Annual Review 08-09 - Eastern Cape Development Corporation

EASTERN CAPE DEVELOPMENT CORPORATION 

Annual Review 

2008/09 

Published by: 

Eastern Cape Development Corporation 

Ocean Terrace Park, Moore Street 

Quigney, East London 

PO Box 11197 

Southernwood 

5213 

South Africa 

© Eastern Cape Development Corporation, 

2009 

Enquiries: 

Marketing Department 


Telephone: +27 (0) 43 704 5600 

Fax: +27 (0) 43 704 5700 

info@ecdc.co.za 

www.ecdc.co.za 

Johnathon Philander is the Hatchery Manager at Espadon Marine in East London 

where fish is farmed for consumption in top-end restaurants in Gauteng and Cape 

Town. As the business grows with the assistance of the Eastern Cape Development 

Corporation, clients will include restaurant chains and supermarket suppliers, with 

30% of production earmarked for export. 

ECDC is to be positioned in the minds of its shareholders, stakeholders, and markets 

alike as a visionary steward of development assets within the Eastern Cape. 

As such, ECDC is the entity that is able to bring ideas to life, to assist in developing 

“an ocean of opportunities” and to do so across a broad range of sectors, 

disciplines, and areas within the province.

EASTERN CAPE DEVELOPMENT CORPORATION | ANNUAL REVIEW 

Contents 

6 | Foreword by the Chairperson of the board 

10 | Introduction and highlights by the Chief Executive Officer 

14 | Executive management 

Share their thoughts on development in 2008/09 

18 | Investing resources: 

A review of the Development Investment Unit 

26 | Creating platforms: 

A review of the Development Properties Unit 

34 | Channels of development: 

A review of the Development Services Unit 

52 | Board of directors 

Background and previous experience 

57 | Financial reports and Annual Financial Statements 

59 | Auditor-General’s report 

62 | Audit Committee’s report 

64 | Directors’ report 

| Consolidated Annual Financial Statements 

68 | Balance sheet 

69 | Income statement 

70 | Statement of changes in equity 

74 | Cash flow statement 

75 | Accounting policies 

83 | Notes to the consolidated Annual Financial Statements 

107 | Supplementary information 

1


Eastern Cape Development Corporation is the 

visionary steward of development assets in the 

Eastern Cape. Our mandate is to identify and 

implement sustainable economic opportunities that 

will transform the currently underdeveloped economic 

landscape of the province by reducing unemployment, 

poverty and historic inequalities. This we achieve by 

providing value-adding services to developmental 

initiatives facilitated by local or foreign investments 

in the private sector. 

2 

The Difference ECDC 

ECDC lends a 

helping hand 

Over the last year, ECDC has assisted various projects in the Eastern Cape, with business 

planning and set-up, loans, or simply by sharing our solid advice and expertise. 

In this Annual Review 2008/09 we feature a photographic selection of a small number of these 

projects to demonstrate the difference ECDC is making in our province, the 

Eastern Cape: 

• aquaculture programmes such as Amalinda Fish Farm, where Koi fish are being grown for 

the local and international ornamental fish wholesale market, and Espadon Marine, where 

marine fish for consumption are being commercialised, are breaking new ground in South 

African fish-farming practices (see pages 9 and 32) 

• Mitrock Community outside Queenstown are working in partnership to produce hazelnuts for 

Italian international chocolate company Ferrero (see page 38) 

• the set-up of Mathomo Protective Clothing manufacturer with a staff of 700 in Dimbaza 

(see page 24) 

• Nozulu Civils, a construction company, growing its business nationwide (see page 51) 

• the growth of Niqua Juice, a juice-bottling factory (see page 17) 

• the phenomenon of the turnaround of the pineapple industry outside Port Alfred, including 

the growth of Summerpride pineapple products business (see page 55). 

The map opposite indicates the extent to which Eastern Cape Development Corporation is 

lending a hand in the Eastern Cape: the table alongside details disbursed ECDC loans throughout 

the province in 2008/09. People are coming together in the Eastern Cape to form part of a larger 

and exciting momentum that is providing skills, creating projects and businesses and benefiting 

the local economy. We are proud to be part of this.


zimbabwe 

botswana 

mozambique 

Namibia 

Johannesburg 

Bloemfontein 

Durban 

eastern cape 

Bhisho 

East London 

Cape Town 

Port Elizabeth 

south africa 

Aliwal North 

Mount Frere 

Middelburg 

Queenstown 

Mthatha 

Lusikisiki 

Port St Johns 

Graaff-Reinet 

Cradock 

Butterworth 

Willowmore 

Aberdeen 

EASTERN CAPE 

King Williams Town 

Bhisho 

East London 

Humansdorp 

Uitenhage 

Grahamstown 

Nelson Mandela Bay 

Port Elizabeth 

Port Alfred 

Jeffreys Bay 

Disbursed loans 

Total disbursed 

amount 2008/09 

Imbewu Micro loans 294 R 11,000,000 

Nexus Trade loans 341 R 73,000,000 

Termcap loans 65 R 77,000,000 

Workflow contractor loans 105 R 141,000,000 

839 R 312,000,000 

3

“My teacher says that the grass is not 

greener on the other side. 

Well, my Dad reckons that’s not true. 

He says there’s a secret world not far 

away with beautiful mountains and 

forests and rivers that shine... 

There are people there who work hard 

everyday to build this magical home. 

And there are giants and castles and 

kings, where the sunrise is like a 

promise. 

My Dad says he’ll take us there 

because it is greener on the other 

side!” 

Make it yours. 

The Eastern Cape 

5 


EC “Make it Yours” commercial 

captures the heart of province 

Peter Gird and Jason Xenopoulos, Producers, Media 2.0 & SMG Africa 

A young boy’s narrative of a secret, magical home is the backdrop of the television commercial that flighted 

on various DSTV and SABC channels from April to June 09. Combining the province’s unique natural 

landscapes, family life and business, the commercial tells a story of an area with diverse and matchless 

offerings. 

The advert was designed to contrast the busy city life, a key characteristic of metropolitan areas in South 

Africa, with the serenity of the Eastern Cape. Shots of Hole-in-the-Wall, Magwa Falls (both on the Wild 

Coast) and whales in Nelson Mandela Bay make the distinct impression that ‘the grass is greener on the 

other side’. ECDC commissioned the advert on behalf of the Eastern Cape Office of the Premier to ‘develop 

a new, bold TV advert aimed at creating national awareness of the Eastern Cape as a lifestyle destination’. 

The advert captivated some of the Eastern Cape’s most influential organisations including AsgiSA EC 

(provincial government’s special purpose vehicle for rural development) and Eastern Cape Tourism Board 

(the provincial tourism authority). As a pledge of support for the advert, both institutions provided funding 

for broadcast and print support of the advert.


Foreword 

by the Chairperson 

of the board 

The newly appointed Board is now 

in place and is working diligently to 

prepare the canvas for a new and fresh 

expression of ECDC. To begin with, it 

gives us great satisfaction to announce 

that once again the Corporation received 

a clean financial audit, which bears 

testimony to the integrity employed in 

the management of the organisation’s 

resources. Due to the economic 

downturn and commercial lenders 

closing shop, ECDC provided a catalytic 

role of supporting businesses especially 

those that were vulnerable. Most of 

these were concentrated in the former 

homelands. The impact of that work 

cannot be totally quantified now, but 

it will be felt through jobs that were 

created and by families that were 

indirectly supported. 

Confronted by the reality of an economic downturn and its 

effect on the economy of South Africa and the Eastern 

Cape, the Eastern Cape Development Corporation emerges from 

the review period poised for a long-term growth phase as it 

delivers its mandate to develop the economic landscape of the 

province. This it will achieve by exercising its core competencies 

of development finance, the development and management 

of properties, and development services which involve the 

disciplines of investment and trade promotion, enterprise 

development, and spatial and rural project development. 

The Corporation is not unfamiliar with turbulence, and is 

increasingly adept at holding its ground in uncertain political 

or adverse economic circumstances. The year 2008/09 has 

presented both, and once again the Corporation remains resolute 

and determined to continue its course to develop the province 

in line with the Provincial Growth and Development Plan’s core 

goals of eradicating poverty, developing rural economies and 

improving food security, and diversifying manufacturing activity in 

the province. 

The previous review period saw the rigorous restructuring 

and establishment of sound governance principles within the 

organisation to focus resources and co-ordinate efforts for the 

provision of a more synergistic developmental value-add to the 

various initiatives in the province. The 2008/09 year brought 

the continuation of the Corporation’s turnaround as its base of 

strategic trajectory built purposefully on the foundation laid in 

2007/08 by refining the internal processes within each of its three 

core units, namely Development Finance, Development Properties 

and Development Services. These refined efficiencies have 

resulted in an organisation that is well positioned for growth and 

expansion in the coming year and beyond. 

The R312 million disbursed to business 

initiatives during the year constituted 

a 112% outperformance on the 

budgeted target of R147 million. The 

Corporation’s 630% growth in its contract finance 

portfolio not only supported critical short term 

poverty alleviation projects such as the Department 

of Education’s school nutrition scheme and the 

Department of Health’s food parcel distribution to 

those in abject poverty, but strategically enabled 

economic growth in line with the Provincial Growth 

and Development Plan’s objectives to develop the 

province. These projects saw the ECDC facilitating 

the building of new roads, completion of government 

construction projects, development of infrastructure 

and the development of new enterprises. 

R312 million 

112% 

630% 

253% 

6


Statement BY THE CHAIRPERSON OF THE BOARD 

Government’s increased spending on infrastructure development saw the Workflow construction contractor’s loan exceeding 

its targets by 253%. Development Properties embarked on a drive to redeem years of mismanagement of ECDC properties, 

which resulted in the tracking of debtors and the efficient collection of outstanding rentals owed to ECDC. The end result was 

the recovery of R18 million in old debt and an updated database of tenants who are servicing their lease agreements. 

Development Services demonstrated the heart and mind 

of the Corporation when they reached out to the pineapple 

industry in Port Alfred, Peddie, and Bathurst, and initiated a 

truly sustainable, innovative and developmental overhaul of 

the industry that has been suffering annual losses for nearly 

a decade. We anticipate the preservation of existing jobs, and 

the creation of new ones, which will alleviate the poverty that 

has been experienced in the Ndlambe area as a result of the 

sector’s stagnation in recent years. 

Achievements such as this, which the reader will no doubt 

learn of in this Review, inspire hope and courage as we venture 

out into the unknown waters of another year. The Board 

remains optimistic about the Corporation’s future and we are 

committed to seeing the economic landscape of the province 

change for the better of all who call this magnificent 

province “home”. 

In closing, I wish to thank the Honorable Mcebisi Jonas, 

MEC for Economic Development, Mxolisi Matshamba, 

CEO of the Corporation, the ECDC Board, and indeed 

the executive managers and their team for their 

continued faith and support, and look forward to 

the feats, challenges and expansion that await the 

organisation as it sets out on a mission to further 

enhance its presence and developmental value-add 

in the province of the Eastern Cape. 

Patrick Ncita, Production Supervisor at 

Summerpride Foods in East London – one of many 

growing businesses assisted by ECDC and part of 

the pineapple industry turnaround in the 

Eastern Cape. 

Summerpride Foods is owned by its growers, staff 

and agents and has a consistent supply of 115,000 

tons of fruit supplied by its own 38 EUREPGAP 

(Good Agricultural Production) accredited growers. 

Mr Bhekokuhle Sibiya 

Chairperson 


Loans disbursed to business initiatives 

Outperformance on the budgeted target of R147 million 

The Corporation’s growth in its contract finance portfolio 

Percentage exceeded by Workflow Construction Contractor’s Loan 

7

9 


Fishing where the 

fish are 

Johnathan Philander, Hatchery Manager, 

Espadon Marine 

As Hatchery Manager at Espadon Marine, Philander and his 

colleagues farm marine fish, with Cob (Kabeljou) being the species 

they have commercialised. Cape Salmon (Geelbek), Spotted Grunter 

and Yellowtail are still at the pilot commercial and research and 

development stages. 

Espadon Marine supplies top-end restaurants in Gauteng and Cape 

Town and, as production grows, they are focusing on new clients such 

as larger restaurant chains and supermarkets – and 30% of production 

has been earmarked for export to the European Union (France and 

Spain) and the United Kingdom. 

ECDC was instrumental in assisting Espadon Marine in relocating 

from the Western to the Eastern Cape. “The climate in the Eastern 

Cape is just about perfect for the farming of marine fish,” says 

Philander and Guy Masson, Managing Director, “ and ECDC assisted 

us directly with permitting and other authority approvals necessary.”


Introduction and highlights 

by the Chief Executive 

Officer 

The strategic intent mapped out by executive 

management for the year 2008/09 was twofold. 

First, to improve our delivery on the mandated 

mission of the Corporation, which is to plan, finance, 

co-ordinate, market, promote and implement the 

development of the Eastern Cape and its people 

in the fields of industry, commerce, agriculture, 

transport and finance. This we have pursued in 

line with the core strategic goals of the Provincial 

Growth and Development Plan and broader national 

and local policy interventions designed to deliver 

economic growth, creation of employment, and 

poverty eradication. 

In channelling our energies and resources into 

the accomplishment of this mission, we have also 

purposed to refine our internal processes and 

efficiencies to eliminate those elements of our 

operations that were encumbering our sustainable 

success as an organisation. Hence we summarise 

the period as one of internal efficiency for 

sustainable external delivery, and we are pleased 

to report on a year that will position us accordingly 

for expansive growth in the next five years, starting 

2009. 

Begining in July 2007 with the loss of confidence by investors in the value 

of securitised mortgages in the United States, the global economic crisis 

resulted in a liquidity emergency that prompted a substantial injection of 

capital into financial markets by the United States Federal Reserve, Bank of 

England and the European Central Bank. The TED (T-bill and Eurodollar) spread, 

an indicator of perceived credit risk in the general economy, spiked up in 

July 2007, remained volatile for a year, then spiked even higher in September 

2008, reaching a record 4.65% on October 10, 2008. In September 2008, the 

crisis deepened, as stock markets worldwide crashed and entered a period 

of high volatility, and a considerable number of banks, mortgage lenders and 

insurance companies failed in the following weeks. 

10


Statement BY THE Chief Executive Officer 

Economic landscape 

The global economic crisis has had a notable impact on the economic wellbeing of South Africa, and indeed 

the province. As a result, growth estimates for South African gross domestic product have been revised down 

to 3.5% per annum, which falls short of the PGDP target to maintain growth of 5-8%. While the province’s 

growth rate has been marginally higher than the national average in recent years, it is unlikely to fall within this 

range. Particular pressure has been placed on our automotive and manufacturing sectors as companies have 

been forced to slash overhead costs in order to survive. The other contributors to this trend have been inflated 

fuel prices, volatile interest rates, the electricity crisis, and reduced customer orders. Ultimately, the disposable 

income of households, particularly the 4.3 million poorer households in the province, has decreased while food 

prices have increased dramatically in the same time period. The medium-term trickledown effect of this trend 

is likely to manifest in the fiscus as depleted financial resources impact negatively on the government 

funding required by the Corporation to deliver on its developmental mandate. 

The emphasis of PGDP, being value addition and beneficiation to existing sectors of the economy, 

is strategically relevant when one considers the negative impact of the economic downturn on 

household income. Food security refers to the availability of food even in the midst of financial poverty. 

For this reason the agricultural production and agro-processing industries have received specific 

emphasis in the review period (as evidenced in the Ndlambe pineapple industry turnaround and the 

berry corridor project). Another important focus is the renewable energy sector, converting agroprocessing 

waste into energy. 

ECDC faces the task of creating sustainable jobs and alleviating poverty in the province, regardless 

of the global economic situation. The sectors most likely to deliver these returns, and hence those 

that will receive our most urgent attention and investment, are the agriculture and agro-processing, 

automotive, tourism and general manufacturing sectors. Bringing more rural people into the 

formal economy remains an imperative, and we also remain determined to facilitate Foreign Direct 

Investment (FDI) into the province. There are, however, tremendous prospects in emerging sectors 

such as Business Process Outsourcing and Off-shoring (BPO&O) and ICT, which the ECDC, together 

with its strategic partners will aggressively pursue. Our experience in the period under review has 

been that it pays well to look after existing companies as the potential for expansion abounds. 

While the Corporation has been, and will be, presented with formidable challenges to its ongoing 

efforts to ensure the economic upliftment of Eastern Cape communities, our steadfast response 

to these circumstances has been to consistently employ a fine balance of courage and financial 

prudence as we persist in our objective to develop the province and to complete the Corporation’s 

three year turnaround process. Despite glaring internal challenges surrounding the changes at Board 

level, as well as those external challenges we have discussed, we are pleased to present another 

impressive set of financial results this year despite the economic crisis, and stand by our rationale 

as we advance into the next financial year. 

11



Refined internal efficiency 

In the previous review period, time was spent in the benchmarking and analysis of the Corporation and its performance 

against its mandate. The findings of that analysis were that we had not reached the critical mass required to secure sustainable 

operations through the disbursement of development investments, the provision of development properties, and the provision 

of development support services. We then embarked on a structural revision that saw a solid executive management force 

being restored to these three areas. 

The focus of the 2008/09 review period was to improve operational effectiveness, enhance record keeping and reporting 

processes, and to maintain a more rigid control of what was happening at the coalface of the Corporation’s engagement with its 

clients, and operate our portfolio of services profitably by 2010. 

The marketing and communication campaign for ECDC business finance products, together with the operational efficiency 

and follow through employed by the Development Investment Unit, saw overall outperformance with respect to its stated 

performance plan for the review period. The unit offers short- and long-term business finance solutions to enterprises within the 

province that present developmental value. 

During the year of review, the targeted R66 million 

in term loan disbursements was outperformed by 

17% as it disbursed R77 million, while the short-term 

Term loan disbursements 2008/09 

finance disbursement goal of R62.5 million (comprised 

Target 

Disbursements 

achieved 

R66 million 

R77 million 

of R10 million in trade finance monies, R40 million in 

construction loans, and R12.5 million in micro-finance) 

was exceeded by 630% in the case of trade finance 

disbursements, 253% with regard to construction 

loans, and underperformance in the case of microfinance 

of -12%. 

+17% 

Short-term finance disbursements 2008/09 

Target: 

Trade finance R10 million 

Construction loans R40 million 

Micro-finance R12,5 million 

Achieved: 

Trade finance R73 million Exceeded by 630% 

Construction loans R141 million Exceeded by 253% 

Micro-finance R11 million Underperformed by -12% 

Development Properties’ rental collection 

2008/09 R42,3 million 

Escalation of 23% from 

previous year 

+23% 

The extensive drive to eliminate bottlenecks and 

inefficiencies within the unit, particularly in the case 

of short-term finance, resulted in the efficient delivery 

of finance to small, medium and micro enterprises 

requiring finance to deliver food parcels to school 

learners in marginalised areas, as well as the poverty 

stricken in the poorest regions of our province. 

The vigorous efforts of the Development Property Unit 

to recover old outstanding rentals, and to re-order 

its database of tenants with accurate information 

resulted in the recovery of R12 million, and the 

collection of R42.3 million which constituted a 23% 

escalation from the previous year. 

The refined efficiencies of the various units brought 

about a greater level of co-ordination amongst them. 

The Development Services Unit led the initiative to 

turn around the pineapple industry in the Ndlambe 

area. The project, led by the team from Project 

Development (a component of our Development 

Services Unit), reflected the synergistic value-add of 

the Corporation as we facilitated loan financing deals 

as well as providing the initiative with development 

and support services. 

The intervention of the organisation in the industry has 

literally breathed hope into a situation weighed down 

by years of economic and social losses. 

12



The recent review of the Provincial Growth and Development Plan’s (PGDP) core strategic goals re-iterates the role of 

the Corporation in the implementation of the reformative strategies formulated by government. The strengthening of the 

implementation of PGDP can only be delivered as developmental entities rally together behind its objectives. ECDC is resolute 

that it will continue to champion these objectives within the province by stewarding developmental resources for maximised 

developmental results. 

The Corporation engaged deliberately in the fulfilment of the stated PGDP objectives during the year of review. In this 

regard, the projects featured in the year 2008/09 were as follows: 

• Department of Education’s school nutrition scheme: ECDC’s critical role, 

• Department of Health’s food parcel distributions: Bridging finance to SMMEs, 

• Integrated Emerging Contractors Development Model: Developmental impact and improved government delivery, 

• ECDC/CIPRO registration synergy: Eastern Cape outperforms the rest, 

• Project scoping in Lusikisiki area: Industrial diversification for sustainable growth, 

• Independent Standards Organisation: Total quality management for SMMEs, 

• Eastern Cape from Above: Photographic exhibition of the province displayed in Europe, 

• Pineapple turnaround in the Ndlambe area: From primary production to beneficiation, 

• The SMME Conference and Business Expo: Aligning efforts to develop SMMEs in the province, 

• Pure Ocean Aquaculture and Espadon fin-fish farms: Pioneering out-of-sea production in the province, 

• Amalinda Fish Farm: Project administration and development, 

• Skills development within the province’s creative industries: World-class craft for world markets, 

• Internal alignment and improved efficiency of the Development Investment, Development Properties 

and Development Services Units: Preparing 

for growth and expansion. 

Not without our stakeholders 

The nature of our accomplishments that have been 

achieved during the review period are such that we 

would not be able to review the various milestones 

and project highlights without the continued valueadd 

of our external partnerships and relationships. 

Constructive engagements with clients and chambers 

were established and improved during the period 

to determine areas of common interest and to 

formulate strategies to overcome challenges faced 

by these players. Close working relationships were 

maintained with the Companies and Intellectual 

Property Registration Office (CIPRO), the two Industrial 

Development Zones in the province, the Development 

Bank of South Africa, the Industrial Development 

Corporation, the municipalities and government 

departments in the province. 

Johnathan Philander, Hatchery Manager, 

tends to the tanks at Espadon Marine in the 

East London Industrial Development Zone 

– where marine fish are being farmed for 

local and international consumption. 

Mr Mxolisi D Matshamba 

Chief Executive Officer 


13


Executive management 

share their thoughts 

on development in 2008/09 

Development Investments 

• Stated term loan disbursements target of R66 million – outperformed by 17% 

• Short-term finance disbursement goal of R62.5 million – trade finance disbursements exceeded by 630% 

construction loans exceeded by 253% 

Development Properties 

• R515 million property portfolio 

• R13 million in rental debt recovered 

Development Services 

• Turnaround of the pineapple industry in the Ndlambe area (Port Alfred, Bathurst and Peddie) 

• Three new aquaculture investments in the Eastern Cape 

• Training of nearly 186 enterprises in ISO 22000/HACCP (Hazard Analysis and Critical Control Points), quality 

management systems (ISO 9001), or OHSAS (Occupational Health and Safety Advisory Services), as well as 

training of 133 crafters and 62 construction contractors 

• Hosting of the four day SMME Summit, which explored solutions to empower the province through enterprise 

• “Eastern Cape From Above” exhibition and the Eastern Cape 

“Make it yours” television commercial 

Msulwa Daca 

Chief Financial Officer 

A chartered accountant by profession, Daca brings 

a wealth of experience after successful years at 

leading professional services firm KPMG and the 

South African Revenue Services. Before joining 

ECDC, he was chief director of accounting support 

services at National Treasury in Pretoria. 

“ECDC’s core business is to assist 

businesses to develop and grow, from 

start-ups to larger businesses seeking 

export opportunities. We provide an 

appropriate governance platform 

to allow ECDC to efficiently and 

economically deliver on its mandate.” 

Luyanda Tsipa 

Development Properties 

With 10 years’ experience in immovable asset management, 

Tsipa is a B Juris graduate of the University of Transkei, whose 

experience includes working in the Land Claims Commission and 

the National Department of Public Works. Her roles at this former 

employer include deputy director of asset management and 

leaseholds, director of prestige property management and chief 

director at the Johannesburg regional office. 

“Development Properties focuses on the 

conversion of non-income-generating properties 

into a strategically aligned property portfolio that 

supports and promotes the mandate of ECDC. 

I was born and bred in the Eastern Cape and its 

economic development means the upliftment of a 

people who shaped me.” 

14


Executive management 

Chris Bierman 


Raised in Johannesburg, Bierman is a chartered accountant who 

has worked with the IDC, as well as lectured in Management 

Accounting at the University of the Witwatersrand. As a former 

business owner, he has extensive experience in large enterprises 

across various sectors in South Africa and Australia. In his role 

as corporate finance dealmaker, Chris has been instrumental 

in facilitating and structuring a large number of black economic 

empowerment (BEE) deals. He has also authored a book on BEE 

on the raising of finance for small to medium size businesses. 

Noludwe Ncokazi 

Development Services 

Ncokazi graduated with a Bachelor of Commerce 

from the University of Western Cape in 1994. Since 

then, she has completed her Honours degree in 

economics and is currently working on her Masters 

degree. Her roles have spanned four of South 

Africa’s provinces as educator, financial manager, 

chief executive officer, executive consultant 

and general manager in the public and private 

sectors. She joined ECDC after four years with the 

Buffalo City Municipality as its general manager 

for economic development, tourism and rural 

development. 

“Development Finance is about the promotion 

of entrepreneurship through the funding of 

technically sound and financially sustainable 

businesses and projects. It targets businesses and 

projects in high-poverty nodes where multiple 

socio-economic objectives can be achieved. 

It also provides low-income individuals and 

communities with investment opportunities in 

private sector partnerships that address their 

needs, like job creation, affordable housing and 

the launching of sustainable businesses.” 

“Development Services accelerates 

the development impact of projects, 

unlocks the latent development 

potential in previously disadvantaged 

areas and actively promotes 

entrepreneurship, and so strengthens 

the position of the Eastern Cape as a 

premier investment destination. ECDC 

is the critical link between government 

and the private sector.” 

15

17 


Juice the juice 

Eunice Mahote, Labelling and Staff Supervisor, 

Niqua Juice, Jeffrey’s Bay 

Niqua Juice in Jeffrey’s Bay bottles fruit juices and other beverages for clients 

such as supermarket retail giants Pick ‘n Pay, Shoprite/Checkers, Spar and 

OK Foods, as well as petrol station forecourt stores and corner grocery stores. 

Previous production focus was on the Eastern Cape alone, but being unable to 

produce enough juice stock for expansion held Niqua Juice back. 

Financing machinery is just one way that ECDC was able to assist the business 

to grow into other provinces, with export possibilities in the near future now also 

within range. “With ECDC’s involvement, it will enable us to focus on more 

products, expansion to other regions as well as bettering our service,” says Hein 

van Rensburg, Director.


