2007 / 2008 Annual Report - Eastern Cape Development Corporation

EASTERN CAPE DEVELOPMENT CORPORATION2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

EASTERN CAPE DEVELOPMENT CORPORATION2007/08 ANNUAL REPORTHonourable P MasualleMember of the Executive Council for the Department of Economic Development and Environmental Affairs.Report of the Chief Executive Officer of the Eastern Cape Development Corporation for the period 1st April 2007 to 31st March 2008.I have the honour to submit the Annual Report of the Eastern Cape Development Corporation.Mr Mxolisi MatshambaChief Executive OfficerEastern Cape Development CorporationPublished by:Eastern Cape Development CorporationOcean Terrace Park, Moore StreetQuigney, East LondonSouth Africa© Eastern Cape Development Corporation, 2008Enquiries:Marketing DepartmentEastern Cape Development CorporationOcean Terrace Park, Moore StreetQuigney, East LondonSouth AfricaTelephone: +27 43 704 5600Fax: +27 43 704 5700COVER PHOTOGRAPH: New road constructed between Ugie and Mthatha to service the forestry industry in the Eastern Cape.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08EASTERN CAPE DEVELOPMENT CORPORATION2007/08 Annual ReportcontentsForeword 3Introduction and Highlights 5Part 1: General Information 7General Overview 7Vision, Mission and Strategic Priorities 7Legislative Mandate 8Part 2: Human Resources Management 11Part 3: Programme Performance 27Programme 1: Enterprise Finance 27Programme 2: Investment Promotion 33Programme 3: Trade Promotion 39Programme 4: Enterprise Development Services 43Programme 5: Development Support Services 49Programme 6: Property Management and Development 55Part 4: Audit Report, Financial Status and other financial information 59Report of the Independent Auditors 59Report of the Audit Committee 62Directors’ Report 64Balance Sheet 70Income Statement 71Changes in Equity 72Cash Flow Statement 74Accounting Policies 75Notes to the Consolidated Annual Financial Statements for the year ended 31 March 2008 83Supplementary information 1061

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 1FOREWORDBY THE CHAIRPERSON OF THEEASTERN CAPE DEVELOPMENT CORPORATIONI am pleased to present to you our 2007/08 Annual Report, which presents an overview of the Corporation’s activitiesduring this period.During the period under review the Corporation focused on establishing and developing the fundamental structures,which has been achieved. The Board is currently at full capacity and has established three board committees,namely the Audit Committee charged with oversight of the Corporation’s system of internal control; the RemunerationCommittee charged with considering executive remuneration; and the Human Resource Committee which considersand makes recommendations on human resource matters. These committees functioned optimally during the year andadded value in the Board’s decision making process.The Executive Management team is also at full complement in key portfolios of the Corporation’s core areas of delivery.A steady stabilisation and turnaround of the Corporation’s business is firmly on course as operating losses have beensignificantly reduced in comparison to the prior year.Although we have experienced an operating loss in the year under review, we are confident that the Corporation willbreak even by 2010 by continuous implementation of the turnaround strategy.On behalf of the Board, I thank the CEO, his Executive team, management and the entire staff of the Corporation fortheir commitment and hard work during this period.I thank the Board for visionary leadership guidance in ensuring that the Corporation adheres to corporate governancestandards. I express my gratitude to the directors who retired during the year under review, Professor Newman Kusi andMs Naledi Burwana - Bisiwe for their contributions and stewardship, and welcome Mr Albert Mfenyana and Mr FrancisMawala as new members of the Board.I also wish to thank the Premier and the MEC of Economic Development and Environmental Affairs (DEDEA), for theirsupport.Prof Wiseman NkuhluChairpersonEastern Cape Development Corporation3

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 1INTRODUCTION &HIGHLIGHTS by thechief executive officerOur ongoing internal restructuring and repositioning processes have produced positive outcomes for the Corporationin the year under review. This is a significant shift from the last financial year where we experienced a high number ofacting positions at executive management level which were a deterrent to effective internal leadership.We were mindful of the fact that if we are not properly organised internally and inadequately equipped to deal withthese challenges, we could not hope to positively shape the Eastern Cape’s economic landscape and to give effect to itsdevelopmental priorities. To counter these potentially destabilizing effects, ECDC began the process of implementing itsturnaround strategy which prioritized filling critical vacancies at senior management level and to have a fully functionalboard. We are proud to report that we have filled all these critical vacancies at executive management level togetherwith a fully functional board which is ably led by Professor Wiseman Nkuhlu.We have continued to deliver on our mandate to facilitate economic growth and to actively respond to the province’sdevelopment imperatives and we have recorded several successes in the year under review.1. The Investment Promotion unit has continued to attract foreign and domestic investment into the Eastern Cape.During the period under review, the unit facilitated the first farming of indigenous fish in sea cages in South Africa- beginning with the Irvin & Johnson (I&J) operation in Port Elizabeth. These cages have been stocked with kob andyellowtail.2. In consultation with DEDEA, the unit is actively facilitating cultivation of medicinal and aromatic plants bycommunities in the Stutterheim area, partnering with both the buyers, investors and commercial farmers.3. The Trade Promotion unit performed admirably, exceeding targets which facilitated over R46 million worth ofexports. The unit also led a trade mission to the renowned German Hanover Trade Fair where Straits Lighting andUitenhage-based automotives headlights manufacturer Hella wowed audiences with their “extremely energyefficientstreetlight.” A memorandum of understanding was signed between the two companies with a successfulEgyptian company involved in smart metering to work jointly on their products. A further 35 countries expressed a“serious” interest in purchasing this product.4. Prisma Engineering received a contract to supply the Maputo Port with equipment worth R1,4 million per annum.This has created 200 new jobs.5. The Enterprise Development unit has continued with its flagship Integrated Emerging Contractor DevelopmentModel which has successfully completed its pilot phase. The R5 million programme is the first of its kind in SouthAfrica and it aims to build capacity amongst emerging contractors. It has registered over 60 contractors this yearand the Construction Industry Development Board (CIDB) is in the process of formulating a national framework toregulate all construction development programmes including this one.6. The unit also recorded a 65% increase in the number of SMME interventions compared to the 2006/2007 financialyear.7. The Development Support Services unit identified 69 projects during the period under review, exceeding its targetof 64 planned projects. ECDC funding used for business-related studies and crop trials amounted to R6,6 million.Thirty-two projects were approved. We are encouraged by this trend as it indicates that more projects are beingreferred to the unit on the back of high demand for rural development initiatives.8. A business plan to test the feasibility of amalgamating three ECDC funded pilot projects into one new entity in thefirst phase and then commercialising the project in the second phase is underway. The Misty Mountains FlowerFarm will be combined with a fruit farm and a vegetable seed operation into an entity to be known as the SomersetEast Agri-Park and could employ up to 80 people, the majority in part-time jobs. Currently, the three projects employ15 people.9. The unit was also involved in a partnership in the Matolweni Irrigation Scheme, which created 40 jobs.10. The Property Management and Development unit has improved the integrity of the asset register. It has identifiedthe disposal of properties with no intrinsic value and has commenced the process of transfer of properties into thename of ECDC where such properties have intrinsic value.5

11. The unit also implemented the first phase of the asset conversion process, which will be followed by the secondphase to be initiated in the 2008/2009 financial year.12. The Enterprise Finance unit renewed its focus on rural development through the provision of micro finance in therural areas and a new focus on structured finance resulting in good quality equity investments.These initiatives indicate ECDC’s commitment to strengthening and developing its core mandate as the key driverof economic growth and development in the Eastern Cape. Although our turnaround strategy has brought its ownchallenges, we can confidently say that the Corporation is growing in stature because we know the levers we need topull to meet our objectives. I am confident that the Corporation will continue to realign its mandate with the province’sdevelopmental priorities, to eradicate poverty, inequality, unemployment and underdevelopment.Mxolisi D. MatshambaChief Executive OfficerEastern Cape Development Corporation6

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 1GENERALINFORMATION1 GENERAL OVERVIEW1.1 IntroductionThe Eastern Cape Development Corporation (ECDC) is a wholly-owned subsidiary of the provincial Department ofEconomic Development and Environmental Affairs. It is the official economic development agency for the Eastern Cape.The ECDC reports to its Board of Directors which represents government, business and labour, as appointed by theprovincial MEC for Economic Development and Environmental Affairs.The Corporation operates from a Head Office located in Ocean Terrace Park, East London, and extends its operationalactivities through five Regional Offices in Port Elizabeth, Queenstown, Butterworth, King William’s Town and Mthatha.1.2 Services rendered by the ECDCThe ECDC renders a variety of services related to the following operational areas:• Enterprise Finance• Investment Promotion• Trade Promotion• Enterprise Development Services• Spatial and Rural Development• Property Management and Development2 VISION, MISSION AND STRATEGIC PRIORITIESThe ECDC’s vision and mission statements were developed within the frameworks of the national and provincialgovernments, and are aligned with the Eastern Cape Provincial Growth and Development Plan (PGDP).2.1 The government of the Eastern Cape envisages:An Eastern Cape which is devoid of the inequalities of the past and unified through integrated and sustainableeconomic, social and cultural development; thus providing an acceptable quality of life for all its people in the contextof a united, non-racial, non-sexist and democratic South Africa.The ECDC is in the position of being a critical interface between the public and private sectors. Hence, it is ECDC’s visionthat: “The socio-economic goals of the Eastern Cape Province can be achieved through innovative and developmentallyconscious private sector development”.2.2 Mission StatementIt is the ECDC’s mission:To positively contribute to government’s development objectives for the Province and to overcome the constraints ofpoverty, unemployment, inequality, under-development and apartheid inheritance.2.3 Priorities• To facilitate and support private sector development in the Eastern Cape through:• Supporting existing business• Creating opportunities for new business• Growing and sustaining existing markets and developing new markets• Improving access to enterprise finance• Ensuring that skills, infrastructure and policies support business developmentWith the above priorities in mind, the following strategic goals have been identified in terms of the Corporation’s fiveyear strategic plan:• Establish a sound approach to implementing the DTI Micro-economic Reform Strategy and the Associated IntegratedManufacturing Strategy• Establish operational and budgetary alignment of the ECDC and the Department of Economic Development andEnvironmental Affairs’ activities, as well as with the PGDP7

• Ensure that the Integrated Development Plans (IDPs) formulated by metro, district and local municipalities reflectachievable programmes and measures for sound and sustainable Local Economic Development (LED)• Establish and maintain appropriate organizational systems to efficiently manage and administer the financial,operational, personnel, information management, communications and legal resources within the ECDC and itsassociated institutional structures• Provide targeted support services to the private sector to enhance their contribution to the growth of the provincialeconomy• Facilitate the financial stability of the ECDC• Build institutional capacity and improve internal efficiencies• Strengthen economic partnerships between investors, the public sector and business, from large to small scale, aswell as community structures3 LEGISLATIVE MANDATEThe ECDC draws its mandate directly from the Eastern Cape Development Corporation ( Act 2 of 1997) and is led by theeconomic development priorities of the provincial government, as detailed in the Provincial Growth and DevelopmentPlan (PGDP).The ECDC Act states that ECDC will:“Plan, finance, co-ordinate, market, promote and implement development of the Province and its people in the fields ofindustry, commerce, agriculture, transport and finance”8

HUMAN RESOURCES MANAGEMENT2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

PHOTOGRAPH: Pineapple planters near Bathurst.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 2HUMANRESOURCESMANAGEMENT1 AIMTo render Human Resources Administration, Human Resources Development, Organisational Development and LabourRelations Services to the Corporation.2 SERVICE DELIVERYAll departments and government institutions / entities are required to develop a Service Delivery Improvement (SDI)Plan. The following tables reflect the components of the SDI Plan as well as progress made in the implementation of theplans by the corporation.2.1 Main Services provided and standardsMain services Actual customers PotentialcustomersProvision of HRservicesAccess to HRservicesAll business units,Management, Board,Staff and UnionAll business units,Management, Board,Staff and UnionJob applicantsJob applicantsStandards of serviceProviding the right person at the righttimeRecruitment of the right skills withinacceptable turnaround timesProvision of professional advice andsupportActual achievementsagainst standardsMore than 80% ofcomplement achievedProfessional advice andsupport rendered on aneeds basis2.2 Consultation arrangements with customersType of arrangement Actual customers Potential customers Actual achievementsRegular consultationManagementBoardStaff- Regular engagement and participation in meetingsReports and submissions made as requiredAd hoc consultations Organised labour - Consultation on matters of mutual interest undertaken2.3 Service information toolsTypes of information toolsHR Policies and Procedures ManualInternet, intranet, email and information system policy documentActual achievementsThe manual has been reviewed and will be submitted to theBoard for approval.Accessible to all customers and potential customers2.4 Complaints mechanismComplaints mechanismDocumented grievance procedureActual achievementsGrievance procedure in place and utilised by staff11

