INDEX TO FINANCIAL STATEMENTS - IDC€¦ · Jealous Paul Muchineripi (Dr) appointed as non-executive director on 12 February 2018 Michael Shorayi Charamba appointed as non-executive

INDEX TO FINANCIAL STATEMENTS

About this report 2

Group Profile 3

Corporate and Group Management 4

Corporate Profile and Mission 5

Letter to the Ministry of Industry,Commerce, and Enterprise Development 7

Notice to the Shareholder 8

Chairman’s Statement 9 - 10

Report of the Directors 11 - 12

Corporate Governance 13 - 15

Directors’ Responsibility Statement 16

General Manager’s Report 17 - 21

Report of the Independent Auditors 22 - 28

Statements of Financial Position 29 - 30

Income Statements 31

Statements of Other Comprehensive Income 32

Statements of Changes in Equity 33 - 35

Statements of Cash Flows 36 - 37

Significant Accounting Policies 38 - 68

Notes to the Financial Statements 69 - 129

CONTENTS PAGE

IDCZ ANNUAL REPORT

For the year ended 31 December 2017

2

IDCZ | ANNUAL REPORT 31 DECEMBER 2017

FOR THE YEAR ENDED 31 DECEMBER 2017

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IDCZ ANNUAL REPORTFOR THE YEAR ENDED 31 DECEMBER 2017

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IDCZ ANNUAL REPORT

ABOUT THIS REPORT

We are pleased to present our 54th Annual Report.

Itisourprincipalcommunicationtoallstakeholdersonourabilitytocreatesustainablevalueovertime.

Boundary and Scope

This annual report covers the performance of the Industrial Development Corporation of Zimbabwe Limited(IDCZ)anditssubsidiariesandassociatesfortheyearended31December2017.

This report informsyou about our operational andfinancial performance against the previously stated plans,stakeholders,governance,materialissues,risksandopportunitiesandhowtheseinfluenceourstrategicobjectivesandfutureplans.

Reporting Principles and Assurance

Thisreportiscompiledandpresentedconsideringtherequirementsofthegenerallyacceptedcorporatepracticesprescribed by the Codes of Best Practice; Cadbury Report, King IV and Zimbabwe Corporate GovernanceFramework for StateEnterprises andParastatals andNationalCodeonCorporateGovernanceZimbabwe, allrelevantlegislation,regulations,relevantInternationalFinancialReportingStandards(IFRS),therequirementsofthePublicFinanceManagementAct(PFMA)(Chapter22:19),whereappropriate.

TheIDCZreceivesexternalassurancefromitsauditor,KPMGCharteredAccountants,onthefairpresentationoftheAnnualFinancialStatements.ThefindingsareincludedintheIndependentAuditor’sReport.

Wearecommittedtoimprovingonthisreportandwouldappreciateyourconstructivefeedback.Commentscanbesenttopr@idc.co.zw,orsubmittedtotheIDCZOfficesat93ParkLane,Harare,Zimbabwe.

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IDCZ ANNUAL REPORT

GROUP PROFILE

Shareholding:100%ownedbytheGovernmentofZimbabwe

Board of Directors

HerbertNkala (Chairman)GloriaZvaravanhu(Mrs) (ViceChairman)JohnMushayavanhu (NonExecutive)RobsonMafori(Prof) (NonExecutive)SelmaMurielFallala(Dr) (NonExecutive)MichaelNyamadzawoNdudzo (GeneralManager)retired31July2017BenjaminNkosentyaKumalo (GeneralManager)joined7September2017

*JealousPaulMuchineripi(Dr)appointedasnon-executivedirectoron12February2018*MichaelShorayiCharambaappointedasnon-executivedirectoron12February2018

RegisteredOffice

93ParkLane,P.O.BoxCY1431,Causeway,Harare

Telephone: 2630242706971-5or250405Email: [email protected]

Auditor KPMGCharteredAccountants(Zimbabwe)MutualGardens100TheChase(West),EmeraldHill,Harare

Bankers

AgriculturalDevelopmentBankofZimbabwet/aAgribankHurudzaHouse14-16NelsonMandelaAvenue,Harare

ZBBankLimitedCornerFirstStreet/SpekeAvenue,Harare

Lawyers

ChiteweLawPractice212ASamNujomaStreet,Avondale,Harare

Chikwengo&TaongaiLawChambers15OrkneyRoad,Eastlea,Harare

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IDCZ ANNUAL REPORT

CORPORATE AND GROUP MANAGEMENT

BOARD COMMITTEES

Business Development Committee

ProfRobsonMafoti(Chairman),MrJohnMushayavanhu,BenjaminNkosentyaKumalo.

Finance & Audit Committee

MrsGloriaZvaravanhu(Chairman),DrSelmaMFallala,MrJohnMushayavanhu,BenjaminNkosentyaKumalo.

Nomination Committee

MrHerbertNkala(Chairman),MrJohnMushayavanhu,MrsGloriaZvaravanhu,ProfRobsonMafoti,DrSelmaM.Fallala,BenjaminNkosentyaKumalo.

Remuneration & Human Resources Committee

MrJohnMushayavanhu(Chairman),MrsGloriaZvaravanhu,BenjaminNkosentyaKumalo.

Corporate Management

MichaelNyamadzawoNdudzo GeneralManager(retired31July2017) BenjaminNkosentyaKumalo GeneralManager(appointed7September2017) CollinMutingwende CorporateServicesExecutive TranosNgwebu SeniorManager:DevelopmentFinance&InvestmentAnalysis NgonidzasheMusungwa FinanceManager ChristopherMutiti InternalAuditManager GilbertTapfuma ProjectsManager:AgroProcessing RindiraiShoko(Mrs) ProjectsManager:Chemicals,Knowledge&MarketResearch BrianMushohwe ProjectsManager:MineralsBeneficiation DerekSibanda PublicRelationsandAdministrationManager LeniKoni CorporateSecretaryandCompliancesManager

*BrianMushohwe(Mr)secondedtoMotira(Private)LimitedasActingManagingDirectoron1January2017

Subsidiary Companies

TapuwaAlvinMashingaidze GroupChiefExecutiveOfficer,ChemplexCorporationLimited GodfreyZivanai GeneralManager,GinholeInvestments(Private)Limitedt/alastHopeEstate BenjaminNkosentyaKumalo GroupChiefExecutiveOfficer,MotecHoldings(Private)Limited FungisaiMupazviriho GeneralManager,SunwayCity(Private)Limited BrianMushohwe ActingManagingDirector,Motira(Private)Limited

*BenjaminNKumaloresignedfromMotecHoldings(Private)Limitedon31August2017

Associated and Other Companies MohammedAbbasi ChiefOperatingOfficer,ModzoneEnterprises(Private)Limited WangYong ManagingDirector,Sino-ZimbabweCementCompany(Private)Limited SylvesterMangani GeneralManager,SurfaceWilmarInvestments&OlivineHoldings(Private)Limited CavinNkiwane GeneralManager,ZimbabweGrainBag(Private)Limited RahminHassim GroupManagingDirector,StoneHoldings(Private)Limited

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IDCZ ANNUAL REPORT

CORPORATE PROFILE AND MISSION TheIndustrialDevelopmentCorporationofZimbabweLimitedwasincorporatedthroughitsenablingIndustrial

DevelopmentCorporationAct (Chapter14:10) in1963 to invest in industry as a state agency.The IndustrialDevelopmentCorporationofZimbabweLimitedActwasamendedin1984toallowtheCorporationtopromoteinvestmentandeconomicco-operationacrossborders.TheCorporationidentifiesanddevelopsindustrialprojectopportunitiesintocommerciallyviableventuresinpartnershipwithlocal,regionalandinternationalinvestors,andtechnologyandmarketaccesspartners.

Havingbeeninbusinessforthelast54years,theCorporationhastransformedandbuiltaninvestmentportfolio,withthecorebeinginthesectorsofmotorandtransport,fertiliserandchemicals,cement,basemineralprocessing,andagro-processing.Italsohasinvestmentsintextiles,graniteprocessing,packaging,insuranceandrealestate.

The main objectives of the Corporation are:

“WiththeapprovaloftheMinistertoestablishandconductindustrialundertakings;tofacilitate,promote,guideandassistinthefinancingofnewindustriesandindustrialundertakings,expansionschemes,betterorganisationandmodernisationofexistingindustries;toundertakethedevelopmentofmanagementandtechnicalexpertiseinthecarryingoutoftheoperationsinindustryandindustrialundertakings,includingthedevelopmentofexpertiseinprojectanalysis,evaluationofinvestmentopportunitiesandprovisionofconsultancyservices,andtotakesuchmeasuresasmaybenecessaryorexpedient toenable theCorporationtoexercisecontroloverenterprises inwhichithasmadeaninvestment.”