Investing resources: 

A review of the 

Development Investment Unit 

Successes in the realm of 

development investments 

As the mandated steward of provincial 

development capital, ECDC endeavours to 

identify projects that will have, or stimulate, 

maximum socio-economic impact within 

the Eastern Cape. The unit that specifically 

manages the applications, processing, risk 

and disbursement of these monies (in the 

form of loan capital) is the Development 

Investment Unit, headed by Chris Bierman, 

CA (SA), who is proud to report on the 

successes of the Corporation in the realm of 

development investments within the review 

period. 

The statistical breakdown of 

loaned monies indicates that: 

• 85% was disbursed to companies turning over 

less than R500,000 per annum. 

• 60% was invested into rural projects, 

indicative of the Corporation’s renewed focus 

on rural development initiatives. 

• 45% of disbursed monies went to female 

applicants. 

• 22% of loans went to projects initiated by 

youth. 

• Contractors received R141 million and R73 

million was disbursed via the ECDC Nexus 

trade product to supply short term finance to 

chain contractors. 

• The micro-finance segment saw an 

R11 million loan amount, granted via the 

ECDC Imbewu and PowerPlus loans. 

• The Corporation maintains a balanced portfolio of shortand 

long-term development investments. 

• The launch of the new “ECDC Business Finance” products 

was successful after a marketing and advertising burst 

campaign was implemented to boost sales and increase 

our markets’ awareness of the ECDC short- and long-term 

development investments offering. 

• We disbursed R312 million to developmental initiatives, 

of which 25% constituted long-term, and 75% short-term 

loans. 

R312 million 

Development initiatives 

25% long-term 

75% short-term loans 

• Impairment (debt at risk of non-repayment) of total 

disbursements during the period under review amounted 

to R5 million, which constitutes a mere 1.6%. This can 

be celebrated as a major feat when held in contrast to 

the fact that during the period between 2001 and 2007, 

impairment estimates were in the region of 66%. 

• An increased focus on structured finance has resulted 

in good quality equity investments on the part of the 

organisation. 

• The completion of the Corporation’s Development 

Investment Policy has meant that the Corporation 

now employs a standard guideline with respect to risk 

management and the awarding of loans. 

18


Development investment 

Refined efficiencies in the 

Development Investment Unit 

Emerging contractors 

Emerging finance excellence 

The Integrated Emerging Contractors Development 

Model, an initiative to improve the skills of emerging 

construction contractors contracted to both the 

public and private sectors, was conceptualised 

and implemented during the 2008/09 year in a 

collaborative partnership between ECDC, the Council 

for Scientific and Industrial Research, and The 

University of the Witwatersrand. 

The programme, stewarded by our Development 

Services Unit, created value for the Corporation’s 

management of loaned monies by training contractors 

in cost-management and technical operation issues. 

By capacitating contractors to manage their contracts 

appropriately, the Corporation experienced an 

improved loan repayment rate, and decreased default 

on loaned monies as a result. Because of this, the 

volume of loans granted increased, and a greater 

developmental effect was leveraged using ECDC 

resources. 

In addition to this, the Enterprise Development 

Services team, a component of Development Services, 

assisted the Development Investment Unit with the 

initial development and implementation of its aftercare 

facility, which formed a central focus of the unit during 

the review period. 

In reflecting on the above cases, ECDC takes great 

delight in demonstrating its increased ability to create 

synergy and cross pollination between its various 

units. 

Drastically reduced turnaround times 

One of the challenges faced by ECDC in the review period was the 

perception of the Corporation in the mind of its target markets, which 

was typically one of ‘delayed turnarounds and inefficiency’. 

Having identified this challenge, the Corporation initiated a 

flagship-status project, ‘Address Turnaround Times’, to address the 

inefficiencies that had become incumbent to its development finance 

offering. 

The project targeted the improvement of our customer feedback 

process, the elimination of internal red tape and inefficiencies related 

to loan authorisations, to see ECDC as an organisation made up of 

units that depended on each other for proper functioning. 

One of the outcomes of the project was the need for a fully 

automated loan application and approval process, which we will 

endeavour to implement during the year following review. 

Negative feedback converted to positive results 

Having completed the project, the Development Investments 

team drastically reduced the turnaround time for an application 

for contractor finance (the Nexus trade and Workflow products) 

to less than 48 hours from the client’s application. This increased 

efficiency has led to the Corporation’s loan book reflecting short term 

disbursements of more than R50 million at any given point in time. 

The majority of complaints received from clients in the past related 

most strongly to short-term, micro-finance applications (loans less 

than R500,000). As a result, the Corporation never managed to gain a 

firm foothold in what the Development Investment Unit refers to as 

“the magic gap” of the R250,000 to R300,000 loan range, and hence 

was not able to have the developmental impact it desired. This began 

to change during the year as satisfied clients gave ‘word-of-mouth’ 

referrals to their colleagues and friends, who were impressed with 

our efficient turnaround times and our new approach to aftercare 

and support, which provided entrepreneurs in this category a swift 

and well defined solution to their developmental ideas. 

ECDC reviewed and revised its portfolio 

of finance products 

• Adapted commercial designs/layouts for 

short-term products with specifications. 

• Long-term products with specifications. 

• Disclaimer that quoted rates and expenses 

pertain to the review period only. 

19



To achieve this, the Development Investment Unit ensured that: 

• the internal investment reporting process was streamlined and consolidated for a more diverse audience; 

• the financial model reflected a standardised approach to applications across the various loan categories; 

• the application documentation was reworked such that the applicant’s signature on the document constitutes a legally 

binding agreement in the event that their application is successful. This has eliminated the need for the ECDC agents to 

venture into remote areas of the province to source the signature of rural applicants whose applications were approved; 

• human capacity was bolstered to deal with micro-finance applications efficiently; six new interns were hired during the 

review period (sourced from the Sectoral Education and Training Authority), which has capacitated the unit to reduce 

complaints and increase client satisfaction. 

In addressing the issues and challenges we faced, the Corporation has begun to build a foundation for further growth in the 

realm of Development Investments. The improved performance of small loans in the Corporation has resulted in an internal shift 

in the perceptions of micro-finance. Once viewed by some as a ‘mickey mouse’ development finance area, these same ECDC 

members entertain a healthy respect for this loan category as a tool with which significant developmental impact can be made 

in the province. 

Some new investments into 

the Eastern Cape 

The Eastern Cape expands its tents 

The Eastern Cape has attracted the investment of 

Bargain Tents, a national manufacturer of marquee 

tents and plastic chairs and tables recognised as the 

largest of its kind in South Africa. We as a Corporation 

are pleased to report our central role in the facilitation 

of the investment process, which led ultimately to this 

operation becoming a new economic contributor in 

the province. 

ECDC offered the investor an ECDC Termcap loan 

of R18 million for new equipment to expand its 

manufacturing capacity and to cover the cost of its 

relocation from KwaZulu-Natal. Its investment into the 

area brings a new source of employment and a wider 

platform for economic activity in the province. The 

relocation of the manufacturer into the Eastern Cape 

was imminent at the time of writing. 

Pioneering a new purpose for pineapples 

The Corporation demonstrated its synergistic offering 

during the review period when its Development 

Investment and Development Services teams 

descended on the ailing pineapple industry in Port 

Alfred to initiate its turnaround after the demand for 

the fruit dipped, causing an economic slump. 

Having conducted the relevant project-scoping 

exercises to ascertain the viability of various 

pineapple-based products, ECDC closed a broadbased 

black economic empowerment deal to grant 

a R28 million TERMcap facility to Ndlambe Natural 

Industries Products (NNIP) (Pty) Ltd. The loan, made on 

the strength of the research findings, provided NNIP 

with the financial muscle to purchase a controlling 

stake in Summerpride Foods, an established fruit 

processing plant in East London which will soon 

be relocated to Bathurst in an effort to consolidate 

agricultural and industrial processes in the sector. 

This is a critical success factor of the project. 

20 

Flexing its muscles of synergy, ECDC was able to offer 

Bargain Tents an investment solution that packaged a 

lease agreement for it to operate from one of ECDC’s 

prime industrial facilities in Dimbaza, an established 

industrial area near King William’s Town. 

NNIP (Pty) Ltd constitutes a rural partnership between the 

following entities: 

• ECDC holds a 33.5% stake; 

• the Pineapple Growers Association (represented by Cayenne 

Pineapple Growers (Pty) Ltd, which holds 40.5%); and 

• the Eastern Cape Pineapple Industry Workers’ Trust, which holds 

a 26% share in the company, rendering the project one of true 

developmental value.



The Cob Creek Wine Estate 

A blend of shiraz red, chardonnay white 

and golfing greens 

ECDC client, Cob Creek Wine Estate Pty (Ltd), is on 

track to launch what will be the first wine estate in 

the Eastern Cape, having confirmed its vine-growing 

viability through scientific testing and research. 

Situated on a 254ha farm straddling the Kabeljouws 

River on the outskirts of Jeffrey’s Bay, the estate enjoys 

breathtaking views of the bay and the Kabeljouws 

Lagoon. Boasting a three-star, seven-bedroom guest 

house, a studio with capacity to accommodate 

100 people, and staff and management housing, 

the owners envisage that the land will become the 

premises for a five-star hotel, wine cellar and golfing 

estate. 

The planting of trellised vineyards on the Cob 

Creek Estate took place in 2008, when it was 

awarded an ECDC TERMcap loan of R3.2 million. The 

developmental aim of the project is to establish a 

second wine route in South Africa which will stimulate 

an exponential increase in the demand for wine by 

tourists seeking a unique Eastern Cape wine-tasting 

experience. To this end the owners of Cob Creek are 

encouraging other local farmers to plant vines so as 

to create the critical mass of wine production that 

would sustain such an initiative. 

ECDC envisages that this initiative (a combination of 

wine estate, tourist accommodation, golfing estate 

and conferencing) will have a notable developmental 

impact on the Jeffrey’s Bay area, creating 70 direct 

jobs, of which 30 will be permanent and 40 seasonal. 

Export Eastern Cape through 

organic growth 

The 2008/09 year saw Mzondo Technologies, an organic juicer in Port 

Alfred being granted financial assistance through the ECDC Nexus 

trade contractor’s loan. 

The Corporation’s Development Investment team, together with the 

Trade Promotion team, provided an integrated financial assistance 

and trade-promotion solution to the juicer, which enabled them to 

expand operations to become the largest organic juice exporter in 

the Eastern Cape, and one of the largest in South Africa. 

Trellising has been completed on Cob Creek 

Estate’s 32 hectares, with around 22 000 poles 

and 500km of wire in place. Additional game 

fencing has been added to keep the antelope 

from helping themselves! Jonny Witbooi and 

Jaco Schoeman (above) check the nursery 

vines for viruses. 

The first Cob Creek wines will be available in 

November 2010, under a second label, as the 

volume will not warrant the full construction 

of the winery at this time. A restaurant and 

tasting room will open in November 2009 to 

create awareness of the farm and increase 

wine appreciation in the area. 

21




yielding fruitful returns 

Sparring with the best of them 

Young entrepreneurs in Lusikisiki 

In 2005, the Corporation granted the owners of 

Lusikisiki Spar a financial loan to fund the growth and 

expansion of their business. 

Three years later, Lusikisiki Spar has developed a solid 

customer base and has experienced rapid expansion. 

Both partners in the business are young entrepreneurs 

who have won awards from Spar, and are esteemed 

by their community as up-and-coming leaders. 

Demonstrative of the Corporation’s commitment to 

stimulating and sustaining business initiatives in the 

rural Eastern Cape, this story provides evidence that 

young minds in the rural areas can play a significant 

role in changing the face of the Eastern Cape through 

enterprise and perseverance. 

Giving credit where it is due 

Tabile Trade’s example 

Since its inception in 2003, Tabile Trade has continued 

to grow its business while reducing its loan debt – 

which is exemplary. The fruit and vegetable retailer in 

Mthatha does business with hawking groups, large 

businesses and walk in customers from the bustling 

Mthatha centre, as well as the nearby small towns. 

ECDC is proud to acknowledge Tabile Trade as a client 

that has flourished through tough times, and one that 

has responsibly managed its debt as an asset to fuel 

the growth of its business. 

Dlatu CZ 

Paid in full 

The Corporation esteems players such as the 

company Dlatu CZ, who can be described as one of 

its ‘strong horses’: it continues to build a sustainable 

business, having already settled two ECDC loans in 

full. The company’s clean, neat and well-stocked bottle 

store in Bizana offers a full spectrum of well-known 

brands, and the customer base encompasses a broad 

range of people, excluding children under 18 years 

of age. This venture is aligned with the Corporation’s 

mandate to continue its efforts to stimulate economic 

activity and growth in rural towns like Bizana in the 

province. To achieve this, the Corporation aims to 

offer the communities in these areas an increasingly 

strategic blend of financial resources and skills 

impartation. 

The Corporation has developed valuable 

partnerships with its various government 

stakeholders to facilitate a more efficient delivery 

of projects and services in the public sector. 

In most cases, other valued partners in these 

projects include the likes of the South African 

Social Security Agency (SASSA), the Independent 

Development Trust (IDT), and AsgiSA-EC 

(the provincial champion of the Accelerated 

Shared Growth Initiative of South Africa also 

known as AsgiSA). 

Spanning across the departments of Health, 

Education, Water and Environmental Affairs, 

Agriculture, and Transport, the wide humanitarian 

impact of these partnerships has seen countless 

disempowered small, medium and micro 

enterprises with no capital and little hope rising 

up to take their place as productive entrepreneurs 


ECDC takes over school nutrition programme 

One of the developmental initiatives that benefited immediately as a 

result of the increased efficiencies of the Development Investment 

offering was the Department of Education’s project to distribute daily 

food parcels to schools in marginalised areas. 

The project, aiming to feed in excess of 1.3 million learners in 

marginalised areas, nearly came to an abrupt end when its numerous 

cash-strapped SMME suppliers (represented by the National African 

Federated Chamber of Commerce, Nafcoc) were unable to deliver 

on their obligations, and were forced to cede their contracts with the 

Department to their key suppliers. The programme would have failed 

at that point were it not for ECDC’s R40 million injection of short-term 

loan finance into these emerging SMME operations. 

The efficiently disbursed bridging finance allowed the numerous 

contracted SMMEs to deliver the right goods at the right time, at the 

right locations, thereby redeeming the scheme and rendering it a 

successful initiative after all. Where problems arose between SMMEs 

and the Department (relating to the payment of service providers by 

the Department), ECDC was able to ensure that these were resolved 

efficiently and fairly. 

The current superintendent-general of the department, Professor 

Harry Nengwenkhulu, has endorsed this partnership between ECDC 

and the School Nutrition Suppliers, and has given his undertaking to 

support the programme to the maximum. 

22



The R203 million 

feeding scheme 

programme has 

fed 296,621 

schoolchildren to 

date, and provided 

162 new jobs in 

the province. 

Healthy teamwork to nourish the poor 

The Corporation’s Development Investment team, together with 

NAFCOC and SASSA, partnered with the Department of Health to 

distribute food parcels to the poorest of the poor as part of their 

nutrition programme in the province. 

Again ECDC provided the bridging finance to fund SMME orders that 

had been received by the Department of Health. Although the time 

deadlines and regional diversity of the project presented challenges, 

ECDC was able to facilitate the transfer of funds efficiently, and 

delivery took place as the Department had intended. 

The nutrition programme will continue into the year following review 

and the Corporation is privileged to participate in a programme 

that not only facilitates SMME development, but indirectly provides 

sustenance to the marginalised and disadvantaged. 

The Development Investments Unit and Coega 

An operational synergy 

In addition to the direct relationships with government, ECDC has 

also played a significant role in facilitating increased efficiencies 

and synergies within the two IDZs in the province. While the East 

London IDZ and the Corporation have collaborated synergistically 

to introduce two pioneering aquaculture investments (see pages 43 

and 44), its Coega counterpart has leveraged exemplary provincial 

capacity utilisation with various government departments and our 

Development Investment Unit. 

An example of this is found in the Department of Education’s 

building of schools in the Eastern Cape during the year. Experiencing 

a shortage of project management capacity at the time, the 

department tapped into the temporarily underutilised capacity of the 

Coega IDZ, which acted as the appointed implementation agent for 

the department. Having conducted the various scoping, research and 

Request For Proposals (RFP) processes, Coega sourced the various 

contractors who would build the schools and, where necessary, 

would refer those requiring short-term cash-flow assistance to 

our Development Investment Unit to apply for the ECDC Workflow 

Contractor’s Loan. 

We believe that this, albeit a simple concept, indicates 

the extent to which government departments and 

other developmental parastatals are integrating with 

the Corporation to maximise delivery in the province. 

Internal resources 

for external impact 

While the Development Investment Unit is excited 

and enthusiastic about the many successes and 

achievements of the review period, it would be 

an incomplete picture were the reader to miss 

the various internal shifts that made the year as 

successful as it was. 

• Executive Manager of Development Investments, 

Chris Bierman, expresses a true satisfaction 

with the performances and attitudes of his team 

members, indicating that their willingness to 

cultivate an ethic of diligence and effectiveness has 

been evident in their morale and sense of unity. 

• Members of the unit are experiencing a more open 

channel of communication between each other, 

resulting in a clear understanding as to what is 

required of them, and what they can expect from 

each other. 

• The recruitment of Siviwe Makasi, a construction 

specialist, has improved the capacity of the 

Corporation to assess the viability of applicants’ 

construction projects, and to provide ongoing 

monitoring regarding the progress of each project. 

• The Development Investment Unit recently 

appointed a new credit and risk manager, Nelisia 

van Dyk, to manage the risk profile of the unit. The 

forthcoming review will detail the full benefit of this 

added capacity to the unit. 

23

24 


Quality breeds success 

Koliwe Mda, Supervisor, Mathomo Protective Clothing 

One is not prepared for the scope, activity and enthusiasm one encounters at the Mathomo 

Protective Clothing manufacturers in Dimbaza outside King William’s Town. With 700 

staff, the factory is well-equipped to supply protective clothing for both local and export 

markets. 

Koliwe Mda, a supervisor at the factory, specifies they “deal exclusively with the 

wholesale distribution channel.” Kevin Schroeder, Director, was impressed with ECDC’s 

speed and efficiency in helping set Mathomo up: “The ECDC was absolutely fantastic in 

that from the day I met the (then) CEO of ECDC on an aeroplane flight with the (then) 

Premier of the Eastern Cape, we were operating two weeks later – it was breathtaking.”


Creating platforms: 


Development Properties Unit 

ECDC’s Development Properties team is pleased to 

look back on a year to be remembered in the unit as 

one that brought with it true internal alignment that 

made internal efficiency and synergy a reality. 

The year under review saw the Development 

Properties Unit giving priority to the refinement of 

its internal processes and systems in order to more 

efficiently manage its portfolio of properties. The 

key objective in doing so was to commence with a 

long-term drive to align the portfolio to the strategic 

goals of the organisation’s economic development 

mandate. 

In order to achieve this alignment, the unit 

identified four key areas upon which to focus for 

the foreseeable future. These are discussed in the 

sections that follow. 

Improving rental collections 

One of the fundamental efficiencies required in 

managing a portfolio of properties is that of rental 

collections and the management of lease agreements. 

The Corporation had its work cut out for it in this 

regard as it addressed the historic mismanagement 

of some of its properties where rental collections 

were poor, as well as a lack of accountability that 

had allowed the problem to continue unabated. The 

problem was two-fold: outdated information and poor 

tenant management. 

Data integrity 

Refreshing the database 

To remedy the problem of outdated information that 

resulted from a long season of poor tenant account 

management, the organisation’s newly formed team 

of property managers commenced with an intensive 

data verification exercise that would leave nothing 

to chance. Employing whatever means necessary to 

ensure a properly updated database of tenants, the 

team went to the point of conducting door-to-door 

physical checks of our properties where other means 

of verification had failed to generate convincing tenant 

identities and contact details. 

ECDC played an integral role in ensuring the success of the 

R1.3 billion Steinhoff/PG Bision chipboard plant investment in Ugie. 

Investment value: 

Quality tenancy 

The way forward 

R1,3 billion 

Milestones: • Pressed first board on Thursday, 13 

December 2007 

• 35 000m 2 per day melamine-faced 

board press 

Employment: 

Salary bill: 

Production: 

Size: 

Expenditure: 

3 000 (est) 

R88 million 

1 000 m 3 per day 

36 ha 

R56 million 

As profiled in the section, “Investing resources into the Eastern 

Cape” (page 18), the Development Properties Unit worked with 

Development Investments to facilitate the investment of the largest 

manufacturer of marquee tents and plastic chairs and tables into 

the province. The manufacturer, who has entered into a lease 

agreement with the Corporation to operate its business from one 

of our industrial facilities in Dimbaza, will bring a qualitative (tenant 

profile) and quantitative (rental revenue) benefit to the Corporation 

and the province, and constitutes the calibre of tenants sought by the 

Development Properties Unit. 

26


Development properties 

Ex-tenant identification and tracking 

Having conducted the data integrity and verification process, the 

Corporation was better positioned to pursue outstanding rentals from 

existing tenants. We faced another challenge, however: accessing 

ex-tenants of the Corporation’s properties who owed us a substantial 

amount in outstanding rentals. Many of these individuals could not be 

traced using available means, which resulted in the unit’s partnership 

with ECDC’s finance and support team and a contracted debt multimanager 

to formulate an identification and tracking process that 

would trace defaulters and call them to account. 

The debt multi-manager provided us with a debtor-coding system 

that risk profiled our attempts to trace each identified debtor. The 

debtors coded as high-risk cases were those who were probably 

untraceable or unable to settle their debt, and those coded as lowrisk 

or medium-risk cases presented a higher likelihood of being 

traced and being in a position to settle their debt. Lower risk cases 

were given priority, which improved our chances of success before 

venturing out to locate our debtors. 

The initial target for the year of review was to recover 20% of arrears 

owed to the organisation. In applying the data verification process 

and the ex-tenant identification and tracking process, we managed to 

recover 19% during the year. 

Eliminating the arrears status of 

the ECDC property portfolio 

Co-ordination between units for maximised 

debt recovery 

Rental received 2008/09 

Target: 43.5 million 

Achieved: 42.3 million 

-3% 

The Corporation’s increased emphasis on integration 

between units translated to greater co-ordination 

between the Property Development Unit and the 

Development Investment Unit as they conceptualised 

and implemented a cross-unit checking process 

to ascertain the standing of loan applicants with 

respect to ECDC properties. Where the applicant for 

a financial loan was found to be a tenant of an ECDCowned 

property, and was in arrears with their rental 

payments, their loan application was declined until the 

outstanding amount had been settled in full. 

The process was a fruitful one facilitating the recovery 

of a substantial portion of old rental debt. This 

bears testimony to the critical importance of cooperation 

between the three units of the Corporation 

(Development Investments, Development Properties 

and Development Services), which is an ongoing focus 

under current leadership. 

Debt recovery with a developmental spirit 

and a shrewd mind 

While ECDC is committed to the fulfilment of its mandate of 

economic development, it also needed to communicate a strong 

message to defaulting tenants and ex-tenants: we are not a charity, 

but we are resolute in our efforts to sustain the Corporation as a 

development finance institution for the development of the 


It is a requirement that the managers of the Development Property 

Unit think like entrepreneurs with a developmental spirit; this will 

bring to an assertive close the sense of entitlement that has become 

endemic in large portions of our tenancy base. The Corporation’s 

developmental mandate means it will deal with its debtors in 

a manner that facilitates the highest degree of sustainability in 

the province and ensure the wellbeing of the organisation. The 

elimination of the various abuses sustained by ECDC resources and 

properties has included the exclusion of tenants and ex-tenants who 

are in arrears. 

27



Aligning the property portfolio to 

developmental mandate 

Residential property disposals 

The mandate of the Eastern Cape Development 

Corporation, in a nutshell, is to stimulate economic 

development that will help achieve the vision of a 

sustainable Eastern Cape. The property managers 

among us are in the process of ensuring alignment 

with that directive. As a development entity, it is of 

little importance for us to hold a multi-million rand 

residential property portfolio. Hence the year of 

2008/09 saw the commencement of a process to shed 

residential properties under management in order 

to generate resources for industrial and commercial 

investment opportunities. 

An example of this approach is found in the partnership that was 

created with a developer to build 200 residential property units on 

one of our sites in Southernwood, Mthatha, where no residential 

development has taken place for nearly two decades. The deal is 

signed and the developers are poised to convert the site into a 

modern townhouse development as soon as some land tenure 

issues are resolved. 

Mthatha’s suburb of Hillcrest is the home of the next site that 

awaits this type of development and disposal. Feasibility studies 

are currently underway to investigate the viability of a project that 

is likely to take place within the framework of the King Sabata 

Dalindyebo (KSD) Municipality’s Integrated Development Plan. 

ECDC views this type of disposal as a developmental one that allows 

us to invest capital into the province while adhering to our own 

mandate to strategically develop industrial and commercial activity in 

the province. 

The unit is pleased to report that during the year, 

it signed off 40 residential deeds of sale, which 

generated R16 million in cash reserves for injection 

into projects that stimulate sustainable economic 

activity. 

40 residential deeds of sale signed 

Generated R16 million 

Disposal of non-income 

generating properties 

The disposal of residential facilities formed only one 

arm of the drive to align the portfolio to reflect a more 

strategic developmental focus. The year of review also 

saw the Corporation identifying vacant sites within 

its portfolio that, while presenting limited commercial 

or industrial potential, showed promise as sites for 

residential development. 

ECDC has begun to seek partnerships with property 

developers who require land for residential 

development. In this case, the Corporation would 

ensure the correct residential zoning of the sites and 

contribute the land to the development projects. The 

partner/developer would then move in with materials 

and labour to develop the residential units for sale 

to buyers in the market. The proceeds of these sales 

would then be apportioned to the Corporation and the 

developer accordingly. 

28



An inherited portfolio 

In aligning our portfolio strategically, 

ECDC has identified opportunities 

to redevelop existing facilities that 

require repurposing, renovation and 

refurbishment in order to offer 

a viable commercial or industrial 

platform for development. 

Many of the properties within ECDC’s R515 million portfolio were not 

purchased or developed by the Corporation, but absorbed into the 

portfolio when the Ciskei Small Business Development Corporation 

and the Transkei Development Corporation were merged, with 

others, to form ECDC. Many of these inherited properties are in 

fact undesirable to many would-be tenants in the commercial and 

industrial realms, either because of an unsuitable location, or an 

irrelevant purpose that renders the unit unviable. 