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08HUMANRESOURCESMANAGEMENT3 EXPENDITURETable 3.1 Personnel costs by programme, 2007/08ProgrammeTotalExpenditure(includingpersonnelcosts)PersonnelExpenditure(Inclusive ofbenefits)PersonnelExpenditureas a % of totalexpenditureTrainingExpenditureProfessionaland SpecialServicesAveragepersonnelcost peremployeeEnterprise Finance 39,991,099 9,849,598 25 25,607 556,154 339,641Property Management andDevelopment70,992,008 10,169,909 14 40,032 133,924 267,629Enterprise Promotion 20,588,905 8,571,694 39 33,926 56,564 954,597Spatial & Rural Development 5,940,389 4,338,526 73 12,294 32,871 394,411Project Development 5,379,078 2,119,319 39 708 9,390 706,440Support Services 39,166,670 18,872,953 48 426,468 1,518,403 309,393Total 182,058,149 53,922,000 30 539,035 2,307,306 308,126(These figures include the temporary employees and external interns in the Corporation)Table 3.2 Personnel costs by salary bands, 2007/08Salary BandsPersonnelExpenditure% of TotalPersonnel CostAverage PersonnelCost Per EmployeeUnskilled (Grade 2-6) 1,517, 528 3 65,979Semi-skilled (Grade 7-11) 12,142,585 23 186,809Skilled (Grade 12-16) 27,492,290 51 404,298Senior management (Grade 17-23) 12,769,597 23 672,084Total 53,922,000 100 308,126Table 3.3 Salaries, Overtime, Home Owner’s Allowance and Medical Assistance by programme, 2007/08Programme Salaries Overtime Home Owners Allowances Medical AssistanceAmountSalariesas a % ofpersonnelcostAmountOvertimeas a % ofpersonnelcostAmount HOA as a %of personnelcostAmountMedicalAssistanceas a % ofpersonnelcostEnterprise Finance 5,133,501 52 - 0 846,651 9 335,153 3Property Management& Development4,916,978 48 3,471 0 946,932 9 484,704 5Enterprise Promotion 4,658,037 54 17,209 0 766,350 9 384,410 4Spatial & RuralDevelopment2,078,384 48 - 0 387,256 9 188,908 4Project Development 1,047,742 49 - 0 190,314 9 83,445 4Support Services 10,335,873 55 17,217 0 1,477,713 8 929,583 5Total 28,170,515 52 37,896 0 4,615,216 9 2,406,202 412

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08Table 3.4 Salaries, Overtime, Home Owner’s Allowances and Medical Aid by salary bands, 2007/08Programme Salaries Overtime Home Owners Allowances Medical AssistanceUnskilled(Grade 2-6)Semi-skilled(Grade 7-11)Skilled(Grade 12-16)Seniormanagement(Grade 17-23)AmountSalariesas a % ofpersonnelcostAmountOvertimeas a % ofpersonnelcostAmount HOA as a %of personnelcostAmountMedicalAssistanceas a % ofpersonnelcost1,179,508 78 2,070 0 106,913 7 43,479 36,491,024 53 20,430 0 1,233,165 10 736,117 613,540,335 49 15,396 0 2,468,493 9 1,196,765 46,959,608 55 - 0 806,646 6 429,841 3Total 28,170,515 52 37,896 0 4,615,216 9 2,406,202 44 EMPLOYMENT AND VACANCIESTable 4.1 Employment and vacancies by programme, 31 March 2008ProgrammeNumber ofposts as at31 March2007RestructuringobsoletepostsNumber ofposts as at31 March2008Number ofposts filledVacancyrate %Number ofemployeesadditional toestablishmentInvestments 32 0 32 25 22 -Property Management and Development 42 0 42 37 12 -Development Services Unit 46 0 46 32 30 -Support Services 64 1 63 54 14 -Total 184 1 183 148 19 -Table 4.2 Employment and vacancies by salary bands, 31 March 2008Salary Band Number of posts Number of postsfilledVacancy rate %Number of employeesadditional to theestablishmentUnskilled (Grade 2-6) 9 9 0 -Semi-skilled (Grade 7-11) 69 61 12 -Skilled supervision (Grade 12-16) 67 61 9 -Senior management (Grade 17-23) 38 17 55 -Total 183 148 19 -13

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08HUMANRESOURCESMANAGEMENTTable 4.3 Employment and vacancies by critical occupation, 31 March 2008Critical occupationsNumber ofpostsNumber of postsfilledVacancy rate%Number of posts filledadditional to theestablishmentAdmin & related personnel 76 65 13 -Drivers 1 1 0 -Information technology personnel 3 3 0 -Secretary & keyboard operators and related 67 62 7 -Senior managers 36 17 53 -Total 183 148 19 -5 JOB EVALUATIONTable 5.1 Job Evaluations, 1 April 2007 to 31 March 2008Salary bandUnskilled(Grade 2-6)Semi-skilled(Grade 7-11)Skilled supervision(Grade 12-16)Top and seniormanagement(Grade17-23)Number ofpostsNumberof JobsEvaluated% of postsevaluated bysalary bandsNumberPosts upgraded% of postsevaluatedPosts downgradedNumber% of postsevaluated9 1 11 - - - -69 3 4 0 0 - -67 0 0 - - 0 038 2 5 - - - -Total 183 6 3 0 0 0 05.2 Profile of employees whose salary positions were upgraded due to their posts being upgraded, 1 April 2007 to31 March 2008No positions were upgraded during this financial year.5.3 Employees whose salary level exceed the grade determined by job evaluation, 1 April 2007 to 31 March 2008(in terms of PSR 1.V.C.3)No employee’s salary level exceeded the grade.5.4 Profile of employees whose salary level exceed the grade determined by job evaluation, 1 April 2007 to 31 March 2008(in terms of PSR 1.V.C.3)No employee’s salary exceeded the grade.14

EASTERN CAPE DEVELOPMENT CORPORATION 2007/086 EMPLOYMENT CHANGESTable 6.1 Annual turnover rates by salary band for the period 1 April 2007 to 31 March 2008Salary bandUnskilled(Grade 2-6)Semi-skilled(Grade 7-11)Skilled supervision(Grade 12-16)Top and Senior management(Grade 17-25)Number ofposts filled asat 31 March2007Appointmentsand transfers intothe CorporationTerminationsand transfersout of theCorporationNumber ofemployees perband as at 31March 2008Turnoverrate %7 3 0 10 -63 0 5 58 865 0 2 63 313 6 2 17 15Total 148 9 9 148Table 6.2 Annual turnover rates by critical occupation for the period 1 April 2007 to 31 March 2008CriticaloccupationNumber ofposts filled asat 31 March2007Appointmentsand transfersinto theCorporationTerminationsand transfersout of theCorporationNumber ofemployees peroccupation as at31 March 2008Turnoverrate %Admin & related personnel 64 3 3 64 5Drivers 1 0 0 1 -Information technology personnel 3 0 0 3 -Secretary & keyboard operators andrelated67 0 4 63 6Senior managers 13 6 2 17 15Total 148 9 9 148Table 6.3Reasons why staff are leaving the organisationTermination Type Number % of totalDeath 1 14Resignation 5 72Expiry of contract 0 0Dismissal – operational changes 0 0Dismissal – misconduct 1 14Dismissal – inefficiency 0 0Discharged due to ill-health 0 0Retirement 0 0Other (transferred to another entity) 0 0Total 7 100Total number of employees who left as a % of the total employment (5%)15

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08HUMANRESOURCESMANAGEMENT6.4 Promotions by critical occupationThere were no promotions during the period under review. However, personnel have been appointed into actingpositions at a higher grade.6.5 Promotions by salary bandThere were no promotions during the period under review. However, personnel have been appointed in acting positionsat a higher grade.7 EMPLOYMENT EQUITYTable 7.1Total number of employees (including employees with disabilities) in each of the following occupational categories asat 31 March 2008Occupational categories Male Female TotalAfrican Coloured Indian White African Coloured Indian WhiteAdmin and related 17 0 0 0 45 0 0 0 62Driver 1 0 0 0 0 0 0 0 1Information Technology 0 0 0 2 1 0 0 0 3Secretary and keyboard operators andrelated22 0 1 7 28 2 0 2 62Senior management 7 1 2 4 3 0 0 1 18Employees with disabilities 0 0 0 0 1 1 0 0 2Total 47 1 3 13 78 3 0 3 148Table 7.2 Total number of employees (including employees with disabilities) in each of the following occupational bands as at 31March 2008(Refer to Table 7.1. above)Table 7.3 Recruitment for the period 1 April 2007 to 31 March 2008Occupational bands Male Female TotalAfrican Coloured Indian White African Coloured Indian WhiteAdmin and related 1 0 0 0 2 0 0 0 3Drivers 0 0 0 0 0 0 0 0 0Information technology 0 0 0 0 0 0 0 0 0Secretary and keyboard operators &related0 0 0 0 0 0 0 0 0Senior management 3 1 1 1 0 0 0 0 6Total 4 1 1 1 2 0 0 0 9Employees with disabilities 0 0 0 0 0 0 0 0 07.4 Promotions for the period 1 April 2007 to 31 March 2008There were no promotions during the period under review. However, personnel have been appointed in acting positionsat a higher grade.16

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08Table 7.5 Terminations for the period 1 April 2007 to 31 March 2008Occupational bands Male Female TotalAfrican Coloured Indian White African Coloured Indian WhiteAdmin & related 1 0 0 0 1 1 0 0 3Drivers 0 0 0 0 0 0 0 0 0Information technology 0 0 0 0 0 0 0 0 0Secretary and keyboard operators &related0 0 1 1 0 0 0 0 2Senior management 1 0 0 1 0 0 0 0 2GRAND TOTAL 2 0 1 2 1 1 0 0 7TOTAL PERMANENT 2 0 1 2 1 1 0 0 7Non-Permanent 0 0 0 0 0 0 0 0 0Employees with disabilities 0 0 0 0 0 0 0 0 0Table 7.6 Disciplinary action for the period 1 April 2007 to 31 March 2008MaleFemaleAfrican Coloured Indian White African Coloured Indian White TotalDisciplinary action 1 0 0 0 0 0 0 0 1Table 7.7 Skills development for the period 1 April 2007 to 31 March 2008(Refer to Tables 13.1. and 13.2. of this document)8 PERFORMANCE REWARDS8.1 Performance Rewards by race, gender, and disability, 1 April 2007 to 31 March 2008The performance management system has been approved by the Board and is being implemented. (Also refer to 8.2)8.2 Performance Rewards by salary bands for personnel below Senior Management Service, 1 April 2007 to 31 March 2008Performance Rewards are an integral part of the Performance Management System. Since the system has only mostrecently been commenced with, at this stage no rewards have as yet been paid.8.3 Performance Rewards by critical occupations, 1 April 2007 to 31 March 2008See 8.28.4 Performance related rewards (cash bonus), by salary band, for Senior Management ServiceSee 8.217