It is a legal requirement for the IDC that:

(a)“TheeconomicrequirementsofZimbabwemaybemetandindustrialdevelopmentwithinZimbabwemaybeplanned,expeditedandconductedonsoundbusinessprinciples”.

(b)“Everyapplicationorproposaldealtwithbyitisconsideredstrictlyonitseconomicmerits,irrespectiveofallotherconsiderationswhatsoever”;andthat

(c)“Sofarasmaybepracticable,theCorporationshallnotberequiredtoprovideanundulylargeproportionofthecapitalwhichisnecessaryforsuchestablishmentordevelopment.”

In broad and aspirational terms, the IDCZ has the following vision: Corporate Vision

TocontributetothetransformationofZimbabwetoavalueaddingandbeneficiatingmiddleincomeeconomy.

Corporate Mission

To identify, develop, mobilize resources and finance industrial project opportunities into commercially viableventures in partnerships with local, regional and international investors, and technology and market accesspartners.

Corporate Values

Transparency Innovation Gendersensitivity Environmentalprotection Professionalismandintegrity Fairplay Empowerment Teamwork

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IDCZ ANNUAL REPORT

Group Investment and Shareholding, Structure and Sector Composition GROUP SUBSIDIARY & ASSOCIATED COMPANIES

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IDCZ ANNUAL REPORT

Letter to Minister of Industry, Commerce and Enterprise Development

TheHonourableDr.MichaelC.BimhaMinisterofIndustry,CommerceandEnterpriseDevelopmentP.O.Box8434CausewayHarare

DearSir

IndustrialDevelopmentCorporationofZimbabweLimitedAnnualReportNo54

Ihave thehonour, onbehalfof the IndustrialDevelopmentCorporationofZimbabweLimited, to submit theCorporation’sAnnualReportandAccountsforthetwelvemonthsended31December2017intermsofSection19(1)oftheCorporation’sAct(Chapter14:10).

Yoursfaithfully

H.NkalaChairman

21June2018

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IDCZ ANNUAL REPORT

NOTICE TO THE SHAREHOLDER

Noticeisherebygiventhatthe54thAnnualGeneralMeetingoftheShareholderwillbeheldintheIDCBoardRoom,93ParkLane,Harareon5July2018at1430hoursfortransactingthefollowing:

1. Proxies,quorumandconstitutionofthemeeting.2. ToapprovetheminutesofthepreviousAnnualGeneralMeetingheldon18July2017.3. Toreceive,considerandadoptthefinancialstatementsandthereportsofthedirectorsandauditorforthe

financialyearended31December2017.4. Toapprovetheremunerationofthedirectorsfortheyearended31December2017.5. ToapprovetheremunerationoftheauditorKPMGCharteredAccountantsfortheyearended31December

2017.6. Toappointauditorfortheensuingyear.7. Appointment,resignationandretirementofDirectors.8. Toconsiderthenon-declarationofdividendsasrecommendedbytheDirectors.9. TotransactallsuchotherbusinessasmaybetransactedatanAnnualGeneralMeeting.

Proxies:Thememberisentitledtoappointoneormoreproxiestoactontheirbehalfandtoattend,voteandspeakintheirplace.AproxyneednotbeamemberoftheCorporation.

ByOrderoftheBoard

CollinTMutingwendeCompanySecretary

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IDCZ ANNUAL REPORT

CHAIRMAN’S STATEMENT

1.0. Operating Environment

TheZimbabweeconomygrewby3.4%whichwasaconsiderable improvementon thatof2016at0.7%.TheimprovedeconomicgrowthisattributablemainlytothestrongperformanceoftheagriculturalsectordrivenbyGovernment’sCommandAgricultureProgramme.Theoverallbusinessenvironment,however,remainedsubduedandwascharacterisedbyweakinvestorconfidence,cashandforeigncurrencyshortages,priceincreasesandawideningtradedeficit.Asaconsequence,themanufacturingsectorcapacityutilisationdeclinedfrom47.4%in2016to45.1%intheyearunderreview.

ThesmoothpoliticaltransitionfollowingtheresignationoftheformerPresidenton21November,2017seemstohavehaltedthenegativedomesticandforeigninvestorconfidenceandusheredrenewedinterestinZimbabweasaninvestmentdestination.

2.0.Inflation

Inflationclosedtheyearended31December,2017at3.46%,upfrom-0.93%asatendofDecember,2016.

3.0. Recapitalisation

DespitetheGovernmenthavingagreed,throughaCabinetResolutionpassedon14November2016,tofollowitsRightsIssueCallofUS$83millionintendedtoaddresstheGroup’stechnicalinsolvency,itwasstillnotpossibletoaccommodatethisinthe2017and2018NationalBudgetsduetolackoffiscalspace.

4.0 Group Financial Performance

TheGroup’sturnoverfor2017increasedtoUS$101.4million,upfromUS$74.8millionin2016.ThegrossprofitincreasedsubstantiallytoUS$29.4millionin2017,upfromUS$16.3millionin2016.

Theimprovedperformancewasattributabletoincreasedproductionandsalesoffertilizersforwintercroppingandfertilizersalestotobaccofarmersduringthetobaccosellingseason.Further,tollmanufacturingofsuperphosphatefertilizersforcompetitortraderswhopreviouslywereimportingmanufacturedfertilizer,helpedtoboostrevenue.Therewasalsoapositiveknock-oneffectfromtheremovalofOfficeofForeignAssetsControl(OFAC)Sanctionson4October,2016whichtriggeredunrestrictedresumptionofbusinesswith local, regionaland internationalsuppliers and customers. The removal of theOFAC Sanctions also enabled competitive procurement of rawmaterials.

5.0 Directorate

The IDCZAct (Chapter 14:10) provides for the appointment of aminimumof 5 and amaximumof 9Boardmembers.DuringtheyearunderreviewtheBoardwascomprisedof6membersuptotheendofJulywhenthethenGeneralManager,MrMichaelN.Ndudzowhowasanexecutivedirector,proceededonnormalretirement.MrBenjaminNkosentyaKumalojoinedtheCorporationon7September2017asthenewGeneralManager.A5memberBoardremainedinplacefortherestoftheperiodupto31December,2017withBenjaminNkosentyaKumaloasanex-officiomember.OnbehalfoftheBoard,IwouldliketothankMrMichaelNyamadzawoNdudzoforhiscontributionsandloyaltyover26yearsthatheservedtheCorporation.

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IDCZ ANNUAL REPORT

CHAIRMAN’S STATEMENT (continued)

6.0 Outlook Whilethebusinessenvironmentisexpectedtoremainchallengingintheshorttomediumterm,itisanticipated

thatthenewpoliticaldispensationwillresultina“NewEconomicOrder”whichwillentail,amongothermeasures,thecorrectionoffiscal imbalances,addressingfinancialsectorvulnerabilities;reformingpublicenterprisesandlocalauthorities,dealingwithcorruptionintheeconomyandreengagementwiththeinternationalcommunity.Thisshouldimprovethebusinessenvironmentandinvestmentclimatethusstimulatingeconomicrecovery.

The Corporation has embarked on restructuring its investment portfolio and refocusing on the developmentfinancerolesothatitplaysamuchmoreeffectiveroleintherevivalandsustainablegrowthofindustrialcapacityinthecountry.

TherestructuringoftheCorporationwillentailthefollowingmeasures:• Dilution, disposal, dissolution and development of the Corporation’s entire investment portfolio (the “4DStrategy”)

• Recapitalisation of the Corporation and its individual Strategic Business Units (SBUs) to strengthen theirbalancesheetsand

• InitiativestoraiseadditionalcapitalforthesetupoftheDevelopmentFinancefunction.

7.0 Acknowledgements

ItaketheopportunitytosincerelythankmycolleaguesontheIDCZBoard,andtheDirectorsofsubsidiaryandassociatecompaniesfortheircommitmentandcontributionsduring2017,andlookforwardtocontinuationofthesameaswepressonwiththerestructuringandturnaroundoftheGroup,andrepositionourselvesforthedevelopmentfinancerole.

Ialsothanktheshareholder,entireIDCZGroupManagementandStafffortheirinvaluablecontributions,andlast

butnotleast,Ithankallstakeholdersandcustomersfortheircontinuedsupport.

Yoursfaithfully

HerbertNkala CHAIRMAN

21June2018

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IDCZ ANNUAL REPORT

REPORT OF THE DIRECTORSFor the year ended 31 December 2017

Thedirectorshavepleasureinsubmittingtheirfiftyfourthreport,togetherwiththeauditedfinancialstatementsforthetwelvemonthsended31December2017.

Share Capital Theauthorisedsharecapitalremainedat50000000ordinarysharesofUS$2eachwithavalueofUS$100000

000aspersection13(1)oftheIDCAct(Chapter14:10).

