts Vacancies % of Vacancies Top Management 3 4 1 25%Senior Management 3 3 0 0%Professional qualified 11 12 1 8%Skilled 13 13 0 0%Semi-skilled 22 23 1 4%Unskilled 0 0 0 0%TOTAL 52 55 3 5%

4.2.6 Employment changes

Salary Band Employment at beginning of period Appointments Terminations Employment at end

of the period

Top Management 2 1 1 2Senior Management 1 2 0 3Professional qualified 11 0 1 10Skilled 15 5 1 19Semi-skilled 15 0 9 6Unskilled 0 0 0 0Total 44 8 12 40


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4.2.7 Reasons for staff leavingReason Number % of total no. of staff leavingDeath 0 0%Resignation 3 25%Dismissal 1 8%Retirement 0 0Ill health 0 0Expiry of contract 8 67%Other 0 0Total 12 100%

4.2.8 Labour Relations: Misconduct and disciplinary action Nature of disciplinary Action Number

Verbal Warning 0Written Warning 5Final Written warning 0Dismissal 1

4.2.9 Equity Target and Employment Equity Status

LevelMale

African Coloured Indian WhiteCurrent Target Current Target Current Target Current Target

Top Management 2 - - - - - - - Senior Management - - - - 1 - - - Professional qualified 4 - - - - - - - Skilled 4 - - - 1 - - - Semi-skilled 3 - - - - - - - Unskilled - - - - - - - -Total 13 0 0 0 2 0 0 0

LevelFemale

African Coloured Indian WhiteCurrent Target Current Target Current Target Current Target

Top Management 1 - - - - - - - Senior Management 2 - - - - - - - Professional qualified 6 - 1 - - - - - Skilled 7 - 1 - - - - -Semi-skilled 16 - 1 - 1 - 1 - Unskilled - - - - - - - -Total 32 0 3 0 1 0 1 0


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Levels

Disabled StaffMale Female

CurrentTargetCurrent

Target CurrentTarget

CurrentTarget

Top Management

None

Senior ManagementProfessional qualifiedSkilledSemi-skilledUnskilledTotal


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PART EFINANCIAL INFORMATION


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5. PART E: FINANCIAL INFORMATION5.1 Report of the External Auditor – AGSA

5.2 Annual Financial StatementsAudit report for the year ending 31 March 2018

Report of the auditor-general to the KwaZulu-Natal Provincial Legislature on Agribusiness Development Agency

Report on the audit of the financial statements

Opinion 1. I have audited the financial statements of the Agribusiness Development Agency set out on

pages 71 to 107, which comprise the statement of financial position as at 31 March 2018, the statement of financial performance, statement of changes in net assets, cash flow statement and the statement of comparison of budget information with actual information for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.

2. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Agribusiness Development Agency as at 31 March 2018, and its financial performance and cash flows for the year then ended in accordance with the 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).

Basis for opinion3. I conducted my audit in accordance with the International Standards on Auditing (ISAs).

My responsibilities under those standards are further described in the auditor-general’s responsibilities for the audit of the financial statements section of this auditor’s report.

4. I am independent of the entity in accordance with the International Ethics Standards Board for Accountants’ Code of ethics for professional accountants (IESBA code) and the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA code.

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

Emphasis of matter6. I draw attention to the matter below. My opinion is not modified in respect of this matter.

Material underspending of the conditional grants 7. As disclosed in note 10 to the financial statements, the entity materially underspent the grant

from KwaZulu-Natal (KZN) Department of Agriculture and Rural Development by R12,38 million and the grant from KZN Department of Cooperative Governance and Traditional Affairs by R5,83 million. The underspending resulted from a number of infrastructure projects that were still in progress at year-end.

Responsibilities of board of trustees which constitutes the accounting authority for the financial statements8. The board of trustees which constitutes the accounting authority is responsible for the preparation

and fair presentation of the financial statements in accordance with SA Standards of GRAP and the requirements of the PFMA, and for such internal control as the board of trustees which constitutes the accounting authority determines necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.


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9. In preparing the financial statements, the board of trustees which constitutes the accounting authority is responsible for assessing the Agribusiness Development Agency’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the board of trustees which constitutes the accounting authority either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so.

Auditor-general’s responsibilities for the audit of the financial statements10. My objectives are to obtain reasonable assurance about whether the financial statements as

a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

11. A further description of my responsibilities for the audit of the financial statements is included in the annexure to this auditor’s report.

Report on the audit of the annual performance report

Introduction and scope12. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the

general notice issued in terms thereof, I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

13. My procedures address the reported performance information, which must be based on the approved performance planning documents of the entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

14. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected programmes presented in the annual performance report of the entity for the year ended 31 March 2018:

Programmes Pages in the annual performance reportProgramme 2 – comprehensive capacity building 29 – 31Programme 3 – enterprise and value chain development 32 – 34Programme 4 – infrastructure development 34 – 38

15. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

16. I did not raise any material findings on the usefulness and reliability of the reported performance information for all three programmes tabulated in paragraph 14 of this report.

Other matter17. I draw attention to the matters below.


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Achievement of planned targets18. The annual performance report on pages 27 to 38 contains information on the achievement of

planned targets for the year and explanations provided for the under and over achievement of a significant number of targets.

Adjustment of material misstatements19. I identified material misstatements in the annual performance report submitted for auditing.

These material misstatements were on the reported performance information for all three programmes tabulated in paragraph 14 of this report. I did not raise any material findings on the usefulness and reliability of the reported performance information, as management subsequently corrected the misstatements.

Report on the audit of compliance with legislationIntroduction and scope20. In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility

to report material findings on the compliance of the entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

21. The material findings on compliance with specific matters in key legislation are as follows:

Annual financial statements22. The annual 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 receivables, contingent liabilities, unspent conditional grants as well as gains and losses on foreign exchange transactions identified by the auditors in the submitted financial statements were corrected, resulting in the financial statements receiving an unqualified audit opinion.

Expenditure management23. Effective and appropriate steps were not taken to prevent irregular expenditure incurred by

the entity of R15,05 million as disclosed in note 29.1 to the financial statements, as required by section 51(1)(b)(ii) of the PFMA. All of the irregular expenditure was caused by non-compliance with supply chain management (SCM) regulations as stated in paragraphs 25 and 26 of this report.

Strategic planning24. The 2017-18 annual performance plan was submitted to the executive authority for approval on

20 June 2017 instead of 31 January 2017, as required by paragraph 4.2 of National Treasury’s Framework for strategic plans and annual performance plans.

Procurement and contract management25. Goods and services of a transaction value above R500 000 were procured without inviting

competitive bids. In these instances, deviations were approved by the accounting authority but there was no prior written approval from the relevant treasury, as required by paragraph 8.5 of National Treasury’s SCM instruction note 3 of 2016-17.

26. Competitive bids for all project expenditure were adjudicated by a bid adjudication committee that was not properly constituted in accordance with the entity’s SCM policy, as required by treasury regulations 16A.6.2 (a), (b) and (c).

Other information27. The board of trustees which constitutes the accounting authority is responsible for the other

information. The other information comprises the information included in the annual report. The other information does not include the financial statements, the auditor’s report and those selected programmes presented in the annual performance report that have been specifically reported in this auditor’s report.

28. My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.


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29. In connection with our audit, our responsibility is to read the other information, and in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected programmes presented in the annual performance report, or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

30. If, based on the work I have performed, I conclude that there is a material misstatement in this other information, I am required to report that fact. I have nothing to report in this regard.

Internal control deficiencies31. I considered internal control relevant to my audit of the financial statements, reported

performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance on it.

32. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on the annual performance report and compliance with legislation included in this report.

Financial and performance management 33. There was lack of adequate monitoring and review by management relating to compliance with

supply chain management and other key legislation. The lack of adequate monthly or quarterly reviews and reconciliations resulted in the material misstatements on the financial statements and the reported performance information.

Other reports34. I draw attention to the following investigations that had, or could have, an impact on the matters

reported in the entity’s financial statements, reported performance information, compliance with applicable legislation and other related matters. These reports do not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation.

35. The Board of trustees appointed an independent forensic consultant to investigate various allegations of misconduct against four officials, covering the period 1 April 2016 to 31 March 2017. Two disciplinary proceedings were held in the 2017-18 financial year, resulting in one official being found guilty of misconduct and dismissed. The other official’s contract expired on 31 May 2018 and was not renewed; prior to the disciplinary process being finalised. The remaining two disciplinary cases were referred to an attorney for further investigation.

Pietermaritzburg30 July 2018

A U D I T O R - G E N E R A L

S O U T H A F R I C A

Auditing to build public confidence


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Annexure – Auditor-general’s responsibility for the audit1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain

professional scepticism throughout my audit of the financial statements, and the procedures performed on reported performance information for selected programmes and on the entity’s compliance with respect to the selected subject matters.