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08HUMANRESOURCESMANAGEMENT9 FOREIGN WORKERSTable 9.1Foreign Workers, 1 April 2007 to 31 March 2008, by salary bandSalary band 1 April 2007 31 March 2008 ChangeNumber % of total Number % of total Number % changeUnskilled (Grade 2-6) - - - - - -Semi-skilled (Grade 7-11) - - - - - -Skilled (Grade 12-16) 1 100 1 100 1 100Senior management (Grade 17-23) - - - - - -Total 1 100 1 100 1 100Table 9.2Foreign Workers, 1 April 2007 to 31 March 2008, by major occupationMajor occupation 1 April 2007 31 March 2008 ChangeNumber % of total Number % of total Number % changeTrade & Industry Advisor and related 1 100 1 100 1 100Total 1 100 1 100 1 10010 LEAVE UTILISATION FOR THE PERIOD 1 APRIL 2007 TO 31 MARCH 2008Table 10.1 Sick leave, 1 April 2007 to 31 March 2008Salary band Total days Number ofdays withmedicalcertificationNumber ofemployeesusing sickleave% of totalemployeesusing sickleaveAveragedays peremployeeEstimatedcost(‘000’)Unskilled (Grade 2-6) 85 74 7 70 12 34Semi-skilled (Grade 7-11) 223 165 49 84 5 123Skilled (Grade 12-16) 572 265 40 63 14 144Senior management (Grade 17-23) 43 18 10 59 4 94Total 923 522 106 72 9 395Table 10.2 Disability leave (temporary and permanent), 1 April 2007 to 31 March 2008There was no disability leave during the period under review.Table 10.3 Annual leave, 1 April 2007 to 31 March 2008Salary bands Total days taken Average days per employeeUnskilled (Grade 2-6) 156 16Semi skilled (Grade 7-11) 1353 23Skilled (Grade 12-16) 1251 20Senior management (Grade 17-23) 410 24Total 3170 21Table 10.4 Capped leave, 1 April 2007 to 31 March 2008Leave has been capped at 40 days per employee.18

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08Table 10.5 Leave payouts for the period 1 April 2007 to 31 March 2008The following table summarises payments made to employees as a result of leave that was not taken.ReasonTotalamountNumber ofemployeesAverage paymentper employee (R’s)Leave payout for 2007/08 due to non-utilisation of leave for the previous cycle - - -Capped leave payouts on termination of service for 2007/08 - - -Current leave payout on termination of service for 2007/08 259 666 15 17 311Total 259 666 15 17 31111 HIV/AIDS & HEALTH PROMOTION PROGRAMMESTable 11.1Steps taken to reduce the risk of occupational exposureUnits/categories of employees identified to be at high risk ofcontracting HIV & related diseases (if any)NoneKey steps taken to reduce the riskThe HIV/AIDS Committee did play a role to make staff aware of thepandemic, and was working towards motivating staff to do VoluntaryCounselling and Testing (VCT). During the period reported thiscommittee has been inoperative.Table 11.2Details of Health Promotion and HIV/AIDS ProgrammesQuestion Yes No Details, if yes1. Has the corporation designated a member of the SMS to implementthe provisions contained in Part VI E of Chapter 1 of the Public ServiceRegulations, 2001? If so, provide her/his name and position.2. Does the corporation have a dedicated unit or has it designatedspecific staff members to promote the health and well being of youremployees? If so, indicate the number of employees who are involved inthis task and the annual budget that is available for this purpose.3. Has the corporation introduced an Employee Assistance or HealthPromotion Programme for your employees? If so, indicate the keyelements/services of this programme.4. Has the corporation established (a) committee(s) as contemplatedin Part VI E.5 (e) of Chapter 1 of the Public Service Regulations, 2001? Ifso, please provide the names of the members of the committee and thestakeholder(s) that they represent.5. Has the corporation reviewed its employment policies and practices toensure that these do not unfairly discriminate against employees on thebasis of their HIV status? If so, list the employment policies/practices soreviewed.6. Has the corporation introduced measures to protect HIV-positiveemployees or those perceived to be HIV-positive from discrimination?If so, list the key elements of these measures.7. Does the corporation encourage its employees to undergo VoluntaryCounselling and Testing? If so, list the results that you have you achieved.8. Has the corporation developed measures/indicators to monitor &evaluate the impact of its health promotion programme? If so, list thesemeasures/indicators.√√√√√√√√June Moshoeshoe Coordinator: Training andDevelopment2 EmployeesJune Moshoeshoe had been appointedfor this responsibility. No progress in thereported period.June MoshoeshoeLindelo BottomanYoliswa NtlokoIkhona MvaphantsiAll HR policies were reviewed. Therecruitment policy complies with legislation.Pre-employment testing prohibited. Benefitsoffered only in terms of conditions ofemployment and not on basis of HIV status.The policy on HIV was adopted. The policyprohibits any employment practicesthat discriminate against HIV positiveemployees.Progress has not been measured inthis regard as VCT is encouraged as aconfidential exercise to avoid stigma anddiscrimination.19

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08HUMANRESOURCESMANAGEMENT12 LABOUR RELATIONSTable 12.1 Collective agreements, 1 April 2007 to 31 March 2008Total collective agreements1 (SACCAWU)- Wage AgreementTable 12.2 Misconduct and disciplinary hearings finalised, 1 April 2007 to 31 March 2008Outcomes of disciplinary hearings Number % of totalCorrectional counselling - -Verbal warning - -Written warning 0 -Final written warning 0 -Suspended without pay - -Fine - -Demotion - -Dismissal 1 100Not guilty - -Case withdrawn - -Total 1 100Table 12.3Types of misconduct addressed at disciplinary hearingsType of misconduct Number % of totalPoor work performance 1 1Assault of colleague - -Unacceptable behaviour - -Misuse of vehicle - -Theft - -Bribery - -Negligence - -Misappropriation of funds - -Fraud - -Sexual harassment - -Total 1 100Table 12.4 Grievances lodged for the period 1 April 2007 to 31 March 2008Number % of TotalNumber of grievances resolved - -Number of grievances not resolved - -Total number of grievances lodged 0 0Table 12.5 Disputes lodged with Councils for the period 1 April 2007 to 31 March 2008No disputes lodged with the CCMA in the period under review.20

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08Table 12.6 Strike actions for the period 1 April 2007 to 31 March 2008NoneTable 12.7 Precautionary suspensions for the period 1 April 2007 to 31 March 2008Number% of TotalNumber of people suspended 0Number of people whose suspension exceeded 30 days 0Average number of days suspended 0Cost (R’s) of suspensions 013 SKILLS DEVELOPMENTTable 13.1 Training needs identified 1 April 2007 to 31 March 2008Occupational categories Gender Number ofemployeesidentified as at1 April 2007Legislators, senior officialsand managersTraining needs identified at start of reporting periodInternshipsSkills programmes& other shortcourses & ABETOther forms oftraining studyloansTotalprogrammes &short courses &forms of trainingFemale 5 0 30 0 30Male 22 0 0 0 0Professionals Female 4 6 0 0 6Technicians and associateprofessionalsMale 12 4 16 0 20Female 8 8 4 0 12Male 7 0 0 0 0Clerks Female 31 15 16 0 31Male 4 4 0 0 4Service and sales workers Female 41 24 0 0 24Skilled agriculture andfishery workersCraft and related tradesworkersPlant and machineoperators and assemblersMale 21 3 21 0 24Female 6 - 0 0 0Male 0 - 6 - 6Female - - - - 0Male - - - - 0Female - - - - 0Male 0 0 0 0 0Elementary occupations Female 0 0 0 0 0Male 0 - - 0 0Sub Total Female 95 53 53 0 106Male 66 11 40 0 51Total 161 64 93 0 157*NB* Skills programmes and other short courses were not identified by gender. The figures indicated under this columncater for both genders.21

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08HUMANRESOURCESMANAGEMENTTable 13.2 Training provided 1 April 2007 to 31 March 2008Occupational Categories Gender Number ofemployeestrained as at 31March 2008Legislators, senior officialsand managersTraining provided within the reporting periodInternshipsSkills Programmes& other shortcourses & ABETOther forms oftraining StudyLoansTotalProgrammes &short courses& forms oftrainingFemale 1 0 1 0 1Male 8 0 9 0 9Professionals Female 3 0 5 6 11Technicians and associateprofessionalsMale 6 0 12 6 18Female 0 0 0 0 0Male 0 0 0 0 0Clerks Female 7 0 13 4 17Male 0 0 0 0 0Service and sales workers Female 9 0 13 1 14Skilled agriculture andfishery workersCraft and related tradesworkersPlant and machineoperators and assemblersMale 5 0 8 0 8Female 0 0 - - 0Male 0 0 - - 0Female - - - - -Male - - - - -Female - -Male 0 - - - -Elementary occupations Female 0 - - -Male - - - - -Sub Total Female 20 0 32 11 43Male 19 0 29 6 35Total 39 0 61 17 7814 INJURY ON DUTYTable 14.1 Injury on duty, 1 April 2007 to 31 March 2008Nature of injury on duty Number % of totalRequired basic medical attention only 1 100Temporary Total Disablement - -Permanent Disablement - -Fatal - -Total 1 10022

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0815 UTILISATION OF CONSULTANTS15.1 Report on consultant appointments using appropriated fundsA consultancy firm was appointed to conduct restructuring process and the funds for the project were provided for bythe DEDEA.15.2 Analysis of consultant appointments using appropriated funds, in terms of Historically Disadvantaged Individuals(HDI's)No consultants were appointed using appropriated funds.15.3 Report on consultant appointments using donor fundsNo consultant was appointed using donor funds.15.4 Analysis of consultant appointments using donor funds, in terms of Historically Disadvantaged Individuals (HDI's)No consultant was appointed using donor funds.23

ENTERPRISE FINANCE2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

PHOTOGRAPH: Alicedale, home to the Bushman Sands Golf Course.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 3PROGRAMME PERFORMANCEENTERPRISEFINANCE1 Strategic goals2 Budget• To create a development investment portfolio producing:- a quality development investment portfolio; with- a market related sustainable return; which- would create sustainable jobsProgrammeSub–programme1: Contractor’sFinanceSub–programme2: General LoansSub–programme3:Micro FinanceSub–programme4: StructuredFinanceBudgetApprovals(R’000’s)ActualApprovals(R’000’s)50 000 26 900(disbursed 26 900)34 000 42 500(disbursed 27 800)4 000 6 600(disbursed 2 600)32 000 22 150(disbursed 13 050)% Deviation Reason for deviation-46 Slow roll-out of infrastructure expenditure+25 Strong demand for loans, however actual disbursementslagging due to the inherent limitations of thesecuritisation process.+65 Approval to MFI’s in place but actual disbursementslagging due to the bulk of approvals being made duringthe last quarter of the financial year.-30 Product drive and awareness gained momentum towardsthe end of the financial year.3 Outputs and service delivery trends3.1 Sub-programme 1: Contractor’s Finance3.1.1 Sub-programme 1: Contractor’s Finance performance in 2007/8Measurable Objectives Performance Measure PlannedPerformanceTo provide financialassistance to contractorsValue of Contractor’sLoansActualPerformance%DeviationReason for deviationR30 mil R20.1 mil -33 Slow roll-out by governmentof construction programmesAs above Performance Guarantees R20 mil R6.8 mil -66 As above3.1.2 Sub-programme 1: Contractors’ Finance trends in performance from 2005/06 to 2007/08Measurable Objectives Performance Measure 2005/6(actual)(R’000’s)To provide financialassistance to contractorsAs aboveValue of Contractor’sLoansPerformanceguarantees2006/7(actual)(R’000’s)2007/8(actual)(R’000’s)CompoundAnnualGrowth %Reasons for deviationR38.5 R15.0 R20.1 -27 Slow roll-outby governmentof constructionprogrammesR20.6 R16.0 R6.8 -42 As above27