On14November2016,CabinetapprovedtheconversionofdebtowedtotheMinistryofIndustry,CommerceandEnterpriseDevelopment(theMinistry)into10086717ordinarysharesof$2eachwithavalueof$20173543.TheshareswereissuedtotheMinistryinFebruary2017.Theissuedsharecapitalincreasedfrom4172054ordinarysharesofUS$2eachwithavalueofUS$8344108to14258771ordinarysharesofUS$2eachwithavalueofUS$28517543.

2017 2016

Group Income and Appropriations US$ US$

Profit/(loss)fromoperations 11790144 (3151816)Netfinancecharges (6213780) (7838002)Shareofincome:associatedcompanies (984386) (1634652)Fairvaluegain:investmentproperty 40000 (198822)

Impairmentloss:assets (110781) (2567805)

Impairmentofinvestments - 2006Exceptionalitems - (461198)Gainonlossofcontrol (1460975) 21605249Exchange(losses)/gain (701360) 1060381

_____________ _____________Profitbeforetaxation 2358862 6815341Incometaxcredit/(charge) (4764866) 877879Lossfromdiscontinuedoperations (111805) (640943)

_____________ _____________(Loss)/profitaftertaxation (2517809) 7052277Othercomprehensiveincome 4361479 4593671

_____________ _____________Totalcomprehensiveincomeforyear 1 843 670 11 645 948

Attributable to:-

Non-controllingInterest (1460385) (61521)Ownersoftheparent 3310055 11707469

_____________ _____________1 843 670 11 645 948

_____________ _____________

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IDCZ ANNUAL REPORT

REPORT OF THE DIRECTORS (continued)

Directorate

ThetermsforMr.H.Nkala,Prof.Mafoti,Mr.JMushayavanhuandDr.M.Fallalawereextendedfor3yearsfrom05December2015to05December2018.MrsG.ZvaravanhuwasappointedDeputyChairpersoneffectivefrom12October2015andhertermasdirector,whichranupto30April2017,was extended to 30April 2020.Terms forDr. J. PMuchineripi andMr.M. SCharambawhowereappointed directors on12 February 2018will expire on11 February 2021,while that ofMr.B.NKumalowhowasappointedExecutiveDirectoron7September2017runsupto6September2020.

Dividend

ThedirectorsdonotproposetodeclareadividendforthisyearendedDecember2017astheGroupcontinuedtoreportnegativeretainedearnings.

Auditors Atthe54thAnnualGeneralMeetingscheduledfor5July2018,thedirectorswillfixtheremunerationofthe

auditorsforthepastaudit,andappointauditorsfortheensuingyear.

ForandonbehalfoftheBoard

CTMutingwende CorporateSecretary

21June2018

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IDCZ ANNUAL REPORT

CORPORATE GOVERNANCE REPORT TheIndustrialDevelopmentCorporationofZimbabweLimitedisaregisteredlimitedliabilityentity,subjecttothe

provisionsoftheIDCZAct(Chapter14:10)of1963asamended.

NoneoftheprovisionsoftheCompaniesAct(Chapter24.03),orofanyotherlawrelatingtocompaniesshallapplytotheCorporationexceptinrespectofspecificprovisionsasmaybeenactedbyPresidentialProclamation.

Foritsroleincatalyzingindustrialization,theIDCZisclassifiedasaDevelopmentFinanceInstitution(DFI)andshallnotbewoundupexceptbyorundertheauthorityofanActofParliament.

Board of Directors

TheBoardofDirectors isappointedbytheMinisterof Industry,CommerceandEnterpriseDevelopment.TheIDCZActdeterminestheconstitution,rights,powersandobligationsoftheBoard.Ofthesixdirectorsledbyanon-executivechairman,fivearefromtheprivatesectorandarenon-executivewiththeGeneralManagerbeingtheonlyexecutivedirector.

TheBoardmeetsatleastquarterly.ThefiveexistingBoardCommitteesmeetaheadofthenormalboardmeetings.AllBoardcommitteesarechairedbynon-executivedirectors.TheBoardhasreservedcertainitemsforitsreviewincludingapprovalofperformanceresults;Greenfieldandexpansionprojectsdevelopment(i.e.structuringjointventuresandappropriatefinancingthereof)andrelatedmaterialagreements;disposalsofinvestments;budgetsandlong-rangeplans,andseniorexecutiveappointmentsandremuneration.TheBoardthusretainsfullcontrolbyapprovingstrategicplan,keyresultareasandmonitoringperformancethroughkeyperformanceindicatorsatleastquarterly.

TheBoard’s assessmentof the IDCZ’sposition ispresented in itsAnnualReport,whichaddressesmattersofconcern and interest to stakeholders, including non-financial matters, reports on both positive and negativeaspectsofIDCZ’sactivities.

TheAnnual Report and the external auditors’ opinionwhich are adopted at theAGMbefore being tabled inParliamentbytheMinisterofIndustry,CommerceandEnterpriseDevelopmentareavailabletothepublic.

TheBoard subscribes to the need to conduct business in linewith generally accepted corporate governancepracticesprescribedbytheCodeofBestPractice(CadburyReport),NationalCodeonCorporateGovernanceandtheCorporateGovernanceFrameworkforStateEnterprisesandParastatals,allrelevantlegislation,regulations,relevantInternationalFinancialReportingStandards,andinaccordancewithitsCorporateValues.

Business Development Committee The Committee oversees the active search for and identification of Greenfield and expansion investment

opportunitiesforimplementationbytheCorporation,throughneworspecialpurposeimplementationvehicles,orthroughexistinginvestmentvehicles.AllcommercialprojectsidentifiedforimplementationmustpassthehurdleofareturnabovetheCorporation’scostofcapital.

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CORPORATE GOVERNANCE REPORT (continued) Finance & Audit Committee

The Committee deals with accounting matters, financial reporting and internal controls. It meets at leastquarterlyandreviewsthefinancialstatementsbeforetheyaresubmittedtotheBoard.TheCommitteemonitorsproposedchangestoaccountingpolicy,reviewsinternalcontrolandreportingmatters,reviewsInternalAuditandIndependentExternalAuditors’reports.TheCommitteehasaccesstoboththeExternalAuditPartnerandtheInternalAuditManager,whoalsoattenditsmeetings.AllsignificantfindingsduringtheauditarebroughttotheattentionoftheBoard.

TheInternalAuditDepartmentisrequiredtocovereachCorporationinvestmentatleastfourtimesperannum.TheCorporationobtainedtheagreementofpartnersinassociatedcompaniesfortheInternalAuditDepartmenttoconductauditsatthoseinvestmentssince2001.

Nomination Committee

TheCommitteerecommendstotheBoardnamesofqualifiedpersons,fromadatabasebuiltforthepurpose,forappointmentasnon-executivedirectorsinCorporationinvestments,withaviewtoachievingaskill,genderandgeographicalmixontheseboards.

Remuneration & Human Resources Committee

TheCommitteeisresponsibleforreviewofexecutivemanagementremunerationinlinewiththeRemunerationPolicyapprovedbytheBoard.TheRemunerationPolicywasputinplaceintermsofSections12and23oftheIDCAct (Chapter14:10),afterconsideringthepracticesofcommercializedandprivatizedGovernmentownedcompanies, IDCZSubsidiariesandotherholdingcompaniesofasizeandstandingsimilar tothe Corporation.ThepolicyisaimedatensuringthattheremunerationpracticesattheCorporationarecompetitivetoenabletheCorporationtoattractandretainhighcalibreexecutiveswhileprotectingtheinterestsoftheShareholder.

Risk Management Committee

TheCommitteeidentifiesrisksfacedbytheCorporationanditsinvestmentsandproactivelyseekssolutionsandmeasurestomanagetherisk,whicharerecommendedtoboththeCorporationanditsinvestments.

ATTENDANCE REGISTER Therecordofattendancebythedirectorswasasfollows:-

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CORPORATE GOVERNANCE REPORT (continued) ATTENDANCE REGISTER (continued)

Key/Notes

NM–NotMemberMr.M.N.NdudzoretiredasGeneralManageron31July2017.Mr.B.N.KumalowasappointedGeneralManageron07September2017.TheNominationCommitteedidnotsitastherewerenoappointmentstobemade.TheBoardTransactionCommitteeonlymeetswhenthereisatransactiontobeconducted.TheSpecialRemunerationandHumanResourcesCommitteemeetingsweretoidentify,interviewandappointtheNewGeneralManager.

Code of Conduct and Business Ethics Charter

TheIDCZCodeofConductandBusinessEthicsCharterformsanintegralcomponentofthecontractsofserviceofemployees,andprovideguidanceregardingthebehaviourexpectedfromemployees.