Financial statements

2. In addition to my responsibility for the audit of the financial statements as described in this auditor’s report, I also:

• identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control

• obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the accounting authority

• conclude on the appropriateness of the accounting authority’s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Agribusiness Development Agency’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of this auditor’s report. However, future events or conditions may cause an entity to cease continuing as a going concern

• evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation

Communication with those charged with governance

3. I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4. I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and, where applicable, related safeguards.


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AGRIBUSINESS DEVELOPMENT AGENCY TRUST(Registration number IT 2041/1999)

FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2018

PRESENTED TO BOARD AND AUDIT COMMITTEES


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Index

The reports and statements set out below comprise the financial statements presented to the:

Page

Responsibility of the Trustees 74

Statement of Financial Position 75

Statement of Financial Performance 76

Statement of Changes in Net Assets 77

Cash Flow Statement 78

Statement of comparison in Budget and Actual 79

Accounting Policies 80

Notes to the Financial Statements 90


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Corporate Information

Registration number IT 2041/1999

Registered office 5 Cascades Crescent Cascades Office Park Montrose KwaZulu-Natal Pietermaritzburg 3202

Postal address Private Bag X01 Cascades Montrose 3202

TrusteesDr. Mnqobi E Ngidi Mrs. Preetha Dabideen Mr. Wakhe Richard Dladla Adv. Khayelihle Prince Thango Ms. Thandeka Ntshangase Mrs. Nonhlanhla Petronella Linda Mr. Nhlanhla Khambule Mr. Mthandeni Vitalis Khumalo Mr. Aubrey Greyling Mthembu

Auditors Auditor - General South Africa

Preparer The financial statements were internally compiled by: N Mkhathini Acting Chief Financial Officer and approved by the Board of Trustees

Bankers ABSA Bank

4 Frosterley Park, La Lucia Ridge, Durban

Nature of business and principal activities The Agribusiness Development Agency is a public entity that was established in 2009 to serve as a special purpose vehicle to drive socio-economic transformation in the agricultural and agribusiness sector in KwaZulu-Natal.

The Agency provides holistic agricultural support services to entrant commercial farmers, focusing mainly on previously disadvantaged farmers, who have acquired land through the government's Land Reform Programme and on private basis. The ADA also aims to develop strategies to address inequities, create opportunities for the farmers to participate in the value chain, provide access to markets and foster sustainability in the agricultural sector.


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Responsibility of the Trustees

The Trustees are responsible for the maintenance of adequate accounting records. It is their duty to ensure that the preparation of financial statements is done efficiently. Integrity is insisted upon in all of the functions of the Trustees. Auditors have the responsibility of reporting on the fair representation of the financial statements.

The financial statements have been prepared in accordance with South African Standards of Generally Recognised Accounting Practice and in the manner required by the Public Finance Management Act.

The Trustees are also responsible for the Trust's systems of internal financial control as well as to ensure that appropriate accounting policies supported by reasonable and prudent judgment and estimates, are applied on a consistent and going concern basis. The system of internal control is designed to provide reasonable, but not absolute assurance as to the reliability of the financial statements and to adequately safeguard, verify and maintain accountability of assets, and to prevent and detect misstatement and loss. The Trustees, are of the opinion, based on the information and explanations given and on comment by the independent external auditors on the results of their statutory audit, that the Trust's internal accounting controls are adequate, so that the financial records may be relied upon for preparing the financial statements and maintaining accountability for assets and liabilities. The Trustees believe that the Trust's assets are protected and used as intended in all material respects with appropriate authorisation. Nothing has come to the attention of the Trustees to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review.

In preparing the financial statements, the Trust has used appropriate accounting policies, supported by reasonable judgments and estimates, and has complied with all applicable accounting standards.

The financial statements have been prepared on the going concern basis, since the Trustees have every reason to believe that the Agency has adequate resources in place to continue in operation for the foreseeable future.

The financial statements set out on pages 75 to 107 were approved by the board of Trustees on 31 July 2018 and are signed on their behalf by:

Dr Mnqobi Edwin NgidiChairperson of the ADA Board of Trustees.


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* See Note 13

Statement of Financial Position as at 31 March 2018Figures in Rand Note(s) 2018 2017

Restated*

Assets

Current AssetsReceivables from non-exchange transactions 2 3 845 049 793 547 Prepaid expenses 3 7 514 711 10 821 934 Deposits 17 118 17 118 Cash and cash equivalents 4 28 382 285 26 488 085

39 759 163 38 120 684

Non-Current AssetsProperty, plant and equipment 5 3 173 853 2 610 455 Intangible assets 6 3 472 333 4 330 990

6 646 186 6 941 445

Total Assets 46 405 349 45 062 129

Liabilities

Current LiabilitiesFinance lease obligation 7 - 6 166 Operating lease liability 8 4 531 205 3 880 102 Payables from exchange transactions 9 1 963 657 4 504 204 Unspent conditional grants and receipts 10 22 055 944 24 182 076 Provisions 11 822 823 735 355

29 373 629 33 307 903

Total Liabilities 29 373 629 33 307 903Net Assets 17 031720 11 754 226

Share capital / contributed capital 12 5 000 5 000 Accumulated surplus 17 026 718 11 749 225

Total Net Assets 17 031 718 11 754 225


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* See Note 13

Statement of Financial PerformanceFigures in Rand Note(s) 2018 2017

Restated*

Revenue

Revenue from exchange transactionsGain on disposal of assets and liabilities - 15 740 Government Grants 14 67 230 230 57 819 888 Interest received - investment 14 374 989 356 942 Sundry Income 14 81 797 59 600 Project Management Fees 14 173 438 785 000 Gain on foreign exchange 1 192 950 -

Total revenue from exchange transactions 69 053 404 59 037 170

Revenue from non-exchange transactions

Transfer revenueGovernment grants & subsidies 14 46 094 000 41 342 150

Total revenue 14 115 147 404 100 379 320

ExpenditureAssets written off (336 044) (31 072) Depreciation and amortisation 5&6 (1 568 674) (1 676 490) Employee related costs 16 (23 886 754) (23 367 898) Finance costs 17 (334) (10 097) General Expenses 19 (10 356 887) (10 226 074) Loss on disposal of assets and liabilities (35 079) - Loss on foreign exchange - (231 620) Repairs and Maintenance (153 797) (75 741) Operating lease rental 8 (5 095 449) (5 066 829) Project Expenses 21 (68 436 893) (66 098 216)

Total expenditure (109 869 911) (106 784 037)

Surplus (deficit) for the year 5277 493 (6 404 717)


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* See Note 13

Statement of Changes in Net Assets

Figures in Rand

Share capital / contributed

capital

Accumulated surplus

Total net assets

Balance at 01 April 2016 5 000 18 153 942 18 158 942Changes in net assets Restated deficit for the year - (6 404 717) (6 404 717)

Total changes - (6 404 717) (6 404 717)

Restated* Balance at 01 April 2017 5 000 11 749 225 11 754 225Changes in net assets Surplus for the year - 5 277 493 5 312 291

Total changes - 5 277 493 5 312 291

Balance at 31 March 2018 5 000 17 026 718 17 031 718

Note 13


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* See Note 13

Cash Flow StatementFigures in Rand Note(s) 2018 2017

Restated*

Cash flows from operating activities

ReceiptsProject management fees 958 860 - Sundry income 81 797 59 600 Interest received 1 396 293 1 813 704 Transfers and subsidies 10 106 510 212 109 131 200

108 947 162 111 004 504

PaymentsEmployee costs (23 454 672) (23 171 715) Suppliers (81 947 253) (86 110 829) Finance costs (334) (10 097)

(105 402 259) (109 292 641)

Net cash flows from operating activities 22 3 544 903 1 711 863

Cash flows from investing activities

Purchase of property, plant and equipment 5 (1 646 256) (213 625) Proceeds from sale of property, plant and equipment 5 6 302 29 700 Purchase of other intangible assets 6 (4 583) (267 242)

Net cash flows from investing activities (1 644 537) (451 167)

Cash flows from financing activities

Finance lease payments (6 166) (45 692)

Net increase/(decrease) in cash and cash equivalents 1 894 200 1 215 004Cash and cash equivalents at the beginning of the year 26 488 085 25 273 080

Cash and cash equivalents at the end of the year 4 28 382 285 26 488 085


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Unaudited Statement of Comparison of Budget and Actual Amounts

Revenue from exchange transactions

Approved Adjustments FinalActual Amounts on comparablebasis

Difference: Final Budget and actual

Reference

ReceiptsProject Management fee - 1 085 000 1 085 000 958 860 (126 140) 1 Other Income 58 000 - 58 000 81 797 23 797Interest Received 1 137 000 86 000 1 223 000 1 396 293 173 293 2

