Annual Report 2016The Foundation Stones of Knowledge

22

ContentsAbout Lepharo P2

Chairperson’s report P4

General Managers Report P6

Operational Overview P8

Performance Highlights P19

Financial Report P26

Lepharo Incubation Model P30

Established in 2006, Lepharo launched its technology business centre in February 2011 in Springs, Ekurhuleni, in the Gauteng Province of South Africa.

It offers a combination of business, technical training and mentoring for budding entrepreneurs, as well as incuba-tion space.

Formally registered as a not-for-profit company, and gov-erned by a detailed memorandum of agreement, signed by all the stakeholders,

Lepharo is a fruit of the culmination of 5 years of careful planning and consultation between major industry players, spanning the private and public sectors, industry associations and tertiary institutions.

It is also constituted of a pool of stakeholders (City of Ekurhuleni, Ekurhuleni Base Metals, Exxaro, Gold One, IZASA, Impala Platinum, Lonmin, Macsteel, PG Group, SEDA) ensuring participation from both the private and public sector responsible for economic development.

The principal mission is to provide support through:

• skillsdevelopment• valuecreation• entrepreneurialmentorship

Welcome to Lepharo, the SEDA Ekurhuleni Base Metals Incubation Programme.

About Lepharo

3

List of Abbreviations and Acronyms

BDO Business Development Office

EBDA Ekurhuleni Business Development Academy

EBM Ekurhuleni Base Metals

EMM Ekurhuleni Metropolitan Municipality

ETDP Seta Educational, training & Development Practice Sector

GDED Gauteng Department of Economic Development

GEDA Gauteng Economic Development Agency

GEP Gauteng Enterprise Propeller

IZASA International Zinc Association of Southern Africa

KPI Key Performance Indicators

LED Local Economic Development

Merseta Manufacturing, Engineering & Related Service Sector

MQA Mining Qualification Authority

NQF National Qualification Framework

NVC New Venture Creation

NYDA National Youth Development Agency

PDI/E Previously Disadvantaged Individuals/ Enterprises

PRET Project Review and Evaluation Technique

SAICA South African Institute of Chartered Accountants

SEDA Small Enterprise Development Agency

SETA Sector Education and Training Authority

SHEQ Safety, Health, Environment and Quality

SME Small, Medium Enterprise

SMME Small, Micro and Medium Enterprises

STP Seda Technology Programme

SWOT Strengths, Weaknesses, Opportunities and Threats

44

Chairperson’s ReportSustainable Economic Development remains the key purpose and vision for Lepharo’s existence. In line with the National Development Plan, Lepharo continues to reinvent itself in attempt to ensure that the final out-come of the programme results in full time employment of both semi and highly skilled members of society by SME’s in the Engineering & Manufacturing Industry.

Corporate Enterprise /Supplier chain development success is best measured and indicated by the number of SMEs supported and indicated by value of retainer contracts given to SME’s by both the private as well as public sector.The journey is still long, however, the vision is clear in that true sustainable growth of SMEs in engineering and manufacturing can only bear results if the intended market is part of the development process of SME’s.

It is with this objective in mind that the Board has approved strategic partnerships with key organizations that share in Lepharo’s board vision of providing technical, procurement assistance and advice to the programme members as well as the centre management itself.

The board wishes to welcome new members joining the board from Macsteel and PG Group. Their participation is testimony to the commitment certain companies demonstrate in the potential value of Lepharo and the need for socio economic status of the people of Ekurhuleni.

Since the centre’s launch in 2011, Lepharo’s 3 year delivery model was launched in 2012 and has been proven to be successful as it produced its first graduates from the programme in 2015.

The Board prides itself of Lepharo’s achievements and would also like to congratulate the Centre Management team and its employees for consistently exceeding KPI targets as set by funders.

Our primary key focus going forward is to identify opportunities that would contribute towards self-sufficiency for long term sustainability with less reliance on external funding.

I would also like to thank the continued visible participation of my fellow board members and their invaluable contributions.