In most cases, the properties in question require redevelopment to 

render them attractive and viable developmental platforms once 

more. The disposal of residential properties and those not generating 

an income will provide capital to commence with these projects. In 

the interim, however, the Corporation pays rates and taxes on the 

facilities while they stand vacant. 

An example of this redevelopment methodology is found in the 

redevelopment of Hillcombe, one of ECDC’s townhouse complexes 

in Mthatha. The facility currently stands vacant, vandalised and in 

disrepair, and is an eyesore to its community. While the facility is not 

well positioned for residential occupation, it is a prime location for 

the development of commercial facilities. The preferred alternative 

to disposing of such a property would be to redevelop the site into 

a complex of commercial suites to stimulate economic activity and 

improve the state of development of the area. 

During the year of review, the Corporation advertised a request for 

development and construction proposals in local media. Having 

received a weak response to these appeals, we made a decision to 

cast the net wider to invite national players to the table. 

The final evaluation of proposals and selections are to be made 

soon and we are eagerly anticipating the opportunity to report on a 

successful redevelopment project in our forthcoming 2009/10 review. 

The project will form a developmental investment into the KSD 

central business district, and will uplift and revitalising its immediate 

surrounds. 

Agricultural industry thriving in Patensie 

Patensie derives its name from the Khoisan word for ‘resting place of the cattle’. 

It serves an extensive agricultural producing region often known as the pantry of 

the Eastern Cape and is an hour’s drive from Port Elizabeth. Situated in a flood 

plain, agricultural industry thrives here and Patensie is surrounded by a mosaic of 

cultivated lands and orange groves. 

ECDC assists investors in identifying and accessing business opportunities within 

key sectors of the provincial economy, one of them being the agricultural industry. 

Highly qualified and knowledgeable sector specialists at ECDC assist investors 

leverage excellent returns on their investments through identifying business 

opportunities, facilitating joint ventures, accessing local business service networks 

and lobbying provincial and national government for relevant interventions, 

amongst others. 

29



New synergies within 

the properties unit 

Internal synergies leveraged 

Complementary to the intensive initiative to refine the 

unit’s efficiencies is the increased human capacity 

that has been brought on board during the year. New 

appointments made have already lifted our game 

significantly. 

In this regard, we welcome Mandy Tyikwe as Manager 

of Property Administration (she now manages rental 

collections, leases and property disposals within 

the unit) and Alex Noholoza as Manager of Property 

Development (he handles the management of our 

facilities and the development and redevelopment of 

ECDC properties). 

Synergy with external stakeholders 

The 2008/09 year saw the Development Properties Unit sparking 

discussions with other developmental institutions in the province to 

set in motion a project that will involve the investment of ECDCowned 

land into social housing developments. We eagerly anticipate 

what the forthcoming year of review will bring in this regard. 

Along the same line, we have begun discussions with our rural 

developmental partner, AsgiSA-EC, champion of the national 

Accelerated Shared Growth Initiative of South Africa (AsgiSA) in the 

rural Eastern Cape, to contribute ECDC-owned land and facilities 

earmarked for disposal into various rural developmental initiatives 

scheduled to take effect over the next few years. These investments 

would include the development of sawmills, shops, wholesalers, and 

crop storage and distribution facilities. This will further enhance our 

developmental imperative in disposing of non-income generating 

properties. 

These appointments have brought about an increased 

efficiency and streamlining within the unit, as well as a 

greater clarity with respect to roles and responsibilities 

in an environment of accountability and transparency. 

An improved all-round health within the unit has 

emerged, and has catalysed a new culture that 

embraces a unique combination of business 

objectives and economic development goals. 

The Development Projects’ Spatial and Rural 

programmes at ECDC aim to assist in the 

implementation of integrated spatial planning that 

focuses on strategic economic development clusters 

in the Eastern Cape. Target sectors include tourism, 

agriculture, agro-processing, property development and 

renewable energy. ECDC provides advice on how to go 

about establishing projects and consider funding from 

various business-related studies in the form of business 

plans, feasibility studies, crop trials and environmental 

impact assessments. Generally, most projects are of a 

greenfield nature and include primary production. 

Mngazana (right) is a coastal hamlet on the Transkei 

coast. The Mngazana Estuary is regarded as the most 

important estuary in the Eastern Cape as it forms part 

of a 140 hectare stand of mangroves, the third largest 

in South Africa. Mangrove conservation and community 

tourism initiatives at Mngazana have experienced 

promising success. Mangrove timber has a number 

of benefits over other timber, but the importance of 

preserving the delicate ecological balance is a value 

communities are slowly appreciating. 

30



Greatest challenges facing the unit in the 

coming year 

The Corporation’s Development Properties Unit operates in 

a politically sensitive realm, where housing and residential 

development are some of the key deliverables of the current regime. 

Disposing of our residential portfolio in such a manner that tenants 

are in a better position at the end of the day is a both a primary 

objective and a challenge to our operation. 

In realigning our portfolio of properties to reflect the strategic 

economic development essence of the Corporation, a number of 

challenges are posed to our operation: 

A culture of default 

No culture is quickly formed, and none is easily changed. The 

culture of default amongst some ECDC tenants, who feel they are 

entitled to free accommodation at the expense of the Corporation, 

is a primary challenge within the property management function of 

our organisation. To simply move in and evict defaulters, as would 

happen in the private sector, would often 

amount to a non-developmental move on the 

part of ECDC. In the midst of our intentions 

to become a strategic, dynamic and creative 

property manager, we require a continuous 

humanitarian mindset that remains sensitive 

to the economic need that exists in the 

province and how we can alleviate that need 

rather than exacerbate it. 

In some cases, however, the amount owed to ECDC 

in outstanding rentals is nearly tantamount to the 

book values of the property occupied by the tenant 

in question. The tenant would then be required to pay 

close to double the value of the property, which he or 

she would not be able to recoup in the resale of the 

property on the market, leaving him or her worse off 

than before. 

Assuming a property inflation rate of 10%, the 

new property owner would only recover their 

capital through a property sale after seven years of 

ownership, excluding the interest they would pay on 

a mortgage bond and inflation, which would further 

negatively impact this timeline. In such a situation, 

ECDC would approach the disposal in a different 

manner, one that creates opportunity rather than 

burden. 

In dealing with its extensive arrears problem, the 

Corporation is holding to its course to eliminate a 

sense of entitlement amongst tenants, while ensuring 

an overall atmosphere of opportunity rather than 

burden in the province. 

Arrears settlements and residential 

property disposal 

When ECDC determines to sell a given 

residential unit, the tenant of that unit is 

granted “first right of refusal” to purchase the 

property. In the event that the tenant owes 

outstanding rentals, full settlement of debt 

needs to be made before the Corporation will 

proceed with the transfer of ownership. 

31

32 


Koi farming takes off in 

East London 

Simphiwe Zono, Staff Supervisor, Amalinda Fish Farm 

Just outside East London, world-class quality Koi are being farmed for the local and 

international ornamental fish wholesale market, proving once again that the Eastern Cape 

is full of latent potential. 

The conversion of Amalinda Fish Station’s derelict buildings, ponds and infrastructure 

almost ten years ago gave birth to Amalinda Fish Farm, where Simphiwe Zono, Staff 

Supervisor, says “our core focus now is to produce high quality Koi fish that range from 

nine to 19cm.” 

The business was set up with financial planning assistance from ECDC and its 

geographical situation is ideal, where the water temperature remains above 20˚C for much 

of the year. Although ornamental fish require expensive feed, the short growing time and 

considerably high unit market price outweigh this disadvantage. Because of their small 

size, Koi (which are common carp selected over several centuries for the aesthetic value 

of their colouration) need minute quantities of food and water in comparison to food fish, 

making Amalinda Fish Farm a sustainable commercial aquaculture farm with a good 

investment return.


Channels of development: 


Development Services Unit 

The Development Services Unit is geared towards 

the identification, research, expansion and 

facilitation of developmental initiatives within 

the province. It operates as a probe to discover 

and develop channels through which jobs might 

be created, poverty alleviated, and the socioeconomic 

landscape changed. 

The year of review presented the unit great 

opportunity and, along with it, the many and 

varied challenges, complexities, and frustrations 

that have made our role a fascinating one. We 

have persevered through tough economic times 

and maintained the courage required to catalyse 

the opportunities that align with the Provincial 

Growth and Development Plan to diversify the 

developmental asset base of the province. The 

objective behind this diversification is to prevent 

unsustainable dependencies by communities on 

any given industry or sector. 

The atmosphere in the unit has changed 

as capacity has been developed and fresh 

perspectives introduced by newly appointed 

business advisors and programme heads. A new 

vibrancy is evident in the unit as a result, and we 

are proud to review a year of significance and 

progress. 

The value-add of the Corporation’s Development 

Services Unit has resulted in the increased 

empowerment and organisation of communities 

so that they are able to maximise the 

opportunities presented to them. The most 

important interventions in this regard took place 

in the villages of Gomolo, Lower Kroza, and 

Mlengana and in Mthatha. 

During the year of review, 

the Corporation’s project 

development team secured 

32 project approvals, totalling 

R7.6 million. The highlights of 

our project development 

efforts are as follows: 

1 Ndlambe pineapple industry turnaround 

The Corporation engaged the ailing industry to bring 

about a renewed viability by exploring the untapped 

value of pineapple fruit and applying innovative 

strategies to realise that value (see also pages 

20, 36 and 55). 

2 Amalinda Fish Farm 

ECDC played a crucial role in administrating 

the funding and project development of this initiative, 

which is well under way to 

becoming one of three new fish farms 

in East London that will supply fin-fish 

to local and global markets 

(see also page 32). 

EASTERN CAPE 

34


DEVELOPMENT services 

3 Packaging and implementation 

ECDC continues to provide support towards the 

packaging and implementation of projects post the OR 

Tambo District Investment Conference. 

4 Blueberry project 

As profiled in the previous ECDC review, the project 

constitutes a R45 million, 5,000 job creation venture 

near Stutterheim. The first planting of 15ha of protected 

blueberries took place in October 2008, and results are 

to follow in the forthcoming review period. 

7 Matolweni Irrigation Scheme 

The investment of R600,000 into Matolweni Irrigation 

Scheme – this created 40 new jobs. 

8 Agriculture and rural development 

This involves skills development for 30 emerging farmers in 

Nyandeni, Mhlontlo and Port St Johns. 

9 Lusikisiki under exploration 

ECDC, in partnership with the Land Claims Commission, Department 

of Agriculture, and AsgiSA-EC (provincial champions of the 

Accelerated Shared Growth Initiative of South Africa) embarked on a 

mission to identify opportunities in agricultural production, tourism 

and infrastructure development industries as a diversification 

measure in Lusikisiki that will alleviate the unsustainable pressure 

placed on the tea industry in the area. 

10 Steinhoff truck stop 

German timber giant Steinhoff has built a R25 million truck stop on 

the road that links Ugie with Mthatha, one of many projects near its 

flagship timber processing plant in Ugie, and created 23 jobs. 

11 Pure Ocean 

Pure Ocean Aquaculture is a new company building and operating 

a land- based marine fish farming operation in the East London 

Industrial Development Zone: R20 million project, 44 jobs created. 

12 SMA Engineering 

The R61 million expansion of SMA Engineering South Africa, a global 

manufacturer and supplier of air conditioning and engine cooling 

lines for the automotive industry, has created 20 jobs. 

5 Hazelnuts in 

Queenstown 

The exploration of hazelnut 

production has commenced in 

Queenstown in partnership with a 

multinational confectioner (see also 

page 38). 

6 Lukhanji Aerodrome and integrated 

business hub 

Queenstown is increasingly a growth node in the 

province, and has been the continued focus for the 

development of the Lukhanji Aerodrome business hub 

during the year. 

13 Rise Safety Glass 

This Chinese business has developed a R20 million project and 

created 90 jobs in the manufacturing industry. 

14 Rehau Polymer 

This German business’s Uitenhage branch has undergone a R250 

million expansion and created 80 jobs: Rehau is the leading 

international systems manufacturer in the building solutions, 

automotive and industrial sector worldwide. 

15 SeaArk 

Phase 1 of Africa’s first ever prawn farm at Coega has resulted in a 

R250 million investment and 347 jobs. 

16 Siyahlwayela 

ECDC piloted a business outreach programme, Siyahlwayela, in 

partnership with Community Self-Employment Centre (COMSEC) 

targeting the Makana and Nelson Mandela Metropolitan 

Municipalities incorporating PE, Grahamstown, Alicedale, 

Riebeeck East, Fort Brown, Salem, Sidbury 

35



Pineapple industry turnaround 

NNIP (Pty) Ltd development impact 

The Corporation demonstrated its synergistic valueadd 

to the pineapple industry turnaround project in 

the Ndlambe Municipality by delivering a packaged 

combination of project development, development 

finance and enterprise development services. ECDC is 

playing a central role in the strategic overhaul of the 

sector necessitated by various economic challenges 

that have caused it to suffer major losses and 

threatened its sustainability. 

The objective of the turnaround project is to convert 

the industry from being one of primary production 

(supplying its own local population) to being one of 

beneficiation (participating in national and global 

markets). 

The Corporation conducted a multi-million rand 

research project during the year, the outcomes of 

which indicate that pineapple fruit offers attractive 

commercial opportunity far greater than was ever 

conceived of in the Ndlambe area. Included in these 

opportunities are the cultivation of human-grade 

dietary fibre and the use of pineapple fibre in the 

renewable energy, textile fibre and juicing industries. 

The research also found that the inflated cost of 

processing inputs has weighed down the industry 

significantly. 

Project phases 

Ndlambe Natural Industries Products (NNIP) (Pty) 

Ltd, the broad-based black economic empowerment 

company that will facilitate the sector’s turnaround, is 

a collaborative partnership between the Eastern Cape 

Department of Agriculture, the Pineapple Growers’ 

Association, and the Eastern Cape Pineapple Industry 

Workers’ Trust. Numerous established and emerging 

farmers across a wide demographic and geographic 

scale within Ndlambe region (Bathurst, Peddie and 

Port Alfred) will benefit as a result of the initiative. 

The objectives of the NNIP are expressed in phases 

which will be executed as follows: 

• Acquire a controlling equity stake in Summerpride Foods 

(completed in the 2008/09 year). 

• Implement a business turnaround strategy within 

Summerpride Foods. 

• Commence with the pineapple waste processing project 

to enter the dietary fibre market. 

• Establish an integrated fruit processing facility in Bathurst 

(Summerpride to relocate from East London). 

• Implement the pioneering project to cultivate pineapple 

produce for renewable energy. 

• Initiate the pineapple leaf-fibre project to penetrate 

the textile market. 

• Roll out the pineapple enzyme (bromelain) project. 

The trying economic conditions of the provincial pineapple industry 

are evidenced by the fact that since 2003, the number of active 

pineapple growers has decreased from 46 to 22, representing an 

attrition rate of 48%. Considering that this stagnation occurred in 

times of general economic buoyancy, rapid intervention is required 

to sustain the industry that provides 1,500 jobs in times of general 

economic slowdown. 

The NNIP project’s establishment of an integrated fruit processing 

plant in Bathurst, together with the innovative utilisation of previously 

discarded plant material and processing waste, will spark increased 

commercial trade with national and global markets. The relocation 

of Summerpride Foods (subsidiary of NNIP) to Bathurst will save 

the industry R5 million in travel costs per year, and ensure a fresher 

perishable product to end users of pineapple products. 

The overall developmental impact of the project will 

take place in the following areas: 

Development of emerging entrepreneurs 

Numerous small, medium and micro enterprises (SMMEs) in 

the region will participate in the newly re-structured pineapple 

industry. NNIP, the Industrial Development Corporation (IDC), the 

Department of Industry, the Department of Economic Development 

and Environmental Affairs (DEDEA), Ndlambe Municipality and its 

community representatives have engaged to identify a strategy 

to formalise the various investment and community involvement 

programmes that will be required to facilitate the training and 

development of these entrepreneurs. 

Ownership by the previously disadvantaged 

The Eastern Cape Pineapple Industry Workers’ Trust owns 26% 

of NNIP (Pty) Ltd, which effectively falls into the hands of 1,500 

previously disadvantaged people employed on farms in the area. 

The share acquisition was funded by the Department of Agriculture’s 

R17.5 million grant to the trust, who will also hold 19.62% voting 

rights in Summerpride Foods. 

The NNIP/Ndlambe Municipality Pineapple Training College 

Interactions between NNIP, Ndlambe Municipality, the Development 

Bank of South Africa (DBSA) and ECDC took place during the year and 

have led to NNIP’s funding applications to European Union 

grant sources, as well as to local funders, to establish 

a Pineapple Training College for the development of 

emerging farmers and entrepreneurs in the pineapple 

processing industry. The college will be housed on the 

126ha of land earmarked for the NNIP plant in Bathurst, 

and will be an initiative shared by the company and the 

Ndlambe Municipality. 

Textile training for job creation 

The focus of the training college will be to develop skills 

in the textile sector to support the proposed pineapple 

fibre project, which will generate an estimated 2,000 to 

3,000 new jobs. The majority of these will be employed in 

the “cut, make and trim” of garments, and will thus have 

a natural bias to the employment of women. Tradelink 

Textiles, a Free State-based company, will partner with 

NNIP to implement this aspect of the turnaround project.



Renewing the pineapple industry 

ECDC engaged the ailing pineapple industry in the 

Ndlambe municipality, which incorporates the districts 

around Port Alfred, to bring about a renewed viability 

by exploring the untapped value of pineapple fruit and 

applying innovative strategies to realise that value. 

Located on the outskirts of Bathurst just off the R67, 

only 15km from Port Alfred, is where the world’s biggest 

pineapple is found, standing 16.5 m high with three 

stories. The Bathurst “Pineapple” is constructed from 

a fibreglass outer skin covering a steel and concrete 

superstructure. 

Lukhanji a provincial growth node 

Hazelnuts about the Eastern Cape 

The Danish International Development Agency (Danida) 

grant funding 

Outside funding, amounting to 5.744 million Danish Kroner, has been 

secured from Danida through the NNIP’s association with Advanced 

Non-Woven in Denmark, a Danish manufacturer and operator of nonwoven 

fibre production lines. The grant will be invested into training 

on the conversion of pineapple fibre into composite materials such 

as insulation, sound-proofing and oil absorption materials. 

Generation of employment opportunities 

The anticipated job creation to be provided by the NNIP project will 

amount to 400 to 600 new jobs. The successful establishment of a 

vertically integrated textile fibre operation could see this figure rising 

to 3,000. The facility would integrate the entire textile supply chain 

into one business, from raw material to the manufacture of complete 

garments. 

Emerging farmers’ access to prime agricultural land 

An established and successful emerging farmer programme in the 

Peddie area known as PineCo, is a company co-owned by the South 

African Pineapple Association, the local Peddie community, and the 

workers in the industry. This model will be replicated by NNIP in the 

Bathurst area as it seeks to maximise the yield from large tracts of 

underutilised municipal land perfect for pineapple production. These 

lands will be operated by participating emerging farmers. 

The Corporation’s newly initiated working partnership 

between its project development team and an 

international confectioner looking to invest resources 

into the development of a hazelnut farm near 

Queenstown, has resulted in a long-term trial and 

testing process that will ascertain the suitability of the 

area to hazelnut production. Should the investment 

take place, the project will provide numerous new 

jobs. The outcomes of the research are expected soon. 

Lukhanji Aerodrome and integrated 

business hub 

The Spatial and Rural Development arm of the 

Development Services Unit worked with the 

Development Properties Unit on a project to develop 

the existing aerodrome infrastructure in Lukhanji 

Municipality’s Queenstown area. The year of review 

saw the launching of a project scoping exercise to 

evaluate the viability of establishing an aerodrome 

business hub. Pending the outcomes of the research, 

the project will take form through the redevelopment 

of existing ECDC facilities and other infrastructure in 

and around the aerodrome to become an integrated 

commercial park. 

Contribution to food security at a national level 

It is conservatively anticipated that the NNIP Project will improve our 

national food security situation as it increases pineapple production 

by at least 25% and implements the human-grade dietary fibre 

project. 

Socio-economic development 

NNIP’s project and business plans are based on triple bottom line 

investment principles. This means that the project’s aim is to benefit 

environmental, social and economic drivers in the area. In this 

regard, ECDC and NNIP are embarking on initiatives such as the 

sustainable cottage industry, where women and disabled people will 

be employed to manufacture pineapple fibre garments using antique 

methods. This operation will be housed in the Bathurst Agricultural 

Museum and used to promote tourism activity in the Bathurst area. 

37

38 


Chocolate makes the 

world go round 

Patience Qiqimana-Baleng, Administrator, 

Mitrock Community, Queenstown 

With ECDC assistance, Mitrock community outside Queenstown have launched 

pilot and trial projects to grow hazelnuts for International Italian chocolate 

company Ferrero, with the first trees planted in May 2009. 

If successful, over 10,000ha of hazelnut plantations will cover the land, 

making this the largest hazelnut plantation in Africa. “Ongoing evaluation of 

the performance of these trees will be done over the next four years together 

with the community,” says Patience Qiqimana-Baleng, an Administrator on the 

project, “and close collaboration is in place with the local municipality as well as 

the provincial Department of Agriculture.”



Product development training sessions are usually 

held in partnership with local municipalities. The 

following sessions were conducted during the year: 

Creative industries 

Creative solutions to access local and global markets 

The depth of creative talent in the province has begun to generate 

returns as ECDC has worked strategically over the past year to 

facilitate increased access to markets for entrepreneurs in this sector. 

The Corporation has leveraged its relationship with the Department 

of Trade and Industry (DTI) to generate numerous international leads, 

which have resulted in our products reaching global markets, and 

in partnership with DTI and the Department of Arts and Culture, has 

commenced with the establishment of a provincial craft hub. While 

the hub is in its embryonic stages, ECDC has commenced with 

the implementation of some of the support programmes that will 

later form a part of its offering to provide access to local and global 

markets for craft produced in the province. 

Having conducted what we have termed “product development 

training” with craft enterprises, the Corporation saw 15 ECDCsupported 

crafters attending the Grahamstown Arts Festival and the 

Christmas in July Festival in Hogsback. On a national platform, we 

supported 14 enterprises as they ventured out to attend the Decorex 

Expos in Durban, Johannesburg and Cape Town. And finally, five 

local Eastern Cape crafters made their way to international expos in 

Germany (Ambiente exhibition), Seoul in South Korea, and Atlanta, 

USA. 

ECDC spearheaded training for local people to cultivate 

traditional crafts into business opportunities, creating new 

jobs within crafters’ home areas. Crafters’ were provided with 

business skills needed to develop and operate a viable craft 

business and engage effectively with the retail market. 

• 15 women in the Willowmore area were trained 

in the development of wire, bead and felt product 

development. 

• 13 women in Nieu Bethesda were trained in the 

making of mohair felting. 

• In Mzamba, 25 women were trained in weaving, 

beading, pottery and the making of soft furnishings. 

• 10 of Fort Beaufort’s people were trained in 

leather craft. 

• 70 people in the province received training in the 

making of products using beading, woodwork, soft 

furnishings and ceramics. 

As a result of these initiatives, crafters generated 

income in excess of R400,000 during these events, 

which evidences the value-add of the training 

provided by the Enterprise Development team 

of ECDC. 

Crafters excel with ECDC support 

and development 

During the year of review, 11 Eastern Cape crafters 

claimed the “Best Crafts Stand Award” at the South 

African Handmade Collection exhibition at Gallagher 

Estate in Gauteng. 

The group was part of an ECDC delegation to the 

DTI-managed event, and a substantial measure of 

its success can be attributed to the Corporation’s 

ongoing skills development programme, which aims to 

capacitate established and novice crafters to access 

markets, and to develop the skills of people starting 

their own businesses in the province. 

The crafters, who hail mainly from Queenstown, Port 

Elizabeth, Alice and Mthatha, exhibited craft in the 

disciplines of ceramics, mohair products and beaded 

jewellery, and attracted high praise from passersby at 

the exhibition. 

ECDC helps individual crafters with product 

development, the correct pricing for the right market, 

and colour trends and packaging. Those individuals 

starting their own businesses are taught basic 

business skills, such as bookkeeping and gaining 

market access. Established crafters receive assistance 

in compiling a marketing strategy to facilitate the 

exposure of their products to local and international 

audiences.



The Integrated Emerging 

Contractors Development Model 

Impact on government delivery 

The value-add contributed by the multi-year Integrated 

Emerging Contractors Development Model (IECDM), 

which was pioneered by the Corporation a year prior 

to this review has proven to be a synergistic asset to 

our Development Investment Unit. A deeper inquiry 

into the benefits of the project, however, will reveal 

the high level of value it has added to the delivery of 

government projects. 

The programme’s focus on enhancing contractors’ 

service delivery in terms of quality, cost and time 

management has made a significant qualitative impact 

on various government projects executed by the 

Department of Housing and the Department of Roads 

and Transport. 

Mentorship on site 

During the year, the R5 million programme recruited 62 

contractors, nine of whom are from Port Elizabeth, 14 

from East London, 11 from Queenstown, and 28 from 

Mthatha. These players have received theoretical and 

practical training in construction contracting issues. 

Mentorship programme 2008/09 

Programme value: R5 million 

Contractors recruited 62 

To apply this learning effectively, each contractor is allocated a 

qualified mentor in the construction industry who provides support to 

the contractor on site in the areas of quality assurance and business 

management. 

Many of the contractors who have passed through the programme 

have seen notable capacity improvements to the point where they 

have been moved up three grades on the Construction Industry 

Development Board (CIDB) register. The programme accepts 

emerging contractors from grades one to five. 

Developed in partnership with the Council for Scientific and Industrial 

Research (CSIR) and the Construction Education and Training 

Authority (CETA), the programme is a first for South Africa and is 

only operational within the Eastern Cape. The CIDB is, however, 

in the process of formulating a national framework to regulate all 

construction development programmes including this one. 

From emerging to established 

Contractors arise 

Luzuko Mtwebana, from Zani Construction in Butterworth, joined the 

programme in 2005. He explains that he once operated in a vacuum 

without considering the statutory or legal requirements necessary 

to comply with industrial specifications. He now testifies to the 

success of the programme: he says he is better organised to both 

comprehend and apply the various legal regulations and cash-flow 

principles required for him to apply for Grade 7 status – which means 

he will compete with established contractors, and migrate from his 

“emerging” status. 

South African Value Education (Save), which facilitated 

the training of the programme, endorsed the design 

of the programme as it enabled proper testing of 

contractors’ knowledge and highlighted where topup 

training was required to bring contractors up to 

speed. 