Total revenue from exchange transactions

1 195 000 1 171 000 2 366 000 2 436 950 70 950

Revenue from non-exchange transactions

Transfer revenueGovernment grants & subsidies 134 948 000 12 875 000 147 823 000 106 510 212 (41 312 788) 3 Total revenue 136 143 000 14 046 000 150 189 000 108 947 162 (41 241 838)

PaymentsCompensation of employees (30 835 000) 6 450 000 (24 385 000) (23 454 672) 930 328 4 Finance costs (5 290) - (5 290) (334) 4 956 5 Capital Assets (300 000) (2 550 000) (2 850 000) (1 650 839) 1 199 161 6 Project Expenditure (88 897 000) (13 812 000) (102 709 000) (62 770 199) 39 938 801Goods and services (16 105 710) (4 134 000) (20 239 710) (14 688 732) 5 550 978 7 Total expenditure (136 143 000) (14 046 000) (150 189 000) (102 569 286) 47 624 224

Surplus before taxation - - - 6 382 386 6 382 386

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

- - - 6 382 386 6 382 386

The variance between the actual and budget amounts are presented and explained in Note 24 and .25


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Accounting Policies

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 (ASB).

These financial statements have bee0n prepared on an accrual basis of accounting and are in accordance with historical cost convention as the basis of measurement, unless specified otherwise. They are presented in South African rands.

The following GRAP Standards were approved by Accounting Standards Board but are not yet effective GRAP 20 Related Parties Disclosure GRAP 32 Service Concession Arrangements: Grantor GRAP 34 Separate Financial Statements GRAP 35 Consolidated Financial Statement GRAP 36 Investments in Associates and Joint Ventures GRAP 37 Joint Arrangements GRAP 38 Disclosure of Interest in Other Entities GRAP 108 Statutory Receivables GRAP 109 Accounting by principal and Agents GRAP 110 Living and Non-Living Resources

The above standards will be adopted when they become effective from the 1st of April 2017 (except for those standards

that are not are not applicable to the Entity) The entity has opted to apply GRAP 20 in formulating disclosure on related parties.

The cash flow statement is prepared in accordance with the direct method. Specific information has been presented separately on the statement of financial position such as:

- Receivables from non-exchange transactions, - Payables from non-exchange transactions

Disclosure of any amount and nature of any restrictions on cash balances is required. A summary of the significant accounting policies, which have been consistently applied in the preparation of these financial statements, are disclosed below.

1.1 Going concern assumption

These financial statements have been prepared based on the expectation that the entity will continue to operate as a going concern for at least the next 12 months.

1.2 Trade and other receivables

The entity measures a financial asset and financial liability initially at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial liability. Transaction costs are added to financial instrument carried at amortised cost.

1.3 Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call accounts with banks and investments in money market instruments.

1.4 Accounting estimates and assumptions

In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts presented in the financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. Significant judgements include:

1.4.1 Useful lives of property, plant and equipment and intangible assetsThe entity depreciate or amortises its property, plant and equipment and intangible assets over the estimated useful lives of the assets, taking into account the residual values of the assets at the end of their useful lives, which is determined when the asset becomes available for use. The useful lives and residual values of the assets are based on industry knowledge and reviewed annually.


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Accounting Policies

1.4 Accounting estimates and assumptions (continued)

1.4 .2 Revenue recognitionAccounting policy note 1.13 on Revenue from both exchange transactions and non-exchange transactions describes the conditions under which revenue is recorded by the management of the entity. In making their judgement, management considered the detailed criteria for the recognition of revenue as set out in GRAP 9; Revenue from Exchange Transactions and GRAP 23 Revenue from Non Exchange Transactions and in particular, when services have been rendered. The management of the entity is satisfied that recognition of the revenue in the current year is appropriate.

1.4.3 ProvisionsManagement determined an estimate for provision raised based on the information available.

1.4.4 Financial assets and liabilitiesThe classification of financial assets and liabilities into categories, is based on management’s educated judgement.

1.4.5 Impairment of property plant and equipmentThe impairment of property, plant and equipment is based on the input provided by the entity's technical advisors including those of management. This input includes the conditional assessment of assets after physical verification.

1.5 Property, plant and equipment

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

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

it is probable that future economic benefits or service potential associated with the item will flow to the entity; and the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

Initial measurement

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 through a non-exchange transaction, 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, it's 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.

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.


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Accounting Policies

1.5 Property, plant and equipment (continued)The useful lives of items of property, plant and equipment have been assessed as follows:

Item Depreciation method Average useful lifeFurniture and fixtures Straight line 7 - 9 years Motor vehicles Straight line 5 - 8 years Computer equipment Straight line 6 - 8 years Finance lease Straight line 2 - 3 years Other fixed assets Straight line 3 - 5 years

The depreciable amount of an asset is allocated on a systematic basis over its useful life.

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

The depreciation method used reflects the pattern in which the asset’s future economic benefits or service potential are expected to be consumed by the entity. The depreciation method applied to an asset is reviewed at least at each reporting date and, if there has been a significant change in the expected pattern of consumption of the future economic benefits or service potential embodied in the asset, the method is changed to reflect the changed pattern. Such a change is accounted for as a change in an accounting estimate.

The entity assesses at each reporting date whether there is any indication that the entity expectations about the residual value and the useful life of an asset have changed since the preceding reporting date. If any such indication exists, the entity revises the expected useful life and/or residual value accordingly. The change is accounted for as a change in an accounting estimate.

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

Items of 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.

Assets which the entity holds for rentals to others and subsequently routinely sell as part of the ordinary course of activities, are transferred to inventories when the rentals end and the assets are available-for-sale. Proceeds from sales of these assets are recognised as revenue. All cash flows on these assets are included in cash flows from operating activities in the cash flow statement.

The entity separately discloses expenditure to repair and maintain property, plant and equipment in the notes to the financial statements (see note 5).

1.6 Intangible assets

An asset is identifiable if it either: is separable, i.e. 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, identifiable assets or liability, regardless of whether the entity intends to do so; or

arises from binding arrangements (including rights from contracts), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

The entity assesses the probability of expected future economic benefits or service potential using reasonable and supportable assumptions that represent management’s best estimate of the set of economic conditions that will exist over the useful life of the asset.

Where an intangible asset is acquired through a non-exchange transaction, its initial cost at the date of acquisition is measured at its fair value as at that date.

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


8 3

Accounting Policies

1.6 Intangible assets (continued)

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

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

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

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

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

Internally generated goodwill is not recognised as an intangible asset.

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

Item Amortisation method Average useful lifeComputer software Straight line 3 - 8 years

The entity discloses relevant information relating to assets under construction or development, in the notes to the financial statements (see note 6).

1.7 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.

A financial asset is:

cash; a residual interest of another entity; or a contractual right to:

- receive cash or another financial asset from another entity; or - exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.

Financial assets are measured at amortised cost using the effective interest rate method, less any impairment. Interest income is recognised by applying the effective interest rate except for short-term receivables when the recognition of interest would be immaterial.

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

deliver cash or another financial asset to another entity; or exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity.

Financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis, except for short-term trade payables where the recognition of interest will be immaterial.

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 that are directly attributable to the acquisition or issue of the financial asset or financial liability.

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.


8 4

Accounting Policies

1.8 Leases

Finance leases - lessee

Initial recognition and measurementFinance 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 interest rate implicit in the lease.

Subsequent measurementMinimum 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 so as 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 - lessor

Operating lease revenue is recognised as revenue on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease revenue.

The aggregate cost of incentives is recognised as a reduction of rental revenue over the lease term on a straight-line basis.

The aggregate benefit of incentives is recognised as a reduction of rental expense over the lease term on a straight-line basis.

Income for leases is disclosed under revenue in statement of financial performance.

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.

1.9 Impairment of cash-generating assets

Cash-generating assets are assets used with the objective of generating a commercial return. Commercial return means that positive cash flows are expected to be significantly higher than the cost of the asset.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Carrying amount is the amount at which an asset is recognised in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets used with the objective of generating a commercial return that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.

Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value less costs to sell is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.

Recoverable amount of an asset or a cash-generating unit is the higher its fair value less costs to sell and its value in use.

Useful life is either:


8 5

Accounting Policies

1.9 Impairment of cash-generating assets (continued)

the period of time over which an asset is expected to be used by the entity; or the number of production or similar units expected to be obtained from the asset by the entity.