RegardsMr Mongezi VetiChairperson of the Board

Mr Mongezi VetiChairperson of the Board

24 NEW SMME’SESTABLISHED

92 CLIENTS SUPPORTED

22% GROWTH IN SMME’S INCOME

100 jOBS CREATED

72 SMMES SUPPORTED

5

General Manager’s ReportThe centre managed to operate within budget and achieve savings in some areas.

Since it’s launch the programme has grown and is now focusing on ensuring that it’s offerings are streamlined specifically for the benefit of today’s SME in the engineering and manufacturing sector.

The mandate from the board was for management to ensure and create an environment that ensured mutual value for the SME and the market they ser-viced.

To achieve this: the programme has engaged in strategic procurement part-nerships with our stakeholders and other industry associations who shared our vision for a broader economic development through enterprise incubation.

As such the centre successfully registered as a Merseta accredited training centre with phase 2 registration of new venture creation being finalised as well. This will minimise if not eradicate use of Grant funding for training of SMES and their employees.

Strategic partnerships with stakeholders have also resulted in benefit for SMEs to access steel through a credit facility with Macsteel with further pro-vision of technical fabrication training being finalised.

With guidance from the board, we continue to explore ways in which to im-prove as well as reinvent if necessary our delivery methodology and the re-sults are encouraging to both management and SMES to pursue excellence in our objectives.

RegardsZenzo NkomoGeneral Manager

Zenzo NkomoGeneral Manager

66

With guidance from the board, we continue to explore ways in which to improve as well as reinvent, if necessary, our delivery methodology

92 CLIENTS & 72 SMMES

SUPPORTED

7

Operational Overview The objective of the Business Development is to find business opportunities (marketing) for the Incubatees, ensuring that they comply with the require-ments of the big companies and getting sustainable jobs for them.

We aim to procure as many opportunities as possible for our clients. Our focus for the current year was organizing trainings such as QMS, Lean Manufacturing and business seminars to ensure they are well informed on how they can grow their businesses through networking and liaising with relevant people in the same industry.

88

9

Procured Opportunities

1. Manufacturing and Supply of Mini Lockers for Gold One Mine

Zimele Engineering was awarded an opportunity to supply Gold One with mini lockers and after delivering were promised to be given another job of the same scope.

Zimele Engineering Pictures below

2. Refurbishment of Mining Scrapers

The office was thrilled to finally secure an opportunity with Gold One Mine for an opportunity of refur-bishing scrapers, which was awarded to Zimele Engineering. It is a long contract that is contributing positively to the growth of the business (incubate). The incubatee is refurbishing about 6 scrapers-bi-week.

3. New Companies marketed to - Denel (Aviation, Land Systems, PMP) - Department of Trade & Industry - Bevcan Nampak - Coca-Cola - Department of Education

- Lonmin - National Youth Development Agency (NYDA) - BAW - Huhtamaki - Ekurhuleni Base Metals - VWSA

New Companies Marketed To

15

10

5

0

Target Actual

11

3

Target

Actual

1010

Annual Performance Statistics

1. SEDA QMS Trainings

Dates Attendance

7-9 July 2015 39

3-5 October 2015 15

Total: QMS Training 55

2. Productivity SA (Business Performance Improvement Workshops)

Dates Attendance

November-December 2015 18

Summary: Training for the implementation of Quality Management file was positive, attendance was beyond expectation, however out of the lot that attended only a few have populated the files and been reviewed for approval.

QMS Review: Out of all the QMS files that were audited, 5 were approved; Matona Mining, Mmaboko Chemicals, Zimele Engi-neering, Waste Truck Repairs and Annah and Herbert, which qualifies them to start applying for SABS certification.

ISO 9001 certification: 10 clients have completed QMS documentation and have been in a process of applying for ISO certifi-cation, which SEDA has started the process with the following clients; Waste Truck Repairs and Airventfil. Audits were done mid -January 2016.