The developmental impact of IECDM 

EASTERN CAPE 

Over 200 contractors on the programme are to 

receive financial support, job creation and skills 

development by the departments of Housing and 

Public Works, which have testified to the strategic 

nature and effect of the programme by entering into 

a two-year tripartite memorandum of understanding 

with the Corporation to sustain the programme’s 

success. The departments have agreed to offer 

graduates from the programme preference as 

they participate in tenders for infrastructure 

development projects. The Department of Housing 

has set aside 1,098 housing units for development 

by emerging contractors, and a new directorate for 

the management of emerging contractors has been 

established. 

This has taken place as a measure in line with 

government’s declaring the construction sector a 

developmental priority because of its potential to 

create jobs and bolster economic growth. 

41



The SMME Conference and 

Business Expo 2008: 

empowerment through enterprise 

South Africa still faces huge challenges in the areas 

of poverty, inequality and unemployment. The 

development of small, medium and micro enterprises 

(SMMEs) is seen to constitute one of the strategic 

tools to overcome these systemic problems. 

The SMME Conference and Business Expo, hosted 

by the Corporation in partnership with the University 

of Fort Hare and the Department of Economic 

Development and Environmental Affairs during the 

review period, sought to facilitate information-sharing, 

discussion and debate between entities involved in 

the development of SMMEs. 

Of primary importance during the event was the 

emphasis placed on the following issues: 

• The importance of SMME growth and development 

in the provincial economy. 

• SMME research. 

• The provision of a platform upon which SMME 

entrepreneurs, government representatives, 

donors, academics and other experts on a local 

and global scale could interact and network. 

• The dissemination of cutting edge information 

and innovative solutions that define best practice 

methodologies and execution in the SMME sector. 

Four day conference, business expo 

and gala event 

The four day conference was held in September 2008, 

and reached close to 300 small businesses from 

all six districts in the province. Targeted economic 

sectors included agriculture, manufacturing, tourism, 

information and communication technology, forestry 

and services. 

The attendance at the conference saw delegates 

from local, provincial and national government, nongovernmental 

organisations, entrepreneurs from big 

businesses to rural and urban SMME entrepreneurs, 

academics and students. 

Following the conference, the Business Expo hosted 

exhibitors from all categories of conference delegates, 

and the two gala events provided an opportunity 

for informal discussion between delegates and 

for the official launch of the Centre for Enterprise 

Development. 

The Corporation’s partnership with the 

Eastern Cape AIDS Council, the South African 

Business Coalition on HIV/AIDS and Inwent (a 

German capacity building agent) to implement 

a programme to support SMMEs in their 

development of workplace HIV/AIDS policies 

and programmes, saw close to 170 companies 

being equipped to effectively manage the effect 

of the illness on their operations. The need for 

this manner of support and development cannot 

be overstated at this stage in the province’s 

developmental history. 

Skills development programmes during 

2008/09 

Money matters for emerging companies 

During the year the Corporation’s Development Services Unit 

identified the need to provide emerging companies with training in 

costing and pricing matters. This training was conducted in four key 

development nodes in the province being Mthatha, Queenstown, 

East London and Port Elizabeth. A total of 59 enterprises received 

training in this regard. 

Quality management by quality managers 

The initiative to develop enterprises for 2010 and beyond included 

the Corporation’s training to inform and equip enterprises to manage 

the quality of their processes and products. 200 Eastern Cape SMMEs 

received International Standards Organisation (ISO) certificates during 

the year, allowing them to compete in international markets and for 

big contracts. 

The SMMEs went through a rigorous training programme conducted 

through Qualitec, which focused on quality management services 

as a means to ensure that the quality of the SMMEs’ products and 

services align with international standards. The R3 million project was 

funded by ECDC, together with the Small Enterprise Development 

Agency (SEDA), Tourism Enterprise Partnership (TEP), the Eastern 

Cape Tourism Board (ECTB) and the Department of Economic 

Development and Environmental Affairs (DEDEA). 

42



The profile of training during the year was as follows: 

• Nearly 140 enterprises providing accommodation were trained 

in HACCP (Hazard Analysis and Critical Control Points), the 

standard also known as the ISO 22000 which is maintained by the 

Integrated Organisation for Standardisation in the food health and 

safety category. 

• 46 enterprises received training on quality management systems, 

the standard referred to as the ISO 9001. 

• 35 entities received training in OHSAS, the Occupational Health 

and Safety Advisory Services accreditation. 

Both the public and private sectors make it an imperative that service 

providers comply with ISO standards, particularly because the public 

sector is the major procurer of SMME services. This programme helps 

improve competitiveness of small business, and gives them an edge 

to compete abreast with big business. 

CIPRO and ECDC Business 

Registration programme 

On the whole, the Corporation’s level of intervention in the lives of 

SMMEs in the province increased by 65% during the review period. 

This is evidenced by the fact that more than 2,000 new entities were 

registered with the Companies and Intellectual Property Registration 

Office (CIPRO) in a synergistic partnership between ECDC and CIPRO 

to fast track new applications of emerging entities. 

Increase in ECDC intervention 

65% growth 

2,000 new SMMEs registered 

Highlights 

• We are proud to announce the confirmed 

investment of Espadon Marine and Pure Ocean 

Aquaculture into the province as a result of the 

Corporation’s introduction and partnership with 

East London Industrial Development Zone sector 

specialists. 

• The Corporation collaborated with industry 

players in the newly introduced business process 

outsourcing and off-shoring sector through a 

partnership with Business Process Enabling 

South Africa Eastern Cape, which is an industry 

association; the focus of the collaboration was 

to raise awareness and lobby provincial-wide 

support. 

Eastern Cape: a prime fin-fish 

investment destination 

The various investment solicitation efforts of ECDC 

during the review period have helped position the 

province as the premier investment destination 

for marine fish culture in South Africa. Massive 

investments into the aquaculture industry, running into 

billions of rands, have constituted a challenge to the 

Western Cape’s dominance of the industry. 

Having begun its endeavours with the I&J’s pilot 

project in Port Elizabeth, the first operation in the 

country to grow indigenous marine fish (Yellowtail and 

Cob), the Corporation has facilitated the set up of four 

more fin-fish operations in the province. 

The improvement of turnaround times from the time of application to 

official registration of new entities was achieved by the Corporation 

as it streamlined its relationship with CIPRO to bolster its onestop 

shop value-add to new enterprises. Its offering includes the 

processing of applications for registration, the formulation of 

business plans, the processing of applications for finance, and the 

provision of mentorship and support services. This translates to 

increased cost efficiency for both the client and the Corporation, and 

reduces the time delays for these players to commence operations. 

In order to achieve this level of turnaround, ECDC employed 

resources in a full-time capacity, and we are pleased to report that 

CIPRO’s ratings indicated that ECDC, as a representative of the 

province, outperformed the new registrations of any other province 

within the year of review. 

The Corporation attributes the major upswing in new registrations in 

the province to the increased rate of unemployment that stemmed 

from the global economic recession in the automotive, shipping 

and manufacturing sectors, and retrenched persons turning to 

entrepreneurship to make ends meet. 

I&J achieved a major breakthrough in spawning and rearing 

two endangered indigenous species, Silver Cob and Dusky 

Cob, in Port Elizabeth. Trials in a sea cage system are 

necessary to evaluate the biological suitability of fish to 

cage culture and farming economics.



East London IDZ 

Mariculture hot-spot 

ECDC’s strategic environmental assessment conducted during 

the year to identify sites for aquaculture in the province found 

that Algoa Bay, St Francis Bay, and East London present prime 

investment opportunities for investors in the industry. The most 

attractive of destinations has proved to be the East London 

Industrial Development Zone, where Seatek has been running a pilot 

abalone farm for three years. Two operations, Espadon Marine and 

Pure Ocean Aquaculture, confirmed their decision to locate their 

operations within the Zone in the year of review. Both operations’ 

industrial focus is on the land-based culture of Cob (Argyrosomus 

japonicus). Probably the single most important traditional line fish 

species in South Africa, Cob populations have been drastically 

depleted in recent decades. 

During the financial year, Espadon Marine spawned Cob under 

commercial conditions for the first time in the Eastern Cape. Both 

companies utilise re-circulating technology which allows greater 

control over the culture process than when the fish are housed in 

cages or ponds. This allows for greater control over diseases, water 

quality and feeding regimes, and leads to an optimised rate 

of growth. 

East London idz Growing in strength 

The East London Industrial Development Zone (ELIDZ), an 

initiative by the South African government to encourage 

export-oriented growth in the country through the attraction 

of foreign and local investors, aims to bring economic growth 

to the Eastern Cape and beyond by offering investors a 

globally competitive combination of geographic position, 

infrastructure, services and labour. 

Since its inception in September 2002, the East London IDZ has achieved a number of 

milestones. The Zone now boasts more than 100 fully serviced sites. Adequate supply of 

electricity, water and other related services ensure full steam operations for manufacturers 

that have already settled in the Zone. Road networks and other regional transport linkages 

allow for speedy access to key markets and on-time delivery of raw materials. 

14 manufacturers have already taken up the opportunity of settling within one of South 

Africa’s prime industrial estates. These manufacturers span a variety of sectors including 

automotive, aquaculture, transport and logistics. The East London IDZ is currently involved 

in discussion with a number of other potential investors that want to develop competitive 

world-class facilities in South Africa. 

44



ECDC and East London IDZ 

an investment attraction partnership 

Both Espadon Marine and Pure Ocean Aquaculture were introduced to the IDZ by the 

Corporation’s aquaculture and fisheries investment promotion team, and their investments were 

secured by a team of ECDC and East London IDZ sector specialists. The co-operation between 

the two agencies in securing the investment was characterised by a level of efficiency that 

eliminated the common pitfalls of duplication of resources and miscommunication between 

organisations. 

Prospective investors’ interest has spiked since news of these investments was made public. 

Numerous mariculture inquiries by serious investors are currently being assessed by our 

aquaculture and fisheries sector specialist. The most recent of these was that of Cell Aquaculture 

who travelled to the province during the review period to conduct a detailed feasibility for 

their operation. The study took place as a response to a lead that was generated by one of our 

outward bound missions to Australia in 2008. 

The combined climate, logistics and infrastructure in the province make for a destination of 

interest to a range of marine fin-fish species, and we as ECDC will continue to pitch the province 

as the best place to locate land-based fin-fish operations in South Africa. 

The industry contributes 0.005% to the country’s gross domestic product, and currently provides 

1,200 direct jobs. During the 2007/08 year, the Department of Environmental Affairs and Tourism 

reported that aquaculture is one of the fastest growing food production systems in the world, 

growing at rate of 8% per annum since 1950. Africa’s contribution, however, is less than 1% 

of global production, and South Africa only contributes about 1% of Africa’s production. This 

indicates the level of opportunity that exists for aquaculture investors to establish the industry 


Eastern Cape’s prime positioning 

The Eastern Cape holds several competitive advantages that make it a viable 

investment destination for fin-fish mariculture: the lower average price of 

suitable land (as opposed to the Western Cape), the warmer sea temperatures 

that allow the fish to reach market size in a shorter time than what would be 

experienced in colder water, and the fact that the province is the home of 

Rhodes University’s Department of Icthyology and Fisheries Science, the leading 

mariculture research institute in Africa, and the only one of its kind in the 

southern hemisphere. 

The Department of Environmental Affairs and Tourism, which has earmarked 

aquaculture as an opportunity to diversify fish production to satisfy global 

exports and the creation of new jobs, has implemented its “Policy for the 

Development of a Sustainable Marine Aquaculture Sector in South Africa”. 

The policy seeks to ensure that a range of financial incentives are routinely 

employed by government to benefit the marine aquaculture industry, and will 

see the department facilitating access to finance for emerging aquaculture 

initiatives, farmers and community initiatives in collaboration with the DTI and 

other relevant agencies. 

45



The ECDC Exporters’ Platform 

A year such as the one in review required the 

exporters’ networking forum, an offering of the 

Corporation’s trade promotion team, to hold regular 

meetings within the province to focus on finding 

solutions to the effects of the global crisis on exporting 

operations. It did this by facilitating maximised 

information sharing and support, specifically 

emphasising the opportunity that exists within the 

Southern African Development Community (SADEC) 

region as an alternative to pressurised European 

markets. 

• The ECDC exporters’ platform’s regular leads, 

together with the financial assistance from the 

Development Investment Unit, provided these 

exporters with the ability to respond to inquiries 

efficiently. 

• Through the provision of efficient mentorship 

services, the unit saw an increase in local 

applicant businesses who qualified for the 

Department of Trade and Industry incentives. 

• Global missions that took place, together with 

the “Eastern Cape From Above” photographic 

exhibition and the television commercial for 

the Eastern Cape “Make it Yours” campaign, 

definitely profiled the province locally and 

abroad in an attractive manner. 

• Members on the exporters’ platform have 

made significant headway in accessing global 

markets, specifically those in the realm of agroprocessing. 

The E-platform was launched in February 2008 as a mechanism by 

which to enhance the access of local exporters to global markets via 

a central network. Already we can vouch for its value-add, as it has 

already facilitated global connections between its members and their 

markets in foreign countries. 

The strategic relevance of the E-Platform 

One year down the line 

During the year, Transnet National Ports Authority statistics confirmed 

that exports from the Eastern Cape’s two commercial ports are 

on the increase, most notably in the automotive sector, reflecting 

a 4% increase in 2006, and a 7% increase in 2007. The Motor 

Industry Development Programme has been pivotal to securing the 

mammoth-sized export contracts secured by the province’s “Little 

Detroit”, comprising Mercedes-Benz SA, Volkswagen, General Motors 

and Ford. However, smaller entrepreneurs like MFA Global that are 

currently registered on the E-Platform are now also venturing out into 

global export markets. 

Outside of the automotive sector, which has faced its own global 

economic challenges during the year, the export of other goods from 

the province is also on the rise. While maize and motor vehicles 

dominated bulk and break bulk cargo exports at the East London 

port, manganese ore exports led this category at the Port Elizabeth 

port. Bulk cargo is any unpackaged cargo ranging from fuel and bulk 

liquids to a variety of grains, such as maize, sunflower seed and 

wheat. 

For more than a year now, ECDC’s E-Platform has actively been 

providing local exporters like MFA Global, Prisma Engineering and 

Makana Meadery with the support and mentoring they require to 

become export ready. Exporters wishing to ready themselves for 

global exports are guided by our various forums and networks as to 

how best they can access their prospective global markets. 

Small, medium and micro enterprises are emerging from the 

E-Platform with a developed understanding of the several preferential 

trade agreements that exist at a regional and bilateral level between 

South Africa and its trade partners, and an awareness of the terms 

of international commerce. South Africa’s membership of the World 

Trade Organization (WTO) and it being the founding member of the 

General Agreement on Tariffs and Trade, also provide impetus to local 

exporters. 

The country’s membership of the Southern African Development 

Community (SADC), which consists of 14 states and provides 

access to a population of 140 million, is one of the platform’s key 

connections to a successful export operation wishing to venture out 

into global exports. 

The port of East London 

is South Africa’s only 

remaining river port and 

is situated at the mouth 

of the Buffalo River in the 

Eastern Cape province. The car terminal has an annual capacity of over 50,000 

vehicles a year and is highly mechanised and computerised. 

Our Export Network Forums and 

Exporters’ Clubs offer network 

opportunities to prospective and existing 

exporters to discuss any export issues or 

concerns with logistics service providers 

and industry specialists. 

46



Coega IDZ 

The Coega Industrial Development Zone near Port 

Elizabeth is a purpose-built industrial and commercial 

park covering 11 000 hectares – the size of a small city. 

The Coega Development Corporation (CDC) provides a 

highly competitive environment for companies positioning 

themselves to take maximum advantage of the next upturn 

in the global economy. 

Ideally located for global manufacturers, logistics suppliers 

and business process outsourcing companies, the Coega 

IDZ is situated 20 km east of Port Elizabeth on the southeastern 

Indian Ocean coast of South Africa. It is served by 

the new deepwater port of Ngqura, which is the most modern harbour in Africa. There are also direct rail and 

road links from the IDZ into the Southern African land networks, while the nearby Port Elizabeth airport has 

daily flights linking travellers to the four corners of the globe. 

As part of the Nelson Mandela Metropolitan Municipality, which includes the city of Port Elizabeth and 

towns of Uitenhage and Despatch, Coega offers a modern, cosmopolitan lifestyle with world-class education 

and medical facilities, as well as a relaxed Indian Ocean lifestyle surrounded by ‘big five’ reserves, the 

Baviaanskloof World Heritage site and more. 

47



A bird’s eye view of the Eastern Cape 

Eastern Cape From Above 

Aerial photographic exhibition 

Europeans were drawn to expressive photographic imagery of the 

Bathurst “Big Pineapple”, the Wild Coast’s Hole-in-the-Wall, Algoa 

Bay’s Bird Island and our very own bottle nosed dolphins. The 

“Eastern Cape From Above” was the Corporation’s third photographic 

exhibition in Europe which took place in the review period. 

The exhibition was received with open arms in Germany’s Lüneburg 

and Munich Airport. Since then, the exhibition has stirred the intrigue 

of Swedes and Belgians viewing the display in public areas both 

indoors and out. 

The tremendous interest generated by the 40 aerial photographs 

in the display indicates the show’s vivid illustration of the Eastern 

Cape’s scenic beauty which remains one of its most popular features. 

Other attractions that got people talking were the province’s yearround 

sunny climate, abundant wildlife, rich heritage and tapestry of 

fascinating cultures. 

One photograph that drew attention was the aerial view of the 2010 

World Cup stadium in Port Elizabeth which is able to accommodate 

45,000 spectators at any one time. 

The objective of the exhibition was to create awareness about the 

Eastern Cape and to highlight its investment, trade and tourism 

potential. Because the impact of such a project is primarily on its 

audiences’ minds and emotions, it is one difficult to measure in 

statistical terms. The response received by the Corporation to this 

initiative, however, has been very complimentary indeed. The South 

African Airway’s office in Munich has reported a “skyrocketing” 

increase in foreign interest in the country since the exhibition. 

Co-incidence? We think not. 

Photographic feast 

“Eastern Cape from Above” attracted up to 

28 000 visitors per week in host countries 

Germany, Belgium, Portugal, Sweden and France 

from May to November 2009. The exhibition 

profiled 40 aerial views of the Eastern Cape, 

home of South African leaders Nelson Mandela 

and Thabo Mbeki. 

ECDC co-ordinated the exhibition on behalf of 

its provincial government. Josef Neumeier, head 

of ECDC’s investment promotions unit says 

exhibiting in Germany, amongst others, makes 

sound business sense. “Germany is an important 

trading partner for the Eastern Cape. Our 

province is home to Volkswagen and Mercedes- 

Benz, two German giants who have invested 

heavily in our automotive sector. We were 

exceptionally pleased to include aerial views of 

these manufacturing plants in our exhibition.” 

“Our province’s scenic beauty is its most 

popular feature. This is followed by our 

year-round sunny climate, our rich 

abundance of wildlife, our 

malaria-free status and 

our tapestry of fascinating 

cultures,” says Neumeier. 

48 

The “Eastern Cape from Above” 

photographic exhibition showcased 

the Eastern Cape at Munich Airport in 

Germany in mid-2009. From there it 

moved to Portugal, Belgium, Sweden 

and France.



The atmosphere of the Development 

Services Unit 

The year of review has seen a vigorous capacity development phase 

taking place within the unit. This has taken place in line with a move 

across the Corporation to eliminate any inefficiency that has resulted 

from years of fragmented strategic oversight. 

This initiative has been strategic for the units under the Development 

Services Unit, especially the Spatial and Rural Development Unit, 

where a renewed focus has generated confidence in stakeholders 

as ECDC now brings a tangible value-add with its involvement in its 

various developmental projects. 

The development of this capacity has taken place 

using training interventions in the following areas: 

1 Lüneburg – Germany 

2 Munich airport – Germany 

20,000 visitors counted over two weeks 

• The discipline of project management in the area of investment 

and trade promotion 

• Total Quality Management training 

• Due diligence studies and financial sustainability assessments 

of proposed projects – a joint training effort with the two 

industrial development zones (IDZs) in the province, the East 

London and Coega IDZs 

3 Porto Airport – Portugal 

4 Gent – Belguim 

30,000 visitors counted over two weeks 

5 Gothenburg – Sweden 

6 La Rochelle – France 

The spatial and rural development team within the unit has achieved 

a dramatic improvement in their performance since the training took 

place. 

The Development Services Unit has experienced a notable change in 

morale as people have been capacitated to perform responsibilities 

that are well communicated and closely managed by an established 

strategic management team. 

As unit members have realised their identities within the 

organisation, an environment of inactivity has been supplanted by 

one of a greater sense of urgency and desire to achieve. 

Europe 

49

51 


Building for the 

future 

Simthembile Nkunzi, Owner, Nozulu Civils 

Simthembile Nkunzi’s business is booming. Nozulu Civils 

handles civil construction, water and sanitation projects 

and general construction for a number of clients all over 

South Africa, including government departments, industrial 

development zones and some private sector projects. 

ECDC has assisted Nozulu Civils in holding staff workshops 

and “has instilled a sense of professionalism in our business,” 

says Nkunzi. Simply put, ECDC has enabled Nozulu Civils 

to grow.


Board of directors 

Background and previous 

experience 

Charting a new course for ECDC is a task that 

requires the most astute of minds, and the 

availability of those minds to continuously steer 

the “ship” in the direction it must go to fulfil its 

mission. It is no secret that the leadership of the 

Corporation, at board level, has experienced some 

volatility over the past twelve months. However, a 

newly appointed board is firmly in place, and we 

are now poised to launch the Corporation into a 

medium term growth phase that will establish it as 

the visionary steward of development assets in the 


Dr Somadoda Fikeni (below right) 

Fikeni held the position of Chief Operating Officer for the National 

Heritage Council of South Africa. He has received several awards 

and fellowships for academic performance and community 

building. Fikeni was the founder of the former University of 

Transkei’s RDP unit, which evolved into the Rural Research and 

Development Institute. He serves as Chairperson of the Walter 

Sisulu University council. 

Mr John Cerff (below left) 

Cerff’s previous work experience at ECDC allows Cerff an 

understanding of our business, and he brings a wealth of auditing 

and accounting knowledge to his post on the board of ECDC. He 

currently serves as Chief Financial Officer at Amathole Economic 

Development Agency (AEDA, trading as ASPIRE). 

Mr Bhekokuhle Sibiya (above) 

Sibiya’s varied education, involvement in development 

programmes and leadership positions around the 

world bring much to his position of Chairperson 

at ECDC. As former founding Chief Executive 

Officer of Business Unity South Africa (BUSA), he is 

also Chairperson of Smartvest, Brait South Africa, 

eValuations and Born Free Investments, and serves on 

the boards of Inkezo Land Company, Famous Brands, 

Tiger Brands and Pretoria Portland Cement (PPC). 

Ms Nothemba Mlonzi 

(not available at time of photograph) 

With a background as an attorney, and with 

stints as Acting Judge in the Cape Town 

and Johannesburg High Courts, Mlonzi has 

served on the boards of the South African 

Civil Aviation Authority, the South African 

National Energy Research Institute and 

as Chairperson of Amatola Water Board. 

She is currently MD of Econ Oil & Energy, 

Director of the Agricultural Research 

Institute, Chairperson of Fort Cox College 

of Agriculture and a director of Mlonzi & 

Company legal practice. 

52


Board of directors 

Mr Mxolisi D Matshamba (above left) 

Prior to joining ECDC as Chief Executive Officer in 

2006, Matshamba worked as acting Chief Executive 

Officer of Trade and Investment South Africa, a 

division of the Department of Trade and Industry. With 

an accounting background and experience in trade 

promotion, Matshamba is well positioned to lead 

ECDC. He has worked for British Petroleum as audit 

relationship manager and business performance 

manager. Matshamba serves on the East London 

Industrial Development Zone board and as CEO, he 

holds an ex officio position on ECDC’s board. 

Mr Mninawe Pepi Silinga (above centre) 

Silinga is currently the Chief Executive of Coega 

Development Corporation. He is a member of the 

Institute of Directors, SA and UK, South African 

Institute of Civil Engineers and Project Management 

Institute and a Fellow of the South African Academy 

of Engineers. He also serves in the capacity of 

Non-Executive Chairperson of Agrement SA as well 

as Chairperson of the Council of University of Fort 

Hare. He has worked in the NGO sector, private civil 

engineering consulting fraternity and the public 

sector for the past two decades. He has experience 

in corporate governance responsibilities of boards, 

having served on various public sector boards in 

different capacities. 

Professor Sipho Buthelezi (above right) 

Buthelezi is the director of the School of Public Management and 

Development at the University of Fort Hare. He has a strong research 

background and has published extensively in areas which include 

public enterprise, globalisation and land and agrarian activities in 

Africa. Buthelezi is a board member of the History Advisory Panel of 

Freedom Park in Gauteng. 

Mr Gaster Sharpley (not available at time of photograph) 

Sharpley’s vast experience in authoring books on small business 

development and his own business ownership history contribute to 

his knowledge on local economic development, social facilitation 

and development, business law, local government legislation and 

cooperative governance. He has served on the Mthatha City Council 

as Executive Chairperson, and was Municipal Manager of Buffalo City 

Municipality. 

Ms Nomawethu Mhlaba (not available at time of photograph) 

With experience of having owned and run her own business 

(Nomawethu Trading), Mhlaba also brings her solid accounting 

knowledge to ECDC. She is currently a director of Yithethe ma-Afrika 

Promotions in Port Elizabeth. 

53

55 


Respect the pineapple 

Patrick Ncita, Production Supervisor, 

Summerpride Foods, East London 

The Eastern Cape is known as pineapple country where farmers whose 

relationship with the land and the pineapple goes back to the 1800s, when it 

was first discovered that conditions are perfect to grow succulent and nutritional 

pineapples, a tradition that has been maintained to this day. Summerpride Foods 

produces more than 200 different canned pineapple products, with the focus on 

juice concentrate, which is packed without any form of preservatives in frozen 

and aseptic form. Summerpride’s concentrate is sought after as a preferred base 

for many tropical fruit juices and blends throughout the world, and products are 

shipped to markets in Europe, North and South America, the Middle East, Africa 

and Australasia. 