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PROGRAMME PERFORMANCEENTERPRISEFINANCE3.2 Sub-programme 2: General Loans3.2.1 Sub-programme 2: General Loans performance in 2007/2008Measurable ObjectivesPerformanceMeasurePlannedPerformanceActualPerformance% Deviation Reason for deviationTo provide financialassistance tosustainable businessenterprisesValue of GeneralLoansR34.0 mil R42.5 mil(disbursedR27.8 mil)+25 Strong demand for generalloans, however disbursementsare lagging approvals due tothe inherent limitations of thesecuritisation process.3.2.2 Sub-programme 2: General Loans trends in performance from 2005/06 to 2007/08Measurable ObjectivesPerformanceMeasure2005/6(actualapproval)(R’000’s)2006/7(actualapproval)(R’000’s)2007/8(actualapproval)(R’000’s)CompoundAnnualGrowth%Reason for deviationTo provide financialassistance tosustainable businessenterprisesValue of GeneralLoans43 200 29 000 42 500(disbursed27 800)_Good level of approvals,but disbursementslagging due to theinherent limitationsof the securitisationprocess.3.3 Sub-programme 3: Micro Finance3.3.1 Sub-programme 3: Micro Finance performance in 2007/08Measurable ObjectivesPerformanceMeasurePlannedPerformanceActualPerformance%DeviationReason for deviationTo providefinancialassistanceto sustainablebusiness enterprisesValue of MicroLoansR4.0 mil R6.6 mil(disbursedR2.6 mil)+65 R6.0 mil approved to MFI’s in rural areastowards the end of the financial year,but disbursements lagging due to thebulk of approvals being made during thelast quarter of the financial year.3.3.2 Sub-programme 3: Micro Finance performance from 2005/06 to 2007/08Measurable ObjectivesPerformanceMeasure2005/6(actualapproval)(R’000’s)2006/7(actualapproval)(R’000’s)2007/8(actualapproval)(R’000’s)CompoundAnnualGrowth%Reason for deviationTo provide financialassistance tosustainable businessenterprisesValue of MicroLoansN/A 800 6 600(disbursed2 600)+725 New focus on ruraldevelopment and microlending implementedtowards the end of thefinancial year28

EASTERN CAPE DEVELOPMENT CORPORATION 2007/083.4 Sub-programme 4: Structured Finance3.4.1 Sub-programme 4: Structured Finance performance for 2007/08Measurable ObjectivesPerformanceMeasurePlannedPerformanceActualPerformance%DeviationReason for deviationTo provide financial assistance tosustainable business enterprisesby providing a mix of loan andequity financeValue ofStructured FinanceR32 milR22.15 mil(disbursed R13mil)-30 Product drive andawareness gainedmomentum towards theend of the financial year.3.4.2 Sub-programme 4: Structured Finance trends in performance from 2005/06 to 2007/08Measurable ObjectivesPerformanceMeasure2005/6(actual)2006/7(actual)2007/8(actual)Reason forDeviationTo provide financial assistanceto sustainable businesses byproviding a mix of loan andequity financeValue of StructuredFinanceR20 mil R5 mil R22.15mil(Disbursed R13mil)Product drive andawareness gainedmomentum towards theend of the financial year.4 Debt Collection performance from 2005/06 to 2007/08Measurable Objectives Performance Measure 2005/6(actual)Reduce Default Rate of Loan BookPercentage collected from new loanbook2006/7(actual)2007/8(actual)N/A N/A 955 Development Investments challenges faced during 2007/08• Development Investment Policy only approved after financial year end;• Appointment of managerial staff only started after financial year end;• No performance management system for Account Managers during current financial year;• After care programme only implemented after current financial year end.6 Development InvestmentS achievements during 2007/08• Renewed focus on rural development through the provision of micro finance in the rural areas;• New focus on structured finance resulting in good quality equity investments;• Development Investment Policy completed, however final Board approval was only obtained shortly after the currentfinancial year end.29

INVESTMENT PROMOTION2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

PHOTOGRAPH: Magwa Tea Estate, near Lusikisiki.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 3PROGRAMME PERFORMANCEINVESTMENTPROMOTION1 STRATEGIC GOALS2 BUDGETStrategic goals for the sub-programme are:• To attract foreign and local direct investment into the Eastern Cape• To maintain and support existing investmentsBased on the objectives of the PGDP, the unit focuses on the following sectors:• Manufacturing-based potential, which sub-divides into general manufacturing and automotive• Agro-processing, Medicinal and Aromatic plant production, green house Horticulture and Aquaculture• Tourism Infrastructure investment promotion• BPO – Business Process Outsourcing (links to all of the above sectors)These are driven through the following approaches:• Image building activities (Pro-active)• Investment generation activities (Pro-active)• Investor servicing activities (Re-active)• Policy advocacy• Support function to municipalities (Demand driven)ProgrammeSub-programme 2.1:Investment PromotionBudget(R’000’s)13,079( 14,910 incl vat)Actual(R’000’s)%DeviationReason for deviationOverheads 6,556 -23 Provincial Branding projectProjects 3,544is behind schedule (Note:Corporate Services overheadsTotal 10,100R3,002K)3 Outputs and service delivery trends3.1 Investment Promotion performance in 2007/2008MeasurableObjectivesFacilitateInvestmentsPerformance MeasureNumber of newprospectsNumber of newinvestmentsValue of investments(R ‘million) facilitatedPlannedPerformanceActualPerformance%Deviation100 101 +1 Target met28 29 +3 Target metR1,164 million R738.34millionReason for deviation-37 Sea Ark R250m EIA processdelaying start upGreenzone Addo R150 milRezoning of Agric land causingdelaysNumber of Jobs Createdor Saved2027 2177 +7.4 Target met33

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PROGRAMME PERFORMANCEINVESTMENTPROMOTION3.2 Investment Promotion trends in performance from 2005/6 to 2007/8MeasurableObjectivesFacilitateinvestmentsPerformanceMeasureNumber of newprospectsNumber of newinvestmentsValue of investments;and (R ‘million)facilitatedNumber of jobscreated or saved2005/6(actual)NewmeasureNewmeasure2006/7(actual)2007/8(actual)CompoundAnnualGrowthReason for deviation91 101 +11 Sub sector-focusedapproach bearing fruit24 29 +20 Project pipeline lag1 416.5 766 738.34 -27 Sea Ark – R250 mil - EIAprocess delaying start upGreenzone Addo R150 mil- Rezoning of land causingdelays3 467 3 522 2177 -21 Reduction of labourintensive projects in2007/84 Investment Promotion challenges faced during 2007/08Agriculture and agro-processing sector• Inadequate investment in research and development for high value crops in the province;• Land tenure issues limit cultivation of crops for Bio fuels, and other high value crops;• Challenges in implementation of NEMBA (National Environmental Management of Biodiversity Act) regulations byDEDEA for the management of the wild harvesting of medicinal plants in the province;• Lack of clarity with regards to ownership of Magwa Tea Estate and its related funding model.Manufacturing, auto and energy• Delays in the completion of the new MIDP (Motor Industry Development Programme). There is uncertainty about theformat and benefits of the replacement programme.BPO and tourism• A marketing strategy for Business Process Outsourcing being finalised by the OTP;• Local incentives are required to attract call-centre operators;• Poor infrastructure remains a limiting factor for tourism development – especially on the Wild Coast.Aquaculture, fisheries and environmental management• Unreliable power supply is making international investors nervous about investing in aquaculture;• Slow turnaround times for re-zoning and environmental authorizations remain a deterrent for investors.5 Investment Promotion achievements DURING 2007/08Agriculture and agro-processing sector• An EU approved de-boning / tannery plant for the ostrich industry is being established in Grahamstown by IMPEC(Integrated Meat Processors of the Eastern Cape), a joint venture between the Department of Agriculture (National)and a Private Sector Consortium (Phillipi Holdings);• In consultation with DEDEA, the unit is actively facilitating cultivation of medicinal and aromatic plants (MAPs) bycommunities in the Stutterheim area, partnering with both the buyers/investors and the commercial farmers;• Koukamma Fruit Packers Company (a partnership between an Emerging Farmers Trust, and Du Toit Fruit MarketingGroup) established an EU approved pack-house for apples, pears, etc, in the Joubertina – Langkloof area;• PG Bison Chip Board Factory is up and running (ECDC supported the project on behalf of Government to ensureinfrastructure was in place for on time start up).34

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08BPO and tourism• One new call centre in Coega and expansion in East London (Real People);• The world’s largest tour operator, Tui, began including the Eastern Cape in their South African itinerary;• Two more hiking and holiday lodges opened for business at Ntafufu and Manteku on the Wild Coast.Aquaculture, fisheries and environmental management• The first farming of indigenous fish in sea cages began in the province with I&J’s operation in Port Elizabeth;• Development of a fin-fish hatchery and grow-out facility for land based mariculture has started in East London;• Final site identification for a trout cage culture operation (funding secured), is underway in the UkhahlambaMunicipality.Other• East London Port Expansion lobby function is continuing with a high level meeting held between Minister Erwin,MBSA, East London IDZ and BCM. ECDC participates by funding the project manager and being on the steeringcommittee.35

TRADE PROMOTION2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

PHOTOGRAPH: The Mercedes Benz South Africa plant in East London.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 3PROGRAMME PERFORMANCETRADEPROMOTION1 Strategic goals:To increase exports from the Eastern Cape province and to increase the number of exporters in the province in alltargeted sectors.Focus sectors:The sectors with the highest production capacity and manufacturing capability are:• Automotive• Agro-processing• ManufacturingFocus target countries:In addition to the EU and US markets, the unit has begun to promote exports into the Middle East and the neighbouringAfrican countries whose economies are growing substantially. Due to similar environmental and infrastructuralconditions, products developed and made for the South African market are found to be more suitable for other Africancountries than European countries.2 BUDGETProgrammeSub-programme 2.2:Trade PromotionBudget(R’000’s)3,947(4,500 incl vat)Actual(R’000’s)%DeviationReason for deviationOverheads 2,804 +22 Overspend due to corporateProjects 1,996overhead allocation (R811K)Total 4,8003 OUTPUTS AND SERVICE DELIVERY TRENDS3.1 Trade promotion performance in 2007/08MeasurableObjectivesIncreasethe value ofexportsPerformance MeasureValue of exportsgeneratedPlannedPerformanceActualPerformance% Deviation Reason for deviationR20 mil R46,171 mil +131 Targets were over achieved dueto a weaker rand and soonerthan expected turnaround ordersgenerated from trade missionsIncrease thenumber ofexportersIncrease thevalue of tradewithin theprovinceGeneration of newexportersNumber of existingexporters assistedNumber of businessesbenefiting from DTIincentives10 16 +60 Target exceeded due to the weakerrand30 31 +3 Target exceeded48 16 -66 The shortfall is a result ofmissions cancelled by the DTI andunsuccessful applications dueto delays in submitting requireddocumentation39

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PROGRAMME PERFORMANCETRADEPROMOTION3.2 Trade Promotion trends in performance from 2005/06 to 2007/08MeasurableObjectivesIncreasethe value ofexportsPerformance Measure 2005/6(actual)Value of exportsgeneratedNewmeasure2006/7(actual)2007/8 CompoundAnnualGrowthReason for deviationR17,760 mil R46,171 mil 160 Targets were overachieved dueto a weaker rand and soonerthan expected turnaroundorders generated from trademissionsIncrease thenumber ofexportersGeneration of newexportersNo. of existingexporters assistedNewmeasureNewmeasure6 16 166 Target exceeded due to theweaker rand21 31 47 Target exceededIncrease thevalue of tradewithin theprovinceNo. of businessesbenefiting from DTIincentivesNewmeasure29 16 -45 The shortfall is a result ofmissions cancelled by the DTIand unsuccessful applicationsdue to delays in submittingrequired documentation4 Trade Promotion challenges faced during 2007/08• The language barrier is still a challenge in new markets – Asia and Africa (Chinese, Mandarin, Portuguese andFrench speaking);• DTI cancelled major international trade Initiatives and companies have been unsuccessful in their applications forthe DTI Export Marketing and Investment Assistance Scheme;• Non-tariff barriers have a negative effect on our exporters, e.g. toxic fertilisers in the pineapple industry5 Trade Promotion achievements during 2007/08• E-platform was launched in February 2008 to enhance access to international markets;• MFA Global secured a contract worth R2 mil in Oman;• MFA Global secured a tender to supply a housing project in Beira, Mozambique;• Makana Meadery secured a contract to supply the Japanese Market with the health beer (Qhilika);• Due to a growing demand for their product, Makana Meadery has opened a distribution branch in the United Statesunder the name B United International Inc. Redding CT 06896;• Prisma Engineering received a contract to supply the Maputo Port with equipment to the value of R1 440 000 perannum. This has created employment of 200 new jobs;• OPM Tooling has been exporting electronic connectors (demisters) to the US, during the last quarter of the financialyear they expanded exports to Belgium, Estonia, UK and Peru;• Momentos of Africa has expanded to three more outlets at the Cape Town Airport - International Departures, ORTambo Airport domestic commercial floor, and the Waterfront in Cape Town;• Since the Scandinavian mission two years ago the export sales of Cape Mohair Spinners to the area have beenaccumulating progressively.40