11

Productivity SA- Business Performance Improvement Workshop Statistics

30

28

26

24

22

20

18

16

Target Actual

25

Target Actual

18

Summary: Attendance to BPIW training

was not as expected, the office expected

25 companies to attend however only

18 attended. After the trainings clients

were given assignments to work on and

submit to Productivity SA for further

interventions. Some clients have already

been visited by Productivity SA.

1212

13

SMME Design Clinic Programme

The purpose of the program is to provide assessment that forms Seda they can further invest in the business in its cur-rent state or new direction.

In the last year the following companies participated in the Design Clinic Programme; GND Engineering, Happy Soaps, JS Aluminums, Lively Productions and Devine Conexion.

Summary:10 incubatees were selected and given an opportunity to participate in the SABIC exhibition which took place on 10 March 2016, for the purpose of networking and marketing their businesses on exhibition stands.

Clients made contacts and some received RFQ’s, which we believe in future they will find opportunities to do business with potential clients that were met.

Macsteel Usizo Program

Lepharo participated in Usizo Programme. The purpose of the Usizo Networking forum was to connect SMMEs with big companies (stakeholders) and to also understand the purpose of being on the Usizo program for incubatees that are in the steel industry or are using steel. The program allows businesses to get steel on credit and at a discount. The BDO is facilitating the applications on behalf of the incubatees and ensuring that they are discounted every time they purchase steel at Macsteel.They attended Forum on March 2016, where there were companies like SEFA, SEIFSA, Ekurhuleni Municipality and other big companies.

Proudly SA Summit

- This provides an opportunity for SMMEs to interact with business enterprises, entrepreneurs and procurement decision makers. - Providing a central database of local suppliers in all sectors for all state organs and businesses, to use when procuring to ensure that they procure locally manufactured products and make use of local services

Annual Performance Statements Date: 18/07 /2016

Num

ber o

f Com

pani

es

120

100

80

60

40

20

0

CODE UIF MEDICALS WORKSHOPS AUDITS TOOLBOX TALKLEGAL

APPINTMENTS (SECT 16:1)

COMPANY HSE POLICY HSE FILE DISC

HSE OPRERATIONS 50 58 10 78 45 80 90 90 90

TARGET 100 100 100 100 100 100 100 100 100

Health, Safety and Environmental

1414

Achievements

HSE OPERATION ACHIEVEMENTS

COID50 companies are compliant and are submitting their returns of earnings. The rest of the companies are either not operational or not making enough money to submit.

UIFEach new company is registered For UIF and the response to from SMMEs is very good. All SMMEs have been taught how to declare for their employees and any other information regarding UIF has been made available to all SMMEs. So far 58 companies are registered.

MedicalsSMME’S have had done medical examinations even though they have not renewed due to the fact that most of the SMMEs are not making enough money to renew the exams .

Workshops(UIF,COIDA and HSE File)

SMMEs have been attending workshops even though the numbers have been going down as most companies are now equipped with information on UIF, COIDA and HSE File.

AuditsMost SMMEs that are operational and those that are based at the center have been audit-ed and have worked on recommendations .They are all working towards safer workshops with the guidance of the HSE Team.

Toolbox TalkSMMEs are supplied with safety talks every month plus safety information that is shared with them during weekly meetings.

Legal appointments, HSE Policy and HSE File Disc

Every SMME that has joined the program has been issued with a legal appointments, HSE policy as well HSE File discs.

Awareness campaignsCancer awareness campaigns have been conducted and the SMMEs have responded positively.

Cancer Awareness in the Workplace October Cancer Campaign

15

SAICA ANNUAL PERFORMANCE STATS OVERVIEWPeriod 01 April 2015 to 31 March 2016

SERVICES Number of clients Comments

Management Accounts Processed 30All clients who submitted their information have been assisted

Draft Annual Finacial Statements 9 These are not yet signed off by clients

Annual Finacial Statements completed 17 These were completed in the period

VAT Returns 13

All SARS returns we done for clients that have released their tax types to SAICA Enterprisation

Income Tax Returns ITR14 24

Provisional Tax IPR6 24

Legal Training 15

The numbers included in this report represent only the incubatees that have approached SAICA and engaged our services. As a result our performance will figured exclude new clients we have not yet engaged with.