“Summerpride is an extension of its farmers, who are shareholders in the 

processing facility,” says Patrick Ncita, Production Supervisor at Summerpride: 

the company is owned by its growers, staff and agents. The business receives 

a consistent supply of 115,000 tons of fruit supplied by approximately 38 

accredited growers who stretch from Komga 90 kilometres north of East 

London to Alexandria 200km to the south, and was formed in 1994 when its 

growers took over the factory from the previous owners and set about 

improving it. 

The investments made over the past five years, with the help of ECDC loan 

finance, are starting to bear fruit and Summerpride is now regarded as one of the 

top quality pineapple producers in the world. In addition, every effort is made 

to maintain the unique pineapple tradition of the Eastern Cape, with a sense of 

pride, integrity and total commitment. Anthony Albers of Summerpride says, 

“Simply put, without the assistance of ECDC this project would never have 

got off the ground. They have played a true developmental role and we cannot 

speak highly enough of them. Their staff are committed and skilled, and they 

are a pleasure to deal with.”


Financial reports 

and Annual Financial Statements 

59 | Auditor-General’s report 

Report of the Auditor-General to the Eastern Cape provincial legislature 

on the Eastern Cape Development Corporation and group financial 

statements and performance information of ECDC for the year ended 

31 March 2009. 

62 | Audit Committee’s report 

Report of the Audit Committee of ECDC required by Treasury 

regulations 27.1.7 and 27.1.10 (B) and (C) in terms of the Public 

Finance Management Act 1 of 1999, as amended. 

64 | Directors’ report 

The directors of ECDC are required to maintain adequate accounting records and are 

responsible for the content and integrity of the annual financial statements and related 

financial information included in this Review. They are responsible to ensure that the 

annual financial statements fairly represent the state of affairs of ECDC as at the end of 

the financial year, and the results of its operations and cash flows, in conformity with 

South African Statements of Generally Accepted Accounting Practice. 

| Consolidated Annual Financial Statements 

68 | Balance sheet 

69 | Income statement 

70 | Statement of changes in equity 

74 | Cash flow statement 

75 | Accounting policies 

83 | Notes to the consolidated Annual Financial Statements 

107 | Supplementary information 

57


Auditor-General’s 

report 

REPORT OF THE AUDITOR-GENERAL TO THE EASTERN CAPE PROVINCIAL LEGISLATURE ON THE CORPORATION 

AND GROUP FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION OF EASTERN CAPE DEVELOPMENT 

CORPORATION FOR THE YEAR ENDED 31 MARCH 2009 

REPORT ON THE FINANCIAL STATEMENTS 

Introduction 

1. I have audited the accompanying group financial statements and financial statements of the Eastern Cape 

Development Corporation which comprise the consolidated and separate balance sheet as at 31 March 2009, 

consolidated and separate income statement, consolidated and separate statement of changes in equity and 

consolidated and separate 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 62 to 106. 

The accounting authority’s responsibility for the financial statements 

2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in 

accordance with the South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) 

and in the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA), the Eastern 

Development Corporation Act, 1997 (Act No. 2 of 1997), (ECDCA) and the Companies Act of South Africa and for 

such internal control as the accounting authority determines is necessary to enable the preparation of financial 

statements that are free from material misstatement, whether due to fraud or error. 

The Auditor-General’s responsibility 

3. As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with section 4 of the Public 

Audit Act, 2004 (Act No. 25 of 2004) (PAA) my responsibility is to express an opinion on these financial statements 

based on my audit. 

4. I conducted my audit in accordance with the International Standards on Auditing read with General Notice 616 

of 2008, issued in Government Gazette No. 31057 of 15 May 2008. Those standards require that I compiy with 

ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial 

statements are free from material misstatement. 

5. 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 judgement, 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. 

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

Opinion 

7. In my opinion the financial statements present fairly, in all material respects, the consolidated and separate financial 

position of the Eastern Cape Development Corporation as at 31 March 2009 and its consolidated and separate 

financial performance and its consolidated and separate cash flows for the year then ended, in accordance with the 

South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) and in the manner 

required by the PFMA and the Companies Act of South Africa. 

Emphasis of matter 

Without qualifying my opinion, I draw attention to the following matters on which I do not express a qualified opinion: 

Highlighting critically important matters presented or disclosed in the financial statements 

8. Freehold title was held for the majority of investment properties disclosed in note 2 to the financial statements. 

However, properties with a combined value of R83,5 million were disclosed as being owned by government, tribal 

authorities and municipalities. 

59


Auditor-General’s report 

9. Although the Corporation’s right to occupy properties to the value of R83,5 million has not been laid down in writing, 

it derives economic benefits from the use thereof and carries the risks that are incidental to ownership. 

Other matters 

Without qualifying my opinion, I draw attention to the following matters that relate to my responsibilities in the audit 

of the financial statements: 

Unaudited supplementary schedules 

The supplementary information set out on pages 107 to 110 do not form part of the financial statements and is 

presented as additional information. I have not audited these schedules and accordingly I do not express an opinion 

thereon. 

Key governance responsibilities 

10. The PFMA tasks the accounting authority with a number of responsibilities concerning financial and risk 

management and internal control. Fundamental to achieving this is the implementation of key governance 

responsibilities, which I have assessed as follows: 

Number Matter Yes No 

Clear trail of supporting documentatlon that is easily available and provided In a tlmely manner 

1. No significant difficulties were experienced during the audit concerning delays or the availability 

of requested information. 

Quality of financial statements and related management informatlon 

2. The financial statements were not subject to any material amendments resulting from the audit. 

3. The annual report was submitted for consideration prior to the tabling of the auditor’s report. 

Timeliness of financial statements and management information 

4. The annual financial statements were submitted for auditing as per the legislated deadlines 

[section 55 of the PFMA] 

Availability of key officials during audit 

5. Key officials were available throughout the audit process. 

Development and compliance with risk management, effective internal control and governance 

practices 

6. Audit committee 

• The corporation had an audit committee in operation throughout the financial year. 

• The audit committee operates in accordance with approved, written terms of reference. 

• The audit committee substantially fulfilled Its responsibilities for the year, as set out in 

section 77 of the PFMA and Treasurv Regulation 27.1.8. 

7. Internal audit 

• The Corporation had an internal audit function in operation throughout the financial vear. 

• The Internal audit function operates in terms of an approved internal audit plan. 

• The internal audit function substantially fulfilled its responsibilities for the year, as set out in 

Treasury Regulation 27.2. 

8. There are no significant deficiencies in the design and implementation of internal control in 

respect of financial and risk management. 

9. There are no significant deficiencies in the design and Implementation of internal control in 

respect of compliance with applicable laws and regulations. 

10. The information systems were appropriate to facilitate the preparation of the financial 

statements. 

11. A risk assessment was conducted on a regular basis and a risk management strategy, which 

includes a fraud prevention plan, is documented and used as set out in Treasury Regulation 27.2. 

12. Powers and duties have been assigned, as set out in section 56 of the PFMA. 

60


Auditor-General’s report 

Number Matter Yes No 

Follow-up of audit findings 

13. The prior year audit findings have been substantially addressed. 

14. SCOPA/Oversight resolutions have been substantially implemented. 

Issues relating to the reporting of performance Information 

15. The information systems were appropriate to facilitate the preparation of a performance report 

that is accurate and complete. 

16. Adequate control processes and procedures are designed and implemented to ensure the 

accuracy and completeness of reported performance information. 

17. A strategic plan was prepared and approved for the financial year under review for purposes 

of monitoring the performance in relation to the budget and delivery by the Eastern Cape 

Development Corporation against its mandate, predetermined objectives, outputs, indicators and 

targets (Treasury Regulation 29.1). 

18. There is a functioning performance management system and performance bonuses are only paid 

after proper assessment and approval by those charged with governance. 

11. The financial reporting unit has adequate skills and competencies. However various material adjustments were 

affected after the submission of the financial statements that resulted from revisions of the material judgements and 

fair value measurement assessments as a result of the audit process. 

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS 

Report on performance information 

12. I have reviewed the performance information as set out in Eastern Cape Development Corporation’s Annual Report, 

pages 23 to 50. 

The accounting authority’s responsibility for the performance information 

13. The accounting authority has additional responsibilities as required by section 55(2)(a) of the PFMA to ensure that the 

annual report and audited financial statements fairly present the performance against predetermined objectives of 

the public entity. 

The Auditor-General’s responsibility 

14. I conducted my engagement in accordance with section 13 of the PAA read with General Notice 616 of 2008, issued 

in Government Gazette No. 31057 of 15 May 2008. 

15. In terms of the foregoing my engagement included performing procedures of an audit nature to obtain sufficient 

appropriate evidence about the performance information and related systems, processes and procedures. The 

procedures selected depend on the auditor’s judgement. 

16. I believe that the evidence I have obtained is sufficient and appropriate to report that no significant findings have 

been identified as a result of my audit. 

APPRECIATION 

17. The assistance rendered by the staff of the Eastern Cape Development Corporation during the audit is sincerely 

appreciated. 

East London 

31 July 2009 

Auditing to build public confidence 

61


Audit Committee’s 

report 

Report of the Audit Committee required by Treasury Regulations 27.1.7 and 27.1.10 (b) and (c) in 

terms of the Public Finance Management Act 1 of 1999, as amended. 

1. Overview 

We are pleased to present our report for the financial year ended 31 March 2009. 

1.1 Audit Committee members and attendance 

The Audit Committee consists of the members listed hereunder. As per its terms of reference, the committee is 

required to meet at least 5 times a year. During the year under review, 5 meetings were held. 

Name of member Period of membership Number of 

meetings attended 

J Njeke - Chairperson 1 April 2008 – 31 March 2009 4 

Prof S Buthelezi 1 April 2008 – 31 March 2009 4 

E Heynes 1 April 2008 – 31 March 2009 4 

T Nodada-Qhali 1 April 2008 – 31 March 2009 1 

R Nicholls 1 April 2008 – 31 March 2009 4 

1.2 Audit Committee responsibility 

The Audit Committee is a committee of the Board and has discharged its responsibilities accordingly in terms of 

section 51 (1) a (ii) of the PFMA and 27.1.8 of the Treasury Regulations. The Audit Committee adopted a formal 

terms of reference, has regulated its affairs in compliance with these terms of reference and has discharged its 

responsibilities contained therein. 

1.2.1 Effectiveness of internal control 

During the year various reports of the Internal Auditors as well as the Audit Report on the Annual Financial 

Statements and Management Letter of the Auditor General indicated that the system of internal control has 

shortcomings. The Audit Committee has noted these and based on the outcome of such reviews and the information 

provided by Management, the Audit Committee is of the opinion that the internal controls of the Corporation 

operated effectively throughout the year under review. 

The Audit Committee is also of the view that progress has been made with respect to the control environment, 

especially in view of the fact that the Corporation has achieved its third successive unqualified audit report. 

1.2.2 Risk management and governance 

A risk management framework and policy was adopted and approved by the Board during the current financial year. 

A process of enterprise wide risk management was implemented by the Corporation wherein risk assessments are 

conducted and updated on an annual basis by the Internal Audit function at both senior management and 

Board level. 

During the year the Corporation adopted and approved various policies and procedures to strengthen the control 

environment. The governance of the various management committees was also improved, with the adoption and 

approval of formal terms of references. 

1.2.3 Monthly and quarterly performance information 

The Audit Committee is satisfied with the content and quality of monthly and quarterly reports prepared and issued 

by the Corporation during the year under review. 

1.2.4 Internal audit 

The Audit Committee reviewed the activities of the internal audit function and has concluded the following: 

• the function is effective and that there were no unjustified restrictions or limitations; 

• the internal audit reports were reviewed at quarterly meetings, including its annual work programme, 

co-ordination with the external auditors, the reports of significant investigations and the responses of 

management to issues raised therein. 

62


Audit committee’s report 

1.2.5 External auditors 

The Auditor-General acted as the external auditors throughout the year. The Audit Committee reviewed the external 

auditors’ scope and work plan to ensure that key risk areas of the business were being addressed during the audit 

process. 

2. Evaluation of Annual Financial Statements 

The Audit Committee has: 

• reviewed and discussed with the Auditor-General and the Accounting Authority the audited annual financial 

statements to be included in the Annual Report; 

• reviewed the Auditor-General’s audit report, the management letter and management responses thereto; and 

• reviewed the significant adjustments resulting from the audit. 

The Audit Committee concurs and accepts the conclusions of the Auditor-General on the annual financial statements 

and is of the opinion that the audited financial statements be accepted and read together with the report of the 

Auditor-General and the Directors’ Report. The Audit Committee agrees that the adoption of the going concern 

premise is appropriate in preparing the annual financial statements. 

J Njeke 

Chairperson of the Audit Committee 

3 August 2009 

63


Directors’ 

report 

The directors have pleasure in presenting their report and the audited financial statements for the year ended 

31 March 2009. 

1. Nature of business 

1.1 Constitution 

Established in terms of section 2 of the Eastern Cape Development Corporation Act, 1997 (Act No. 2 of 1997), the 

Eastern Cape Development Corporation (the Corporation) is a Provincial Government Business Enterprise listed in 

Schedule 3 D of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (the PFMA). The Corporation became 

operational with effect from 1 April 2001. In terms of the PFMA the Board of Directors is the accounting authority of 

the Corporation. 

1.2 Objectives 

The objectives of the Corporation are to plan, finance, market, promote and implement the development of the 

Province of the Eastern Cape and its people in the fields of commerce, industry, transport, agriculture and finance. 

The objectives set out above are attained through the following: 

• Existing business support; 

• Creating opportunities for new business; 

• Growing and sustaining existing, and developing new, markets; 

• Improving access to finance; and 

• Ensuring that business development is supported by skills, infrastructure and policies. 

Strategic objectives and activities were set for the Corporation to ensure the long term sustainability of the 

Corporation, which include: 

• Establishing operational and budgetary alignment with the Department of Economic Development and 

Environmental Affairs; 

• Maximising Operating Income to ensure self sustainability of the Corporation; 

• Realising return from Investment Assets; 

• Providing efficient, effective and integrated development and support services to SMMEs; 

• Growing the Loan Book with sustainable businesses; 

• Achieving expenditure ratios that are appropriate for the Corporation; 

• Increasing the rate of debt collections to acceptable norms; 

• Facilitating new investments in priority sectors in line with the Provincial Growth and Development Programme; 

• Improving the Return on Assets to levels appropriate to the Corporation as a Development Finance Institution; 

• Human Resource Management; and 

• Finalising the Corporation’s appropriate position of its shareholding in subsidiaries. 

For the purpose of achieving its development mandate, the Corporation focuses on the provision of finance 

and support expertise to all businesses types, including small, medium and micro enterprises (SMMEs) and 

stimulation of domestic and foreign direct investment, and will continue facilitating high economic development 

impact projects. The Corporation has a clearly defined role of improving access to finance for business with an 

economic development impact and in improving entrepreneurial capacity for long term economic development and 

sustainability. 

The Corporation also renders economic development services in the areas of investment promotion, export 

promotion and support to municipalities and local authorities in the Eastern Cape Province. 

2. Development Loans Advanced 

The total disbursement of development loans for the current year amounted to more than R310 million. The bulk of 

these development loans have been disbursed to SMMEs and are geographically spread throughout the province of 

the Eastern Cape. Striking a healthy balance between obtaining a commercial return and at the same time effecting 

sustainable socio-economic development impact remains a challenge due to perceptions in the market that 

Development Finance Institutions are “soft” lenders. This perception and expectation in the market provides its own 

challenges in the area of debt collection. 

64


Directors’ report 

3. Investment Properties 

The Corporation continued to improve the integrity of the Asset Register by integrating the information from the 

rental billing system onto the fixed asset register. The tenant and asset verification exercise which commenced in 

December 2008 is planned for completion during the 2009/10 financial year. 

The Corporation continued with the implementation of the Asset Conversion Policy, which consists of disposal 

of residential properties. The global economic climate has affected rental collection and the sale of properties as 

financial institutions reviewed their lending criteria. Delays were experienced in transferring some of the properties 

to purchasers, as well as commencement with identified development projects because of land claims. 

4. Post balance sheet events review 

The directors are not aware of any material matter or circumstance arising since the end of the financial year. 

5. Authorised and issued share capital 

The authorised share capital of the Corporation remained unchanged at R1 billion worth of ordinary shares. 

Of this the Corporation issued R298, 683 million worth of ordinary shares to the Provincial Government of the Eastern 

Cape (Department of Economic Development and Environmental Affairs). The issued share capital is made up of 

149, 342 million “A” shares of R1 each and 149, 341 million “B” shares of R1 each. 

6. Financial Results 

The results of the Corporation and the group are disclosed in the annual financial statements. 

7. Policy Directives 

During the year under review, no new policy directives were received by the Corporation from the Member of the 

Executive Council responsible for the Department of Economic Development and Environmental Affairs. 

8. Dividends 

The directors of Transkei Share Investments (Pty) Ltd, a subsidiary, declared a dividend of R31,9 million, including 

Secondary Tax on Companies and R783,000 due to minority shareholders. 

9. Interest bearing borrowings 

No new borrowings were incurred during the year. The corporation continued to reduce its existing borrowings with 

the Development Bank of Southern Africa Limited. 

10. Subsidiaries 

Financial information in respect of interests of the Corporation in subsidiaries and associates is set out under 

Supplementary Information (1). During the financial year, funding agreements were concluded with the following 

subsidiaries in order to improve oversight and governance: 

• East London Industrial Development Zone (Proprietary) Limited 

• Automotive Industrial Development Company (Proprietary) Limited 

65



11. Directors’ Responsibilities for the financial statements for 

the year ended 31 March 2009 

The directors are required, in terms of the Public Finance Management Act, 1999 (Act No. 1 of 1999, as amended), 

and the Eastern Cape Development Corporation Act, 1997 (Act No. 2 of 1997), to maintain adequate accounting 

records and are responsible for the content and integrity of the annual financial statements and related financial 

information included in this report. The directors are further responsible to ensure that the annual financial 

statements fairly represent the state of affairs of the Corporation as at the end of the financial year, and the results 

of its operations and cash flows for the period then ended, in conformity with South African Statements of Generally 

Accepted Accounting Practice. The external auditors are engaged to express an independent opinion on the annual 

financial statements. 

The Corporation’s annual financial statements are prepared in accordance with South African Statements of 

Generally Accepted Accounting Practice and are based upon appropriate accounting policies consistently applied 

and supported by reasonable and prudent judgements and estimates. 

Acknowledging their responsibility for the system of internal control established by the Corporation, the Directors 

place considerable importance on maintaining a strong control environment. The Directors set standards for internal 

control aimed at reducing the risk of error or loss in a cost effective manner. These standards include proper 

delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate 

segregation of duties to ensure an acceptable level of risk. These controls were monitored as far as reasonably 

possible throughout the Corporation and all employees are required to maintain the highest ethical standards 

in ensuring the Corporation’s business is conducted in a manner that in all reasonable circumstances is above 

reproach. The risk management focus in the Corporation is on identifying, assessing, managing and monitoring 

all known forms of risk across the Corporation. It is acknowledged that operating risk cannot be fully eliminated. 

However, the Corporation endeavours to minimise it by ensuring that appropriate infrastructures, controls, systems 

and ethical behaviour are applied within predetermined procedures and constraints. 

Based on the information and explanations provided by Management, the Directors are of the opinion that the 

system of internal control provides reasonable assurance that the financial records may be relied upon for the 

preparation of annual financial statements. Any system of internal control can, however, provide only reasonable, and 

not absolute, assurance against material misstatement or loss. 

12. Going Concern Statement 

Having reviewed the Corporation’s cash flow forecast for the year to 31 March 2010 and, in the light of this review 

and current financial position, the Directors are satisfied that the Corporation has, or has access to, adequate 

resources to continue its operational existence for the future. 

66



13. Directors and Secretary 

The details of the Corporation’s directors and Secretary are reflected in the Corporate Governance section of this 

Annual Report. The directors’ and Audit Committee fees were paid as follows: 

Fees 

Board meeting 

Fees 

Audit committee 

Nkuhlu, W L – Chairperson 102,500 - 102,500 

Buthelezi, S 38,500 22,000 60,500 

Fikeni, S 76,500 - 76,500 

Ndabeni, M 63,000 - 63,000 

Nonkwelo, L 58,500 - 58,500 

Nodada-Qhali, T 33,000 2,000 35,000 

Pakati, X 51,500 - 51,500 

Tabata, S 104,000 - 104,000 

Nicholls, RG - 19,000 19,000 

Njeke, JJ 13,000 43,000 56,000 

Heynes, E 20,500 22,000 42,500 

Grand total 561,000 108,000 669,000 

Total 

Mr Bhekokuhle Sibiya 

Mr Mxolisi D Matshamba 

Chairperson of the Board 

Chief Executive Officer 

30 July 2009 30 July 2009 

67


Balance sheet 

Consolidated Annual Financial Statements 

for the year ended 31 March 2009 

Group 

Company 

Note(s) 2009 

R’ 000 

Assets 

Non-current assets 

Investment property 2 927,336 712,839 511,960 481,389 

Property, plant and equipment 3 540,219 566,728 19,054 19,272 

Investments in subsidiaries 4 - - 26,119 26,071 

Investments in associates 5 45,780 6,094 36,985 3,000 

Loans to group companies 6 - 33,765 26,412 55,297 

Investments 7 151,847 144,173 151,153 143,450 

Deferred tax 8 1,120 1,125 - - 

Loans advanced 9 111,084 56,190 111,069 56,177 

1,777,386 1,520,914 882,752 784,656 

Current assets 

Current tax receivable 1,913 246 - - 

Trade and other receivables 10 63,024 34,899 32,140 14,322 

Loans advanced 9 103,649 52,079 103,649 52,079 

Cash and cash equivalents 11 452,084 435,364 254,500 304,110 

620,670 522,588 390,289 370,511 

Total assets 2,398,056 2,043,502 1,273,041 1,155,167 

Equity and Liabilities 

Equity - equity attributable to equity holders of parent 

Share capital 12 298,683 270,870 298,683 270,870 

Reserves 13 741,450 700,039 722,415 680,450 

Accumulated loss (16,504) (36,799) (52,724) (81,354) 

Minority interest 3,454 6,392 - - 

1,027,083 940,502 968,374 869,966 

Liabilities 

Non-current liabilities 

Loans from group companies 6 - - 27,771 56,623 

Interest bearing borrowings 14 16,139 17,601 16,080 17,601 

Retirement benefit obligation 15 16,004 10,756 16,004 10,756 

Deferred income 16 526,931 675,689 - - 

Deferred tax 8 - 1,925 - - 

559,074 705,971 59,855 84,980 

Current liabilities 

Interest bearing borrowings 14 1,495 1,483 1,483 1,483 

Current tax payable - 4,260 - - 

Trade and other payables 17 100,699 58,856 29,678 23,633 

Deferred income 16 520,385 188,643 30,508 37,495 

Project grants 18 189,320 143,787 183,143 137,610 

811,899 397,029 244,812 200,221 

Total liabilities 1,370,973 1,103,000 304,667 285,201 

Total equity and liabilities 2,398,056 2,043,502 1,273,041 1,155,167 


R’ 000 


R’ 000 


R’ 000 

68


Income statement 



Group 

Company 


R’ 000 

Revenue 19 94,572 92,973 70,432 72,211 

Other income 20,329 13,781 18,698 11,225 

Government grants 147,127 110,270 68,552 54,094 

Operating expenses (301,481) (250,311) (201,448) (179,208) 

Operating loss 20 (39,453) (33,287) (43,766) (41,678) 

Investment revenue 22 46,490 32,272 74,407 32,573 

Fair value adjustments 23 46,771 61,243 41,965 49,870 

Income from equity accounted investments 2,701 1,469 - - 

Gain on non-current assets held for sale 

or disposal groups 


R’ 000 


R’ 000 


R’ 000 

1,203 - - - 

Finance costs 24 (1,579) (2,672) (2,011) (2,850) 

Profit before taxation 56,133 59,025 70,595 37,915 

Taxation 25 3,633 (1,649) - - 

Profit for the year 59,766 57,376 70,595 37,915 

Attributable to 

Equity holders of the parent 58,578 57,352 70,595 37,915 

Minority interest 1,188 24 - - 

69


Statement of changes in equity 



group 

Share capital 

Fair value adjustment 

assets available-forsale 

reserve 

Other NDR 

R’ 000 R’ 000 R’ 000 

Open balance as previously reported 239,373 - 572,910 

Adjustments 

Prior year adjustments - - - 

Balance at 01 April 2007 as restated 239,373 - 572,910 

Fair value gains transferred - - 53,946 

Financial assets - 74,173 - 

Duplicate property derecognised - - (750) 

Reversal of loans - - (240) 

Net income (expenses) recognised directly in equity - 74,173 52,956 

Profit for the year - - - 

Total recognised income and expenses for the year - 74,173 52,956 

Issue of shares 31,497 - - 

Correction of tax provision - - - 

Change in degree of controll - - - 

Total changes 31,497 74,173 52,956 

Balance at 01 April 2008 as restated 270,870 74,173 625,866 

Changes in equity 

Fair value gains - - 41,411 

Net income (expenses) recognised directly in equity - - 41,411 


Total recognised income and expenses for the year - - 41,411 


Change in degree of control - - - 

Prior period correction - - - 

Dividends paid to minority - - - 

Total changes 27,813 - 41,411 

Balance at 31 March 2009 298,683 74,173 667,277 

70



Total reserves Accumulated loss Total attributable to 

equity holders of the 

group/company 

Minority interest 

Total equity 

R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 

572,910 (39,024) 773,259 6,371 779,630 

- (1,273) (1,273) - (1,273) 

572,910 (40,297) 771,986 6,371 778,357 

53,946 (53,946) - - - 

74,173 - 74,173 - 74,173 

(750) - (750) - (750) 

(240) - (240) - (240) 

127,129 (53,946) 73,183 - 73,183 

- 57,352 57,352 24 57,376 

127,129 3,406 130,535 24 130,559 

- - 31,497 - 31,497 

- 92 92 - 92 

- - - (3) (3) 

127,129 3,498 162,124 21 162,145 

700,039 (36,799) 934,110 6,392 940,502 

41,411 (42,361) (950) - (950) 

41,111 (42,361) (950) - (950) 

- 58,578 58,578 1,188 59,766 

41,411 16,217 57,628 1,188 58,816 

- - 27,813 - 27,813 

- - - (48) (48) 

- 3,295 3,295 (3,295) - 

- 783 783 (783) - 

41,411 20,295 89,519 (2,938) 86,581 

741,450 (16,504) 1,023,629 3,454 1,027,083 

71



corporation 

Share capital 

Fair value adjustment 

assets available-forsale 

reserve 

Other NDR 

R’ 000 R’ 000 R’ 000 

Balance at 01 April 2007 239,373 - 559,892 



Financial assets - 74,180 - 

Duplicate property derecognised - - (750) 

Loans reversed - - (240) 

Net income (expenses) recognised directly in equity - - - 


Total recognised income and expenses for the year - 74,180 46,378 


Total changes 31,497 74,180 46,378 

Balance at 01 April 2008 270,870 74,180 606,270 



Net income (expenses) recognised directly in equity - - 41,965 


Total recognised income and expenses for the year - - 41,965 


Total changes 27,813 - 41,965 

Balance at 31 March 2009 298,683 74,180 648,235 

72



Total reserves Accumulated loss Total attributable to 

equity holders of the 

group/company 

Minority interest 

Total equity 

R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 

559,892 (71,901) 727,364 - 727,364 

47,368 (47,368) - - - 

74,180 - 74,180 - 74,180 

(750) - (750) - (750) 

(240) - (240) - (240) 

120,558 (47,368) 73,190 - 73,190 

- 37,915 37,915 - 37,915 

120,558 (9,453) 111,105 - 111,105 

- - 31,497 - 31,497 

120,558 (9,453) 142,602 - 142,602 

680,450 (81,354) 869,966 - 869,966 

41,965 (41,965) - - - 

41,965 (41,965) - - - 

- 70,595 70,595 - 70,595 

41,965 28,630 70,595 - 70,595 

- - 27,813 - 27,813 

41,965 28,630 98,408 - 98,408 

722,415 (52,724) 968,374 - 968,374 

73


Cash flow statement 



Group 

Company 

CASH flow from operating activities 


R’ 000 

Cash used/generated in operations 26 187,037 211,183 (41,257) (29,668) 

Interest income 39,015 25,879 38,383 26,238 

Dividends received 137 100 - 44 

Finance costs (1,579) (2,672) (2,011) (2,850) 

Tax paid 27 (1,697) (299) - - 

Net cash from operating activities 222,913 234,191 (4,885) (6,236) 

CASH flow from investing activities 

Purchase of property, plant and equipment 3 (194,518) (160,553) (1,527) (1,742) 

Sale of property, plant and equipment 3 1,389 7 - - 

Sale of investment property 2 12,282 17,137 12,032 16,790 

Loans advanced to group companies - (5,723) (1,785) - 

Proceeds from loans from group companies - - - 3,928 

Purchase of financial assets (10,080) (4,490) (10,127) (4,493) 

Sale of financial assets 630 600 600 600 

Net loan disbursements (115,745) (7,624) (115,743) (7,623) 

Completion of investment property (178,777) - - - 

Completed infrastructure transferred to assets 206,810 - - - 

Net cash from investing activities (278,009) (160,646) (116,550) 7,460 

Cash flow from financing activities 

Proceeds on share issue 12 27,813 31,497 27,813 31,497 

Repayment of interest bearing borrowings (1,530) (1,421) (1,521) (1,421) 

Movement in project grants 45,533 (15,310) 45,533 (15,310) 

Net cash from financing activities 71,816 14,766 71,825 14,766 


R’ 000 


R’ 000 


R’ 000 

Total cash movement for the year 16,720 88,311 (49,610) 15,990 

Cash at the beginning of the year 435,364 347,053 304,110 288,120 

Total cash at end of the year 11 452,084 435,364 254,500 304,110 

74


Accounting Policies 



1. Presentation of Consolidated Financial Statements 

The consolidated annual financial statements of the Eastern Cape Development Corporation have been prepared in 

accordance with South African Statements of Generally Accepted Accounting Practice and in the manner required by 

the Public Finance Management Act (Act No. 1 of 1999, as amended) and the Eastern Cape Development Corporation 

Act. The consolidated annual financial statements have been prepared on the historical cost basis as modified by 

the revaluations of certain land and buildings, investment properties, available for sale financial assets and financial 

assets and financial liabilities (including derivative instruments) at fair value through profit or loss. 