H. Nkala Mrs G Zvaravanhu R. Mafoti (Prof)

BoardChairmanandNominationsCommitteeChairman

FinanceandAuditCommitteeChairman

BusinessDevelopmentCommitteeChairman

J Mushayavanhu M.S. Fallala (Dr)

RemunerationandHumanResourcesCommitteeChairman

RiskManagementCommitteeChairman

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DIRECTORS’ RESPONSIBILITY STATEMENT TheDirectorsoftheCorporationarerequiredbytheIndustrialDevelopmentCorporationActtomaintainadequate

accountingrecordsandtopreparefinancialstatementsthatpresentfairlythestateofaffairsoftheCorporationanditsinvestmentsattheendofeachfinancialyearandoftheprofitandcashflowsfortheperiod.Inpreparingtheaccompanyingfinancialstatements,InternationalFinancialReportingStandardshavebeenfollowed.Suitableaccounting policies have been used and consistently applied, and reasonable and prudent judgements andestimateshavebeenmade.

TheDirectorshavesatisfiedthemselvesthattheGroupwillremainprofitableandthattheCorporationwillbeabletodischargeitsliabilitiesastheyfalldue.ItssubmittedstrategicturnarounddocumenttoGovernmentasitsshareholderandasperrequest,forconsiderationofitsrecapitalisationandotherpolicyassistanceneedswasapprovedon14November2016.TheCorporationBoard is implementing resolutionspassedbyCabinet andthe4D(Dilution,Disposal,DissolutionandDevelopment)StrategyadoptedbytheBoard.Accordingly,theyaresatisfiedthatitisappropriatetoadoptthegoingconcernbasisinpreparingthefinancialstatements.

TheBoardrecognisesandacknowledgesitsresponsibilityfortheGroup’ssystemsofinternalfinancialcontrol.TheGroupmaintainsinternalcontrolsandsystemsthataredesignedtosafeguarditsassets,preventanddetecterrorsandfraudandensurethecompletenessandaccuracyofrecords.TheGroup’sFinanceandAuditCommitteehasmettheExternalAuditortodiscusstheirreportsontheresultsoftheirwork,whichincludeassessmentsoftherelativestrengthsandweaknessesofkeycontrolareas.

Thefinancialstatementsfortheyearended31December2017,whichappearonpages29to129havebeenapprovedbytheBoardofDirectorsatitsmeetingheldon21June2018andweresignedonbehalfoftheBoard,bytheChairmanoftheBoard,andtheGeneralManager.Thesefinancialstatementswhichhavebeenpreparedunderthehistoricalcostconventionareinagreementwiththeunderlyingbooksandrecords,havebeenproperlypreparedinaccordancewiththeaccountingpoliciessetoutinnote2,andcomplywiththedisclosurerequirementsoftheIndustrialDevelopmentAct(Chapter14:10)andtherelevantregulationsmadethereunder.

Thefinancial statements areprepared in accordancewith International FinancialReportingStandards (IFRSs).IFRSscompriseinterpretationsadoptedbytheInternationalAccountingStandardsBoard(IASB),whichincludesstandardsadoptedbytheInternationalAccountingStandardsBoard(IASB)andinterpretationsdevelopedbytheInternational FinancialReporting InterpretationsCommittee (IFRIC) or by the former Standing InterpretationsCommittee(SIC).

ThefinancialstatementswerepreparedunderthesupervisionoftheFinanceManager,NgonidzasheMusungwa,a holder ofBSc (Hons)AppliedAccounting andMasters ofBusinessAdministration (MBA); amember of theAssociation of Chartered CertifiedAccountants (ACCA), Institute of Certified Public Accountants Zimbabwe(CPAZ), and anAssociatemember of the Institute of Chartered Secretaries andAdministrators in Zimbabwe(ACIS).PublicAccountantsandAuditorsBoard(PAAB)registerednumber03702.

H.Nkala B.N.Kumalo Chairman GeneralManager 21June2018 21June2018

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GENERAL MANAGER’S REPORT ON OPERATIONSFOR THE YEAR ENDED 31 DECEMBER 2017

1.0 ZIDERA sanctions

Outofthe$4.2millioninterceptedbyOfficeofForeignAssetsControl(OFAC)intheGroup,$938530.86isstilloutstandingaftertheremovalofthesanctionswiththeresthavingbeenrecoveredduringtheyear.

2.0 Recapitalisation

TherewasnoprovisionfortheUS$83millioninthe2018nationalbudgetpresentedinDecember2017.

Statutorydebtmoratoriumsimplementationremainedoutstandingandisexpectedtobeeffectedin2018.

3.0 Litigation

3.1 Chemplex Corporation (Private) Limited

ChemplexCorporationisexpectedtobenefitfromthethreeyearmoratoriumonitsstatutorydebtofUS$11.9millionapprovedbyCabinetonthe14November,2016.Thishadhowevernotbeenimplementedbytheendoftheyear.

Bank debt restructuring during the year extended the repayment period to 2025. This greatly improve thecompany’stechnicalsolvency.

3.2 ROMSIT

TheROMSITclaimremainsoutstandingandstoodatUS$10883000asatendofDecember2017.Effortstorecover the funds through diplomaticmeans did notmaterialize during theyear under review.However, theInternationalCourtofArbitrationinParisisbeingengagedforrecovery.

3.3 Zimglass

The liquidatorcontinuedto lookforuptakersoftheassetasagoingconcerntomaximizevalueforcreditorswithoutsuccess.

TheguaranteedconsortiumofbanksdebtofUS$16.6millionwhichGovernmenthadpromisedtosettlethroughvariousset-offoptionstofendoffawritofexecutionissuedbytheHighCourtagainsttheCorporationremainsoutstanding,withtheattendantthreatontheCorporation’sassetspledgedassecurity.TheassetsunderthreatincludeIDCZ’sshareholdinginSunwayCityandSurfaceWillmarInvestments.

3.4 Willowvale Motor Industries

The$14.2millionrightsissuefromGovernmentwhichwassupposedtobenefitthemotorGroupdidnotmaterializeduringtheyearnorwasitprovidedforinthe2018annualbudget.Itis,however,hopedthattheUS$5.4millionfromthemoratoriumonstatutorydebtwhichdidnotmaterializein2017willbeimplementedin2018.

3.5Interfin/CFXCuratorClaimonGuarantee

AclaimforZAR909969.02filedbyInterfinBank(underliquidation)attheHighCourtinrespectofaguaranteetheCorporationpurportedlyissuedon22May2009toBonnezim(Private)LimitedisstilltobeheardaftertheCorporationfiledforitsdefence.

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GENERAL MANAGER’S REPORT ON OPERATIONS (continued)

4.0 Performance Reports By Sector

CapacityutilizationwhichremainedbelowbreakevenintheGroupsubsidiariescontinuedtothreatensustainedenterpriseviabilityduringtheperiod.

Thiswasaresultoflackofproperlypricedcapitalforretoolingastheliquiditycrunchpersisted,coupledwithdiminishingnostrobalancestosupportcriticalrawmaterialimports.Thecountryremainedahighcostproducerthereby inhibitingthecountry’sexportpotentialforthegenerationofthemuchneededforeigncurrencyforcriticalrawmaterials,sparesandcapitalequipment.

4.1 Agro-Processing

4.1.1 Fertiliser & Chemicals

WhileDorowaMineralsplantwasrehabilitatedthroughanRBZmediated&guaranteedoffshorelineofcreditfromAfrieximbankin2016,therehabilitationofZimbabwePhosphatesIndustries(ZIMPHOS’s)sulphuricandphosphoricacidplantshoweverremainedoutstanding.

EffortwillbemadetorehabilitatetheZIMPHOSplantin2018notwithstandingthenostrochallenges.

Thesearchforastrategicpartnerinthebusinesscontinuedduringtheyearbutwasunsuccessful.ItishopedthatgiventherenewedandheightenedinvestorinterestinZimbabwethisobjectivewillbeachievedin2018.

4.1.2 Food Processing

OperationswererationalizedduringtheyearbetweenSurfaceWilmar(Private)LimitedandOlivineIndustries(Private)Limitedtoachieveproductionefficienciesandreduceoverheads.

However,shortagesoflocallyproducedsoyabeansandcottonseed,whicharekeyinputsintheextractionofcookingoilandproductionofstockfeed,continued.

ImportationofcrudesoyaoilcontinuedduringtheperiodunderreviewwithGovernment,throughtheReserveBankofZimbabwe(RBZ),playingapivotalroleinavailingnostrosupportforsuchimportstoensureproductavailabilityonthelocalmarket.

4.2 Mineral Processing

4.2.1 Cement

Competitionremainedstiffduringtheyearasevidencedbytheemergenceofmoreplayersatthetailendofthevaluechainandthiscausedalotofpriceundercutting.ThefirmingoftheRandtowardstheendoftheyearunderreviewisexpectedtoprotectthelocalindustryfromimportsfromSouthAfrica.