1616

17

Annual Financial Statements

Annual Financial Statements Summary 2015/16

Draft Annual financial statements 9

Complete/Signed off Annual financial statements 17

TOTAL 26

Complete/Signed off Annual financial statements

Draft Annual financial statements

35%

65%

Management Accounts Processed (Monthly information from clients)

Management Accounts Processed Clients

Management Accounts Processed 30

Total number information not submitted 13

Total clients requiring SAICA’s assistance 43

Total number information not submitted

Management Accounts Processed

70%30%

17

SARS

SARS Returns

VAT returns 13

Income Tax Returns ITR14 24

Provisional Tax IPR6 24

Tax Clearance 24

30

25

20

15

10

5

SARS Returns

VAT returns

Income Tax Returns ITR14

Provisional Tax IPR6

Tax Clearance

Webber Wentzel Legal training

Legal Training

Total clients Invited 94

Total Attended 15

Total clients Invited Total Attended

84%

16%

1818

24 SMME’ s Created 92 Clients Supported 72 SMME’s Supported 100 Jobs Created 22% Growth in SMME’s Income

Performance Highlights

19

We have audited the accompanying financial statements of SEDA Ekurhulcni Base Metals Incubator NPC, which comprise the balance sheet as at 31 March 2016, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes, and the directors‘ report, as set out on pages 2 to 1 1.

Directors’ Responsibility for the Financial StatementsThe company‘s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards for SMEs and the requirements of the Companies Act of South Africa. and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements. whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believethat the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.

OpinionIn our opinion. the financial statements present fairly. in all material respects. the financial position of SEDA Ekurhuleni Base Metals Incubator NPC as on 31 March 2016. and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards for SMEs and the requirements of the Companies Act of South Africa.

.....................................................................................Greyling & Van Der MerweRegistered Accountants and Auditors /Chartered Accountants (SA)17 August 2016

Report of the independent auditors of the members of SEDA Ekurhuleni Base Metals Incubator NPC

2020

Directors Report for the year ended 31 March 2016

Main business activities of the companyThe main business activityof the company is the provision of support for SMME incubation development and growth through focused developmental programmes to ensure sustainable technical and financial success.

Registered addressThe registered address of the company is:No 1 Plover StreetStruisbultSprings1567

Directors and officersThe following individuals were directors during the year under review:

The following individuals were directors during the year under review: Mr. RT White -Director Ms. HM Sibande -Director Mr. M Veti -Director Mr. KA Taukobong -Director Mr. J Botha -Director Mr. C Chauke -Director Mr. C Van Den Berg -Director Mr. A Dookoo -Director Mr. EC Jacobs -Director (Appointed: 26/O8/2015) Mr. M Moolman -Director (Appointed: 13/11/2015) Ms. TL Ndlovu -Alternate Director Mr. R Chhagan -Alternate Director Mr. RJ Segabutla -Alternate Director Ms. ME De Bruyn -Alternate Director (Appointed: 13/1 1/2015) Ms. TJ Maia -Alternate Director (Appointed: so/09/2015) Ms. N Masumpa -Alternate Director (Appointed: 26/08/2015) Ms. A Pitout -Atternate Director (Appointed: 20/05/2015)

Fixed assetsFixed assets of R579 150 (2015: R50 247) were acquired during the year under review.

After balance sheet eventsNo events after the balance sheet date, affecting the current year’s financial information occurred.

21

Balance sheet at 31 March 2016

NOTES 2016 2015

R R

ASSETS

Non Current Assets 6 1,840,846 1,667,154

Fixed assets

Current assets 1,625,959 1,697,087

Cash and cash equivalents 2 1,228,250 1,321,233

Trade and other receivables 5 397,709 375,834

Total assets 3,466,805 3,364,221

RESERVES AND LIABILITIES

Accumulated surplus 2,790,535 3,359,847

Current liabilities 676,270 4,874

Trade and other payables 3 676,270 4,374

Total reserves and liabilities 3,466,805 3,364,221

The notes on pages 7 to 11 are an integral part of these financial statements.