Judgements made by management in applying the criteria to designate assets as cash-generating assets or non-cash- generating assets, are as follows:

[Specify judgements made]

1.10 Impairment of non-cash-generating assets

Cash-generating assets are assets used with the objective of generating a commercial return. Commercial return means that positive cash flows are expected to be significantly higher than the cost of the asset.

Non-cash-generating assets are assets other than cash-generating assets.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs to sell and its value in use.

Identification

When the carrying amount of a non-cash-generating asset exceeds its recoverable service amount, it is impaired.

The entity assesses at each reporting date whether there is any indication that a non-cash-generating asset may be impaired. If any such indication exists, the entity estimates the recoverable service amount of the asset.

Irrespective of whether there is any indication of impairment, the entity also test a non-cash-generating intangible asset with an indefinite useful life or a non-cash-generating intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable service amount. This impairment test is performed at the same time every year. If an intangible asset was initially recognised during the current reporting period, that intangible asset was tested for impairment before the end of the current reporting period.

1.11 Share capital / contributed capital

Contributed capital is the initial contribution made by the Kwazulu-Natal Provincial government.

1.12 Employee benefits

Post-employment benefits: Defined contribution plans

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

When an employee has rendered a service to the entity during a reporting period, the entity recognises the contribution payable to a defined contribution plan in exchange for that service:

as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the reporting date, an entity recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and

as an expense, unless another Standard requires or permits the inclusion of the contribution in the cost of an asset.

Where contributions to a defined contribution plan do not fall due wholly within twelve months after the end of the reporting period in which the employees render the related service, they are discounted. The rate used to discount reflects the time value of money. The currency and term of the financial instrument selected to reflect the time value of money is consistent with the currency and estimated term of the obligation.


8 6

Accounting Policies

1.13 Provisions

Provisions are recognised when: the entity has a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits or service potential will be required to

settle the obligation; and a reliable estimate can be made of the obligation.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 28.

All the provisions are short-term in nature and thus ignore the effect of discounting.

1.14 Revenue

Revenue comprises gross inflows of economic benefits or service potential received and receivable by an entity, which represents an increase in net assets, other than increases relating to contributions from owners.

Recognition

Revenue comprises of revenue from exchange and non-exchange transaction. An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow.

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

Grants and other donor income

Bequests that satisfy the definition of an asset are recognised as assets and revenue when it is probable that the future economic benefits or service potential will flow to the entity, and the fair value of the assets can be measured reliably.

Interest earned on grant income

Interest earned on conditional grant monies received is reflected as “amounts owing to funders", in a case where specific permission is required from the funder before it can be expended on project activities. When approval is granted, interest earned is transferred to conditional grants and recognised as revenue in accordance with principles set out in paragraphs above.

Unspent grants

When grants are received are initially recognised as a liability. Once the entity has complied with all the conditions of the grant received, the grant is re-allocated from liability and recognised in the Statement of Financial Performance.

Other income

Revenue from the sale of bid documents is recognised upon receipt of cash.

1.15 Borrowing costs

Borrowing costs are interest and other expenses incurred by an entity in connection with the borrowing of funds.

Borrowing costs are recognised as an expense in the period in which they are incurred.

1.16 Unauthorised expenditure

Unauthorised expenditure means: overspending of a vote or a main division within a vote; and expenditure not in accordance with the purpose of a vote or, in the case of a main division, not in accordance with the

purpose of the main division.


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Accounting Policies

1.16 Unauthorised expenditure (continued)

All expenditure relating to unauthorised expenditure is recognised as an expense in the statement of financial performance in the year that the expenditure was 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.

1.17 Fruitless and wasteful expenditure

Fruitless expenditure means expenditure which was 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 that the expenditure was 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.

1.18 Irregular, fruitless and wasteful 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) this Act; or (b) the State Tender Board Act, 1968 (Act No. 86 of 1968), or any regulations made in terms of the Act; or (c) any provincial legislation providing for procurement procedures in that provincial government.

National Treasury practice note no. 4 of 2008/2009 which was issued in terms of sections 76(1) to 76(4) of the PFMA requires the following (effective from 1 April 2008):

Irregular expenditure is recorded in the notes to the financial statements when confirmed.

Irregular expenditure that was incurred and identified during the current financial and which was 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 also required with the exception of updating the note to the financial statements.

Irregular expenditure that was 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.

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.

Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount as debt impairment and disclose such in the relevant note to the financial statements. The irregular expenditure register must also be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto must remain against the relevant programme/expenditure item, be disclosed as such in the note to the financial statements and updated accordingly in the irregular expenditure register.

1.19 Budget information

The entity is subject to budgetary limits in the form of appropriations or budget authorisation's (or equivalent), which is given effect through authorising legislation, appropriation or similar.

General purpose financial reporting by entity shall provide information on whether resources were obtained and used in accordance with the legally adopted budget.

The approved budget is prepared on a cash basis and presented by economic classification linked to performance outcome objectives.

The approved budget covers the fiscal period from 2017/04/01 to 2018/03/31.


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Accounting Policies

1.19 Budget information (continued)

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

Changes between the approved and final budget are a consequence of reallocations within the budget.

1.20 Related parties

A related party is a person or an entity with the ability to control or jointly control the other party, or exercise significant influence over the other party, or vice versa, or an entity that is subject to common control, or joint control.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Joint control is the agreed sharing of control over an activity by a binding arrangement, and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the ventures).

Related party transaction is a transfer of resources, services or obligations between the reporting entity and a related party, regardless of whether a price is charged.

Significant influence is the power to participate in the financial and operating policy decisions of an entity, but is not control over those policies.

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.

The entity is exempt from disclosure requirements in relation to related party transactions if that transaction occurs within normal supplier and/or client/recipient relationships on terms and conditions no more or less favourable than those which it is reasonable to expect the entity to have adopted if dealing with that individual entity or person in the same circumstances and terms and conditions are within the normal operating parameters established by that reporting entity's legal mandate.

Where the entity is exempt from the disclosures in accordance with the above, the entity discloses narrative information about the nature of the transactions and the related outstanding balances, to enable users of the entity’s financial statements to understand the effect of related party transactions on its financial statements.

1.21 Events after reporting date

Events after reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Two types of events can be identified:

those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and

those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).

The entity will adjust the amount recognised in the financial statements to reflect adjusting events after the reporting date once the event occurred.

The entity will disclose the nature of the event and an estimate of its financial effect or a statement that such estimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence the economic decisions of users taken on the basis of the financial statements.

1.22 Commitments

Items are classified as commitments where the entity commits itself to future transaction that will result in the future outflow of resources. Commitments represent both goods and services that have been approved and contracted for where the expenditure has been approved and the contract has been awarded at the reporting period.


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Accounting Policies

1.23 Risk management

It is the policy of the entity to disclose information that enables the users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed on the reporting date. Risk and exposure are disclosed as follows:

Credit RiskEach class of financial asset is disclosed separately. Maximum exposure to credit risk not covered by collateral is specified. Financial assets covered by collateral are specified.

Liquidity riskLiquidity risk is the risk that the entity will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk is managed by ensuring that all assets are reinvested at maturity at competitive interest rates in relation to cash flow requirements. Liabilities are managed by ensuring that all contractual payments are met on a timeous basis and if required, additional new arrangements are established at competitive rates to ensure that cash flow requirements are met.

A maturity analysis for financial liabilities (where applicable) that shows the remaining undiscounted contractual maturities is disclosed in the notes to the annual financial statements.

1.24 Prepaid Expenses

Amounts prepaid are recognised in the Statement of Financial Position when the payments are made and are derecognised as and when the goods or services are received or the funds are utilised. Prepayments outstanding at the end of the year are carried in the Statement of Financial Position at cost.

1.25 Foreign currency translation

Cash flows arising from foreign currency transactions are translated into South African Rands using the spot exchange rates prevailing at the date of payment and losses or gains are recognised in the Statement of Financial performance.

1.26 Rounding

Unless otherwise stated financial figures have been rounded to the nearest one Rand.

1.27 Current year comparison with budget

A comparison between the approved, final budget and actual amounts for each programme or economic classification is included in the Statement of Comparison of Budget and Actual Amounts.

1.28 Employee Costs

The cost of short term benefit is recognised during the period in which the employees renders the related service. The provision for employee entitlements to salaries and annual leave represent the amount which the entity has a present obligation to pay as result of employee’s service provided for at the reporting date. The provision and accrual have been calculated at undiscounted amount on current salary rates

1.29 Expenditure

Expenditure is recognised on an accrual basis.


9 0

Notes to the Financial Statements

Figures in Rand 2018 2017

2. Receivables from non-exchange transactions

Project Management Fees - COGTA - 785 000 Receivables from non-exchange transactions-DARD 3 845 049 - Employees Debtors - 8 547

3 845 049 793 547

Receivables are as a result of staff salary overpayment which have been fully recovered in the current year and grants or management fees that were not received at year end.