The transferof IndivaFarmby theMinistryof Lands to IDCZ remainedoutstanding as atyearend. This isnecessary as the landwas pledged as part of the IDCZ’s equity contribution into Sino Zimbabwe CementCompany.

Itishopedthatthiswillbeimplementedin2018andopenupothernewprojectopportunitiesatSinoZimbabweCementCompany.

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4.2 Mineral Processing (continued)

4.2.2 Ceramic Products & Tourism

ThedisposaloftheDetemaestateanditsimprovementstoindigenouspeoplethroughapublictenderdidnotmaterializebecauseallthebidswerebelowthereserveprice.

Thisisexpectedtobeconcludedin2018.

4.2.3 Dimension Stone

Theexistingmajorityshareholderagreedtoexercisetheirpre-emptiverightstopurchaseIDCZ’s49%shareholdinginStoneHoldings.Asharesaleagreementwassignedduringthefirsthalfof2017.Howeverthepurchaserfailedtopayinaccordancewiththeagreement.Thisdelayedtheprocessofdisposaloftheshares.

4.2.4 Glass/Silica Sand

ThesharecertificatesofownershipinIndustrialSands(Private)Limitedcouldnotbelocatedandsothesubsidiarycontinuestobeaccountedforasbeforependingfurthersearches.

4.3 Motor & Transport

RemittancestosuppliersremainedachallengeduringtheperiodunderreviewonaccountofdiminishednotrobalancesintheeconomyandtoalesserextentlowdomesticaggregatedemandmakingtheknockedDown(KD)businessdifficulttosustain.

4.3.1 Motor Assembly

Ajointventureconsummatedin2016byWillowvaleMotorIndustry(WMI),AstolMotorsandBeijingAutomobileIndustryofChina(BAIC)facedchallengesofservicingthesupplycreditforimportedmotorvehicleskitsduetoforeigncurrencyshortages.Asaconsequenceassemblyoperationsweresuspendedpendingresolutionofthenon-payment.

EffortstocontractassemblebrandsofotherOriginalEquipmentManufacturers(OEMs)arebeingpursuedwithverygoodprospectsgiventheapprovaloftheMotorIndustryDevelopmentPolicybyGovernment.However,theseplansmayalsobesetbackbythenonavailabilityofforeigncurrencytopayforkits.

4.3.2 After Sales Service, Engineering and Retail

Workshopthroughput,workingcapitalavailabilityandprofitabilityimprovedatAmtecduringtheperiodunderconsideration.

However,thecompany,likeotherplayersinthesector,facedforeigncurrencychallengesforprocurementofthemotorvehicleunitsandpartsstockpipeline.

4.3.3 Tractors

MOTIRA’sbusinessmodelofsourcingbothtractorunitsandpartsfrommultiplesupplierscouldnotbesustainedandhenceadecisionwastakenthatthebusinessbetransferredbacktoAMTECin2018andthatMOTIRAceasesoperations.

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GENERAL MANAGER’S REPORT ON OPERATIONS (continued) 4.4 Non-Ferrous Metal Fabrication

4.4.1 Aluminium

TheIDCZdisposedits51%inAlminMetalIndustriestoArchitecturalAluminiumduringtheyear.

4.4.2 Copper

ThedisposaloftheassetsofZimbabweCopperIndustries(Private)Limitedthroughpublicauctionbytheliquidatorwascompletedduringtheyearalthoughproceedswerenotenoughtocovertheliquidationexpensesandsecuredcreditors.

4.5 Textiles

Cottonproductionhasdeclineddramaticallyinrecentyearsduetounattractivecommoditypricesofcottonlintinthecountryandassuchthesectorremainedunattractiveforinvestors.AfroranSpinnersinNortonremainedoperationalbutatverylowcapacity.

DespiteGovernmentincentivesforcottonproductionthroughdirectbudgetarysupporttocottongrowers,thesector’sfortunesdidnotimproveduringtheperiod.

Modzonesubsidiaries,IrazimTextilesandTravanBlanketsremainedunderjudicialmanagement.

4.6 Polypropylene Packaging

ThesaleofIDCZ’s49%sharesinZimbabweGrainBag(Private)Limitedtothemajorityshareholderunderpre-emptiverightsdidnotproceed.Itishopedtoconcludethesharesaleagreementin2018.

4.7 Insurance

ThesearchforstrategicfitpartnersintheindustryoroutrightdisposalofIDCZsharesinAlliedInsurancetoavoidtheriskofnon-compliancewiththeminimumcapitalisationrequirementswillcontinuein2018.

4.8 Real Estate

SunwayCity is lookingfor jointventurepartnerstodeveloptheInformationCommunicationTechnology(ICT)Hubwhichwouldavailfactory/officespaceforleasetoinvestorswhowouldcomeintotheSpecialEconomicZonedesignatedarea.

Theprocesstofindsuchpartnerswillcontinuein2018.

5.0 Short-Time Working and Retrenchments

With national capacity utilization still below average, the IDCZGroup continued to adopt cost containmentmeasures(includinglabourcosts)andtosearchformeasurestoincreaseitsrevenuestreams.

6.0 Capacity Building

The Corporation staff continued to benefit under Southern African Development Community DevelopmentFinanceResourceCentre(SADCDFRC)capacitybuildingworkshopsandotherrelevantworkshopsandeducationprogrammeswhichwererunlocallyduringtheyear.

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7.0 ZITF

The IDCZGroupexhibited its products and services at theyear’s annual event inBulawayoandwonaGoldMedalAwardfortheBestZimbabweanExhibit,(Chemicals,Pharmaceuticals,CosmeticsandToiletriesGroup)andanotherGoldMedalAwardfortheBestZimbabweanExhibit,(Construction,BuildingandHardware).

8.0 Acknowledgement

Ithanktheshareholder,GroupmanagementandstafffortheirinvaluablecontributionsduringtheyearandcallfortheircontinuedsupportastheCorporationgoesthroughaperiodofrestructuringtoenhanceitsroleintheindustrialisationoftheeconomy.IalsothanktheBoardforitswisecounselandleadershipunderaverydifficulteconomicenvironment.

IwouldliketoalsoacknowledgethecontributionsandloyalservicerenderedbymypredecessorMrM.N.Ndudzo,whoretiredduringthecourseoftheyear.

B.N.Kumalo GeneralManager

21June2018

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KPMGMutualGaderns100TheChase(West)EmeraldHillP.O.Box6Harare,ZimbabweTel:+263242303700,302600Fax:+263242303699

Independent Auditor’s ReportTo the Members of the Industrial Development Corporation of Zimbabwe Limited

Opinion

WehaveauditedtheconsolidatedandseparatefinancialstatementsoftheIndustrialDevelopmentCorporationofZimbabweLimited(theGroupandCorporation)setoutonpages29to129,whichcomprisethestatementsoffinancialpositionasat31December2017,andtheincomestatementsandstatementsofothercomprehensiveincome,thestatementsofchangesinequityandthestatementsofcashflowsfortheyearthenended,andthenotestothefinancialstatements,includingasummaryofsignificantaccountingpolicies.

Inouropinion,exceptforthepossibleeffectofthematterdescribedintheBasisforQualifiedOpinionsectionofourreport,thesefinancialstatementsgiveatrueandfairviewoftheconsolidatedandseparatefinancialpositionoftheIndustrialDevelopmentCorporationofZimbabweLimitedasat31December2017,andofitsconsolidatedandseparatefinancialperformanceandconsolidatedandseparatecashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandardsandinthemannerrequiredbytheprovisionsoftheIndustrialDevelopmentCorporationAct(Chapter14:10).

BasisforQualifiedOpinion

Note 8.1 explains that Industrial Sands (Private) Limited (Industrial Sands)was classified as awholly ownedsubsidiaryoftheIndustrialDevelopmentCorporationofZimbabweLimiteddespitebeingdisclosedasawhollyownedsubsidiaryofZimglassIndustries(Private)Limited(Zimglass)inprioryears.DocumentationinplaceisnotclearonwhetherIndustrialSandsisownedbytheCorporationorbyZimglass.Thenotefurtherexplainsthatthedirectorsareintheprocessofregularisingthelegaldocumentation.WewerenotprovidedwithfurtherevidencetoshowthatIndustrialSandsisownedbytheCorporationortootherwisesupportitsclassificationasasubsidiaryoftheCorporation.ThefinancialresultsofIndustrialSandswereincludedintheconsolidatedfinancialstatements.While the amounts involved are not considered quantitatively material nor pervasive to these consolidatedfinancial statements, thismatter isconsideredqualitativelymaterial to theusersof thesefinancial statementsgiventhenatureofthematter.Ouropinionwasalsoqualifiedinrespectofthismatterintheprioryear.