2222

Income Statement For The Year Ended 31 March 2016

NOTES 2016 2015

R R

Grants received 2,500,000 2,500,000

Other income 680,594 572,128

Donation received - 500,000

Facilitating fees received 21,953 -

Exxaro chairman funds 489,638 -

Storage income 100,000 -

Rental received 26,618 35,069

Interest received 42,385 37,059

Gross income 3,180,594 3,072,128

Operating expenses 3,749,906 3,029,923

Advertising and promotion 39,005 8,905

Audit fees 11,950 10,300

Bad debts - - 110,483

Bank charges 9,010 7,335

Catering expenses 27,110 20,568

Compliance expenses 125,634 58,245

Computer expenses 3,752 3,423

Consulting tees 46,550 215,455

Consumables 10,144 -

Depreciation 405,458 417,638

Entertainment expenses 1,194 1,164

insurance 83,141 29,682

Legal fees 19,626 28,052

Meeting expenses 8,929 2,457

Printing, stationery and cleaning 51,119 42,849 ,

Professional fees 613,086 539,802

Protective clothing 11,237 -

Repairs and maintenance 225,111 43,377

Salaries and wages 1,319,177 1,098,574

Security 289,628 243,148

Subscriptions - - 5,803

Telephone,fax and Internet 51,532 37,385

Training 259,795 26,191

Travel and accommodation 137,718 79,086

Net deficit for the year (569,312) 42,205

The notes on pages 7 to 11 are an integral part of these financial statements.

23

Statement of Changes In Reserves For The Year Ended31 March 2016

Accumulated

Surplus

Balance 1 April 2014 3,317,642

Surplus for the year 42,205

Balance 31 March 2015 3,359,847

Deficit for the year (569.312)

Balance 31 March 2016 2,790,535

The notes on pages 7 to 11 are an integral part of these financial statements.

Cash Flow Statement for The Year Ended 31 March 2016 NOTES 2016 2015

R R

Cash flows from operating activities

Operating deficit for the year (569,312) 42,205

Adjusted for:

Depreciation 405,458 417,638

Interest received (42,385) (37,059)

Cash surplus (shortage) before working capital changes (206,239) 422,783

Movements in working capital 650,021 (628,938)

(Decrease) / Increase in accounts payable 671,896 (289,014)

(Increase)/ Decrease in accounts receivable 21,875 339,919

Cash inflow /(outflow) from operations 443,782 (206,150)

Interest received 42.385 37,059

Cash generated from! (utilised in) operating activities 486,167 (169,091)

Cash flows from investing activities

Acquired to expand operations

Fixed assets acquired (579,150) (50,247)

Cash utilised in investing activities (5579.150) (50,247)

Decrease in cash and cash equivalents (92,983) (219,337)

Cash and cash equivalents at beginning of year 1,32,283 1,540,570

Cash and cash equivalents at end of year 1,228,250 1,321,233

The notes on pages 7 to 11 are an integral part of these financial statements.

2424

25

2626

Notes to the financial statements at 31 March 2016

1.1 General informationSEDA Ekurhuleni Base Metals Incubator NPC T/A Lepharo is a non-profit company with members registered in the Republic of South Africa.

1.2. Basis of preparation and accounting policiesThese financial statements have been prepared in accordance with the International Financial Reporting Standard for Small and Medi-um-sized Entities (IFRS for SME’s) issued by the International Accounting Standards Board (IASB) and the Companies Act 71 of 2008.

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

The financial statements have been prepared under the historical cost convention.

1.3 Fixed assets and depreciationitems of property plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.Depreciation is charged so as to allocate the cost of assets less their residual values over their estimated useful lives, using the straight-line method.