3. Prepaid Expenses

CategoriesPrepayment of software licenses 75 601 140 021 Prepayment for goods and services 7 439 110 10 681 913

7 514 711 10 821 934

Prepayments on software are for license fees paid partly for 2018 and 2019 financial years. Prepayment for goods and services relates to project funds that were paid to the Implementing Agency (Techno Serve) but have not been fully utilised at year end.

4. Cash and cash equivalents

Operational Account 1 948 612 4 109 001 KZN Department of Agriculture and Rural Development Call Account 13 844 320 7 570 948 KZN Department of Economic Development, Tourism and Environmental Affairs Call 6 236 229 6 304 230 Account Department of Rural Development and Land Reform Call Account - COGTA

6 353 124

8 503 906

28 382 285 26 488 085

ABSA : 40-5078-5995Cash book balance at beginning of the year

4 109 001

1 875 520 Cash book balance at end of the year Bank statement balance at beginning of the year

1 949 113 -

4 109 001

4 109 001 -

1 875 520 Bank statement balance at end of the year 1 948 612 4 109 001

ABSA DEDT Call Account- 92-7008-9704Cash book balance at beginning of the year

6 304 230

29 485

Cash book balance at end of the year Bank statement balance at beginning of the year

6 236 229 -

6 304 230

6 304 230 -

29 485 Bank statement balance at end of the year 6 236 229 6 304 230

COGTA ABSA Call Account- 92-7008-9819Cash book balance at beginning of the year

8 503 906

3 906 489


6 353 124 -

8 503 906

8 503 906 -


DARD ABSA Call Account- 92-7008-9495Cash book balance at beginning of the year

7 570 948

19 461 586


13 844 320 -

7 570 948

7 570 948 -



9 1



4. Cash and cash equivalents (continued)Cash on hand 2 647 2 207

The entity had a balance of R2 647 in petty cash at the end of 31 March 2018.

5. Property, plant and equipment

2018 2017 Cost / Accumulated Carrying value Cost / Accumulated Carrying value

Valuation depreciation and

accumulatedimpairment

Valuation depreciation and

accumulated impairment

Finance lease asset - - - 80 708 (73 919) 6 789 Computer equipment 3 382 683 (1 209 937) 2 172 746 3 249 112 (1 795 089) 1 454 023 Motor vehicles 1 420 995 (1 289 139) 131 856 1 420 995 (1 154 796) 266 199 Furniture and fixtures 1 767 516 (1 111 935) 655 581 1 727 516 (939 955) 787 561 Other fixed assets 504 898 (291 228) 213 670 328 956 (233 073) 95 883

Total 7 076 092 (3 902 239) 3 173 853 6 807 287 (4 196 832) 2 610 455

Reconciliation of property, plant and equipment - 2018

Opening balance

Additions Disposals Depreciation Impairment loss

Total

Finance lease 6 789 - - (6 789) - - asset Furniture and 787 561 40 000 - (171 980) - 655 581 fixtures Motor vehicles 266 199 - - (134 343) - 131 856 Computer 1 454 023 1 430 314 (41 381) (370 111) (300 099) 2 172 746 equipment Other fixed 95 883 175 942 - (58 155) - 213 670 assets

2 610 455 1 646 256 (41 381) (741 378) (300 099) 3 173 853

Reconciliation of property, plant and equipment - 2017

Openingbalance

Additions Disposals Depreciation Impairmentloss

Total

Finance lease asset 73 282 - (3 656) (62 837) - 6 789 Furniture and fixtures 946 197 20 509 - (171 415) (7 730) 787 561 Motor vehicles 442 226 - - (176 027) - 266 199 Computer equipment 1 679 969 150 117 (10 302) (344 757) (21 004) 1 454 023 Other fixed assets 140 715 42 999 - (85 494) (2 337) 95 883

3 282 389 213 625 (13 958) (840 530) (31 071) 2 610 455

Assets subject to finance lease (Net carrying amount)

Leased assets - 6 789


9 2



5. Property, plant and equipment (continued)

Expenditure incurred to repair and maintain property, plant and equipment

Expenditure incurred to repair and maintain property, plant and equipment included in Statement of Financial PerformanceFurniture and Fixtures

105 905

41 958 Motor vehicles 47 892 33 783

153 797 75 741

6. Intangible assets

2018 2017

Cost / Accumulated Carrying value Cost / Accumulated Carrying valueValuation Amortisatio

n and accumulatedimpairment

Valuation Amortisationand

accumulatedimpairment

Computer software 7 813 498 (4 341 165) 3 472 333 8 137 123 (3 806 133) 4 330 990

Reconciliation of intangible assets – 2018

Computer software

Opening balance4 330 990

Additions

4 583

Amortisation

(827 295)

Impairment Total loss

(35 945) 3 472 333

Reconciliation of intangible assets – 2017

Computer software


Additions

267 242

Amortisation Total

(835 960) 4 330 990

7. Finance lease obligation

Minimum lease payments duewithin one year - 6 500

- 6 500 less: future finance charges - (334)

Present value of minimum lease payments - 6 166

Present value of minimum lease payments duewithin one year - 6 166

Non-current liabilities Current liabilities

- - - 6 166

- 6 166


9 3



7. Finance lease obligation (continued)

-ADA leased Ipads from 27 February 2014 for 2 years at an interest rate of 17% per annum and lease installments amounted to R7 182. The lease came to an end in February 2016

-The ADA leased cell phones on 21 April 2015 for 2 years. Capital lease installments of R3 349 are payable monthly in arrears. The effective interest is charged at 3.2% per month. Ownership will pass to ADA at the end of the lease term

-An additional two year cell phone lease commenced on 31 August 2015. Capital lease installments of R1 299 are payable monthly in arrears. The effective interest is charged at 1.78% per month. Ownership will pass to ADA at the end of the lease term.

8. Operating lease Liability

Current liabilities (4 531 205) (3 880 102)

Lease payments under an operating lease shall be recognised as an expense in the statement of financial performance on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the user's benefit.

Minimum lease payments dueWithin one year 4 806 397 4 411 669 In second to fifth year 16 851 766 21 469 831 More than five years 12 969 838 12 857 056

34 628 001 38 738 556

The entity entered into a 10 year lease for office premises commencing on the 1st of March 2014. Lease rentals are subjected to an 8% escalation rate per annum.

There is another lease for 3 years with Minolta which commenced on the 1st of October 2017 with no escalation rate.

Lease payments under the operating lease shall be recognised as an expense in the statement of financial performance on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the users benefit. The VAT increase by 1 percent was adjusted in the rental figure from 1 April 2018.

9. Payables from exchange transactions

Trade payables 225 361 21 741 Accrued expenses 1 632 947 4 482 463 Leave accrual 105 349 -

1 963 657 4 504 204

The leave accrual of R105 000 as disclosed above is annual leave payable to employees who left the organisation at year end.


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10. Unspent Grants

2018 KZN Department of Agriculture and rural


Receipts

106 510 212

Interest

532 082

Payments (109 336 138)

Closing balance12 382 147

Development (DARD) Accrued income -KZN (DARD)

-

3 840 000

-

-

3 840 000

KZN Department of Cooperative Governance and Traditional Affairs

9 506 085 - 489 242 (4 161 530) 5 833 797

24 182 076 110 350 212 1 021 324 (113 497 668) 22 055 944 2017 KZN Department of Cooperative


Receipts

14 550

000

Interest

404 187

Payments

(9 354 590)

Closing balance9 506 085

Governance and Traditional Affairs KZN Department of Agriculture and rural

8 849 664

94 581 200

1 052 575

(89 807 448)

14 675 991

Development

12 756 152 109 131 200 1 456 762 (99 162 038) 24 182 076

11. Provisions

Reconciliation of provisions - March 2018

Other provisions

Opening Balance

735 355

Movement

87 468

Total

822 823

Reconciliation of provisions - 2017

Other provisions

Opening Balance

593 561

Movement

141 794

Total

735 355

12. Share capital / contributed capital

IssuedInitial contribution

5 000

5 000

13. Prior period errors

Intangible assets were understated and disclosed under computer software. Creditors, prepaid expenses and unsent grants were overstated hence expenditure and revenue were adjusted.

The effect of the prior year errors on the 1st April 2017 results are shown below.