The preparation of annual financial statements in conformity with South African Statements of Generally Accepted 

Accounting Practice requires the use of certain critical accounting estimates. It also requires management to 

exercise its judgment in the process of applying the group’s accounting policies. The areas involving a higher degree 

of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial 

statements are disclosed in note 1.15. 

The annual financial statements have been prepared in the Corporation’s functional currency, the South African 

Rand. 

These accounting policies are consistent with the previous period. 

Underlying assumptions 

The financial statements are prepared on the going concern basis, which assumes that the Corporation will continue 

in operation for the foreseeable future. The financial statements are prepared using accrual accounting whereby the 

effects of transactions and other events are recognised when they occur rather than when the cash is received or 

paid. 

Assets and liabilities and income and expenses are not offset unless specifically permitted by an accounting 

standard. Financial assets and financial liabilities are offset and the net amount reported only when a current legally 

enforceable right to set off the amounts exists and the intention is either to settle on a net basis or to realise the 

asset and settle the liability simultaneously. 

Changes in accounting policies are accounted for in accordance with the transitional provisions in the applicable 

standard. If no such guidance is given, they are applied retrospectively unless it is impracticable to do so, in which 

case the change is applied prospectively. Changes in accounting estimates are recognised in profit or loss in the 

period they occur. Prior period errors are retrospectively restated unless it is impracticable to do so, in which case 

they are applied prospectively. 

Recognition of assets and liabilities 

An asset, being a resource controlled by the entity as a result of a past event from which future economic benefits 

are expected to flow, is recognised when it is probable that the future economic benefits associated with it will 

flow to the Group and its cost or fair value can be measured reliably. A liability, being a present obligation of the 

Group arising from a past event the settlement of which is expected to result in an outflow of resources embodying 

economic resources from the Group, is recognised when it is probable that future economic benefits associated with 

it will flow from the Group and its cost or fair value can be measured reliably. 

Derecognition of assets and liabilities 

Financial assets or parts thereof are derecognised, i.e. removed from the balance sheet, when the contractual 

rights to receive the cash flows have been transferred or have expired or if substantially all the risks and rewards 

of ownership have passed. Where substantially all the risks and rewards of ownership have not been transferred or 

retained, the financial assets are derecognised if they are no longer controlled by the Group. However, if control is 

retained, financial assets are recognised only to the extent of the Group’s continuing involvement in those assets. 

All other assets are derecognised on disposal or when no future economic benefits are expected to flow to the 

Group from their use or disposal. Financial liabilities are derecognised when the relevant obligation has either been 

discharged or cancelled or has expired. 

Post-balance sheet events 

Recognised amounts in the financial statements are adjusted to reflect events arising after the balance sheet date 

that provide evidence of conditions that existed at the balance sheet date. Events after the balance sheet date that 

are indicative of conditions that arose after the balance sheet date are dealt with by way of a note. 

75


Accounting policies 

1.1 Investment property 

Investment property is held for long-term rental yields or for capital appreciation or both and comprises properties 

not occupied by the Group. Hotel buildings held by the Group are classified as investment property as the Group is 

not involved in the hotel operations. Investment properties are initially measured at cost, including transaction costs, 

and are subsequently stated at fair value determined by an independent sworn appraiser every third year. 

Fair value 

Subsequent to initial measurement investment property is measured at fair value. A gain or loss arising from a 

change in fair value is included in net profit or loss for the period in which it arises. Fair value gains and losses are 

transferred from accumulated surplus to reserves. 

1.2 Property, plant and equipment 

Property, plant and equipment are depreciated on a straight line basis at rates that will reduce the gross carrying 

amount to estimated residual values over the expected useful lives of the assets. Property, plant and equipment 

acquired under finance lease agreements are capitalised. Such assets are depreciated on a straight line basis at 

rates considered appropriate to reduce capitalised cost to estimated residual values over the expected useful lives 

of the assets. Lease finance charges are amortised over the duration of the finance leases using the effective interest 

rate method. 

The expected useful lives of the assets are as follows: 

Item 

Land 

Buildings and infrastructure 

Plant and machinery 

Furniture and fixtures 

Motor vehicles 

Office equipment 

IT equipment 

Computer software 

Other property, plant and equipment 

Average useful life 

Indefinite 

25-50 years 

4 years 

6-10 years 

4-5 years 

4-5 years 

3 years 

3 years 

5 years 

Land is not depreciated as it is deemed to have an infinite life. The residual value and the useful life of each asset are 

reviewed at each financial period-end. 

On initial recognition, property, plant and equipment is measured at cost. The cost of buildings and infrastructure 

includes all direct building costs, allocated overhead costs and capitalised borrowing costs. Subsequent to initial 

recognition, costs incurred to add to, replace part of, or perform major services are included in the cost of an item 

of property, plant and equipment. If a replacement cost is recognised in the carrying amount of an item of property, 

plant and equipment, the carrying amount of the replaced part is derecognised. 

Land and buildings and infrastructure are carried at revalued amounts. All other classes of property, plant and 

equipment are carried at cost. 

When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of the 

revaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying 

amount of the asset after revaluation equals its revalued amount. 

If an asset’s carrying amount is increased as a result of a revaluation, the increase is credited directly to equity under 

the heading of revaluation reserve. However, the surplus is recognised in profit or loss to the extent that it reverses 

a revaluation decrease of the same asset previously recognised in profit or loss. If an asset’s carrying amount is 

decreased as a result of a revaluation, the decrease is recognised in profit or loss. However, the decrease is debited 

directly to equity under the heading of revaluation reserve to the extent of any credit balance existing in the 

revaluation reserve in respect of that asset. 

Where the carrying amount of an asset is greater than its estimated market value, it is written down to its market 

value. 

76



1.3 Investments in subsidiaries 

Subsidiaries are entities, including unincorporated partnerships and companies without a share capital, that are 

controlled by the Group. Control exists where the Group has the power to govern the financial and operating policies 

of an entity so as to obtain benefits from its activities. 

Consolidated annual financial statements 

The consolidated annual financial statements incorporate the assets, liabilities, income, expenses and cash flows of 

the Corporation and its subsidiaries. The results of the subsidiaries acquired or disposed during the year are included 

from the date of acquisition or up to the date of disposal. Inter-company transactions and balances are eliminated on 

consolidation. 

Corporation annual financial statements 

In the Corporation’s separate annual financial statements, investments in subsidiaries are carried at cost less any 

accumulated impairment. 

The cost of an investment in a subsidiary is the aggregate of: 

• the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments 

issued by the Corporation; plus 

• any costs directly attributable to the purchase of the subsidiary. 

An adjustment to the cost of a business combination contingent on future events is included in the cost of the 

combination if the adjustment is probable and can be measured reliably. 

1.4 Investments in associates 

Associates are entities, including unincorporated partnerships and companies without a share capital, over which 

the Group exercises significant influence. 

Consolidated annual financial statements 

An investment in an associate is accounted for using the equity method, except when the asset is classified as 

held-for-sale in accordance with IFRS 5: Non-current assets held for sale and discontinued operations. Under the 

equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased 

to recognise the group’s share of the profits or losses of the investee after acquisition date. The use of the equity 

method is discontinued from the date the group ceases to have significant influence over an associate. 

Any impairment losses are deducted from the carrying amount of the investment in associate. 

Distributions received from the associate reduce the carrying amount of the investment. 

Profits and losses resulting from transactions with associates are recognised only to the extent of unrelated 

investors’ interests in the associate. 

The excess of cost of acquisition over the Group’s interest in the net fair value of an associate’s identifiable assets, 

liabilities and contingent liabilities is accounted for as goodwill, and is included in the carrying amount of the 

associate. 

The excess of the group’s share of the net fair value of an associate’s identifiable assets, liabilities and contingent 

liabilities over the cost is excluded from the carrying amount of the investment and is instead included as income in 

the period in which the investment is acquired. 

Corporation annual financial statements 

Associate companies are those companies in which the Corporation holds a long-term equity interest and over 

which it exercises a significant influence over its financial and operating policies, other than investments in 

companies acquired to protect advances or as a conduit for advances. 

The investments in associate companies are initially recorded at cost. Subsequent to initial recognition, the 

investment in the associate is carried at fair value as an available-for-sale financial asset in accordance with the 

accounting policy on financial assets. If fair value cannot be measured reliably, the investment is carried at cost. 

An appropriate provision is made where there is considered to be a permanent diminution in the value of the 

investment. 

77



1.5 Impairment of assets 

An impairment loss on an asset or cash-generating unit is the amount by which the carrying amount, i.e. the amount 

recognised on the balance sheet after deducting any accumulated depreciation and accumulated impairment losses, 

exceeds its recoverable amount. The recoverable amount is the higher of an asset’s or cash-generating unit’s fair 

value less costs to sell and its value in use. Value in use is the present value of future cash flows expected to be 

derived from an asset or cash-generating unit. 

At each reporting date the carrying amount of the tangible and intangible assets are assessed to determine whether 

there is any indication that those assets may have suffered an impairment loss. If any such indication exists, the 

recoverable amount of the cash-generating unit to which the asset belongs is estimated. Value in use is estimated 

taking into account future cash flows, forecast market conditions and the expected useful lives of the assets. 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the 

carrying amount is reduced to the higher of its recoverable amount and zero. Impairment losses are recognised in 

profit or loss. The loss is first allocated to reduce the carrying amount of goodwill and then to the other assets of the 

cash-generating unit. Subsequent to the recognition of an impairment loss, the depreciation or amortisation charge 

for the asset is adjusted to allocate its remaining carrying value, less any residual value, over its remaining useful life. 

If an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased 

to the revised estimate of its recoverable amount, limited to the carrying amount that would have been recognised 

had no impairment loss been recognised in prior years. A reversal of an impairment loss is recognised in profit or 

loss. Impairments to goodwill are not reversed in subsequent accounting periods. 

1.6 Financial instruments 

78 

Financial assets 

Recognition and measurement 

The group classifies its investments into the following categories: 

• financial assets at fair value through income; 

• available-for-sale financial assets; 

• loans and receivables; 

• held-to-maturity financial assets. 

a) Financial assets at fair value through profit or loss 

A financial asset is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling 

or repurchasing in the near term or if it is part of a portfolio of identified financial instruments that are managed 

together and for which there is evidence of a recent actual pattern of short-term profit-taking. 

b) Financial assets held-to-maturity 

Investments with fixed maturity that the Group has the intent and ability to hold to maturity are classified as 

investments held-to-maturity and are included within non-current assets. 

c) Loans and receivables 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in 

an active market. 

d) Available-for-sale financial assets 

Financial assets classified by the Group as available-for-sale financial assets are generally strategic investments held 

for an indefinite period of time, or financial assets that are not classified in the other three categories. 

Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes party 

to the contractual provisions of the instrument. 

Financial assets are initially measured at fair value plus transaction costs. However, transaction costs in respect of 

financial assets classified as at fair value through profit or loss are expensed. 

Investments classified as held to maturity are measured at amortised cost less any impairment losses recognised. 

Available-for-sale financial assets are measured at fair value with gains or losses being recognised directly in equity. 

Fair value, for this purpose, is market value if listed or a value arrived at by using appropriate valuation models 

if unlisted. Impairment losses are recognised in profit or loss when there is objective evidence that the asset is 

impaired. Any reversal of impairment losses is recognised directly in equity. 

Loans advanced are stated at the outstanding capital amount and accrued interest after deduction of amounts 

which, in the opinion of the directors, are required as specific impairment allowances. Specific impairment



allowances are made against identified doubtful advances. The aggregate impairment allowances, which are made 

during the year, less amounts released and recoveries of advances previously written off are charged to the income 

statement. Irrecoverable advances are written off as irrecoverable when the extent of the loss has been confirmed. 

Cash and cash equivalents are measured at fair value, with changes in fair value being recognised in profit or loss. 

Financial liabilities 

Financial liabilities are initially measured at fair value plus transaction costs. However, transaction costs in respect of 

financial liabilities classified as at fair value through profit or loss are expensed. 

Financial liabilities that are not designated on initial recognition as at fair value through profit or loss are measured at 

amortised cost. Financial liabilities that are designated on initial recognition as at fair value through profit or loss are 

measured at fair value, with changes in fair value being recognised in profit or loss. 

1.7 Share capital and equity 

Ordinary share capital, preference share capital or any financial instrument issued by the group is classified 

as equity when: 

• payment of cash, in the form of a dividend or redemption, is at the discretion of the group; 

• the instrument does not provide for the exchange of financial instruments under conditions that are potentially 

unfavourable to the group; 

• settlement in the group’s own equity instruments is for a fixed number of equity instruments at a fixed price; and 

• the instrument represents a residual interest in the assets of the group after deducting all of its liabilities. 

The group’s ordinary share capital is classified as equity. 

Consideration paid or received for equity instruments is recognised directly in equity. Equity instruments are initially 

measured at the proceeds received less incremental directly attributable issue costs. No gain is recognised in profit 

or loss on the purchase, sale, issue or cancellation of the group’s equity instruments. 

When the group issues a compound instrument, i.e. an instrument that contains both a liability and equity 

component, the equity component is initially measured at the residual amount after deducting from the fair value 

of the compound instrument the amount separately determined for the liability component. Transaction costs that 

relate to the issue of a compound financial instrument are allocated to the liability and equity components of the 

instrument in proportion to the allocation of proceeds. 

Distributions to holders of equity instruments are recognised as dividends within equity in the period in which they 

are payable. Dividends for the year that are declared after the balance sheet date are disclosed in the notes. 

1.8 Government grants and deferred income 

Government includes government agencies and similar bodies whether local, national or international. Government 

assistance is action by government designed to provide an economic benefit specific to an entity or range of 

entities qualifying under certain criteria. A government grant is assistance by government in the form of transfers of 

resources. 

When the conditions attaching to government grants have been met and the grants have been received, they 

are recognised in profit or loss on a systematic basis over the periods necessary to match them with the related 

costs. When they are for expenses or losses already incurred, they are recognised in profit or loss immediately. 

The unrecognised portion of project spend at the balance sheet date is presented as deferred income. No value is 

recognised for other government asistance. 

Government grants are recognised when there is reasonable assurance that: 

• the Group will comply with the conditions attaching to them; and 

• the grants will be received. 

Government grants are recorded as deferred income when they become receivable and are then recognised as 

income on a systematic basis over the periods necessary to match the grants with the related costs, which they are 

intended to compensate. 

Government grants related to assets, including non-monetary grants at fair value, are presented in the balance sheet 

by setting up the grant as deferred income. 

79



1.9 Project grants 

The grants received and associated expenditure are not included in the income statement of the Group but 

transferred directly to individual project fund accounts, which are reflected as a current liability. Interest received 

on the funds is accounted for in the fund account unless the Group is entitled thereto according to the agreement. 

The funds are applied to either specific expenditure as directed by the funder or in terms of the agreement with the 

funder. 

1.10 Provisions 

Provisions are recognised when: 

• the Group has a present obligation as a result of a past event; 

• it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; 

• a reliable estimate can be made of the obligation. 

The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. 

Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, 

the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if 

the Group settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the 

reimbursement shall not exceed the amount of the provision. 

Provisions are not recognised for future operating losses. 

When the Group has a contract that is onerous, the present obligation under the contract is recognised and 

measured as a provision. 

1.11 Revenue 

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts 

receivable for goods, services and operating lease income provided in the normal course of business, net of value 

added tax. 

Interest is recognised, in profit or loss, using the effective interest rate method. 

Operating lease income is recognised as income on a straight-line basis over the lease term or another systematic 

basis, if more representative of the time pattern of the user’s benefit. 

Dividends are recognised, in profit or loss, when the Group’s right to receive payment has been established. 

1.12 Employee benefits 

1.13 Leases 

Short-term employee benefits 

Employee benefits’ cost include all forms of consideration given in exchange for services rendered by employees. 

The cost of providing employee benefits is recognised in profit or loss in the period they are earned by employees. 

The cost of short-term employee benefits is recognised in the period in which the service is rendered and is not 

discounted. 

The expected cost of short-term accumulating compensated absences is recognised as an expense as the 

employees render service that increases their entitlement or, in the case of non-accumulating absences, when the 

absences occur. The expected cost of performance bonus payments is recognised as an expense when there is a 

legal or constructive obligation to make such payments as a result of past performance. 

Post-employment benefit obligations 

The cost of providing defined benefits is determined using the projected unit credit method. Valuations are 

conducted annually. The amount recognised in the balance sheet represents the present value of the defined benefit 

obligation as adjusted for unrecognised actuarial gains and losses. 

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. 

A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to 

ownership. 

80



1.14 Tax 

Operating leases – lessee 

Rentals payable under operating leases are recognised in profit or loss on a straight-line basis over the term of the 

relevant lease, or another basis if more representative of the time pattern of the Group’s benefit. Any contingent 

rents are expensed in the period they are incurred. 

Current tax 

The charge for current tax is based on the results for the year as adjusted for income that is exempt and expenses 

that are not deductible using tax rates that are applicable to the taxable income. 

Deferred tax 

A deferred tax asset is the amount of income taxes recoverable in future periods in respect of deductible temporary 

differences, the carry forward of unused tax losses and the carry forward of unused tax credits. 

A deferred tax asset is only recognised to the extent that it is probable that taxable profits will be available against 

which deductible temporary differences can be utilised, unless specifically exempt. It is measured at the tax rates 

that have been enacted or substantially enacted at the balance sheet date and is not discounted. 

A deferred tax liability is recognised for taxable temporary differences, unless specifically exempt, at the tax rates 

that have been enacted or substantially enacted at the balance sheet date and is not discounted. A deferred tax 

liability is the amount of income taxes payable in future periods in respect of taxable temporary differences. 

Temporary differences are differences between the carrying amount of an asset or liability and its tax base. 

Deferred tax arising on investments in subsidiaries, associates and joint ventures is recognised except where the 

Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will 

not reverse in the foreseeable future. 

A deferred tax asset is recognised for the carry forward of unused tax losses and unused STC credits to the extent 

that it is probable that future taxable profit will be available against which the unused tax losses and unused STC 

credits can be utilised. 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the 

asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively 

enacted by the balance sheet date. 

1.15 Key assumptions concerning the future and key sources of estimation 

The financial statements are prepared in accordance with and comply with SA GAAP and its interpretations adopted 

by the Accounting Practices Board. In the preparation of the financial statements the corporation has assumed 

certain key sources of estimation in recording various assets and liabilities, as set out below. 

Credit impairment of loans and advances 

The Group adopted an incurred-loss approach to impairment in accordance with accounting policy 1.6. Impairment 

losses are incurred only if there is objective evidence of impairment as a result of one or more past events that has 

occurred since initial recognition. This necessitates the establishment of ‘impairment triggers’ on the occurrence of 

which an impairment loss may be recognised. 

Credit impairment is based on discounted estimated future cashflows on an asset or group of assets, where such 

objective evidence of impairment exists. The discount rates used to calculate the recoverable amount exclude 

consideration of any anticipated future credit losses. 

The group has created a portfolio provision for incurred but not reported (IBNR) losses. The purpose of the IBNR 

provision is to allow for latent losses on a portfolio of loans and advances that have not yet been individually 

evidenced. Generally, a period of time will elapse between the occurrence of an impairment event and objective 

evidence of the impairment becoming evident, which is known as the ‘emergence period’. The IBNR provision is 

based on the probability that loans that are ostensibly performing at the calculation date are impaired, and objective 

evidence of that impairment becomes evident during the emergence period. 

The implementation of these principles is at a Corporation level and will be specific to the nature of their individual 

loan portfolios and the loan loss data available to the investment division. 

81



Provisions, contingent liabilities and contingent assets 

The group, in the ordinary course of business, enters into transactions that expose the group to tax, legal and 

business risks. Refer to notes 28 and 29 for further information on provisions, contingent liabilities and contingent 

assets. 

Fair value of investment properties 

For valuation methodologies utilised to fair value investment properties, refer to note 2. 

Unlisted investment valuations 

The valuation of unlisted investments is based on the discounted free cash flows of the investments taking into 

account the projected future activities of the entity. These values are established either by independent valuers or 

management and are reviewed by the Development Investment Committee. 

1.16 Borrowing costs 

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying 

asset are capitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The 

amount of borrowing costs eligible for capitalisation is determined as follows: 

• actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less any 

temporary investment of those borrowings; 

• weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose of 

obtaining a qualifying asset. The borrowing costs capitalised do not exceed the total borrowing costs incurred. 

The capitalisation of borrowing costs commences when: 

• expenditures for the asset have occurred; 

• borrowing costs have been incurred; 

• activities that are necessary to prepare the asset for its intended use or sale are in progress. 

Capitalisation is suspended during extended periods in which active development is interrupted. 

Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended 

use or sale are complete. 

All other borrowing costs are recognised as an expense in the period in which they are incurred. 

82


Notes 



2. Investment propertY 

Group 

Company 

Reconciliation of investment property - Group - 2009 

Reconciliation of movement 

Balance at beginning of year 712,839 671,689 481,389 449,962 

Disposals (13,137) (16,297) (12,897) (15,957) 

Additions resulting from capitalised subsequent expenditure 182,854 - 593 - 

Fair value gain 43,870 57,431 41,965 47,368 

Other movements 910 16 910 16 

927,336 712,839 511,960 481,389 

Reconciliation of fair value gain to income statement 

Fair value gain per balance sheet 43,870 57,431 41,965 47,368 

Compensation received for fair value loss on investment property 2,901 3,812 - 2,502 

Fair value gain recognised in profit or loss (note 23) 46,771 61,243 41,965 49,870 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

These properties are situated throughout the Eastern Cape, with the majority of properties concentrated in the areas in and 

surrounding Mthatha, Butterworth, King William’s Town, East London and Queenstown. The portfolio mainly consists of industrial, 

residential and commercial properties. 

Percentage Value Number 

R’ 000 R’ 000 R’ 000 

Corporation - 2009 

Type of properties 

Residential 48 244,002 558 

Commercial 19 96,456 250 

Vacant land 5 26,985 777 

Industrial 25 126,115 193 

Other 3 18,402 115 

100 511,960 1,893 


Type of properties 

Residential 48 226,396 593 

Commercial 21 103,469 257 

Vacant land 6 29,104 813 

Industrial 25 122,026 197 

Other - 394 73 

100 481,389 1,933 

Investment properties were valued in terms of the accounting policy, which requires a value determined by a sworn appraiser 

every three years. Valuations are normally based on comparable sales in the area or on the income earning potential of the 

building. 

Investment properties are subject to operating leases with tenants. No rental was charged on certain properties, mainly because 

the properties are vacant or undeveloped land or unoccupied buildings. 

83


Notes 

Freehold title is held by the Corporation for the majority of properties, but not for all. Properties for which freehold title is not 

held are recorded when they are managed by the Corporation and result in the receipt of economic benefits and rewards and 

when the Corporation incurs the risks incidental to ownership. 