ENTERPRISE DEVELOPMENT SERVICES2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

PHOTOGRAPH: Citrus, chicory, vegetable and tobacco farming near Patensie.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 3PROGRAMME PERFORMANCEENTERPRISE DEVELOPMENTSERVICES1 STRATEGIC GOALSTo provide effective, efficient and integrated business development and support services to priority sectors.Strategic goals for the programme• Foster growth and development of SMMEs• Foster strategic partnerships with other agencies and institutions providing business support• Provide effective and efficient Business Development Services (BDS) support in a sector-focused approachQuality improvement measures• Partnership with Institutions of Higher Education and Learning• Strengthened co-operation with SEDA and CIPRO• Introduced Quality Management System training2 BUDGETProgrammeEnterpriseDevelopmentServicesBudget(R’000’s)Actual(R’000’s)%DeviationReason for deviation13,309 Overheads 6,742 -6 8 SMMEs withdrew from the Business Development15,173 (Incl VAT.) Projects 5,745Support Programme. Two major interventionsconsolidated, thereby reducing costs significantly.Total 12,487Corporate Services overhead allocation was R2,985K.3 OutputS AND Service Delivery Trends3.1 Enterprise Development Services performance in 2007/08MeasurableObjectivesTo provideBusinessDevelopmentServices (BDS) ina sector-focusedapproachTo provide amentorshipprogramme on ademand drivenbasis.Performance MeasureNumber of businessessupported in priority sectors(Number of interventions)Impact of support per prioritysector; CIDB rating forconstructionPlannedPerformanceActualPerformance%DeviationReason for deviation300 279 -7 8 SMMEs withdrew from theprogramme, some interventionsconsolidated and the remainderof interventions in progress asat the end of the financial year.60 62 +3% Target exceededTurnover for arts and crafts R507 150 R15 565 -97 Partner (DSRAC) withdrewfundingIntegrate/partner with otherdevelopment agencies w.r.t.SMME Development (Numberof walk-ins and businessreferrals)Business registrations (CCregistrations only (CK1, CK2& CK3)Reduction in default rate forbusinesses supported- 731 n/a New measure- 1907 n/a New measure, SLA not in placeat the time of setting targets.15% 16% -1 Some businesses havenegotiated paymentarrangements.43

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PROGRAMME PERFORMANCEENTERPRISE DEVELOPMENTSERVICES3.2 Enterprise Development Services trends in performance from 2006/07 to 2007/08Output Performance Measure 2005/6(actual)To provide BusinessDevelopmentServices (BDS) ina sector-focusedapproachTo providementorshipprogramme on ademand drivenbasisNumber of businessessupported inpriority sectors (# ofinterventions)Impact of support perpriority sector; CIDBrating for constructionTurnover for arts andcraftsIntegrate/Partner withother DevelopmentAgencies w.r.t. SMMEDevelopment (No. ofwalk-ins and BusinessReferrals)Business Registrations(CC Registrationsonly(CK1, CK2 & CK3)SMME Training andcapacity buildingsessions/workshopsfocusing on QualityManagement Systems(QMS) & OccupationalHealth & Safety (OHS)Reduction in defaultrate for businessessupported2006/7(actual)2007/8(actual)CompoundAnnualGrowthReason for deviation119 169 279 +53 Increase in demand.54 54 62>Grade 5+7 Positive response to 5regional Road shows(Construction Indabas)n/a R441 000 R15 565 -96 DSRAC withdrew support,grossly affecting operations. Acomparison with the previousyear not realistic.n/a N/A 731 n/a New measuren/a n/a 1 907 n/a New measure4 4 13 +80% Partnered with BKCOB,UFH and NMMU in hostingBusiness EXPOs and SMMEConference. Held thematicseminars covering variousaspects such as BEE,Importance of networking,access to finance, etc. 5workshops held for theconstruction sector (1 perregion)4 Enterprise Development Services challenges fACED DURING 2007/08• Lack of accreditation of service providers by their respective SETAs still remains a problem (even when this service isprovided, there are serious delays in the process);• Most businesses are not affiliated to any professional body and this fragmentation affects co-ordination of support;• There is an uneven spread and acute shortage of service providers in the province, particularly in rural areas.44

EASTERN CAPE DEVELOPMENT CORPORATION 2007/085 Enterprise Development Services achievements During 2007/08• Training of SMMEs in Quality Management and Occupational Health Systems comprising:o ISO 9000 (30 entities) and ISO 22 000 (16 entities)o OHSAS (35 entities)• 54 Emerging Contractors successfully completed the final phase of the Integrated Emerging Contractor DevelopmentModel training programme, which was supported by 15 mentors who were in turn developed by ECDC through amentorship training programme with the University of the Free State (UFS);• Partnered with the DTI on the Arts & Craft Export Programme;• Implementing Agent for the Provincial Craft Hub with the DTI;• 65% increase in the number of SMME interventions as compared to last year;• 1 907 businesses registered with CIPRO through ECDC;• Non-financial support to AB350 and bus operators, which was subsequently launched in March 2008;• Piloted a business outreach programme (Siyahlwayela) in partnership with COMSEC targeting Makana and NelsonMandela Metropolitan Municipalities.45

DEVELOPMENT SUPPORT SERVICES2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

PHOTOGRAPH: Mzimvubu River Valley.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 3PROGRAMME PERFORMANCEDevelopment Support SERVICES1 STRATEGIC GOALS2 BUDGETTo increase rural economic development through implementing sustainable economic development projects in selectedsectors and geographical areas.ProgrammeBudget(R’000’s)Actual(R’000’s)%DeviationReason for deviationRural Projects 17,832 Overheads 14,695 +4 Above budget primarily due to corporate servicesincl VAT Projects 3,907overhead allocation of R4,202 K. Projectsunderspent due to slow progress when engaging20,329 18,602many community stakeholders3 OUTPUTS AND SERVICE DELIVERY TRENDS3.1 Programme 1: Project Identification, Scoping and Implementation3.1.1 Programme 1: Project Identification, Scoping and Implementation and Performance for 2007/08Measurable objectives Performance Measure PlannedPerformanceTo create jobs andwealth throughestablishing viable andsustainable projectsActualPerformance%DeviationReason for deviationNumber of projects identified 64 69 +8 Target exceededECDC funding used for businessrelated studies and crop trials3rd party funding obtained forbusiness related studies, croptrials and project implementationR6,2 mil R6,632 mil +7 Target exceededR101,8 mil R103,84 mil +2 Target exceededNumber of projects established 29 19 -34 Below target. Reasonsinclude the length oftime it takes to establishprojects from projectidentification and numberof stakeholders involved.Number of actual jobs createdand/ or savedECDC funding used for projectimplementation2 691 2 479 -8 Below target mainlybecause of the timeit takes to implementprojects. Included in theactual is 1 500 jobs savedin the pineapple industry.R2,4 mil 0 -100 Below budget, themain reason being slowprogress when engagingmany communitystakeholders during thescoping phase.49

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PROGRAMME PERFORMANCEDevelopment Support SERVICES3.1.2 Trends in performance from 2005/06 to 2007/08MeasurableObjectivesPerformanceMeasureNumber ofprojects identifiedECDC fundingused for businessrelated studiesand crop trials3rd party fundingobtained forbusiness relatedstudies, croptrials and projectimplementationNumber ofprojectsestablishedNumber of actualjobs createdECDC fundsfor projectimplementation2005/6 (actual) 2006/7 (actual) 2007/8 (actual) AverageAnnualGrowthR8,3 mil(approvalsincludingimplementation)Reason for deviation34 51 69 +42 More projects beingreferred to the UnitHigh demand forrural developmentinitiatives.R9,061 mil(approvalsincludingimplementation)R6,632 mil(disbursements+ commitments)n/aThe Unit has changedthe performancemeasure fromapprovals obtainedduring the period toactual disbursementsplus orders in thesystem.R51,7 mil R89,3 mil R103.84 mil +42 Greater collaborationwith 3rd party funders.24 11 19 -11 Movement over theyears from smallprojects to largerprojects which makemore of an impactbut take longer toimplement.1 146 728 2 479 +47 Concentrating on largerprojects that havemajor impact.n/a n/a 0 n/a New measure3.2 Programme 2: Facilitate and support the Integrated Development Plan (IDP) process3.2.1 Programme 2: Facilitate and support the IDP process and performance for 2007/08MeasurableObjectivesPerformanceMeasurePlannedPerformanceActualPerformance% Deviation Reason for deviationFacilitate andsupport the IDPprocessImplementable LEDprogrammes12 workshops and22 projects14 workshops and18 projects+17 and -18 Projects reviewedwere not financiallyviable.3.2.2 Trends in performance from 2005/06 to 2007/08MeasurableObjectivesFacilitate andsupport the IDPprocessPerformance Measure 2005/6 (actual) 2006/7 (actual) 2007/8 (actual) CompoundAnnualGrowthImplementable LEDprogrammesn/a n/a 14 workshops and18 projectsn/aReason fordeviationNewmeasure50

EASTERN CAPE DEVELOPMENT CORPORATION 2007/084 DEVELOPMENT SUPPORT SERVICES Projects Unit challenges fACED DURING 2007/08Challenges include the following:• Land tenure and infrastructure gaps;• The amount of social facilitation required and the time it takes to secure funds from all levels of government andother sources confirm that development is a slow process;• Lack of capacity and co-operation between stakeholders in certain municipalities in identifying projects thatgenerate revenue;• Number of stakeholders involved in community projects.5 DEVELOPMENT SUPPORT SERVICES AchievementS DURING 2007/08• During the year, 32 approvals were obtained. These were made up of 27 business plans and various other studies,and four crop trials. The total amount approved amounted to R7,6 mil.Highlights from the list of projects approved during the year include the following:• Madiba Corridor: consultant finalising the last part of the business plan;• Lukhanji Aerodrome: funding business plan;• Somerset East Agric Park: business plan to test feasibility of amalgamating three ECDC funded pilot projects intoone new entity as phase 1, and then commercialise project as phase 2;• Solar Power Solutions: co-funding with DBSA a business plan to test feasibility of installing solar water heatingequipment as well as solar electricity generating equipment on low cost houses in Port Elizabeth;• Property development: co-funding various studies to determine the financial and environmental feasibility of twoproposed property developments in Mthatha and Stutterheim;• Participated in the Thina Sinako funded (R300 000) research in the Mhlontlo LED Strategy Development in whichTralso was the lead research organisation;• Community centered Sustainable Village concept development in Lower Kroza/ Showbary, Gomolo, Mlangana andKondolo;• Participated in the revival of sorghum production in Ntabankulu in partnership with Ntinga Development Agency;• Partnership in the Matolweni Irrigation Scheme, which yielded the creation of 40 jobs;• Involved in developing a “Lifestyle Sector Development” programme which involves craft, fashion design,incubation of SMMEs in Mhlontlo, Nyandeni and KSD;• Involved in developing an Agriculture and Rural Development Programme targeted at assisting 30 emerging farmersin Nyandeni, Mhlontlo and Port St Johns;• Contributed an amount of R201,500 to conduct full EIA for Nkanya Holiday Resort in Mbhashe Municipality;• Co-ordinating the Dwesa-Cwebe Investment Forum;• Developed business plan for Lubomvini Sorghum production project in Willowvale.Highlights on projects funded in prior years include the following:• Rail-based tourism high level feasibility study – this study was completed during this year and indicated that thereis an opportunity to expand this small industry in the province;• Stutterheim Blue Berry project – facilitated and co-funded a R45 mil project with a potential 5000 jobs and the firstplanting of 15 hectares of blue berries scheduled to start in October 2008 is on track;• Pineapple value added project in Bathurst – the business plan is complete and ECDC is currently considering afunding application.51