Statement of financial positionIncrease in Intangible assets - 110 720 Decrease in Creditors - 222 632 Increase in Accruals - 69 172 Increase in Unspent Conditional Grants - 10 681 913 Increase in Prepaid Expense - 10 681 913 Surplus or Deficit for the year - 8 167 377 Net movement - 29 933 727


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13. Prior period errors (continued) Statement of Financial Performance Decrease in Computer Expenses - 110 720 Decrease in Project expenditure - 10 973 487 Decrease in Travel and accommodation - 230 Decrease in KZN Department of Agriculture and Rural Development Grants - 10 681 913 Surplus or Deficit for the year - 8 167 377 Net movement - 29 933 727

Cash flow statement

Cash flow from operating activitiesSuppliers - 1 601 142 Adjusted Balance - (1 711 863)

- (110 721)

Cash flow from investing activitiesTotal-2017 - (340 445) Restated - 451 166

- 110 721

Cash flow from financing activitiesTotal-2017 - 45 642 Restated - (45 642)

- -


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14. Revenue

Project management fees 173 438 785 000 KZN Cooperative Governance and Traditional Affairs 67 230 230 57 819 888 Forex Gain 1192 950 Gain or loss on disposal of assets and liabilities - 15 740 Sundry income 81 797 59 600 Interest Received 374 989 356 942 Government grants & subsidies 46 094 000 41 342 150

115 147 404 100 379 320

The amount included in revenue arising from exchanges of goods or services are as follows:Project management fees 173 438 785 000 KZN Cooperative Governance and Traditional Affairs 67 230 230 57 819 888 KZN Department of Economic Development, Tourism and Environmental Affairs - 15 740 Forex Gain 1192 950 Other income 81 797 59 600 Interest received 374 989 356 942

69 053 404 59 037 170

The amount included in revenue arising from non-exchange transactions is as follows:

Transfer revenueGovernment grants & subsidies 46 094 000 41 342 150

15. Employee benefit obligations

Defined contribution plan

It is the policy of the ADA to provide pension benefits to all its employees. The pension fund benefit came into effect in February 2014.

The entity is under no obligation to cover any unfunded benefits.

The total economic entity contribution to such schemes 5 559 017 4 238 013

The amount recognised as an expense for defined contribution plans is 2 291 673 1 827 061


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16. Employee related costs

Basic salaries 14 703 240 14 312 825 Workmen's Compensation 34 159 296 747 Movement in leave provision 87 468 141 794 Salaries –PAYE 5 128 429 4 954 319 Pension 2 291 673 1 827 061 Board Committee Fees 1 536 436 1 839 009 Leave accrual 105 349 (3 857)

23 886 754 23 367 898

17. Finance costs

Finance leases 334 10 097

18. Audit fees

Current year paid 908 029 755 610

19. General expenses

Advertising 553 740 155 416 Audit fees 908 029 755 610 Bank charges 28 753 18 617 Catering 123 975 155 300 Cleaning 429 975 414 619 Computer Expenses 1 014 731 627 752 Computer Software Licenses 623 873 668 345 Consulting 332 138 1 022 484 Courier and postage 2 065 2 510 Electricity and water 300 433 351 522 Insurance 186 272 184 869 Legal Fees 169 062 512 310 Marketing 635 471 506 698 Motor vehicle expenses 226 021 269 171 Office Consumables 2 221 4 656 Other expenses 6 779 12 613 Photocopying and printing 285 807 384 146 Publications 114 449 278 703 Recruitment costs 28 663 15 269 Security 603 967 568 683 Small assets 3 691 39 775 Staff Wellness 77 347 197 517


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19. General expenses (continued)Stationery

93 558

134 789 Subscriptions 41 205 94 655 Telephone and fax 889 349 925 776 Training 393 037 620 350 Travel and subsistence 2 282 276 1 303 919

10 356 887 10 226 074

20. Taxation

No provision has been made for taxation as the Trust is exempt from income tax.

21. Schedule of grants and expenditure

Project expenditure Project openingbalance

01 April 2017

Project allocation 2017/2018

Current year expenditure

31 March 2018

Project closing balance

31 March 2018Amajuba Grain 309 678 (309 678) - - Asisukume Msinga - COGTA 16 684 (16 684) - - Bayonne Dairy farm 51 859 (18 704) 33 155 - Beef Feedlot in Ophondweni Abattoir - 956 521 956 521 - Buffelshoek 81 864 (81 864) - - Cappeny Estates 1 215 756 5 530 238 1 115 157 5 630 837 Cathedral Peak Outgrower 680 852 11 033 687 10 334 767 1 379 772 Celokuhle 1 663 201 3 471 436 2 190 740 2 943 897 Contractor Development - 1 960 200 1 960 115 85 Cowboy Abattoirs (127 452) - - (127 452) Dabhazi/Maphophoma Mill 2 873 572 1 806 083 2 618 490 2 061 165 Distressed Farmers 202 018 (202 018) - - Emadungeni Piggery-COGTA 4 850 000 - 114 694 4 735 306 Empangisweni Trust 912 500 2 080 300 2 897 744 95 056 Empangisweni Trust-COGTA 3 890 892 251 253 3 315 473 826 672 Eston Family trust 2 571 (2 571) - - eThala Biofuels 1 580 744 (1 580 744) - - Falin Investments 204 882 (204 882) - - Fertilizer Aggregators - 937 758 599 775 337 983 Fish Feed UKZN - 507 209 507 209 - Honey Value Chain - 591 377 78 970 512 407 Inkandla Essential Oils 2 637 348 (124 825) 1 116 813 1 395 710 Ishikishiki 109 514 (109 514) - - Izithelo Zempilo - 910 814 845 580 65 234 KZN Essential oils 4 499 999 257 200 1 882 704 2 874 495 Lanfine farm 13 010 (13 010) - - MaAnde Investments - 5 350 000 559 830 4 790 170 Mango Processing Factory - 593 623 593 623 - Manyiseni 109 993 (109 993) - - Middelrus cluster 427 (427) - - Mkhumbana 568 887 4 446 935 2 942 214 2 073 608 Mkoloni 31 676 (31 676) - - Model Butchery - 1 452 312 971 337 480 975 Msinga Goat Abattoir 350 000 (209 612) 140 388 - Mthethwa Processing 711 820 3 828 489 3 502 136 1 038 173 Nkunzana 492 334 5 663 404 5 163 333 992 405 Nkwali 297 127 461 153 404 297 353 983 Nofisa 1 974 734 1 194 490 1 252 900 1 916 324 Ntuso Farm 1 044 (1 044) - - Peanut butter (20 778) 20 778 - -


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Rapid dawn 66 584 (66 584) - - Programme 2- Comprehensive capacity building 2 050 861 1 099 139 2 542 968 607 032 Pragramme 3- Enterprise and value chain 99 540 425 460 285 222 239 778 development Siyaphambili Tannery 1 847 829 1 427 442 875 132 2 400 139 Summerhill 2 447 811 813 572 2 339 567 921 816 Techno Serve - - 3 246 801 (3 246 801) Thokazi 960 000 (528 692) 431 308 - Umzinyathi Agri-hub 136 (136) - - Okhahlamba Community Vineyard - COGTA 220 647 (220 647) - - Weenen Chicory 2 387 874 1 820 550 3 552 030 656 394 Young Farmers Development programme 4 235 417 3 147 427 9 055 347 (1 678 824)

44 503 455 58 205 545 68 436 893 34 276 339

Project expenditure by classification

Employee Costs

2018 Total Expenditure

7 642 505

2017 Total Expenditure

7 240 363 Travel & accommodation 1 172 572 1 151 449 Production inputs 7 070 394 18 095 040 Production implements 419 209 18 363 560 Training 11 101 136 1 007 371 Engineering services 2 675 705 2 700 229 Farm equipment 9 975 269 - Farm Management service 2 872 506 4 217 881 Operating expenses 4 772 242 5 866 204 Feasibility study 1 580 814 1 624 706 Construction 19 160 862 5 831 413

68 436 893 66 098 216

22. Cash generated from operations

Surplus (deficit) 5 277 493 (6 404 717) Adjustments for:Depreciation and Amortisation 1 568 674 1 676 490 Loss on sale of assets and liabilities 35 079 (15 740) Assets written off or impairment 336 046 31 072 Movements in operating lease assets 651 103 954 898 Movements in provisions (87 468) (141 794) Changes in working capital:Decrease/(Increase) Receivables from non-exchange transactions (3 051 502) (33 528) (Increase) / Decrease in Prepaid expenses 3 307 223 (2 205 680) Decrease/(Increase) in deposits - 10 000 (Decrease)/Increase in Payables from exchange transactions (2 356 613) (3 585 062) (Decrease)/Increase in Unspent conditional grants and receipts (2 126 132) 11 425 924

3 544 903 1 711 863

23. Going concern

We draw attention to the fact that at 31 March 2018, the entity had an accumulated surplus of total assets exceed its liabilities by 17 0310 718066 516.

17 061 516 and that the entity's

The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that 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 a number of factors. The most significant of these is that the Board members continue to procure funding for the ongoing operations for the entity and that the agreement referred to in note 16, these financial statements will remain in force for so long as it takes for the entity.