Percentage Value Number 

R’ 000 R’ 000 R’ 000 

Corporation 81 417,044 1,689 

Government 9 44,204 131 

Tribal land 6 29,978 24 

Municipality 4 20,734 49 

100 511,960 1,893 


Corporation 80 384,947 1,729 

Government 9 44,101 131 

Tribal land 7 31,695 24 

Municipality 4 20,646 49 

100 481,389 1,933 

The categories of freehold title are further described as follows: 

• Corporation - Freehold title is registered to the Corporation or one of the former corporations consolidated under the 

Corporation in terms of the Eastern Cape Development Corporation Act, No 2 of 1997, read with Proclamation 1 of 2001. 

• Government - The title over land is registered to government. The Corporation is in the process of analysing the properties 

within this group, which comprise mainly entitlement in terms of Proclamation 1 of 2001 by the Premier of the Eastern 

Cape. 

• Tribal land - This group comprises mainly of properties where the Corporation has assumed “Permission to Occupy”. The 

majority of these properties are situated on forestry estates and hotels on the Wild Coast. 

• Municipality - The title is registered to different municipalities within the Eastern Cape, but improvements have been made 

by the Corporation. 

The Corporation’s right to occupy properties to the value of R83.5 million (2008: R 83.3 million), included in the above, has not 

been reduced to writing. However, the Corporation has occupied these properties for a number of years and derives economic 

benefits from their use and carries the risks that are incidental to ownership. 

The valuation method used to value these properties assumes that the Corporation has the right to occupy these properties and 

will receive economic benefits in perpetuity. In the unlikely event that the right of occupation is disputed or expires, the valuation 

of these properties may be overstated. In terms of the accounting policy these rights are assessed on an annual basis and 

adjustments may be effected to the valuation of these properties if necessary. 

84


Notes 

3. Property, plant and equipment 

2009 2008 

Cost/ 

valuation 

Accumulated 

depreciation 

Carrying value 

Cost/ 

valuation 

Accumulated 

depreciation 


R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 

Group 

Land 21,914 - 21,914 17,186 - 17,186 

Buildings 539,764 (29,425) 510,339 560,160 (19,043) 541,117 

Leasehold property 80 (16) 64 - - - 

Plant and machinery 1,986 (1,733) 253 1,986 (1,654) 332 

Furniture and fixtures 2,584 (1,368) 1,216 2,502 (1,058) 1,444 

Motor vehicles 1,330 (371) 959 557 (268) 289 

Office equipment 814 (595) 219 862 (652) 210 

IT equipment 11,945 (7,560) 4,385 10,246 (4,834) 5,412 

Computer software 3,458 (3,298) 160 3,430 (3,046) 384 

Other property, plant and equipment 2,805 (2,095) 710 2,419 (2,065) 354 

Total 586,680 (46,461) 540,219 599,348 (32,620) 566,728 

company 

Land 3,265 - 3,265 3,265 - 3,265 

Buildings 15,527 (2,159) 13,368 15,452 (1,849) 13,603 

Furniture and fixtures 1,653 (1,019) 634 1,598 (817) 781 

Motor vehicles 97 (87) 10 97 (63) 34 

Office equipment 487 (380) 107 569 (485) 84 

IT equipment 4,685 (3,768) 917 4,016 (3,101) 915 

Computer software 3,458 (3,298) 160 3,430 (3,046) 384 

Other property, plant and equipment 1,635 (1,042) 593 1,247 (1,041) 206 

Total 30,807 (11,753) 19,054 29,674 (10,402) 19,272 

Opening 

balance 

Additions 

Transfers and 

disposals 

Depreciation 

Impairment 

loss 


R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 

Reconciliation of property, plant and equipment - Group - 2009 

Land 17,186 4,820 (92) - - 21,914 

Buildings 541,117 186,413 (206,809) (10,382) - 510,339 

Leasehold property - 80 - (16) - 64 

Plant and machinery 332 - - (79) - 253 

Furniture and fixtures 1,444 129 (16) (325) (16) 1,216 

Motor vehicles 289 774 - (104) - 959 

Office equipment 210 116 (6) (100) (1) 219 

IT equipment 5,412 1,750 (41) (2,743) 7 4,385 

Computer software 284 28 - (252) - 160 

Other property, plant and equipment 354 488 (5) (127) - 710 

Total 566,728 194,598 (206,969) (14,128) (10) 540,219 

85


Notes 

(continued) 

Opening 

balance 

Additions 

Transfers and 

disposals 

Depreciation 

Impairment 

loss 


R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 

Reconciliation of property, plant and equipment - Group - 2008 

Land 16,921 - 265 - - 17,186 

Buildings 395,725 154,827 935 (10,370) - 541,117 

Plant and machinery 42 312 - (22) - 332 

Furniture and fixtures 983 778 - (313) (4) 1,444 

Motor vehicles 370 40 - (115) (6) 289 

Office equipment 321 54 - (164) (1) 210 

IT equipment 3,594 4,483 - (2,662) (3) 5,412 

Computer software 384 - - - - 384 

Other property, plant and equipment 608 59 (5) (308) - 354 

418,948 160,553 1,195 (13,954) (14) 566,728 

Opening balance Additions Disposals, 

transfers and 

other movements 

Depreciation 


R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 

Reconciliation of property, plant and equipment - Company - 2009 

Land 3,265 - - - 3,265 

Buildings 13,603 75 - (310) 13,368 

Furniture and fixtures 781 102 (16) (233) 634 

Motor vehicles 34 - - (24) 10 

Office equipment 84 81 (6) (52) 107 

IT equipment 915 759 (41) (716) 917 

Computer software 384 28 - (252) 160 

Other property, plant and equipment 206 482 (3) (92) 593 

19,272 1,527 (66) (1,679) 19,054 

Reconciliation of property, plant and equipment - Company - 2008 

Land 3,000 - 265 - 3,265 

Buildings 12,186 781 935 (299) 13,603 

Furniture and fixtures 466 545 - (230) 781 

Motor vehicles 59 - - (25) 34 

Office equipment 150 45 - (111) 84 

IT equipment 1,443 363 (1) (890) 915 

Computer software 1,214 - - (830) 384 

Other property, plant and equipment 397 8 - (199) 206 

18,915 1,742 1,199 (2,584) 19,272 

A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is available for inspection 

at the registered office of the Corporation. 

Land, buildings and infrastructure 

Included in the carrying amount of the Group’s buildings and infrastructure is East London Industrial Development Zone 

(Proprietary) Limited infrastructure of R 484 million (2008: R 514 million). 

Land, buildings and infrastructure are valued by a sworn appraiser every three years. Valuations are normally based on 

comparable sales in the area or on the income earning potential of the building. 

86


Notes 

4. Investments in subsidiaries 

Group 

Company 

Investments in at cost 27,453 27,405 

Impairments of investments (1,334) (1,334) 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

26,119 26,071 

Details of the Corporation’s subsidiaries are disclosed under Supplementary Information (1). 

5. Investments in associates 

Group 

Company 

Reconciliation of carrying amount 

Investments at cost 55,109 5,654 46,314 3,000 

Impairment (9,329) - (9,329) - 

Share of associates’ earnings since acquisition - 3,440 - - 

Share of associates’ losses since acquisition - (3,000) - - 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

45,780 6,094 36,985 3,000 

Bushman Sands Developments (Pty) Ltd 

Assets 40,360 22,958 - - 

Liabilities 101 69,836 - - 

Revenue 360 16,998 - - 

Profit (Loss) for the period 259 (12,344) - - 

The above information is based on management accounts of Bushman Sands Developments (Pty) Ltd for the year ended 

31 March 2009. Bushman Sands Developments (Pty) Ltd disposed of its shareholding in Bushman Sands Hospitality (Pty) Ltd. 

The group now holds a 50% (2008: 20%) interest in the associate. 

Group 

Company 

Holiday Inn Transkei (Pty) Ltd 

Assets 23,041 18,203 - - 

Liabilities 6,168 6,477 - - 

Revenue 33,233 26,138 - - 

Profit for the period 5,148 3,006 - - 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

The above information is based on the audited financial statements of Transkei Holiday Inn (Pty) Ltd for the year ended 31 March 

2009. The group holds a 49.95% (2008: 49.95%) interest in the associate of which 9.95% (2008: 9.95%) is held by the Corporation. 

87


Notes 

6. Loans to (from) group companies 

Group 

Company 

Subsidiaries 

Eastern Cape Marketing Authority (Pty) Ltd (ECMA) - - 18 1 

Centre for Investment and Marketing in the Eastern Cape (CIMEC) 

- - 11,787 10,564 

(Unsecured loan bearing interest at 10.76% per annum with no fixed terms of repayment) 

Cimvest (Pty) Ltd - - (4,507) (4,893) 

Transido (Pty) Ltd - - 82,078 82,051 

Umtata Small Industries Complex (Pty) Ltd (USICO) - - 390 384 

Transkei Share Investment Company 

Limited (INTRASHARE) 

- - (15,779) (47,961) 

TDC Property Investments (Pty) Ltd - - 3,433 3,704 

Transdev Properties (Pty) Ltd 

(Unsecured loan bearing interest at 16% per annum with no fixed terms of repayment) 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

- - (7,485) (3,769) 

Windsor Hotel (Pty) Ltd - - 1,012 462 

Automotive Industrial Development Centre 

(AIDC) 

- - 2,000 2,001 

Magwa Enterprise Tea (Pty) Ltd 3,756 3,345 3,756 3,345 

Subtotal 3,756 3,345 76,703 45,889 

Impairment of loans to subsidiaries (3,756) (18) (78,062) (77,653) 

- 3,327 (1,359) (31,764) 

Associates 

Bushman Sands Developments (Pty) Ltd 

(The loan is secured by surety from the Mantis Group, bears interest at prime plus 1% 

and is repayable by 30 June 2012) 

- 35,946 - 35,946 

Worthytrade 93 (Pty) Ltd 4,333 4,333 4,333 4,333 

Subtotal 4,333 40,279 4,333 40,279 

Impairment of loans to subsidiaries (4,333) (9,841) (4,333) (9,841) 

- 30,438 - 30,438 

Non-current assets - 33,765 26,412 55,297 

Non-current liabilities - - (27,771) (56,623) 

- 33,765 (1,359) (1,326) 

88


Notes 

7. Investments 

Group 

Company 

Available for sale 

Listed shares 694 723 - - 

Unlisted shares 89,914 87,804 89,914 87,804 

Subtotal 90,608 88,527 89,914 87,804 

Available for sale (impairments) (6,779) (5,034) (6,779) (5,034) 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

83,829 83,493 83,135 82,770 

Held to maturity 

Fixed Term Investments 55,140 48,789 55,140 48,789 

Other Investments 12,878 11,891 12,878 11,891 

68,018 60,680 68,018 60,680 

Analysis of available-for-sale investments 

Listed shares at fair value 723 723 - - 

Unlisted shares at cost 8,106 7,770 8,135 7,770 

Unlisted shares at fair value 75,000 75,000 75,000 75,000 

75,000 83,829 83,493 83,135 82,770 

Non-current assets 

Available for sale 83,829 83,493 83,135 82,770 

Held to maturity 68,018 60,680 68,018 60,680 

151,847 144,173 151,153 143,450 

The total amount of change in fair value recognised directly in equity 

(Note 13) 

- 74,173 - 74,180 

Investments to the value of R26 million (2008: R26 million) are pledged as security for interest bearing borrowings as per 

Note 14. 

8. Deferred tax 

Group 

Company 

Deferred tax asset / (liability) 

Fair value gains in investment property - (1,925) - - 

Unutilised tax credits 952 964 - - 

Other temporary differences 168 161 - - 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

1,120 (800) - - 

Non-current assets 1,120 1,125 - - 

Non-current liabilities - (1,925) - - 

1,120 (800) - - 

89


Notes 

9. Loans Advanced 

Group 

Company 

Loans advanced 344,416 210,173 344,401 210,160 

Impairment allowance (129,683) (101,904) (129,683) (101,904) 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

214,733 108,269 214,718 108,256 

loans advanced 

Non-current assets 111,084 56,190 111,069 56,177 

Current assets 103,649 52,079 103,649 52,079 

214,733 108,269 214,718 108,256 

10. Trade and other receivables 

Group 

Company 

Trade receivables 29,453 18,805 18,757 8,367 

Prepayments 43 13 - - 

VAT 10,141 4,524 121 - 

Other receivables 23,387 11,557 13,262 5,955 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

63,024 34,899 32,140 14,322 

Analysis of carrying amount of Trade receivables 

Gross carrying amount 235,615 212,886 196,408 174,084 

Impairment allowance (206,162) (194,081) (177,651) (165,717) 

29,453 18,805 18,757 8,367 

Other receivables 

Gross carrying amount 30,803 18,973 20,678 13,371 

Impairment allowance (7,416) (7,416) (7,416) (7,416) 

23,387 11,557 13,262 5,955 

11. Cash and cash equivalents 

Cash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or 

other purposes. Cash and cash equivalents include cash on hand, bank deposits, investments in money market instruments and 

comprise: 

Group 

Company 

Bank balances 213,516 137,190 15,932 5,936 

Short-term deposits 238,568 298,174 238,568 298,174 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

452,084 435,364 254,500 304,110 

Commited to Projects (Note 18) 189,320 143,787 183,143 137,610 

90


Notes 

12. Share capital 

Group 

Company 

Authorised 

50 billion “A” shares of 1 cent each 500,000 500,000 500,000 500,000 

50 billion “B” shares of 1 cent each 500,000 500,000 500,000 500,000 

1,000,000 1,000,000 1,000,000 1,000,000 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

iSSUED 

“A” shares of 1 cent each 149,342 135,435 149,342 135,435 

“B” shares of 1 cent each 149,341 135,435 149,341 135,435 

298,683 270,870 298,683 270,870 

Reconciliation of number of shares issued 

Reported as at 01 April 2008 270,870 239,373 270,870 239,373 

Share capital received 27,813 31,497 27,813 31,497 

298,683 270,870 298,683 270,870 

13. Reserves 

Pre-incorporation reserve 

Pre-incorporation reserves represent the net book value of assets and liabilities transferred from previous corporations, adjusted 

for any changes in the value of these assets due to information which has been established during the current and prior years 

that refer to the value of assets taken over. 

Property revaluation reserve 

The property revaluation reserve represents the total revaluation of land and buildings and fair value adjustments on investment 

properties. 

Fair value adjustment available-for-sale assets reserve 

Fair value reserves comprise all fair value adjustments that are recognised directly in equity and/or transfers from retained 

earnings. When an asset or liability is derecognised, the portion of the fair value reserve relating to that asset or liability is 

transferred to profit or loss. 

Group 

Company 

Pre-incorporation reserve 377,324 377,324 384,265 384,265 

Property revaluation reserve 289,953 248,542 263,970 222,005 

Fair value adjustment on available-for-sale reserve 74,173 74,173 74,180 74,180 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

741,450 700,039 722,415 680,450 

Analysis of carrying value for Property revaluation reserve 

Balance at beginning of year 248,542 194,595 222,005 174,636 

Total fair value adjustment on investment properties transferred from 

retained earnings 

41,411 53,947 41,965 47,369 

289,953 248,542 263,970 222,005 

91


Notes 


Group 

Company 

Held at amortised cost 

Development Bank of Southern Africa 17,575 19,084 17,563 19,084 

Finance lease 59 - - - 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

17,634 19,084 17,563 19,084 

Non-current liabilities 

At fair value 16,139 17,601 16,080 17,601 

Current liabilities 

At fair value 1,495 1,483 1,483 1,483 

15. Retirement benefit obligation 

Defined benefit plan 

The Corporation provides retirement benefits to employees by contributing to the Eastern Cape Development Corporation 

pension fund. An actuarial valuation of the fund was conducted and the actuary found the fund to be in a sound financial 

position. The pension fund is governed by the Pension Funds Act, 1956. 

Retirement benefit costs are expensed in the income statement as and when incurred. Furthermore, the Corporation is 

responsible for 50% of the contributions to medical aid funds of retired employees. 

Group 

Company 

Post retirement medical benefits 

Present value of the defined benefit obligation (18,073) (14,092) (18,073) (14,092) 

Net actuarial gains or losses not recognised 2,069 3,336 2,069 3,336 

(16,004) (10,756) (16,004) (10,756) 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

Changes in present value 

Opening balance 10,756 9,656 10,756 9,656 

Contributions by members (195) (180) (195) (180) 

Net expense recognised in the income statement 5,443 1,280 5,443 1,280 

16,004 10,756 16,004 10,756 

Net expense recognised in the income statement 

Current service cost 847 538 847 538 

Interest cost 1,260 742 1,260 742 

Actuarial (gains) losses 3,336 - 3,336 - 

5,443 1,280 5,443 1,280 

92


Notes 

Past (accrued) and future service liability 

Principal actuarial assumptions 


R’ 000 

Group 


R’ 000 

Company 

Health care cost inflation 8,25% 8% 8,25% 8% 

Discount rate used 7,25% 9% 7,25% 9% 


R’ 000 


R’ 000 

Present value of accrued liability 

Active members 15,018 11,295 15,018 11,295 

CAWM’s liability 3,055 2,797 3,055 2,797 

18,073 14,092 18,073 14,092 

Future Service liability 

Active members 11,278 8,672 11,278 8,672 

Contributions to post employment retirement benefit fund 

Employer 7,604 3,520 7,361 3,339 

Employee 1,904 1,831 1,784 1,714 

9,508 5,351 9,145 5,053 

16. Deferred income 

Group 

Company 

Non-current liabilities 526,931 675,689 - - 

Current liabilities 520,385 188,643 30,508 37,495 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

1,047,316 864,332 30,508 37,495 

Analysis per group company 

Eastern Cape Development Corporation 30,508 37,495 30,508 37,495 

East London Industrial Development Zone 

(Pty) LTD (ELIDZ) 

1,016,808 826,837 - - 

1,047,316 864,332 30,508 37,495 

Government grants are deferred to the extent that they are unspent. 

93


Notes 

17. Trade and other payables 

Group 

Company 

Trade payables 58,538 25,843 771 607 

VAT 6,289 5,201 - 468 

Accrued leave pay 5,831 5,448 4,039 4,033 

Accrued bonus 1,433 1,552 1,078 1,072 

Accrued expenses 1,040 713 51 440 

Provision for penalties and interest - 450 - - 

Deposits received 1,115 1,316 - - 

Other payables 26,453 18,333 23,739 17,013 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

100,699 58,856 29,678 23,633 

18. Project grants 

Group 

Company 

Project grants 189,320 143,787 183,143 137,610 

Details of project grants are presented under Supplementary Information (3). 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

19. Revenue 

Group 

Company 

Rendering of services 3,629 4,433 - - 

Rental Income 72,432 67,219 51,921 50,890 

Interest on loans 18,511 21,321 18,511 21,321 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

94,572 92,973 70,432 72,211 

94


Notes 

20. Operating loss 

Operating profit for the year is stated after accounting for the following: 

Operating lease charges 


R’ 000 

Group 


R’ 000 

Company 

Premises - Contractual amounts 2,266 1,743 1,690 1,931 

Equipment - Contractual amounts 629 882 617 775 


R’ 000 


R’ 000 

2,895 2,625 2,307 2,706 

(Loss) profit on sale of property, plant and equipment (66) 1 (66) - 

(Loss) profit on sale of investment property (855) 843 (865) 833 

Loss on recognition of financial instruments - (142) - (142) 

Gain on derecognition of liabilities 1,622 - - - 

Impairment on property, plant and equipment 10 14 - - 

Impairment on investments 11,074 - 11,074 - 

Impairment on loans to group companies - 740 - 740 

Reversal of impairment on loans to group companies (8,509) - (5,509) - 

Impairment of loans advanced 16,537 21,471 16,537 21,471 

Impairment on trade and other receivables 10,084 19,457 9,669 19,457 

Reversal of impairment on trade and other receivables (10,671) - (10,671) - 

Depreciation on property, plant and equipment 14,128 13,954 1,679 2,584 

Employee costs 102,295 75,854 70,017 53,922 

Direct property operating expenditure 56,042 40,088 48,081 38,498 

21. Auditors’ remuneration 


R’ 000 

Group 


R’ 000 

Company 

Fees 1,664 1,599 1,381 1,376 


R’ 000 


R’ 000 

22. Investment income 

Group 

Company 

Dividend income 

Subsidiaries - Local 67 - 28,686 - 

Associates - Local 70 101 - 44 

137 101 28,686 44 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

Interest income 

Bank 39,015 25,879 38,383 26,237 

Investment income 7,338 6,292 7,338 6,292 

46,353 32,171 45,721 32,529 

Grand total 46,490 32,272 74,407 32,573


Notes 

23. Fair value adjustments through profit or loss 

Group 

Company 

Investment property 46,771 61,236 41,965 49,870 

Other financial assets - Fair value through profit or loss - 7 - - 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

46,771 61,243 41,965 49,870 

24. Finance costs 

Group 

Company 

Finance leases 18 - - - 

Late payment of tax (450) 44 - - 

Interest expense 2,011 2,628 2,011 2,850 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

1,579 2,672 2,011 2,850 

25. Taxation 

Major components of the tax (income) expense 

Group 

Company 

Current 

Local income tax - current period (3,208) 912 - - 

Local income tax - recognised in current tax for prior periods 1,495 - - - 

(1,713) 912 - - 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

Deferred 

Originating and reversing temporary differences (1,953) 685 - - 

Arising from prior period adjustments 33 52 - - 

(1,920) 737 - - 

(3,633) 1,649 - - 

Reconciliation of the tax expense - Reconciliation between accounting profit and tax expense 

Accounting profit 56,133 59,025 70,595 37,915 

Tax at the applicable tax rate of 28% (2008: 29%) 15,717 17,117 19,767 10,995 

Tax effect of adjustments on taxable income 

Change in rate of tax - (8) - - 

Other temporary differences (12) 27 - - 

Fair value gains not subject to capital gains tax - (627) - - 

Exempt income (13,341) (14,860) (19,767) (10,995) 

Reversal of tax provision (6,101) - - - 

Tax losses carried forward 12 - - - 

Prior year’s under-provision 92 - - - 

(3,633) 1,649 - - 

The Corporation has been granted exemption from South African normal taxation in terms of Section 10(1)(cA)(i) of the Income Tax Act.


Notes 

26. Cash generated from (used in) operations 


R’ 000 

Group 


R’ 000 

Company 

Profit before taxation 56,133 59,025 70,595 37,915 


R’ 000 


R’ 000 

Adjustments for: 

Depreciation and amortisation 12,635 13,968 1,086 2,584 

Loss (profit) on sale of assets 921 (843) 931 (833) 

Profit on sale of non-current assets and disposal groups (1,203) - - - 

Income from equity accounted investments (2,701) (1,469) - - 

Dividends received (137) (100) (28,619) (44) 

Interest received (64,851) (52,387) (64,219) (52,745) 

Finance costs 1,579 2,672 2,011 2,850 

Fair value adjustments (46,771) (61,243) (41,965) (49,870) 

Impairment loss 42,676 43,154 45,278 45,787 

Movements in retirement benefit assets and liabilities 5,248 1,280 5,248 1,280 

Release from debt on liquidation - (2,949) - - 

Provision for doubtful performance guarantees - (1,486) - (1,486) 

Changes in working capital: 

Inventories - 43 - - 

Trade and other receivables (41,319) (22,022) (30,661) (21,018) 

Trade and other payables 41,843 (4,687) 6,045 (5,895) 

Deferred income 182,984 238,227 (6,987) 11,807 

187,037 211,183 (41,257) (29,668) 

27. tax paid 

Group 

Company 

Balance at beginning of the year (4,014) (3,401) - - 

Current tax for the year recognised in income statement 1,713 (912) - - 

Reversal of tax provision (exemption granted) 2,517 - - - 

Balance at end of the year (1,913) 4,014 - - 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

(1,697) (299) - - 

28. Contingencies 

The Corporation has exposure to litigation of R 1.3 million (2008: R 1.3 million) against it. The legal claims are expected to be 

settled in the course of the next twelve months. 

97


Notes 

29. Commitments 

Authorised capital expenditure 

Group 

Company 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

Already contracted for but not provided 

Purchase of shares 1,243 1,291 1,243 1,291 

Loans approved not yet disbursed 93,386 28,608 93,386 28,608 

Operating leases – as lessee (expense) - Minimum lease payments due 

- within one year 3,355 3,050 2,252 2,599 

- in second to fifth year inclusive 8,803 8,003 7,185 7,590 

12,158 11,053 9,437 10,189 

Operating lease payments represent rentals payable by the Group for certain of its office properties, office equipment and 

cellular phones. Leases are negotiated for an average term of seven years and rentals are fixed for an average of three years. No 

contingent rent is payable. 

30. Related parties 

Relationships 

Subsidiaries Refer to Supplementary Information (1) 

Shareholder 

Department of Economic Development and Environmental Affairs (DEDEA) 

Directors Refer to the Director’s Report (12) 

Key management and other 

senior managers 


- M D Matshamba (Chief Executive Officer) 

- M Daca (Executive Manager: Finance) 

- C Biermann (Executive Manager: Development Investments) 

- L Tsipa (Executive Manager: Property Management and Development) 

- N Ncokazi (Executive Manager: Development Services) 

East London Industrial Development Zone (Proprietary) Limited 

- S Kondlo (Chief Executive Officer) 

- N Madyibi (Chief Financial Officer) 

- J Burger (Executive Manager: Technical Services) 

- T Gwintsa (Executive Manager: Investor Services) 

- T Zweni (Executive Manager: Business Development) 

AIDC Development Centre Eastern Cape (Proprietary) Limited 

- J Manilal (Chief Executive Officer) 

98


Notes 

Related party balances 

Subsidiaries and associates: Related party balances with subsidiaries and associates are disclosed in Note 6: Loans to (from) 

group companies. 