PROPERTY MANAGEMENT & DEVELOPMENT2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

PHOTOGRAPH: The Automotive Supplier Park in the East London IDZ.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PART 3PROGRAMME PERFORMANCEPROPERTY MANAGEMENT &DEVELOPMENT1 STRATEGIC GOAL2 BUDGETThe programme aims to anticipate and satisfy customer needs by ensuring availability of suitable industrial andcommercial premises for investors throughout the Eastern Cape, and disposing of residential units, in a manner thatwould maximise returns from the Corporation’s property portfolio.Strategic goals of this programme are:• Provision of rental property portfolio• Development of new industrial and commercial properties• Management of investment propertyProgramme Budget (R’000’s) Actual (R’000’s) % Deviation Reason for DeviationOverhead expenditure 61 318 78,715 +28 Increase in impairmentallowance and rates expense3 OUTPUTS AND SERVICE DELIVERY TRENDS3.1 Programme 5: Property Management and Development performance for 2007/08Measurable ObjectivesTo increase rentalcollection from 60% to95% by 2009/10Increase collection onoutstanding rentalsTo convert residentialproperties to tenants ingood standingMaintain ECDCPropertiesIncrease rate ofoccupancy by 5%PerformanceMeasurePlannedPerformanceActualPerformance%DeviationReason for deviationRental received 75% 54% -21 Moratorium on evictions had anadverse affect on collections.Arrears collected 17.5% 25% +7 Above target as some tenants settledtheir debt per the settlement policyand qualified to buy their houses.Value of propertysalesObtain goodvalue for propertyNumber of unitsoccupiedOngoing andstay withinbudget ofR7,2milR60 mil R18 mil -70 Moratorium on evictions, land claimsand tenants with high rental arrears.R5,967 mil +17 Only maintain properties wheretenants are in good standing with theirrental payments.5% - - Occupancy remained unchanged.55

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08PROGRAMME PERFORMANCEPROPERTY MANAGEMENT &DEVELOPMENT3.2 Programme 5: Property Management and Development trends in performance 2005/06 to 2007/08Measurable ObjectiveTo increase rentalcollection from 60%to 95% by 2009/10Increase collection onoutstanding rentalsTo convert residentialproperties to tenantsin good standingMaintain ECDCpropertiesIncrease rate ofoccupancy by 5%PerformanceMeasure2005/6(actual)Rental received R46, 87 5mil2006/7(actual)2007/8(actual)Arrears collected N/A N/A R15,389milValue of propertysalesObtain goodvalue for propertyNumber of unitsoccupiedCompoundAnnualGrowth %Reason for deviationR48, 855 mil R34,68 mil -14 Change in performancemeasure which nowexcludes recoveries onarrear collection. For directcomparative purposes(R34,68m + R15,389m =R50,074 m)See aboveSee aboveR13 mil R23 mil R18 mil +18 Moratorium on evictions hadan adverse affect on propertysales.R3,761 mil R5,725 mil R5,967 mil +26n/a n/a n/a n/a Unchanged4 Property Management and Development challenges FACED DURING 2007/08• Low levels of occupancy in the industrial sector, especially in areas like Ezibeleni and Dimbaza;• The lengthy legal processes of collection and the impact of the moratorium on eviction of residential defaulters;• Delays in implementing the first phase of the Asset Conversion Policy due to the number of defaulting residentialtenants that do not qualify to purchase their houses;• The debt collection results of the debt management company appointed in the prior financial year have not been assuccessful as anticipated due to the moratorium, among others.5 Property Management and Development achievements DURING 2007/08• Improved the integrity of the Asset Register;• Identified the disposal of properties with no intrinsic value and have commenced the process of transfer ofproperties into the name of ECDC where such properties have intrinsic value and ECDC has a right to them but wherethese are currently under the control of third parties;• Implemented the first phase of the asset conversion process, the second phase will be initiated in the 2008/9financial year.56

AUDIT REPORT, FINANCIAL STATUS& OTHER FINANCIAL INFORMATION2007/08 ANNUAL REPORTEASTERN CAPE DEVELOPMENT CORPORATION

PHOTOGRAPH: The deepwater port of Ngqura in the Coega IDZ near Port Elizabeth.

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08REPORT OF THEAUDITOR GENERALREPORT OF THE AUDITOR-GENERAL TO THE EASTERN CAPE PROVINCIAL LEGISLATURE ON THE CORPORATION ANDGROUP ANNUAL FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION OF THE EASTERN CAPE DEVELOPMENTCORPORATION FOR THE YEAR ENDED 31 MARCH 2008Introduction1 I have audited the accompanying consolidated and separate financial statements of the Eastern Cape DevelopmentCorporation which comprise the consolidated and separate balance sheet as at 31 March 2008, consolidated andseparate income statement, consolidated and separate statement of changes in net equity and consolidated andseparate cash flow statement for the year then ended, and a summary of significant accounting policies and otherexplanatory notes and the directors' report, as set out on pages 64 to 106.Responsibility of the accounting authority for the financial statements2 The accounting authority is responsible for the preparation and fair presentation of these financial statements inaccordance with South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) andin the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA) and the Eastern CapeDevelopment Corporation Act, 1997 (Act No. 2 of 1997) (ECDCA). This responsibility includes:• designing, implementing and maintaining internal control relevant to the preparation and fair presentation offinancial statements that are free from material misstatement, whether due to fraud or error• selecting and applying appropriate accounting policies• making accounting estimates that are reasonable in the circumstances.Responsibility of the Auditor-General3 As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with section 4 of the PublicAudit Act, 2004 (Act No. 25 of 2004) (PAA), my responsibility is to express an opinion on these financial statementsbased on my audit.4 I conducted my audit in accordance with the International Standards on Auditing and General Notice 616 of 2008,issued in Government Gazette No. 31057 of 15 May 2008. Those standards require that I comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance on whether the financial statements arefree from material misstatement.5 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, theauditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statementsin order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity’s internal control.6 An audit also includes evaluating the:• appropriateness of accounting policies used• easonableness of accounting estimates made by management• overall presentation of the financial statements.7 I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.Opinion8 In my opinion the financial statements present fairly, in all material respects, the consolidated and separate financialposition of the Eastern Cape Development Corporation as at 31 March 2008 and its consolidated and separate financialperformance and consolidated and separate cash flows for the year then ended, in accordance with South AfricanStatements of Generally Accepted Accounting Practice and in the manner required by the PFMA and ECDCA.59

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08REPORT OF THEAUDITOR GENERALEmphasis of matterWithout qualifying my audit opinion, I draw attention to the following matter:Highlighting a critically important matter presented or disclosed in the financial statementsInvestment property9 Freehold title is held for the majority of investment properties disclosed in note 2 to the financial statements. However,properties with a combined value of R96.4 million are disclosed as being owned by government, tribal authorities andmunicipalities.Although the corporation’s right to occupy properties to the value of R83.3 million, out of the R96.4 million referredto above, has not been reduced to writing, it derives economic benefits from their use and carries the risks that areincidental to ownership.The valuation method used to value these properties assumes that the corporation has the right to occupy theseproperties and will receive economic benefits in perpetuity.OTHER MATTERSWithout qualifying my audit opinion, I draw attention to the following matters that relate to my responsibilities in theaudit of the financial statements:Matters of governance10 The PFMA tasks the accounting authority with a number of responsibilities concerning financial and risk managementand internal control. Fundamental to achieving this is the implementation of certain key governance responsibilities,which I have assessed as follows:Matter of governance Yes NoAudit committee• The public entity 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 PFMAand Treasury Regulation 27.1.8.Internal audit• The public entity had an internal audit function in operation throughout the financial year.• 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 Regulation27.2.Other matters of governanceThe annual financial statements were submitted for audit as per the legislated deadlines section 55 of the PFMA forpublic entitiesThe financial statements submitted for audit were not subject to any material amendments resulting from theaudit.No significant difficulties were experienced during the audit concerning delays or the unavailability of expectedinformation and/or the unavailability of senior management.The prior year's external audit recommendations have been substantially implemented.√√√√√√√√√√60

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08Unaudited supplementary schedules11 I draw attention to the fact that the annexures set out on pages 107 to 110 do not form part of the annual financialstatements and are presented as additional information. I have not audited these annexures and accordingly I do notexpress an opinion on them.OTHER REPORTING RESPONSIBILITIESReport on performance information12 I have reviewed the performance information as set out on pages 11 to 56.Responsibility of the accounting authority for the performance information13 The accounting authority has additional responsibilities as required by section 55(2) (a) of the PFMA to ensure that theannual report and audited financial statements fairly present the performance against predetermined objectives of thepublic entity.Responsibility of the Auditor-General14 I conducted my engagement in accordance with section 13 of the PAA read with General Notice 616 of 2008, issued inGovernment Gazette No. 31057 of 15 May 2008 .15 In terms of the foregoing my engagement included performing procedures of an audit nature to obtain sufficientappropriate evidence about the performance information and related systems, processes and procedures. Theprocedures selected depend on the auditor’s judgement.Audit findings (performance information)16 I believe that the evidence I have obtained is sufficient and appropriate to report that no significant findings have beenidentified as a result of my review.APPRECIATION17 The assistance rendered by the staff of Eastern Cape Development Corporation during the audit is sincerely appreciated.East London30 July 200861

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08REPORT OF THEAUDIT COMMITTEEReport of the Audit Committee required by Treasury Regulations 27.1.7 and 27.1.10 (b) and (c) in terms of the PublicFinance Management Act 1 of 1999, as amended.We are pleased to present our report for the financial year ended 31 March 2008.Audit Committee Members and AttendanceThe Audit Committee consists of the members listed hereunder. During the year a new chairperson was nominatedfrom outside the Public Service. 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 MemberPeriod ofmembershipNumber of meetingsattendedJJ Njeke (Chairperson) 01 Aug 07 – 31 Mar 08 3N Kusi * 01 April 07 – 31 Dec 07 2WL Nkuhlu (observer) 01 April 07 – 31 Mar 08 3Prof S Buthelezi 01 April 07 – 31 Mar 08 2E Heynes 01 April 07 – 31 Mar 08 5T Nodada-Qhali 01 April 07 – 31 Mar 08 3N Nicholls 01 July 07 – 31 Mar 08 2R Rajdhar** 01 July 07 – 11 Feb 08 1*Resigned on the 31 December 2007. ** Resigned on the 11 February 2008Audit Committee ResponsibilityThe Audit Committee is a sub committee of the Board. It has adopted a formal terms of reference, has regulated itsaffairs in compliance with these terms of reference and has discharged its responsibilities contained therein.In meeting its responsibilities and in executing its duties, the Audit Committee is required to consider the adequacy andeffectiveness of the Corporation’s internal controls. In this regard, the Audit Committee has during the past financialyear, inter alia:• Reviewed the activities of the internal audit function during the year, to determine the effectiveness thereof and toensure that no unjustified restrictions or limitations were made;• Reviewed internal audit reports, including its annual work programme, co ordination with the external auditors, thereports of significant investigations and the responses of management to issues raised therein;• Reviewed external audit scope to ensure that key risk areas of the business are being addressed;• Reviewed external auditors report, including issues arising out of the external audit;• Reviewed the operational effectiveness of the Corporation’s policies, systems and procedures;• Reviewed cases of misconduct or fraud or any other unethical activity by employees of the Corporation;• Reviewed the effectiveness of the system for monitoring compliance with laws and regulations;• Reviewed the quality of the financial information ; and• Reviewed the annual report and financial statements.Based on the outcome of such reviews and the information provided by Management, we are of the opinion that theinternal controls of the Corporation operated effectively throughout the year under review.62

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08Evaluation of Annual Financial StatementsThe Audit Committee has:• Reviewed and discussed the audited annual financial statements to be included in the annual report with theexternal auditors and the Accounting Authority;• Reviewed the external auditor’s audit report thereto for 2007/08;• Reviewed the significant adjustments resulting from the external audit.The Audit Committee accepts the external auditor’s conclusions on the annual financial statements and is of theopinion that the audited financial statements be accepted and read together with the report of the external auditorand the Directors’ Report. The Audit Committee agrees that the adoption of the going concern premise is appropriate inpreparing the annual financial statements.JJ NjekeChairperson of the Audit Committee20 August 200863