The carrying value of assets is reviewed at each balance sheet date to assess whether there is any indication of impairment. If any such indication exists, the recoverable amount of the assets is estimated. Where the carrying value exceeds the estimated recoverable amount, such assets are written down to their estimated recoverable amount.

1.4 Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable, net of discounts and sales-related taxes.

1.5 Financial instruments

Initial recognitionThe company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument, in accordance with the substance of the contractual arrangement.

Financial assets and financial liabilities are recognized on the balance sheet when the company becomes party to the contractual pro-visions of the instrument.

Financial assets and liabilities are recognized initially at fair value. In the case of financial assets or liabilities classified as at fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instruments are added to the fair value.

Subsequent measurementAfter initial recognition financial assets are measured as follows:• Loans and receivables and held-to-maturity investments are measured at amortized cost less any impairment losses recognized

to reflect irrecoverable amounts.• Financial assets classified as available for sale or at fair value through profit or loss, including derivatives, are measured at fair

values. Fair value, for this purpose, is market related if listed, or a value arrived at by using appropriate valuation models, if unlisted.• Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be

reliably measured, are measured at cost.

After initial recognition financial liabilities are measured as follows:• Financial liabilities at fair value through profit or loss, including derivatives that are liabilities, are measured at fair value.

26

Gains and lossesA gain or loss arising from a change in a financial asset or financial liability is recognized as follows:• Where financial assets and financial liabilities are carried at amortized cost, a gain or loss is recognized in profit or loss through

the amortization process and when the financial asset or financial liability is derecognized or impaired.• A gain or loss on a financial asset or financial liability classified as at fair value through profit or loss is recognized in profit or loss.

The particular recognition methods adopted are disclosed in the individual policies stated below:Trade and other receivablesTrade and other receivables originated by the enterprise are classified at cost less impairment.

Cash and cash equivalentsCash and cash equivalents are short term, highly liquid investments that are readily convertable to known amounts of cash. Cash and cash equivalents are measured at fair value.

Trade and other payablesTrade and other payables are recognized at their original debt value less principal payments.

1.6 ProvisionsProvisions are recognized when the enterprise has a present legal or constructive obligation as a result of past events and it is prob-able that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made.

2016 2015

R R

2. Cash and cash equivalents

Nedbank current account 327,628 459,176

Nedbank call account 898,622 860,057

Cash on hand 2,000 2,000

1,228,250 1,321,233

3. Tradeand other payables

Impala Platinum Limited 454,443 -

Other accruals 221,827 4,374

676,270 4,374

4. Grants received

SEDA technology programme 2,500,000 2,500,000

2,500,000 2,500,000

5. Trade and other receivables

Sundry customers 485,004 475,321

Less: Provision for bad debts (154,092) (154,092)

Receiver of revenue — VAT 66,797 54.605

397.709 375.834

27

2015 Plant & Machinery

Computer Equipment

Furniture and fittings

Improvements Land & Buildings Total

Carrying value - beginning of year 1,921,529 9,224 103,792 - 2,034,545

Additions - 33,204 17,042 - 50,247

Depreciation (357,372 (9,953) (49,309) - (417,638)

Carrying value — end of year 1,553,557 32,472 71,025 - 1,667,154

Gross carrying value 3,227,725 239,795 258,741 - 3,726,263

Accumulated depreciation (1 354,059) (207,323) (187,716) - (2,059,109)

Accumulated depreciation beginning of year 1,305,197 197,357 137,907 - 1,341,471

Depreciation - income statement 357,872 9,956 49,809 - 417,638

Fixed assets are depreciated at the following rates: - Plant & equipment: 10% p.a. - Computer equipment: 33% p.a. - Furniture and fittings: 16.67% p.a. - Office equipment: 16.67% p.a.

7. Events after the balance sheet date

Events that occurred after balance sheet date but before the financial statements were approved were considered. There were no events that indicate evidence of any adverse conditions that existed on the balance sheet date that should be adjusted for.

8. Functional and presentation currency

Functional and presentation currencies are both stated in South African Rand unless otherwise indicated. Functional currency is the currency of the primary economic environment in which the company operates. Presentation currency represents the currency in which the financial statements are presented.