Other related parties: The Corporation acquires equity investments in certain entities to which it has advanced loan funds as 

security for these loans or as part of its investment strategy. Outstanding balances with these entities were as follows: 

Related party 

Preference/ 

ordinary shares 

Loan balance 

Accumulated 

impairment 

Border Copiers - 7,163 - 

Road Safety Apparel - 433 (347) 

Magwa Tea Enterprise (Pty) Ltd - 3,756 (3,756) 

S&P Kareedouw - 2,674 - 

EC Biomass 3,200 3,836 - 

Global pack trading 1,500 3,213 (2,165) 

Maritime Academy 245 2,245 (2,245) 

Bushman Sands Developments (Pty) Ltd 46,314 - (9,329) 

Ikhala Aloes - 1,181 (1,181) 

Singisi Forest Products 3,061 - - 

Amatola berries 2,255 - - 

Ndlambe Natural Industrial Products (Pty) Ltd - 11,638 - 

56,575 36,139 19,023 

Related party transactions 

Group 

Company 

Subsidiaries and associates 

Interest from subsidiaries 1,196 - 

Interest from associates - 2,413 

Impairment expense - loans to associates - (772) 

Management fees 772 664 

Rent paid to subsidiaries 1,492 1,399 


R’ 000 


R’ 000 


R’ 000 


R’ 000 

Interest received from related parties 

Border Copiers (Pty) Ltd 1,010 614 

Ndlambe Natural Industrial Products (Pty) Ltd 481 - 

Rent received from related parties 

Eastern Cape Provincial Legislature - 40 

Department of Sport, Arts, Recreation and Culture 29 104 

Department of Transport 113 39 

Department of Public Works 95 76 

Department of Health 237 161 

Dividends received 

Singisi Forest Products - 42 

Transkei Share Investments 28,619 -


Notes 

31. Directors’ emoluments 

Further details in respect of directors’ fees are disclosed in the Directors’ Report (13). 

Non-executive 

Fees Other expenses Total 

For services as directors 

2009 669 216 885 

2008 245 180 425 

32. Risk management 

Overview 

A comprehensive Investment Policy is used to ensure that all the market risks to which the Group is exposed are 

understood and managed. Governance structures are in place to achieve effective independent monitoring and management of 

market risks through: 

• the Board and Audit Committee, which is responsible for the overall risk management oversight of the Group; 

• the Executive Management Committee through setting up subcommittees to deal with specific financial risks; 

• the Development Investment Committee, which is responsible for ensuring that the impact of risks in the loan and equity 

investments is being effectively managed and reported and that all policy, risk limits and relevant market risk issues are 

reported to the Group’s Board and Audit committee; 

• the Investment Committee which is responsible for managing risk associated with the investment of cash and cash 

equivalents. 

Objectives 

The group market risks are managed by the Board and Audit Committee through a number of executive management 

committees. These risks include fair value interest rate risk, currency risk, credit risk, liquidity risk and cash flow interest rate risk. 

The Group seeks to minimise the effects of the negative impact of these risks by ensuring compliance with Board approved 

policies and benchmarks with regard to the following: 

• proposed money market investment strategies do not result in the breach of asset/liability mismatch gap limit; 

• ensuring that the net interest income volatility is within approved benchmark; 

• adequate overnight liquidity limit is complied with by having sufficient call balances; 

• credit risk is controlled by entering into money market transactions with high quality counterparty financial institutions; 

• instrument limits are set to avoid excess concentration in any given financial investment instrument. 

Overall the Group’s main financial risk management objective is to ensure enhanced return within very conservative risk profiles 

or parameters approved by the Board. 

Capital management 

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising 

the return to stakeholders through the optimisation of capital levels. The Group’s overall strategy remains unchanged from 2008. 

The capital structure of the Group consists of cash and cash equivalents, disclosed in Note 11, and equity attributable to equity 

holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 12 and 13, respectively. 

The Group is not subject to externally imposed capital requirements and does not routinely make use of borrowings. 

Liquidity risk 

The Group is exposed to liquidity risk through its operational and banking activities. Liquidity risk is measured in terms of a Board 

approved Investment Policy with appropriate dashboard liquidity risk measures on the basis of which the risk is managed by the 

Finance function. 

100


Notes 

Interest rate risk 

The Group’s exposure to interest rate risk arises from primarily the following: 

• investment in development loans; 

• investment of surplus operational cash. 

The interest rate risk is managed in terms of the Board approved investment and development investment policies. The Group 

monitors and ensures that the interest rate risk profiles are in line with limits and benchmarks stipulated in the policy. 

The cash resources of the group are invested mainly with large money market funds and South African banks. 

Development investments are also made in line with Board policy and would be less profitable as interest rates drop. 

At year end, financial instruments exposed to interest rate risk were interest-bearing borrowings, held to maturity investments 

and loans advanced. A 1% decrease in the interest rate applicable to these financial instruments would result in a R1,841 million 

decrease in net interest income with an equivalent decrease in retained earnings. 

Credit risk 

Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The Corporation only deposits cash with major 

banks with high quality credit standing and limits exposure to any one counter-party. Trade receivables comprise a widespread 

customer base. Management evaluates credit risk relating to customers on an ongoing basis. 

Foreign exchange risk 

The Group has no material exposure to foreign exchange risk. 

Equity price risk 

The Group is exposed to equity risk through its investment in a number of entities as disclosed in Note 7. 

Concentration risk 

The Group’s exposure to concentration risk arises primarily from over exposure to any one given investment instrument. 

Concentration risk is managed in terms of the Board approved Development Investment Policy, which in turn specifies a 

percentage exposure in any approved investment instrument or economic sector. 

The aim of the policy is to protect the Group from any over exposure in any investment instrument where the Group could be 

exposed to liquidity risk in the event of an over exposure in non-tradable instruments like held to maturity assets. The Group 

could also be exposed to interest rate risk due to over exposure in any investment cluster 

Post-tax profit for the year would increase/decrease as a result of gains/losses on equity securities classified as at fair value 

through profit or loss. Other components of equity would increase/decrease as a result of gains/losses on equity securities 

classified as available for sale. 

101


Notes 

33. Financial assets by category 

The accounting policies for financial instruments have been applied to the line items below: 

Loans and 

receivables 

Fair value 

through 

profit or loss 

- designated 

Held to 

maturity 

Available for 

sale 

R’ 000 R’ 000 R’ 000 R’ 000 

Group - 2009 

Investments - - 68,018 83,829 

Loans advanced 214,733 - - - 

Trade and other receivables 63,024 - - - 

Cash and cash equivalents - 452,084 - - 

277,757 452,084 68,018 83,829 


Investments - - 60,680 83,493 

Loans advanced 108,269 - - - 


Cash and cash equivalents - 435,364 - - 

143,168 435,364 60,680 83,493 

Company - 2009 

Investments - - 68,018 83,135 

Loans advanced 214,718 - - - 



246,858 254,500 68,018 83,135 


Investments - - 60,680 82,770 

Loans advanced 108,256 - - - 



122,578 304,110 60,680 82,770 

102


Notes 

34. Financial liabilities by category 

The accounting policies for financial instruments have been applied to the line items below: 

Financial liabilities at 

amortised cost 

Carrying amount 

R’ 000 R’ 000 


Interest bearing borrowings 17,634 17,634 

Trade and other payables 100,699 100,699 

118,333 118,333 


Interest bearing borrowings 19,084 19,084 


77,940 77,940 


Interest bearing borrowings 17,563 17,563 


47,241 47,241 


Interest bearing borrowings 19,084 19,084 


42,717 42,717 

35. New standards, amendments and interpretations 

Revised standards 

The following revisions to International Accounting Standards have not been early-adopted by the Group: 

IFRS 3 Business Combinations 

Comprehensive revision on applying the acquisition method and consequential amendments to IAS 27 Consolidated and 

Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interest in Joint Ventures. The revised IFRS 3 retains 

the basic requirements of IFRS 3 (2004) to apply acquisition accounting for all business combinations within the scope of 

IFRS 3, to identify the acquirer and to determine the acquisition date for every business combination. The most significant 

change is a move from a purchase price allocation approach to a fair value measurement principle. The revision applies to 

business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning 

on or after 1 July 2009. The amended IAS 27 requires accounting for changes in ownership interests in a subsidiary that 

occur without loss of control to be recognised as an equity transaction. When the Group loses control of a subsidiary, any 

interest retained in the former subsidiary will be measured at fair value, with the gain or loss recognised in profit and loss. This 

amendment is effective for the Group for the financial reporting period commencing on 1 April 2010. 

The revision and amendment is applicable prospectively and will not affect past transactions. 

IFRS 8 Operating Segments 

IFRS 8 Operating Segments, which is effective for annual periods commencing on or after 1 January 2009, has not been 

early-adopted in these financial statements and will replace IAS 14 Segment Reporting. IFRS 8 requires an entity to adopt a 

management approach to reporting the financial performance of its operating segments. Generally, the information to be 

reported would be what management is currently using internally for evaluating segment performance and deciding how to 

allocate resources to operating segments. The Group shall apply this IFRS in its annual financial statements for periods beginning 

on 1 April 2009. IFRS 8 is not compulsory for unlisted entities. 

103


Notes 

IAS 1 Presentation of Financial Statements 

Comprehensive revision including requiring a statement of comprehensive income. The changes made to IAS 1 require 

information in financial statements to be aggregated on the basis of shared characteristics and introduce a statement of 

comprehensive income. The revision includes changes in titles of financial statements to reflect their functions more clearly. The 

main change in the revised IAS 1 is the requirement to present all non-owner transactions in the statement of comprehensive 

income. The amendment also requires two sets of comparative numbers to be provided for the financial position in any year 

where there has been a restatement or reclassification of balances. The revised standard will affect the disclosures in the annual 

report. The revision is effective for annual periods commencing on or after 1 January 2009. The Group will adopt the revised 

standard on its effective date. 

Amendments to IAS 32, Financial Instruments Presentation, and IAS 1, Presentation of Financial Statements 

Puttable Financial Instruments Arising on Liquidation and Obligations: the amendment requires additional information to be 

presented on puttable instruments that are presented as equity. The amendment will not affect the Group as the Group does not 

have puttable instruments that are presented within equity. The amendment is effective for annual periods beginning on or after 

1 January 2009. The Group will apply the amendment from its effective date. 

IAS 39 Financial Instruments: Recognition and Measurement: Amendment 

Eligible Hedged Items: the amendment clarifies that inflation may only be hedged in instances where changes in inflation are 

contractually specified portions of cashflows of recognised financial instruments. It also clarifies that an entity is permitted to 

designate purchased or net purchased options as a hedging instrument in a hedge of a financial or non- financial item, and to 

improve effectiveness an entity is allowed to exclude the time value of money from the hedging instrument. 

This amendment is effective for the Group for the annual periods commencing on 1 January 2009 and is not expected to have 

any impact on the Group as the Group doesn’t apply hedge accounting. 

IFRS 2 Share-based Payment 

Amendment relating to vesting conditions and cancellation Under IFRS 2: failure to meet a condition, other than a vesting 

condition, is treated as a cancellation. IFRS 2 specifies the accounting treatment of cancellations by the entity, but does not give 

guidance on the treatment of cancellations by parties other than the entity. The amendment requires cancellations by parties 

other than the entity to be accounted for in the same way as cancellations by the entity. This amendment is effective for the 

Group for the annual periods commencing on 1 April 2009 and is not expected to have an impact on the Group as the Group is 

currently not party to share based payments. 

IAS 40 Investment Property 

The amendment to IAS 40 brings into its scope property that is being constructed or developed for future use as investment 

property. Such property previously fell within the scope of IAS 16 Property, Plant and Equipment. The amendment is expected to 

have a significant impact on the results of the Group. 

Annual improvements projects 

As part of its first annual improvements projects, the IASB has issued its edition of annual improvements. The annual 

improvement projects aim to clarify and improve the accounting standards. The improvements include those involving 

terminology or editorial changes with minimal effect on recognition and measurement. There are no significant changes in the 

current year’s improvement that will affect the Group and the improvements are effective for the Group with effect from 1 

April 2009. 

Interpretations 

The following interpretations of existing standards are not yet effective and have not been early-adopted by the Group: 

IFRIC 13 Customer Loyalty Programmes 

The interpretation clarifies the application of IAS 18 to customer loyalty programmes. The interpretation requires an entity 

that grants loyalty award credits to allocate some of the initial proceeds from the initial revenue-generating transaction to the 

award credit as a liability (entity’s obligation to provide award). The award is accounted for as a separate revenue-generating 

transaction. The interpretation is effective for annual periods commencing on or after 1 July 2008. The application of IFRIC 13 

will result in the Group deferring a portion of income as a liability. The Group will adopt the interpretation for its annual period 

commencing 1 April 2009. 

IFRIC 15 Real Estate Sales 

The interpretation clarifies when real estate sales should be accounted for in terms of IAS 11 Construction Contracts or IAS 

18 Revenue. The Group has not early-adopted this interpretation. The Group will adopt the interpretation for its annual period 

commencing 1 April 2009. 

104


Notes 

IFRIC 16 Hedges of a Net Investment of a Foreign Operation 

The interpretation clarifies which risks can be hedged under a hedge of the net investment in a foreign operation and by which 

entities within the group the hedging instruments can be held in order to qualify as a hedge of a net investment in a foreign 

operation. The Group does not currently have any foreign operations and therefore the adoption of this standard will have no 

effect on the financial performance or position of the Group. This Interpretation is effective for annual periods beginning on or 

after 1 October 2008. 

IFRIC 17 Distributions of Non-cash Assets to Owners 

IFRIC 17 clarifies that: 

• a dividend payable should be recognised when the dividend is appropriately authorised and is no longer at the discretion of 

the entity; 

• an entity should measure the dividend payable at the fair value of the net assets to be distributed; 

• an entity should recognise the difference between the dividend paid and the carrying amount of the net assets distributed 

in profit or loss; and 

• an entity should provide additional disclosures if the net assets being held for distribution to owners meet the definition of 

a discontinued operation. 

IFRIC 17 is effective for annual periods beginning on or after 1 July 2009 and is not anticipated to have an effect on the Group’s 

accounts as the Group has no history of dividend distribution. 

Standards and interpretations adopted in the current year 

Revised standards 

The following revisions to International Financial Reporting Standards have been adopted by the Group: 

IAS 23 Borrowing Costs 

The Group has early-adopted the revision that removed the option of immediately recognising as an expense borrowing costs 

that relate to assets that take a substantial period of time to get ready for use or sale. There was no effect on the Group financial 

position and performance of adopting this amendment, as there were no qualifying borrowing costs incurred. 

IAS 39 Financial Instruments: Recognition and Measurements 

Amendments allowing reclassification of Instruments: this amendment allowed an entity to change the classification of certain 

‘held for trading’ financial assets into financial assets carried at amortised cost, subject to certain criteria being met. There was 

no effect on the Group of adopting this amendment, as the Group did not reclassify any financial assets. 

Interpretations 

The following interpretations of existing standards have been adopted by the Group: 

IFRIC 11, IFRS 2 Group and Treasury Share Transactions 

This interpretation clarifies that, where a parent grants rights to its equity instruments to the employees of a subsidiary, the 

subsidiary will measure the services received from its employees in accordance with the requirements applicable to equitysettled 

share-based payment transactions, with a corresponding increase in equity. ECDC Group doesn’t have any share based 

payments and the standard will not affect the Group financial statements. 

IFRIC 12 Service Concession Arrangements 

The interpretation clarifies the application of existing IFRSs by concession operators for obligations under concession 

arrangements and rights received in service concession arrangements. The Group is not party to concession arrangements, and 

the adoption of the interpretation therefore did not have any impact on the Group. 

IFRIC 14, IAS 19 The Limit on a Defined-benefit Asset, Minimum Funding Requirements and their Interpretation 

The interpretation addresses the implication of minimum funding requirements on the recognition of a defined-benefit 

obligation. The adoption of this interpretation did not have any effect on the Group’s financial position or performance. 

105


Notes 

36. Fair value of financial instruments 

2009 2008 

Carrying amount Fair value Carrying amount Fair value 

R’ 000 R’ 000 R’ 000 R’ 000 

Group 

Fixed term investments 55,140 55,140 48,789 48,789 

Other investments 12,878 12,878 11,891 11,891 

Listed shares at fair value 694 694 723 723 


Unlisted shares at cost 8,106 Refer below 7,770 Refer below 

Loans advanced 214,733 214,733 108,269 108,269 

Trade and other receivables 63,024 63,024 34,899 34,899 

Cash and cash equivalents 452,084 452,084 435,364 435,364 

Other property, plant and equipment 17,634 Refer below 19,084 Refer below 

Trade and other receivables 100,697 Refer below 58,856 Refer below 

company 

Fixed term investments 55,140 55,140 48,789 48,789 

Other investments 12,878 12,878 11,891 11,891 


Unlisted shares at cost 8,135 Refer below 7,770 Refer below 

Loans advanced 214,718 214,718 108,256 108,256 

Trade and other receivables 32,140 32,140 14,322 14,322 

Cash and cash equivalents 254,500 254,500 304,110 304,110 

Other property, plant and equipment 17,563 Refer below 19,084 Refer below 

Trade and other receivables 29,678 Refer below 23,633 Refer below 

Determination of fair value 

Financial instruments with short-term maturities 

At year end the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximated their 

fair values due to the short-term maturities of these assets and liabilities. 

Unlisted shares carried at fair value 

During the year, the Corporation’s investment in Singisi Forest Products was revalued to its fair value of R 75 million. The fair 

value was determined with reference to an offer to purchase the equity instruments and a subsequent valuation performed by 

an independent external firm of accountants and auditors. 

Unlisted shares carried at cost 

In accordance with the accounting policy on available-for-sale financial assets, certain unlisted shares are carried at cost as their 

fair values could not be reliably determined, due to a lack of an active market for these instruments. 

Held to maturity investments, loans advanced and interest bearing borrowings 

The fair values of these financial instruments are determined based on discounted cash flow techniques, taking account of 

market related discount rates appropriate to the instrument and economic conditions current at the balance sheet date. At this 

date, the fair value of the financial instruments approximated their carrying values. 

106


Supplementary information 



1. Subsidiaries 

Issued share 

capital 

R 

Group 

Percentage 

shareholding 

Shares at cost 

less provision 

R 

Company 

Indebtedness 

less provision 

R’ 000 


TDC Property Investments (Pty) Ltd 4,000 100 - 3,433 

Transdev Properties (Pty) Ltd 2,000 100 2,000 (7,486) 

Centre for Investment and Marketing in the Eastern Cape - 100 - 11,787 

Cimvest (Pty) Ltd 120 100 - (4,506) 

Transkei Share Investments Company Limited 232,757 98 26,116,789 (15,779) 

AIDC Eastern Cape 100 75 75 2,000 

Transido (Pty) Ltd 1,330,200 100 - 8,162 

Umthatha Small Industries Complex (Pty) Ltd 400 100 - - 

East London Industrial Development Zone (Pty) Ltd 1,000 74 740 - 

Windsor Hotel (Pty) Ltd 100 100 100 1,012 

Eastern Cape Marketing Authority (Pty) Ltd 2 100 2 17 

26,119,706 (1,359) 


TDC Property Investments (Pty) Ltd 4,000 100 - 3,454 

Transdev Properties (Pty) Ltd 2,000 100 2,000 (3,769) 

Centre for Investment and Marketing in the Eastern Cape - 100 - 10,564 

Cimvest (Pty) Ltd 120 100 - (4,893) 

Transkei Share Investments Company Limited 232,757 98 26,069,016 (47,961) 

AIDC Eastern Cape 100 75 75 2,001 

Transido (Pty) Ltd 1,330,200 100 - 7,048 

Umthatha Small Industries Complex (Pty) Ltd 400 100 - - 

East London Industrial Development Zone (Pty) Ltd 1,000 74 740 - 

Windsor Hotel (Pty) Ltd 100 100 100 462 

Eastern Cape Marketing Authority (Pty) Ltd 2 100 2 1 

26,071,933 (33,093) 

Non-consolidation of equity interests exceeding 50% 

Certain of the Group’s equity investments have not been included in the consolidated annual financial statements as the Group 

does not exercise any control over their operations. The entities affected are Magwa Enterpise Tea (Proprietary) Limited and TIDC 

(Association incorporated under section 21). 

Ikhala Aloes has not been consolidated as the shareholding was only acquired as security and the company’s financial 

information is not material to the Group. 

Entities which were not equity-accounted 

Certain equity investments in which the Group holds 20% or more of the equity have not been equity accounted as the 

investments were only acquired to protect loan advances. The entities affected are Border Copiers and S&P Kareedow. 

Availability of information 

A subsidiary, Windsor Hotel (Proprietary) Limited, and an associate, Bushman Sands Developments (Proprietary) Limited, have 

been consolidated on the basis of limited information due to financial statements for the year ended 31 March 2009 not being 

available. 

107




Instalment 

Date of final 

payment 

Interest rate 2009 2008 

R’ 000 % R’ 000 R’ 000 

Group 

Development Bank of Southern Africa 

Office Block Loan 700 2012 3 months 

JIBAR + 0.75% 

Loan 13942/201 323 2011 3 months 

JIBAR + 0.75% 

Loan 13942/301 460 2016 3 months 

JIBAR + 0.75% 

2,886 3,606 

831 1,163 

3,559 4,032 

Loan 13942/401 

Lump sum on 

final date 

2011 3 months 

JIBAR + 0.75% 

10,287 10,283 

Finance lease 12 2013 24 71 - 

1,495 17,634 19,084 

Corporation 

Development Bank of Southern Africa 

Office Block Loan 700 2012 3 months 

JIBAR + 0.75% 

Loan 13942/201 323 2011 3 months 

JIBAR + 0.75% 

Loan 13942/301 460 2016 3 months 

JIBAR + 0.75% 

2,886 3,606 

831 1,163 

3,559 4,032 

Loan 13942/401 

Lump sum on 

final date 

2011 3 months 

JIBAR + 0.75% 

10,287 10,283 

1,483 17,563 19,084 

108



3. Project grants 

Opening 

balance 

Transfers in Interest Written off Transfer 

payments 

Closing 

balance 

R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 R’ 000 

Group 

AB350 21,870 - 1,224 - (21,113) 1,981 

ASGISA - 100,000 - - (100,000) - 

DEDEA 54,668 20,000 - - (2,636) 72,032 

DRISA 5,131 - - - - 5,131 

Premier’s fund 193 3,560 87 - (3,630) 210 

Treasury (Steinhof) 45,925 43,810 - - (10,499) 79,236 

EL IDZ - 119,910 - - (119,910) - 

Uvimba Finance - 17,473 854 - - 18,327 

Mthatha taxi rank 16,000 - - - (3,597) 12,403 

Total 2009 143,787 304,753 2,165 - (261,385) 189,320 

Total 2008 159,097 314,967 - (12,375) (317,902) 143,787 

corporation 

AB350 21,870 - 1,224 - (21,113) 1,981 

ASGISA - 100,000 - - (100,000) - 

DEDEA 48,491 20,000 - - (2,636) 65,855 

DRISA 5,131 - - - - 5,131 

Premier’s fund 193 3,560 87 - (3,630) 210 

Treasury (Steinhof) 45,925 43,810 - - (10,499) 79,236 

EL IDZ - 119,910 - - (119,910) - 

Uvimba Finance - 17,473 854 - - 18,327 

Mthatha taxi rank 16,000 - - - (3,597) 12,403 

Total 2009 137,610 304,753 2,165 (261,385) 183,143 

Total 2008 152,920 314,967 - (12,375) (317,902) 137,610 

109



AB350 

The Corporation has been appointed as an implementing agent to revive bus transportation in the rural areas around the former 

Transkei. The funds were advanced by the Department of Roads and Transport for this purpose. 

Department of Economic Development and Environmental Affairs (DEDEA) 

The fund represents grants from DEDEA and Provincial Treasury, to be administered on their behalf. It is utilised to assist local 

business service centres, manufacturing technology centres and local economic development units in the Eastern Cape. 

Transfers to beneficiaries are only made on specific instructions from the respective Departments. 

Digitisation and Remanufacturing Institute of South Africa (DRISA) 

DRISA is a section 21 company whose main purpose is Information Communication Technologies for Development, Education 

and Upliftment. The fund represents amounts that were transferred by DEDEA for this purpose. 

East London Industrial Development Zone (Proprietary) Limited (ELIDZ) 

Funds transferred to the Corporation by the Department of Economic Development and Environmental Affairs to forward to 

ELIDZ. These payments are merely channeled through the Corporation to ELIDZ. 

Premier’s Fund 

The fund was created by the Office of the Premier. Transfers to beneficiary institutions are only made on specific 

instructions from the Office of the Premier. 

Treasury (Steinhof) 

The funds are for infrastructure upgrade in Ugie for the Steinhof milling plant. The Corporation is an implementing agent for 

these funds. 

Mthatha Taxi Rank 

The Mthatha Taxi Rank fund is held to be used to fund the development of a taxi rank in Mthatha by the Eastern Cape 

Department of Roads and Transport. 

110


111


112

Photography by: 

Clint Muller and Mary-Anne Mack 

Cob Creek Wine Estate 

COEGA Industrial Development Zone 

Rory Haschick 

Mike Holmes 

Rob Pollock 

Guy Stubbs 

HEAD OFFICE 

Ocean Terrace Park 

Moore Street, Quigney, East London 

PO Box 11197, Southernwood 5213 

Tel: +27 (0) 43 704 5600 

Fax: +27 (0) 43 704 5700 

KING WILLIAM’S TOWN 

75 Alexander Road 

PO Box 498, King William’s Town 5600 

Tel: +27 (0) 43 604 8800 

Fax: +27 (0) 43 642 4199 

BUTTERWORTH 

24 High Street 

PO Box 117, Butterwoth 4960 

Tel: +27 (0) 47 491 4151 

Fax: +27 (0) 47 491 0443 

MTHATHA 

7 Sissons Street, Fort Gale 

Private Bag X5028, Mthatha 5099 

Tel: +27 (0) 47 501 2200 

Fax: +27 (0) 47 532 3548 

QUEENSTOWN 

22 Cathcart Road 

Private Bag X7180, Queenstown 5320 

Tel: +27 (0) 45 838 1910 

Fax: +27 (0) 45 838 2176 

PORT ELIZABETH 

152 Cape Road, Mill Park 

PO Box 1331, Port Elizabeth 6000 

Tel: +27 (0) 41 373 8260 

Fax: +27 (0) 41 374 4447 

Satellite offices 

MOUNT AYLIFF 

SEDA Building 

Nolangeni Street, Mount Ayliff, 4735 

Tel: +27 (0) 39 254 0584 

Fax: +27 (0) 39 254 0584 

ALIWAL NORTH 

98 Somerset Street 

P O Box 198, Aliwal North, 9750 

Tel: +27 (0) 83 399 1427 

info@ecdc.co.za 

www.ecdc.co.za

EASTERN CAPE DEVELOPMENT CORPORATION | ANNUAL REVIEW 2008/09 

SMGAFRICA_3542 

www.ecdc.co.za

Annual Review 08-09 - Eastern Cape Development Corporation

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?