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08DIRECTORS’REPORTThe directors have pleasure in presenting their report and the audited financial statements for the year ended 31 March2008.1 Constitution and MandateThe Eastern Cape Development Corporation (the Corporation) is a Provincial Government Business Enterprise,established in terms of section 2 of the Eastern Cape Development Corporation Act, 1997 (Act No. 2 of 1997). TheCorporation became operational with effect from 1 April 2001, the effective date of Proclamation 1 of 2001 (EasternCape).2 Objectives and main activitiesThe objectives of the Corporation are to plan, finance, market, promote and implement the development of the Provinceof 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 andEnvironmental 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 SMME’s;• 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.In order to achieve its development mandate, the Corporation focuses on the provision of finance and support expertiseto all types of businesses, including small, medium and micro enterprises (SMME); stimulation of domestic and foreigndirect investment , and will continue facilitating projects with a high economic development impact. As part of itsrestructuring programmes the corporation is implementing an asset conversion policy that is focusing on acceleratingthe disposal of residential properties and investing revenues generated in retail, office space, commercial andindustrial developments. The Corporation has a clearly defined role of improving access to finance for business withan economic development impact and in improving entrepreneurial capacity for long term economic development andsustainability. Other areas where the Corporation renders economic development services are investment promotion,export promotion and support to municipalities and local authorities in the Province of the Eastern Cape.3 Corporate Governance and SystemsThe Board continued to render its corporate governance oversight and strategic direction role in the Corporation and thefollowing corporate governance systems were put in place during the year:3.1 Shareholder's CompactA Shareholder’s Compact has been concluded between the Corporation and the shareholder. It serves to promote andencourage good governance practices within the Corporation, as well as providing an effective framework to guide therelationship between the Corporation and the Eastern Cape Provincial Government, as shareholder. The shareholder'scompact further secures transparency, accountability and sound management of revenue, expenditure, assets andliabilities of the Corporation.64

EASTERN CAPE DEVELOPMENT CORPORATION 2007/083.2 Board CharterThe Board adopted a charter which provides a concise overview of the roles, powers and functions of the Board,individual directors and officials of the Corporation. The charter also provides for the delegation of powers to the Boardcommittees, policies and practices of the Board on matters such as corporate governance, declarations of conflict ofinterests, Board meeting documentation and procedures. Nomination, appointment, induction, training and evaluationof directors and members of Board committees are also provided for in the Board charter. This charter is a guide to thedirectors and is not intended to replace or amend the Articles of Association of the Corporation as contained in theSchedule to its founding legislation.3.3 Governance StructuresThe Board established and / or reinforced the capacity of the following committees:3.3.1 Audit CommitteeThe Audit Committee oversees the audit functions, internal controls and financial reporting processes. The auditcommittee has a good spread of members with the necessary expertise and experience to carry out its duties inline with best practice and accepted corporate governance principles. A new independent Chairperson for the AuditCommittee was appointed during the year. Two independent members to the Audit Committee were also appointed, ofwhom one resigned. The Audit Committee has formal terms of reference adopted by the Board.3.3.2 Remuneration CommitteeThis committee makes recommendations on executive remuneration.3.3.3 Human Resource CommitteeThe committee considers and makes recommendations on Human Resource policies and principles of the Corporation.3.4 AuditorsThe Corporation’s auditors are the Auditor-General.3.5 Financial resultsDue to the moratorium on residential property rental evictions, property sales decreased from R23m to R16m ( R 7mreduction). The corporation has managed to deliver improved performance on the following key areas:• Development Equities increased from R60m to R144m (R84m Growth)• Development Loans increased from R102m to R108m (R6m growth)• Revenues generated increased from R98m to R138m (R40m growth)• Reduced operating loss from R68m to R42m ( R26m reduction)3.6 CapacityThe recruitment of key executives to augment the Corporation’s capacity was completed during the year, including thepositions of Legal Adviser, Human Resources Manager, Executive Managers – Development Investments; DevelopmentProperties; and Development Services. The Executive Managers – Development Properties and Development Servicestook office on 01 April 2008. The management team will focus on addressing policy, strategy and systems challengesfacing the Corporation. The Corporation ensures ongoing development of its staff.3.7 Investment PropertiesThe Corporation currently controls 1933 (2007: 2068) properties. The Corporation continued to improve the integrity ofthe Asset Register by integrating the information from the rental billing system (Nicor) with the fixed asset register. Thefixed property audit, started in the 2006/07 financial year, is still continuing. In response to appeals made by tenantsin Butterworth, the provincial cabinet approved a moratorium on evictions, which presented the Corporation with a riskof being unable to collect rent and disposal of residential properties as planned. The unresolved challenge of propertiessituated in tribal land continues to pose a risk to the Corporation (R32m under tribal land) and the Corporation isaddressing that through engagements with the relevant tribal authorities. Progress has also been made in ensuringcontractual arrangements with tenants and ensuring the physical existence of properties.65

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08DIRECTORS’REPORT3.8 Rental IncomeA lease audit task team was established to verify the existence of lease agreements for ECDC leased properties. Work isstill being done to renew expired leases, but the team was successful in ensuring that lease agreements are on hand fora significant number of leased properties. Rentals billed are in terms of these lease agreements. The settlement policyimplemented during the financial year assisted in recovery of some old debt. Straight lining of leases was performedand adequate provision has been made for doubtful debts. The external debt management company employed duringthe prior financial year is still actively trying to recover the arrears. However, rental collections decreased significantlyover the same period due to the eviction moratorium proposed by the Provincial Cabinet as stated under DevelopmentProperties above. In an attempt to resolve this impasse the Corporation is working with the Department of EconomicDevelopment and the affected communities, to find a workable and lasting solution to the challenge.3.9 Loans AdvancedThe total disbursement of development loans for the current year amounted to R70.4 million. This is 7% more thanthe previous year. The quality of the loan portfolio is however improving despite the fact that the net increase in theloan book for the current year is 6% compared to a net decrease of 3% in the previous year. The Corporation hasmanaged to increase the approvals for micro loans during the current financial year sevenfold as part of its objective toprovide financial assistance in the rural areas of the Province. In addition the Corporation has started to focus more onstructured finance, which includes investing in equity.3.10 Internal ControlsIn line with Section 51 of the PFMA, management under the supervision of the Board continued with its role ofmaintaining effective, efficient and transparent systems of financial and risk management and internal control. In thisregard the Board ensured that the Internal Audit function is under the control of the Audit Committee and has, amongothers, approved a rolling three-year strategic internal audit plan and an operational plan for the first year of the rollingplan. The board adopted a Risk Management Framework and Policy during the year under review.In terms of the Policy a Risk Assessment Process took place whereby known and possible risks and opportunitiesto which the Corporation may be exposed were identified and evaluated. Significant risks are controlled and/ortransferred. The Corporation is in the initial stages of integrating risk management into all management processesand will complete implementation of the Risk Management function during the 2008/09 financial year. The Board hasestablished structures and delegations for the day-to-day management and operations of the organisation and its riskmanagement activities.4 Post balance sheet eventsThe directors are not aware of any material matter or circumstance arising since the end of the financial year.5 Authorised and issued share capitalThe allocated share capital of the Corporation was increased to R1 billion worth of ordinary shares in a General Meetingof the Shareholders held on 21st August 2007. Of this, the Corporation issued R31, 497,349.96 worth of ordinary sharesto the Provincial Government of the Eastern Cape (Department of Economic Development and Environmental Affairs).6 Performance66The results of the Corporation and the group are disclosed in the annual financial statements. In analysing the resultscognisance should be taken of the following factors that have impacted on the overall performance of the Corporation:• A steady stabilisation and turnaround of the corporation is firmly on course as operating losses have beensignificantly reduced from the prior year.• A conservative approach has been adopted in providing for doubtful loans advanced and debtors balances. Due topoor collections on both old and new loan books, the Corporation has prudently increased the provision.• This conservative approach has been applied to rental debtors, where the collection strategy adopted during theyear has failed to achieve the level of collections desired.• A task team that was set up to focus on the poor collections and target quick wins in rental collections is continuingwith its work.• Savings have been achieved in some areas due to better management of expenditure

EASTERN CAPE DEVELOPMENT CORPORATION 2007/087 Policy Directives8 DividendsThe Corporation received no policy directives from the Member of the Executive Council responsible for the Departmentof Economic Development and Environmental Affairs during the financial year.No dividends were declared or paid to shareholders during the year.9 Interest bearing borrowings10 InsuranceNo new borrowings were incurred during the year. The Corporation continued to reduce its existing borrowings with theDevelopment Bank of Southern Africa Limited.The Corporation protects itself against catastrophic financial and fraudulent losses by means of a combined lossprotection policy and carries R2 million per claim for its own account, whereafter risks are fully insured up to R70 millionper any one claim. There were no abnormal claims in the financial year under review.11 ContractsContracts in which the Directors and Officers of the Corporation had an interest in are fully disclosed in the annualreport.12 SubsidiariesFinancial information in respect of interests of the Corporation in subsidiaries and associates is set out in Annexure1. During the financial year, funding agreements were concluded with the following subsidiaries in order to improveoversight and governance:• East London Industrial Development Zone (Proprietary) Limited; and• Automotive Industrial Development Company (Proprietary) Limited.The corporation currently does not hold share certificates to substantiate its shareholding in one of its subsidiariespending the resolution of certain legal and administrative matters. The subsidiary affected is Transdev (Proprietary)Limited.13 Directorate and Directors’ FeesThe Member of the Executive Council responsible for the Department of Economic Development and EnvironmentalAffairs, appoints the Board of Directors in terms of section 7(3) of the Eastern Cape Development Corporation Act, 1997(Act No.2 of 1997). The appointments and resignation of Directors during the year were as indicated below:67

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08DIRECTORS’REPORTName Appointed ResignedNkuhlu, W.L. (Chairperson) 01/07/2006Buthelezi, S 01/03/2007Burwana-Bisiwe, N 01/03/2007 31/07/2007Kusi, N 01/07/2006 31/12/2007Fikeni, S 01/03/2007Heynes, E 01/03/2007Ndabeni, M 01/03/2007Nodada-Qhali, T 01/03/2007Nonkwelo, L 01/03/2007Pakati, X 01/03/2007Tabata, S 01/03/2007Mfenyana, S.A.H 01/10/2007Mawala, F 01/01/2008Fees paid to Directors and Audit Committee members during the financial year were as follows:Figures in randsBoard of Directors Board Attendance Audit Committee Attendance Grand TotalNkuhlu, W.L. (1) - - -Buthelezi, S 21,000 4,000 25,000Burwana-Bisiwe, N (2) - - -Kusi, N (2) - - -Fikeni, S 24,000 - 24,000Heynes, E 21,000 10,000 31,000Ndabeni, M 29,000 - 29,000Nodada-Qhali, T 24,000 6,000 30,000Nonkwelo, L 32,000 - 32,000Pakati, X 26,000 - 26,000Tabata, S 30,000 - 30,000Mfenyana, S.A.H (2) - - -Mawala, F (2) - - -OtherNjeke, J - 12,000 12,000Rajdhar, R - 2,000 2,000Nicholls, R - 4,000 4,000Total 207,000 38,000 245,000Notes: (1) Elected not to receive board fees.(2) These directors are government representatives and are not allowed to receive remuneration.Fees68