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24. Reconciliation of budget surplus with Financial Statements

The budget is approved on a cash basis by functional classification. The approved budget covers the year from 1 April 2017 to 31 March 2018. The financial statements are prepared on an accrual basis using a classification of the nature of expenses in the statement of financial performance. The financial statements differ from the budget, which is approved on a cash basis.

Reconciliation of cash between the accrual and cash basis

The amounts in the financial statements were adjusted from the accrual basis to a cash basis and reclassified by classification to be on the same basis as the final approved budget. The amounts of these adjustments are identified in the following table. A reconciliation between the actual amounts on a comparable basis as presented in the statement of comparison of budget and actual amounts and the actual amounts in the cash flow statement for the year that ended 31 March 2018 is presented below.

GRAP 24 Reconciliation Operating

Activities Financing activities

Investing activities

Total

Actual amount comparable basis as presented in the 6 377 876 (334) (1 644 537) 4 733 005 budget and actual comparative statement Entity differences (2 832 973) (5 832) - (2 838 805)

3 544 903 (6 166) (1 644 537) 1 894 200

25. Budget differences

Material differences between budget and actual amounts

1. Project Management Fees- The balance was not invoiced due to under expenditure in the current year.

- The Budget was adjusted to accommodate the Project Management fee for the implementation of the Local Economic Development projects on behalf of KZN Cooperative Governance and Traditional Affairs.

2. Interest received

- Interest is recognised once the funds are spent in line with the conditions of the agreement.

- The interest collected was higher than budgeted due to low level of expenditure hence more funds were retain in the bank

accounts.

3. Grant Revenue

- The invoices for the last quarter were only paid after year end by DARD, this resulted in an under collection.

4. Employee Costs

- The entity had various vacant positions resulting from a number of staff that resigned, however most of the posts were filled in the last quarter of the year.

5. Finance charges

- The under expenditure resulted from the ADA finance leases coming to an end in the second quarter of the year.

6. Capital expenditure

- The budget was adjusted in order to accommodate emergency repairs to restore the servers and increase the storage space.

- The higher expenditure is due to purchase of server equipment in the current year.


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25. Budget differences (continued)

7. Project expenditure - The under expenditure resulted from various infrastructure projects that were in progress by year end. Some of the project EIAs

were not finalised by year end, hence infrastructure development could not be implemented.

26. Commitments

Approved and Contracted for

Capital expenditure Property, plant and equipment

1 246 662

-

Intangible assets 209 922 -

1 456 584 -

Total commitments

Authorised capital expenditure

1 456 583

-

Authorised operational expenditure 37 711 025 16 276 360

39 167 608 16 276 360

The ADA committed to the services for cleaning and security for the period of three years.

27. Related party relationships and transactions

27.1 Related party relationships

27.1.1 Mjindi Farming (Pty) Ltd

Mjindi Farming is a related party to the ADA as they are both controlled by the DARD.

27.2 Related party transactions

27.2.1 Department of agriculture and rural Development (DARD)Revenue 121 334 000 94 581 200

DARD is the sole shareholder of the Agribusiness Development Agency (ADA).The ADA received the funding for operations and project implementation in the form of transfers from DARD. Operational expenditure is funded through equitable share while projects are funded through a conditional grant.

27.2.2 Agricultural Economic Association of South Africa (AESA) Expenditure 60 000 60 000

Dr. Thulasizwe Mkhabela (Chief Operations Officer) and Acting CEO is a Vice President at AESA.

27.2.3 Management remuneration for the period ended 31 March 2018

Salary Pension Other allowance

Total

Dr. TS Mkhabela - Chief Operation Officer - 1 202 450 91 968 150 819 1 445 237 Ms. TBM Ngwenya- Chief Financial Officer - 598 032 44 396 - 642 428 (CFO) Mrs. NN Mkhathini - Acting CFO - 346 640 26 890 211 474 585 004 Ms. C Vilakazi - Specialist PM & E - 94 246 - - 94 246 Ms. VR Dlamini - Project Manager - 1 046 456 80 269 - 1 126 725 Mr. P Sapsford - Project Manager - 417 678 - - 417 678


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27. Related party relationships and transactions (continued)Mr. T Duze - Specialist PM & E - 237 044 18 224 - 255 268 Mr. T Mnguni ( Acting project Manager) - 600 482 61 833 131 526 793 841 Mr. M Hoosen - Project Manager - 237 044 18 224 - 255 268 Ms. Z Mazibuko - Project Manager - 237 044 18 224 - 255 268

- 5 017 116 360 028 493 819 5 870 963

- Mr. C Boldogh - Acting Chief Executive Officer (CEO) was seconded from DARD from 1 October to 31 March 2018 however his salary was paid by the Department of Agriculture.

- Ms. C Vilakazi resigned in April 2017

- Ms. TBM Ngwenya resigned in 30 September 2017. - Mrs. NN Mkhathini started Acting as CFO at 04 October 2017. - Mr. P Sapsford was appointed as senior manager in July 2017 and his contract ended in November 2017.

- Mr. T Mnguni started acting as a project manager from February to 31 December 2017.

- Mr. M Hoosen was appointed as a senior manager from 01 January 2018.

- Ms. Z Mazibuko was appointed as a senior manager from 01 January 2018

- Mr. TS Duze was appointed as a senior manager from 01 January 2018.

27.2.4 Management remuneration for the periodended 31 March 2017

Salary Pension Otherallowance

Closingbalance

Dr. TS Mkhabela - Acting Chief Executive Officer (CEO) 1 139 763 85 482 112 929 1 338 174 Ms. TBM Ngwenya- Chief Financial Officer (CFO) 1 099 617 82 471 - 1 182 088 Mr. FX Mbuli - Legal & Corp.Services Manager 143 949 5 969 - 149 918 Ms. VR Dlamini - Project Manager 977 997 73 350 - 1 051 347 Ms. MFN Mtambo - Project Manager 587 930 38 227 - 626 157 Mr. P Sapsford - Project Manager 332 161 23 876 - 356 037 Ms. C Vilakazi - Specialist PM & E 964 091 - 200 755 1 164 846 Mr. T Mnguni 122 647 9 199 26 930 158 776

5 368 155 318 574 340 614 6 027 343

- Dr. TS Mkhabela was appointed as Acting CEO from 1 October 2016 to September 2017

- Ms. C Vilakazi was appointed as Acting CEO from 01 March 2016 up to 30 September 2016.

- Mr. P Sapsford resigned on the 31st July 2016.

- Mr. FX Mbuli resigned on the 13th of May 2016.

- Ms. Mbali Mtambo resigned on the 31st of October 2017.

- Mr. T Mnguni was appointed as Acting Project Manager from 01 February 2017.

27.2.5 Remuneration of Board Committees 2018 Board

Board Fees

Travel

TotalDr. MS Mbatha - (Chairperson) - Term ended in August 2017 208 730 - 208 730 Dr. ME Ngidi - (Appointed as Chairperson in September 2017) 298 104 - 298 104 Adv. K Thango - (Appointed in September 2017) 50 155 - 50 155 Ms. T Ntshangase - (Appointed in September 2017) 48 915 - 48 915


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27. Related party relationships and transactions (continued)Mrs. NP Linda - (Appointed in September 2017) 50 155 16 254 66 409 Mr. N Khambule - (Appointed in September 2017) 47 675 - 47 675 Mr. MV Khumalo - (Appointed in September 2017) 50 155 - 50 155 Mr. AG Mthembu - (Appointed in September 2017) 50 155 53 408 103 563 Adv. RR Nirghin – (Term ended in August 2017) 25 441 - 25 441 Ms. N Zwane - (Term ended in August 2017) 25 441 - 25 441 Mrs. P Dabideen - (Deputy Chairperson) 132 360 - 132 360 Mr. IZ Ngcobo - (Term ended in August 2017) 25 441 - 25 441 Mr. WR Dladla - (Term ended in August 2017) 50 155 - 50 155

1 062 882 69 662 1 132 544

2018 Audit and Risk Committee ARC Fees Travel TotalMr. Simjee - (Chairperson - Term ended in August 2017) 36 017 - 36 017 Mr. V Mtshali - (Appointed as Chairperson in September 2017) 38 578 - 38 578 Mr. A Ngcobo 15 900 - 15 900 Mr. S Ndlovu 9 540 - 9 540 Adv. RR Nirghin 9 540 - 9 540 Mr. N Sifumba - (Appointed in September 2017) 19 851 - 24 900 Mr. N Khambule 2 480 - 2 480 Adv. K Thango 9 540 - 9 540 Mrs. P Dabideen 12 020 - 12 020 Mr. IZ Ngcobo 15 900 - 15 900 Dr. ME Ngidi 15 900 - 15 900