WeconductedourauditinaccordancewithInternationalStandardsonAuditing(ISAs).Ourresponsibilitiesunderthosestandardsarefurtherdescribed in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report.We are independent of theGroup andCorporation in accordancewith the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants(IESBACode)togetherwiththeethical requirementsthatarerelevanttoourauditofthefinancialstatementsinZimbabwe.WehavefulfilledourotherethicalresponsibilitiesinaccordancewiththeserequirementsandtheIESBACode.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourqualifiedopinion.

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Independent Auditor’s Report (continued) Material Uncertainty Related to Going Concern

Wedrawattentiontonote22inthefinancialstatements,whichindicatesthattheGroupandtheCorporationrecordedatotalprofitandlossfortheyearnetoftaxof$1843670and$1594respectivelyduringtheyearendedDecember312017and,asofthatdate,theGroup’sandtheCorporation’scurrentliabilitiesexceededitscurrentassetsby$35401080and$26426106respectively.AsstatedinNote22,theseeventsorconditions,alongwithothermattersassetforthinthenote,indicatethatamaterialuncertaintyexiststhatmaycastsignificantdoubtontheabilityoftheCorporationanditssubsidiariestocontinueasgoingconcerns.Ouropinionisnotmodifiedfurtherinrespectofthismatter.

Key Audit Matters

Keyauditmattersarethosemattersthat,inourprofessionaljudgement,wereofmostsignificanceinourauditoftheconsolidatedandseparatefinancialstatementsofthecurrentperiod.Thesematterswereaddressedinthecontextofourauditoftheconsolidatedandseparatefinancialstatementsasawhole,andinformingouropinionthereon, andwedonotprovidea separateopinionon thesematters. Inaddition to themattersdescribed inthe Basis for Qualified Opinion and Material Uncertainty Related to Going Concernsectionsofourreport,wehavedeterminedthemattersdescribedbelowtobethekeyauditmatterstobecommunicatedinourreport.

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Independent Auditor’s Report (continued)Valuation of land and buildings and investment properties at year end (applicable to the consolidated financialstatements)

Refer to the summary of significant accounting policies in 2.3(n), 2.3(p) and disclosures in notes 2.4 (b) (ii-iii), 6 and 7.to the financial statements.

The key audit matter How we addressed the matter in our audit

Atyearend,thegroupheldlandandbuildingsandinvestmentpropertieswithfairvaluesamountingto $77.2 million and $3.7 million respectively.TheseassetsaremeasuredatfairvalueaspermittedbyIAS16Property,PlantandEquipment(forlandandbuildings)andIAS40InvestmentProperty.

Thelandandbuildingsandinvestmentpropertieswere revalued by an independent valuationspecialist at year end, using the investment anddirect comparison method. This method takesinto account unobservable inputs and thereforerequires significant judgement. In addition, thepropertymarketremainssubduedandthereisnoreadilyavailablemarketinformationonproperties,so a significant amount of judgement has to beappliedindeterminingthepropertyvalues.

The significance of the land and buildings andinvestment properties to the consolidatedstatement of financial position at year end,togetherwiththesignificantvaluationjudgementsresultedinthisareabeingconsideredakeyauditmatter.

Our audit procedures included: We evaluated the competence, independenceand objectivity of the independent valuationspecialistthroughinquiriesregarding interestsandrelationshipsthatmayhavecreatedathreattotheindependent valuation specialist objectivity andinspecting the independent valuation specialist’squalifications, experience with similar valuationsandreputationwithinthemarket.

We critically evaluated the methodology andassumptions incorporated by the independentvaluation specialist into thevaluationsperformed.Ourevaluationincludedcorroboratingassumptionsusedbytheindependentvaluationspecialistagainstinformationobtainedfromothernotablerealestatepractitionersandourgeneralunderstandingofthepropertymarketandmacro-economicenvironment.

We further compared the propertyvalues againstthe ‘best use’ principle required by IFRS 13 FairValueMeasurementandweassessedwhetherthefairvalueprinciples,accordingtothe independentvaluationspecialist’sdefinitions,wasinlinewiththedefinitionperIFRS13.

We evaluated whether disclosures made bymanagement where adequate in accordance withIAS16,IAS40andIFRS13.

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Independent Auditor’s Report (continued)Impairmentofreceivables–tradereceivables(applicabletotheconsolidatedfinancialstatements)andgroupbalancesreceivables(applicabletotheseparatefinancialstatements)

Refer to the summary of significant accounting policies on note 2.3(k) and disclosures in notes 2.4 (b) (v) and 11, 11(a) including 18 to the financial statements.


AspartoftheGroup’soperations,theGroupsellsgoodsto customers on credit. The Group’s trade receivablesamountedto$14.3millionintheconsolidatedfinancialstatements at year end. In addition, the Corporationprovidesmanagement services and earnsmanagementfees,aswellasdividends,fromentitieswithinthegroup.Group balances receivables in the separate financialstatementsamountedto$2.9millionatyearend.

Theimpairmentofthesereceivablesinvolvessignificantjudgement and estimation about the amounts to berecoveredandthetimingofrepaymentsthereof.

The provisions for impairment raised against thereceivableshavebecomeanevenmorecriticalfocusareainZimbabwe,takingintoaccounttheworseningcashandcurrency shortages, company closures, retrenchmentsandgeneralincreaseincreditriskduetothesefactors.

The significance of the receivables to these financialstatements and the related estimation uncertaintyinvolvedandthehighcreditriskduringtheyear,thiswasconsideredtobeakeyauditmatter inourauditoftheconsolidatedandseparatefinancialstatements.

OurauditofGroup’stradereceivablesincluded:

• Weevaluatedtheoperatingeffectivenessofinternalcontrolsovertheapproval,recordingandmonitoringoftradereceivables.

• We analysed the key inputs used indetermining the receivables impairmentallowanceandevaluatedthereasonablenessof assumptions used by management byinterrogating documentation evidencingthe performance of credit assessments oncustomers in accordance with the Group’spoliciesandapplicablelaws.

• We evaluated payments received fromcustomers subsequent to year-end, pastpayment history and unusual patterns toidentifypotentiallyimpairedbalances.

• We evaluated the reasonability ofmanagement’s judgement by comparingthe prior year’s impairment allowanceraised against current year actualwrite-offsrecorded.

Our audit of the Corporation’s group balances receivables included:

• Weanalysedmanagement’scalculationoftheamountstobeimpairedwithreferencetoourknowledgeof the entitieswithin the group,includingconsiderationof thework thatweperformed in respect of the impairment ofsubsidiaries(seebelow).

We inspected payments received from groupentitiessubsequenttoyearend.

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Independent Auditor’s Report (continued)Impairmentofinvestmentinsubsidiaries(applicabletoseparatefinancialstatements)

Refer to the summary of significant accounting policies note 2.3(o) and other disclosures in note 3.7 and note 8.1 to the financial statements.


Investment in subsidiaries represent a substantialproportionof theCorporation’sassets in the separatefinancial statements. The Corporation measures itsinvestments in subsidiaries at cost. At year end, theCorporation’s investments insubsidiariesamountedto$49.5million.

Due to continuing losses, decreasing revenues andtheinsolvencyofcertainofthesubsidiarieswithintheGroup,thecarryingamountsoftheseinvestmentsmaybe impaired. The Corporation calculates impairmentby comparing the carrying amount to the recoverableamount.

Assessment of impairment requires judgement withregard to determining that the subsidiaries’ carryingamountsarenotabovetheirrecoverableamount.

Duetothepoorperformanceofthesubsidiaries,theirsignificance to the Corporation’s financial statements,thiswasconsideredtobeakeyauditmatter.

Ourauditproceduresincluded:• We evaluated management’s assessment of the

impairment of its subsidiaries by obtaining the auditedfinancial information of subsidiaries and comparing netassetvaluestothecarryingamountsoftheseinvestments.

• WeevaluatedthereasonabilityofusingnetassetvalueasasubstitutefortherecoverableamountofthesubsidiarybyanalysingthenetassetvalueagainstthesubsequentsalepriceofsubsidiariesthathavebeendisposedofbytheCorporation.

• Wealsoanalysedthenetassetvaluesofsubsidiariesthatthegroupplanstodisposeof inthenearfutureagainstthevaluationsprovidedby independent experts and/orindependentpotentialbuyers.

• Weevaluatedtheadequacyofthedisclosuresrelatingtotheimpairmentofsubsidiaries.

Other InformationThe directors are responsible for the other information. The other information comprises of all informationincluded intheAnnualReport. Other informationdoesnot includethefinancialstatementsandourauditors’report thereon.

Ouropinionontheconsolidatedandseparatefinancialstatementsdoesnotcovertheotherinformationandwedonotexpressanauditopinionoranyformofassuranceconclusionthereon.