2016 Plant & Machinery

Computer Equipment

Furniture and fittings

Improvements Land & Buildings Total

Carrying value - beginning of year 1 .563,657 32,472 71,025 - 1,667,154

Additions 12,950 4,912 73,41 1 487,877 579,150

Depreciation (358,621) (16,102) (30,735) - (405,453)

Carrying value — end of year 1 217,986 21 .282 113,701 487,877 1,840,846

Gross carrying value 1 ,577,453 234,751 281,497 (167,796) 3,887,775

Accumulated depreciation (359,467) (213,469) (167,796) (1,306,197) (2,046,929)

Accumulated depreciation beginning of year 846 197,367 137,061 1,306,197 1,641,471

Depreciation - income statement 358,621 16,102 30,735 - 405,458

6. Fixed Assets

2828

9. Financial instruments

Financial risk management

The company’s activities expose it to a variety of financial risks: market risk (including fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the company’s financial performance. Risk management is carried out under the policies approved by management

Market risk

Cash flow and fair value interest rate: As the company has no significant interest bearing assets, the company income and operating cash flows are substantially independent of changes in market interest rates. The company’s interest rate risk arises from non—currentborrowings. Borrowings issued at variable rates expose the company to cash flow interest rate risk. Borrowings issued at fixed rates expose the company to fair value interest rate risk. All the company’s borrowings are denominated in South African rands. The company has no specific processes in placeto manage cash flow risk. Interest rate exposure is not analyzed on a specific basis.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of com-mitted credit facilities and continued financial support from the shareholders.

Credit risk

Financial assets which potentially subject the company to concentrations of credit risk, consist principally of cash resources and trade receivables.

The company’s cash resources are placed with major South African financial institutions of high credit standing and approved by the executive committee comprising senior executives.

Receivables are reflected net of doubtful debt provisions, which are considered adequate. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.The company’s credit risk in respect of amounts owing by related parties is also limited as the parties from whom the amounts are due, are related to the company.

The company has no significant concentration of credit risk, with exposure spread over a large number of counter parties and customers.

Fair values

The carrying amounts of the following financial assets and liabilities approximate their fair value: cash, trade and other receivables and trade and other payables.

Capital risk management

The company’s objectives when managing capital are to safeguard the company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The executive directors are involved in the daily operations of the company and the necessary decisions regarding capital risk manage-ment are made as and when necessary.

29

Lepharo Incubation Model

Stage 02:Pre - Incubation (Prospect)

Can attend workshop / trainings on intervention programme but reports reports are voluntary at this stage

Stage 03: Incubation

• Bookkeeping services• Assistance on Heathly, Safety & Environment • Workshop in in assistance with compiling QMS • Provision of workshop premises • Business Plan mentoring • Techical & Business Skills Training• Assistant with procurement & business

development• Access to the office facilities/ tea & coffee as well

as internet access• Access to workshop , machinery & tools• Registraion with Indusrty Regulator• Access to exhibition and other marketing platform• Assistance with marketing & communication

through GEP & NYDA

Candidates: Entrepreneur youth Labourers Retrech workers Technician Artisans Engineers & Managers Supervisors

Stage 01: Entry Requirement Company Registration document Business Bank Account proof Tax Clearance (Centre will assist) BEE Certificate Business Profile /plan (Centre will assist) Production/Service invoice not compulsory) Unemployment Insurance fund (UIF ) Pay As You Earn (PAYE)

Stage 04: Graduation

• 12 month supply contract• Compliance must in order• Employed at least 02

permanent employees • SABS approval for certifi-

cate & products Stage 05: Post Graduation

Continous Procurement support from the Centre

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The Foundation Stones of Knowledge

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www.lepharo.co.za

No. 1 Plover Street,

Struisbult, Springs

Gauteng, South Africa

Telephone: 011 363 3920 081 454 9490

Fax: 011 363 3655

E-mail: info@lepharo.co.za