185 266 - 185 266

2018 Human Resource and Remuneration Committee (HR & R) HR & R Fees Travel TotalMs. P Dabideen (Chairperson - Term ended in August 2017 ) 32 507 - 32 507 Adv. K Thango - Appointed as Chairperson in September 2017) 16 778 - 16 778 Mr. MV Khumalo 7 950 - 7 950 Mrs. NP Linda 7 950 - 7 950 Mr. AG Mthembu 7 950 - 7 950 Ms. N Zwane 11 183 - 11 183 Adv. RR Nirghin 11 183 - 11 183 Mr. IZ Ngcobo 11 183 - 11 183

106 684 - 106 684

2018 Project and Finance Committee (PFC) PFC Fees Travel TotalMs. Nonjabulo Zwane - (Chairperson) - Term ended in August 2017 24 557 - 24 557 Mr. WR Dladla 16 143 - 16 143 Ms. T Ntshangase - (Appointed Chairperson in September 2017) 8 176 - 8 176 Mr. AG Mthembu 14 150 - 14 150 Mr. MV Khumalo 11 670 - 11 670 Mr. N Khambule 14 150 - 14 150 Mrs. NP Linda 7 440 - 7 440 Dr. ME Ngidi 4 473 - 4 473 Mrs. P Dabideen 11 183 - 11 183

111 942 - 111 942TOTAL 1 466 774 69 662 1 536 436

2017 Board Board Fees Travel TotalDr. M.E Ngidi - (Chairperson) 500 953 - 500 953 Mrs. P Dabideen - (Deputy Chairperson) 250 475 - 250 475 Adv. RR Nirghin 101 763 - 101 763


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27. Related party relationships and transactions (continued)Ms. N Zwane 101 763 - 101 763 Dr. BD Mkhwanazi 50 882 - 50 882 Ms. P Dabideen 76 323 - 76 323 Mr. IZ Ngcobo 101 763 - 101 763 Mr. WR Dladla 101 763 - 101 763

1 285 685 - 1 285 685

2017 Audit and Risk Committee (ARC) ARC Fees Travel TotalMr. Simjee - (Chairperson) 86 440 - 86 440 Mr. S Ndlovu 28 620 - 28 620 Mr. ABZ Ngcobo 38 160 - 38 160 Adv. RR Nirghin 38 160 - 38 160 Mr. IZ Ngcobo 38 160 - 38 160 Dr. ME Ngidi 38 160 - 38 160

267 700 - 267 700

2017 Human Resource and Remuneration Committee (HR & R) HR & R Fees Travel TotalMs. P Dabideen (Chairperson) 58 936 - 58 936 DR BD Mkhwanazi - Deceased in July 2016 6 710 - 6 710 Adv. RR Nirghin 26 840 - 26 840 Ms. N Zwane 26 840 - 26 840 Mr. IZ Ngcobo 26 840 - 26 840

146 166 - 146 166

2017 Project and Finance Committee (PFC) PFC Fees Travel TotalMs. Nonjabulo Zwane - (Chairperson) 50 912 - 50 912 Dr. BD Mkhwanazi 14 734 - 14 734 Mr. WR Dladla 26 840 - 26 840 Dr. E Ngidi 26 842 - 26 842 Ms. Preetha Dabideen 20 130 - 20 130

139 458 - 139 458TOTAL 1 839 009 - 1 839 009

28. Contingencies

Contingent assets

Contingent asset 44 614 44 614

A contingent asset of R44 614.00 arose as a result of the case with the service provider that was dismissed with costs in favour of ADA. The matter was not finalised by year end.

29. Irregular and fruitless and wasteful expenditure 29.1 Irregular expenditureOpening balance 84 543 627 80 699 927 Add: Irregular Expenditure - current year 15 047 856 3 843 700 Less: Amounts recoverable or condoned - - Less: Amounts not recoverable (not condoned) - -

Irregular expenditure awaiting condonation 99 591 483 84 543 627


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29. Irregular and fruitless and wasteful expenditure (continued)

Irregular expenditure of R5.9 million reflected above was incurred as a result of services being sourced by way of a deviation and or due to non-compliance with SCM processes on appointment of an implementing agency. Further irregular expenditure was identified due to deviations not approved by Treasury and BAC member did not include at least 4 senior officials. Irregular expenditure for the prior year was adjusted from 2.8 million to R3.8 million to take into account noncompliance with quotation processes.

Irregular expenditure for the current year has been submitted to the Provincial Treasury for condonation. No further action was taken.

29.2 Fruitless and wasteful expenditureOpening balance 98 023 97 060 Add: fruitless Expenditure - current year 2 276 963 Less: Amounts recoverable (1 605) - Less: Amounts not recoverable (not condoned) - -

Total 98 694 98 023 Fruitless and wasteful expenditure is due to interest charged by suppliers on invoices paid late.

The amount of R97 060 has been condoned by ADA Board but awaiting for Provincial Treasury’s condonation. No further action was taken.

The following fruitless and wasteful expenditure has been recovered from the responsible employees:

Employees: S Shelembe N Mkhathini TotalAmount recovered 1 197 408 1 605

Analysis of expenditure awaiting condonation per age classification

Prior years 80 699 927 80 699 927

Details of irregular expenditure – current year

Actions taken by ADAAppointment of Implementing agencies A request was sent for DARD to investigate.

5 906 233 Announcement was also made that all projects will be investigated.

Deviations approved by accounting authority not These items have been submitted to Treasury to

4 698 039 Treasury investigate and give an opinion. The bid adjudication committee which These items have been submitted to Treasury to

4 443 584

adjudicated these awards was composed of less investigate and give an opinion as there were than four SM members Vacancies for SM in 2017-18 financial year.

15 047 856

Details of irregular expenditure condoned-

Details of irregular expenditure recoverable (not condoned) -

Details of irregular expenditure not recoverable (not condoned) -

30. Events after the reporting period

The funds amounting to R14.8 million were received after year end and R10.9 million was for project expenditure relating to 2017-18 financial year.


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31. Financial instruments disclosure

Categories of financial instruments

2018

Financial assets

At amortised cost

At fair value Total

Other receivables from non-exchange 3 845 049 - 3 845 049 Operational account 1 948 612 - 1 948 612 KZN Department of Agriculture and Rural Development Call Account 13 844 320 - 13 844 320 KZN Department of Economic Development, Tourism and 6 236 229 - 6 236 229 Environmental Affairs Call Account Department of Rural Development and Land Reform-COGTAs 6 353 124 - 6 353 124 Deposits 17 118 - 17 118

32 244 452 - 32 244 452

Financial liabilities

At amortised At fair value TotalCost

Payables from exchange transactions 1 963 657 - 1 963 657

2017

Financial assets

At amortised cost

At fair value Total

Receivables from non-exchange 793 547 - 793 547 Operational account 4 109 001 - 4 109 001 KZN Department of Agriculture and Rural Development Call Account 7 570 948 - 7 570 948 KZN Department of Economic Development, Tourism and 6 304 230 - 6 304 230 Environmental Affairs Call Account Department of Rural Development and Land Reform-COGTA 8 503 906 - 8 503 906 Deposit 17 118 - 17 118

27 298 750 - 27 298 750

Financial liabilities

At amortised At fair value TotalCost

Payables from exchange transactions 4 504 204 - 4 504 204

Credit riskThe 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 employee’s debt and one supplier as indicate in event after reporting period. The cash and cash equivalents are deposits placed with high credit financial institutions. The deposits comprise of grants received from the Department reflected in the cash and cash equivalent note. 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.


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. Financial instruments disclosure (continued)Liquidity risk

The entity’s exposure to liquidity risk is minimal as it is 100% funded by the Department of Agriculture and Rural Development. 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 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.

Foreign exchange risk

Although the entity’s funds are subject to foreign exchange fluctuation risk, due to Young Farmers project where student are taken to Denmark to study, the payment of these funds are done by the reputable financial institutions.


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ANNUAL REPORT2017/2018 KWAZULU-NATAL

AGRIBUSINESS DEVELOPMENT AGENCYTel: +27 33 347 8600 • Fax: +27 33 347 0913

Email: [email protected] • Web: www.ada-kzn.co.zaPrivate Bag X01 • Montrose • Pietermaritzburg • 3202

5 Cascades Crescent • Cascades Office Park Montrose • Pietermaritzburg • 3202

CPW Printers 20017039

Documents

ANNUAL REPORTANNUAL REPORT 2017/2018 KWAZULU-NATAL AGRIBUSINESS DEVELOPMENT AGENCY Tel: +27 33 347 8600 • Fax: +27 33 347 0913 Email: [email protected] • Web: Private Bag X01