Inconnectionwithourauditoftheconsolidatedandseparatefinancialstatements,ourresponsibilityistoreadtheotherinformationand,indoingso,considerwhethertheotherinformationismateriallyinconsistentwiththeconsolidatedandseparatefinancialstatementsorourknowledgeobtained intheaudit,orotherwiseappearstobemateriallymisstated.If,basedontheworkwehaveperformed,weconcludethatthereisamaterialmisstatementofthisotherinformation,wearerequiredtoreportthatfact.Wehavenothingtoreportinthisregard.

Responsibilities of the Directors for the Consolidated and Separate Financial StatementsThedirectorsareresponsibleforthepreparationandfairpresentationoftheconsolidatedandseparatefinancialstatements in accordancewith International Financial Reporting Standards and in a manner required by theIndustrial Development Corporation Act (Chapter 14:10) of Zimbabwe, and for such internal control as thedirectorsdetermineisnecessarytoenablethepreparationofconsolidatedandseparatefinancialstatementsthat

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Independent Auditor’s Report (continued)Responsibilities of the Directors for the Consolidated and Separate Financial Statements (continued)

arefreefrommaterialmisstatement,whetherduetofraudorerror.

Inpreparingtheconsolidatedandseparatefinancialstatements,thedirectorsareresponsibleforassessingtheGroup’sandCorporation’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccountingunlessthedirectorseitherintendtoliquidatetheGroupand/orCorporationortoceaseoperations,orhavenorealisticalternativebuttodoso.

Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements. Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial

statementsasawholearefreefrommaterialmisstatement,whetherduetofraudorerror,andtoissueanauditor’sreportthatincludesouropinion.Reasonableassuranceisahighlevelofassurance,butisnotaguaranteethatanauditconductedinaccordancewithISAswillalwaysdetectamaterialmisstatementwhenitexists.Misstatementscanarisefromfraudorerrorandareconsideredmaterialif,individuallyorintheaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisoftheseconsolidatedandseparatefinancialstatements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professionalscepticismthroughouttheaudit.Wealso:

• Identify and assess the risks ofmaterialmisstatement of the consolidated and separate financial statements,whetherduetofraudorerror,designandperformauditproceduresresponsivetothoserisks,andobtainauditevidencethatissufficientandappropriatetoprovideabasisforouropinion.

• Theriskofnotdetectingamaterialmisstatementresultingfromfraudishigherthanforoneresultingfromerror,asfraudmayinvolvecollusion,forgery,intentionalomissions,misrepresentations,ortheoverrideofinternalcontrol.

• Obtainanunderstandingof internalcontrol relevant to theaudit inorder todesignauditprocedures thatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessofthegroup’sandCorporation’sinternalcontrol.

• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelateddisclosuresmadebythedirectors.

• Concludeontheappropriatenessofthedirectors’useofthegoingconcernbasisofaccountingandbasedontheauditevidenceobtained,whetheramaterialuncertaintyexistsrelatedtoeventsorconditionsthatmaycastsignificantdoubtonthegroup’sandCorporation’sabilitytocontinueasagoingconcern.Ifweconcludethatamaterialuncertaintyexists,wearerequiredtodrawattentioninourauditor’sreporttotherelateddisclosuresintheconsolidatedandseparatefinancialstatementsor,ifsuchdisclosuresareinadequate,tomodifyouropinion.Ourconclusionsarebasedontheauditevidenceobtaineduptothedateofourauditor’sreport.However,futureeventsorconditionsmaycausetheGroupand/orCorporationtoceasetocontinueasagoingconcern.

• Evaluatetheoverallpresentation,structureandcontentoftheconsolidatedandseparatefinancialstatements,includingthedisclosures,andwhethertheconsolidatedandseparatefinancialstatementsrepresenttheunderlyingtransactionsandeventsinamannerthatachievesfairpresentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivitieswithinthegrouptoexpressanopinionontheconsolidatedfinancialstatements.Weareresponsibleforthedirection,supervisionandperformanceofthegroupaudit.Weremainsolelyresponsibleforourauditopinion.

28



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Independent Auditor’s Report (continued)Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements. (continued)

• Wecommunicatewiththedirectorsregarding,amongothermatters,theplannedscopeandtimingoftheauditandsignificantauditfindings,includinganysignificantdeficienciesininternalcontrolthatweidentifyduringouraudit.

Fromthematterscommunicatedwiththedirectors,wedeterminethosemattersthatwereofmostsignificanceintheauditoftheconsolidatedandseparatefinancialstatementsofthecurrentperiodandarethereforethekeyauditmatters.Wedescribethesematters inourauditor’s reportunless laworregulationprecludespublicdisclosureaboutthematterorwhen,inextremelyrarecircumstances,wedeterminethatamattershouldnotbecommunicated inourreportbecausetheadverseconsequencesofdoingsowouldreasonablybeexpectedtooutweighthepublicinterestbenefitsofsuchcommunication.

KPMG Zimbabwe

RegisteredAccountantsandAuditorsCharteredAccountants(Zimbabwe)

Per: ThembaMudidiPartnerRegisteredAuditorPAABPractisingCertificateNumber0437

21June2018

forandonbehalfof,KPMG Chartered Accountants (Zimbabwe), Reporting Auditors100TheChase(West)EmeraldHill,HarareZimbabwe

29



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Statements of Financial Positionas at 31 December 2017

Group Restated

Corporation

Note 2017 2016 2017 2016

ASSETS US$ US$ US$ US$

Non-current assets

Property,plantandequipment 6 91532269 97857458 111339 104951

Investmentproperties 7 3760000 3720000 - -

Intangibleassets 6.1 413 955 - -

Non-currentportionoflandheldforsale 10 13201910 13504313 - -

Investmentinsubsidiaries 8.1 - - 49514137 49408173

Investmentinassociates 8.2 18024312 16774747 12923804 12923804

Non-currentfinancialassets - 285299 - 1019588

Availableforsalefinancialassets 8.4 1548696 1079978 1261412 865152

________________ ________________ ________________ ________________

128067600 133222750 63810692 64321668

________________ ________________ ________________ ________________

Current assets

Inventories 9 15344877 15262954 - -

Tradeandotherreceivables 11 19884236 21258594 283673 40237

Groupbalancesreceivables 11a - - 2908152 1556185

Loansreceivable 16 - 7858 88673 219697

Non-currentassetsheldforsale 8.5 4048238 9571856 3808538 3609181

Cashandcashequivalents 12 14160513 11050965 34376 6240

________________ ________________ ________________ ________________

53437864 57152227 7123412 5431540

________________ ________________ ________________ ________________

________________ ________________ ________________ ________________

TOTAL ASSETS 181 505 464 190 374 977 70 934 104 69 753 208

________________ ________________ ________________ ________________

EQUITY AND LIABILITIES

Capital and reserves

Issued capital 13 28517543 8344108 28517543 8344108

Waitingforallotment 13 - 20173435 - 20173435

Nondistributablereserve 13(b)(ii) 95118064 96456175 109034771 109034771

Revaluationreserve 13(b)(iii) 8465015 8342841 - -

Marktomarketreserve 248787 (223300) 248787 (211874)

Accumulated losses (102415149) (101597019) (106470493) (106008239)

________________ ________________ ________________ ________________

Equityattributabletoownersoftheparent 29934260 31496240 31330608 31332201

________________ ________________ ________________ ________________

Non-controllinginterests 8.7 13252517 13740555 - -

________________ ________________ ________________ ________________

Total equity 43 186 777 45 236 795 31 330 608 31 332 201

________________ ________________ ________________ ________________

30



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Statements of Financial Position (continued)as at 31 December 2017

Group Corporation

Restated

Note 2017 2016 2017 2016

LIABILITIES US$ US$ US$ US$

Non-current liabilities

Loansandborrowings 14.1 32631560 31219500 2900323 7136468

Deferredtaxliability 5 16848181 16416020 3153656 3649752

_____________ __________________ _______________ __________________

49479741 47635520 6053979 10786220

_____________ __________________ _______________ __________________

Current liabilities

Tradeandotherpayables 15 71200195 74498372 20200203 19631490

Liabilitiesheldforsale 8.5 550091 2897759 - -

Groupbalancespayables - - 1474103 751742

Loansandborrowings 14.2 14834335 18253336 11875211 7251511

Bankoverdrafts 12 364646 1169914 - 44

Currenttaxliability 1889679 683281 - -

______________ __________________ ______________ __________________

88838946 97502662 33549517 27634787

______________ __________________ ______________ __________________

Total liabilities 138 318 687 145 138 182 39 603 496 38 421 007

______________ __________________ ______________ __________________

______________ __________________ ______________ __________________

TOTAL EQUITY AND LIABILITIES 181 505 464 190 374 977 70 934 104 69 753 208

______________ _________________ ______________ _________________

……………………………….H.Nkala

……………………………….B.N.Kumalo

Chairman GeneralManager21June2018 21June2018

31



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Income Statementsfor the year ended 31 December 2017

Group Corporation

Note 2017 2016 2017 2016

US$ US$ US$ US$

Continuing operations

Revenue 3.1 101 444 224 74 848 568 711 774 662 120

Costofsales (72035258) (58583285) - -

_______________ _______________ _______________ _______________

Grossprofit 29 408 966 16 265 283 711 774 662 120

Otherincome 3.2 4012172 6069290 28872 787480

Sellinganddistributionexpenses (3473139) (5053414) - -

Administrationexpenses 3.3 (18157855) (20432975) (1613460) (1485303)

Netfinancecosts 3.4 (6213780) (7838002) (1217935) (2120615)

Investmentpropertyfairvaluegain 7 40000 (198822) - -

Shareoflossofequity-accountedinvestees

netoftax 8.2 (984386) (1634652) - -

Impairmentofassets (110781) (2567805) - -

Impairmentofinvestments - 2006 1031722 (6089235)

Otheroperatingexpenses 3.5 - (461198) - (461198)

Profit/(lossondisposalofinvestments) - - 884701 -

Gainonlossofcontrol 3.6 (1460975) 21605249 - -

Exchangeloss (701360) 1060381 (627875) 1111637

_______________ _______________ _______________ _______________

Profit/(loss)fromcontinuingoperations 2 358 862 6 815 341 (802 200) (7 595 114)

Incometaxcredit 4 (4764866) 877879 339946 (204900)

_______________ _______________ _______________ _______________

(Loss)/profitaftertax (2 406 003) 7 693 220 (462 254) (7 800 014)

_______________ _______________ _______________ _______________

Discontinued operations

Lossfromdiscontinuedoperations,netoftax 8.3 (111805) (640943) - -

_______________ _______________ _______________ _______________

(Loss)/profitaftertax (2 517 809) 7 052 277 (462 254) (7 800 014)

_______________ _______________ _______________ _______________

Attributable to:

Equityholders'interest (5827863) 7189315 (462 254) (7800014)

Non-controllinginterests 3310055 (137038) - -

_______________ _______________ _______________ _______________

(2 517 808) 7 052 277 (462 254) (7 800 014)

_______________ _______________ _______________ _______________

32



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Sta

tem

en

ts o

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the

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(2 5

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Othercomprehensiveincome

--

--

Itemsthatwillnotbereclassifiedtoprofitorloss

Revaluationofproperty,plantandequipment-netoftax

6(a)

3900818

4605097

--

Itemsthatareormaybereclassifiedtoprofitorloss

Availableforsalefinancialasset-netoftax

8.4

460661

(11426)

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____

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____

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Totalprofit/(loss)fortheyearnetoftax

1 8

43

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011

64

5 9

48

(1 5

94

)(7

80

0 0

14)

____

____

____

___

____

____

___

____

____

____

___

____

____

___

Attributableto:

Equityholdersoftheparent

(1466385)

11707469

(1594)

(7800014)

Non-controllinginterests

3310055

(61521)

--

____

____

____

___

____

____

___

____

____

____

___

____

____

___

1 8

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____

____

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____

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____

____

____

___

____

____

___

33



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Sta

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Rest

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Bala

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1 Jan

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20

178

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(10

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213

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Correctionoferror

--

(3001512)

--

-(3001512)

-(3001512)

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1 Jan

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20

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d8

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Lossfortheperiod

--

--

(5827863)

(5827863)

3310055

(2517808)


--

3361447

460661

-3822108

539371

4361479

Transfer(from)/toRevenueReserves

-(1980541)

(1545536)

-3526077

--

-

Lossofcontrol

-642430

(1693737)

11426

1483656

443775

(4137464)

(3693689)

-

Dividendspaid

--

--

--

(200000)

(200000)

Issueofnewshares

20173435

(20173435)

--

--

--

-

____

____

____

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7

____

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_

34



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Sta

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Profitfortheperiod

--

--

-7189315

7189315

(137038)

7052277


--

-6231429

(11426)

-6220003

(1626333)

4593670

-

Transfer(from)/toRevenue

Reserves

--

-(104435)

-208870

104435

(104434)

-

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--

-(15894519)

718454

(15176065)

-(15176065)

-

ShareIssuetonon-controlling

inte

rest

--

--

--

-1500000

1500000

Awaitingissuefornewshares

-20173435

--

--

20173435

-20173435

____

____

____

____

____

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____

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____

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____

____

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Theopeningbalanceofthenon-distributablereservehasbeenrestatedrefertonote8.5forfurtherdetailontherestatement.

35



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Sta

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20

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03

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(10

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9)

(211

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4)

31

33

2 2

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Totallossfortheyear

--

(462254)

-(462254)


--

-460661

460661


20173435

(20173435)

--

--

____

____

____

____

____

____

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(211

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Lossfortheperiod

--

(7800014)

-(7800014)


-20173435

--

-20173435

____

____

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31

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2 2

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____

____

____

____

____

____

___

____

____

____

____

____

____

____

____

____

___

____

____

____

36



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

StatementsofcashflowsFor the year ended 31 December 2017

Group Corporation

2017 2016 2017 2016

Note US$ US$ US$ US$

CASH FLOWS FROM OPERATING ACTIVITIES

Profit/(loss)beforetax 2247057 6174398 (802200) (7595114)

-'fromcontinuingoperations 2358862 6815341 - -

-'fromdiscontinuedoperations (111805) (640943) - -

Adjustmentsfor:

-Exchangegains/(losses) 701360 (1060381) 627875 (1111637)

-Depreciationonproperty,plantandequipment

6 3770536 3979892 13104 23236

-Impairmentlosses/otherexpenses 110781 2567805 (692068) 6550433

-Amortisationofintangibleassets 542 3075 - -

-Dividendreceived - - - (651093)

-Netfinancecosts 3.4 6213780 7838002 1217935 2120615

-(Profit)/lossondisposalofplant&equipment/other

18825 397680 (949102) -

-Provisionforcreditlosses:external 11 (344276) 77315 - -

:Intercompanybalances - - - -

-Intercompanybalanceswrittenoff - - - -

-Gainonlossofcontrolofsubsidiaries 1460975 (21605249) - -

-Shareofprofit/(loss)ofassociates 8.3 984386 1634652 - -

-Fairvalueadjustmentonfinancialassetsatfairvalue

throughprofitandloss (40000) - - -

-Fairvalueadjustmentoninvestmentproperty

- 198882 - -

__________ __________ __________ _________

Operatinggain/(deficit)beforeworking capital changes

15 123 966 206 071 (584 456) (663 560)

Working capital adjustments

Decrease/(increase)ininventories (81924) 10865585 - -

Decrease/(increase)intradeandotherreceivables

1718634 (220166) (1464378) 3049084

Decreaseinfinancialassetsthroughprofitand loss

- - - -

Increase/(decrease)intradeandotherpayables

(3298178) 24459776 (309754) 1594168

__________ __________ __________ _________

Cash from operating activities 13 462 498 35 311 266 (2 358 589) 3 979 692

Taxationpaid (3072022) (541502) (156151) (55901)__________ __________ __________ _________

Netcashflowsusedinoperatingactivities

10 390 476 34 769 764 (2 514 739) 3 923 791

__________ __________ __________ _________

37



TWENTY|17


TWENTY|17

IDCZ ANNUAL REPORT

Statementsofcashflows (continued)For the year ended 31 December 2017

Group Corporation

2017 2016 2017 2016

Note US$ US$ US$ US$

INVESTING ACTIVITIES

Purchasesofproperty,plantandequipment 6 (2702805) (1863608) (31858) (5650)

Proceedsorloansfrom/toassociates 7858 2347915 - -

(Purchases)/Saleofinvestments - - 1958979 184600

(Increase)/Decreaseinnon-currentportionofland

heldforsale 302403 (433961) - -

(Increase)/Decreaseinnon-currentassetsheldforsale 5216572 (12008306) - -

(Increase)/Decreaseinliabilitiesheldforsale (2347668) 1511163 - -

Proceedsondisposalofproperty,plantandequipment 765571 161649 - 134

Proceedsoninvestmentproperty - 2150000 - -

Dividendreceived

Documents

INDEX TO FINANCIAL STATEMENTS - IDC€¦ · *Jealous Paul Muchineripi (Dr) appointed as non-executive director on 12 February 2018 * Michael Shorayi Charamba appointed as non-executive

INDEX TO FINANCIAL STATEMENTS - IDC€¦ · Jealous Paul Muchineripi (Dr) appointed as non-executive director on 12 February 2018 Michael Shorayi Charamba appointed as non-executive