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0814 Going concernThe Annual Financial Statements have been prepared on the going concern basis. This basis of accounting has beenadopted by the Board of Directors after having made enquiries from management and given due considerationto information presented to the Board, including budgets and cash flow projections for the year ahead and keyassumptions and accounting policies relating thereto. The corporation maintains a very strong solvency and liquidityposition. Accordingly, the Directors have no reason to believe that the Corporation and its subsidiaries will not continueas a going concern in the year ahead.15 Directors’ ResponsibilitiesIn terms of the Public Finance Management Act, 1999 (Act No. 1 of 1999, as amended), directors are required tomaintain adequate accounting records and are responsible for the content and integrity of the annual financialstatements and related financial information included in this report. The directors are further responsible to ensure thatthe annual financial statements fairly present 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 Statementsof Generally Accepted Accounting Practice. The external auditors are engaged to express an independent opinion on theannual financial statements. The annual financial statements of the Corporation are prepared in accordance with SouthAfrican Statements of Generally Accepted Accounting Practice and are based upon appropriate accounting policiesconsistently applied and supported by reasonable and prudent judgments and estimates.The directors acknowledge that they are ultimately responsible for the system of internal control established by theCorporation and place considerable importance on maintaining a strong control environment. The board of directorssets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. These standardsinclude proper delegation of responsibilities within a clearly defined framework, effective accounting procedures andadequate segregation of duties to ensure an acceptable level of risk. These controls are monitored as far as reasonablypossible throughout the Corporation and all employees are required to maintain the highest ethical standards inensuring the Corporation’s business is conducted in a manner that in all reasonable circumstances is above reproach.The focus of risk management in the Corporation is on identifying, assessing, managing and monitoring all knownforms of risk across the Corporation. Operating risk cannot be fully eliminated, however the Corporation endeavoursto minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are in place. Thedirectors are of the opinion, based on the information and explanations provided by Management, that apart fromthe matters raised under paragraph 3.7 - Investment Properties and paragraph 12 - Subsidiaries, above, the systemof internal control provides reasonable assurance that the financial records may be relied upon for the preparation ofannual financial statements. Any system of internal control can, however, provide only reasonable, and not absolute,assurance against material misstatement or loss.The directors have reviewed the Corporation’s cash flow forecast for the year to 31 March 2009 and, in the light of thisreview and current financial position, are satisfied that the Corporation has and has access to adequate resources tocontinue its operational existence for the foreseeable future. The consolidated annual financial statements set out onpages 64 to 110 , which have been prepared on the going concern basis, were approved by the board of directors on28 July 2008 and were signed on its behalf by:Prof. WL NkhuluChairperson of the BoardMxolisi D MatshambaChief Executive Officer28 July 200869

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008BALANCE SHEETAssetsNon-Current AssetsInvestment propertyProperty, plant and equipmentInvestments in subsidiariesInvestments in associatesLoans to subsidiaries and associatesInvestmentsDeferred taxLoans advancedNote(s)234567892008R’000Group709,354566,728-6,90433,765144,1731,12556,1902007R’000671,689418,948-4,62628,78259,8191,19452,3272008R’000Corporation481,38919,27226,0713,00055,297143,450-56,1772007R’000449,96218,91426,0683,00057,62059,089-52,3151,517,429 1,237,385 784,656 666,968Current AssetsInventoriesCurrent tax receivableTrade and other receivablesLoans advancedCash and cash equivalents10911-30534,73352,079435,29035929,17849,573347,053--14,32252,079304,110--13,03249,573288,120522,407 425,866 370,511 350,725Total Assets 2,039,836 1,663,251 1,155,167 1,017,693Equity and LiabilitiesEquityShare capitalReservesAccumulated lossMinority interest1213270,870700,039(40,441)6,392239,373572,910(39,024)6,371270,870680,450(81,354)-239,373559,892(71,901)-936,860 779,630 869,966 727,364LiabilitiesNon-Current LiabilitiesLoans from group companiesInterest-bearing borrowingsRetirement benefit obligationDeferred incomeDeferred tax61415168-17,60110,756675,6891,925-17,3439,656534,1901,25756,62317,60110,756--52,03117,3439,656--705,971 562,446 84,980 79,030Current LiabilitiesInterest-bearing borrowingsCurrent tax payableTrade and other payablesDeferred incomeProject grants70141716181,4834,22758,865188,643143,7873,1623,46063,54191,915159,0971,483-23,63337,495137,6103,162-29,52925,688152,920397,005 321,175 200,221 211,299Total Liabilities 1,102,976 883,621 285,201 290,329Total Equity and Liabilities 2,039,836 1,663,251 1,155,167 1,017,693

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008INCOME STATEMENTRevenueOther incomeGrant incomeOperating expensesGroup2008Note(s) R’00019 92,97313,781110,270(250,311)2007R’00076,0864,22875,245(216,842)Corporation2008R’00072,21111,22554,094(179,208)2007R’00068,7642,73726,703(166,485)Operating loss 20 (33,287) (61,283) (41,678) (68,281)Investment revenueFair value adjustmentsIncome from equity accounted investmentsFinance costsProfit before taxationTaxation 2522232432,24456,4481,469(2,672)54,202(1,649)25,06062,3031,622(2,172)25,530(605)32,57349,870-(2,850)37,915-24,62660,643-(1,935)15,053-Profit for the year 52,553 24,925 37,915 15,053Attributable to:Equity holders of the parentMinority Interest52,5292424,10582037,915-15,053-71

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008STATEMENT OF CHANGES IN EQUITYGroupOpening balance as previously reportedAdjustmentsPrior year adjustmentsShare capitalFair value adjustmentavailable for sale assetsreserveNon-distributablereservesR’000 R’000 R’000193,823 - 510,606Balance at 01 April 2006 as restated 193,823 - 510,606Changes in equityProfit for the yearIssue of sharesFair value gains transferred45,55062,304Total changes 45,550 - 62,304Balance at 01 April 2007 239,373 - 572,910Changes in equityFinancial Assets 74,173Net income (expenses) recognised directly in equityProfit for the year- 74,173 -Total recognised income and expenses for the yearIssue of sharesChange in degree of controlFair value gains transferredDuplicate property derecognisedLoans originally reinstated now reversed-31,49774,173 -Total changes 31,497 74,173 52,956Balance at 31 March 2008 270,870 74,173 625,866CorporationOpening balance as previously reportedPrior period adjustments53,946(750)(240)193,823 - 499,248Balance at 01 April 2006 as restated 193,823 - 499,248Changes in equityProfit for the yearIssue of sharesFair value gains transferred45,55060,644Total changes 45,550 - 60,644Balance at 01 April 2007 239,373 - 559,892Changes in equityFinancial Assets 74,180Net income (expenses) recognised directly in equityProfit for the year- 74,180 -Total recognised income and expenses for the yearIssue of sharesFair value gains transferredLoans originally reinstated now reversedDuplicate property derecognised-31,49774,180 -Total changes 31,497 74,180 46,378Balance at 31 March 2008 270,870 74,180 606,27047,368(750)(240)72

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08Total reserves Accumulated loss Total attributable toequity holders of theCorporationMinority interestTotal equityR’000 R’000 R’000 R’000 R’000510,606(11,792)692,6375,551 698,188-10,96710,96710,967510,606 (825) 703,604 5,551 709,155--62,30424,105(62,304)24,10545,550-820 24,92545,550-62,304 (38,199) 69,655 820 70,475572,910 (39,024) 773,259 6,371 779,63074,173 74,173 74,17374,173 -52,52974,173--53,946(750)(240)52,529(53,946)74,17352,529126,70231,497--(750)(240)-2424(3)74,17352,553126,72631,497(3)-(750)(240)127,124 (1,417) 157,209 21 157,230700,039 (40,441) 930,468 6,392 936,860499,248-(23,582)(2,728)669,489(2,728)- 669,489(2,728)499,248 (26,310) 666,761 - 666,761--60,64415,053(60,644)15,05345,550-- 15,05345,550-60,644 (45,591) 60,603 - 60,603559,892 (71,901) 727,364 - 727,36474,180 74,180 74,18074,180 -37,91574,180-47,368(750)(240)37,915(47,368)74,18037,915112,09531,497-(750)(240)--74,18037,915- 112,09531,497-(750)(240)120,558 (9,453) 142,602 - 142,602680,450 (81,354) 869,966 - 869,96673

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008CASH FLOW STATEMENTCash flows from operating activitiesCash used in operationsInterest incomeDividends receivedFinance costsTax paidNote(s)26272008R’000Group211,22725,852101(2,672)(391)2007R’000257,90017,8632,099(2,172)(605)2008R’000Corporation(29,669)26,23744(2,850)-2007R’000(50,154)17,4742,053(1,935)-Net cash from operating activities 234,117 275,085 (6,238) (32,562)Cash flows from investing activitiesPurchase of property, plant and equipmentSale of property, plant and equipmentSale of investment propertyLoans advanced to group companiesProceeds from loans from group companiesPurchase of financial assetsSale of financial assetsCapital portion: Loans advanced332(160,553)717,137(5,723)-(4,490)600(7,624)(383,015)27221,005-15,982(20,000)17,9365,270(1,742)-16,792-3,929(4,494)600(7,623)(2,280)1820,643-6,740(20,000)17,8575,271Net cash from investing activities (160,646) (342,550) 7,462 28,249Cash flows from financing activitiesProceeds on share issueRepayment of interest bearing borrowingsMovement in project grants12 31,497(1,421)(15,310)45,550(2,886)95,42831,497(1,421)(15,310)45,550(2,886)95,886Net cash from financing activities 14,766 138,092 14,766 138,550Total cash movement for the yearCash at the beginning of the year88,237347,05370,627276,42615,990288,120134,237153,883Total cash at end of the year 11 435,290 347,053 304,110 288,12074

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008ACCOUNTING POLICIES1 Presentation of Consolidated Annual Financial StatementsThe consolidated annual financial statements of the Eastern Cape Development Corporation have been prepared inaccordance with South African Statements of Generally Accepted Accounting Practice and in the manner required bythe Public Finance Management Act (Act No. 1 of 1999, as amended) and the Eastern Cape Development CorporationAct. The consolidated annual financial statements have been prepared on the historical cost basis as modified bythe revaluations of certain land and buildings, investment properties, available for sale financial assets and financialassets 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 AcceptedAccounting Practice requires the use of certain critical accounting estimates. It also requires management to exercise itsjudgment in the process of applying the group’s accounting policies. The areas involving a higher degree of judgmentor complexity, or areas where assumptions and estimates are significant to the consolidated financial statements aredisclosed in note 1.16. 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.1.1 Underlying assumptionsThe financial statements are prepared on the going concern basis, which assumes that the Corporation will continuein operation for the foreseeable future. The financial statements are prepared using accrual accounting whereby theeffects 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 enforceableright to set off the amounts exists and the intention is either to settle on a net basis or to realise the asset and settle theliability simultaneously.Changes in accounting policies are accounted for in accordance with the transitional provisions in the applicablestandard. If no such guidance is given, they are applied retrospectively unless it is impracticable to do so, in which casethe change is applied prospectively. Changes in accounting estimates are recognised in profit or loss in the period theyoccur. Prior period errors are retrospectively restated unless it is impracticable to do so, in which case they are appliedprospectively.Recognition of Assets and LiabilitiesAn asset, being a resource controlled by the entity as a result of a past event from which future economic benefits areexpected to flow, is recognised when it is probable that the future economic benefits associated with it will flow to theGroup and its cost or fair value can be measured reliably. A liability, being a present obligation of the Group arising froma past event the settlement of which is expected to result in an outflow of resources embodying economic resourcesfrom the Group, is recognised when it is probable that future economic benefits associated with it will flow from theGroup and its cost or fair value can be measured reliably.Derecognition of assets and liabilitiesFinancial assets or parts thereof are derecognised, i.e. removed from the balance sheet, when the contractual rights toreceive the cash flows have been transferred or have expired or if substantially all the risks and rewards of ownershiphave passed. Where substantially all the risks and rewards of ownership have not been transferred or retained, thefinancial assets are derecognised if they are no longer controlled by the Group. However, if control is retained, financialassets 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 theGroup from their use or disposal. Financial liabilities are derecognised when the relevant obligation has either beendischarged or cancelled or has expired.Post-balance sheet eventsRecognised amounts in the financial statements are adjusted to reflect events arising after the balance sheet datethat provide evidence of conditions that existed at the balance sheet date. Events after the balance sheet date that areindicative of conditions that arose after the balance sheet date are dealt with by way of a note.75

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008ACCOUNTING POLICIES1.2 Investment propertyInvestment property is held for long-term rental yields or for capital appreciation or both and comprises properties notoccupied by the Group. Hotel buildings held by the Group are classified as investment property as the group is notinvolved in the hotel operations. Investment properties are initially measured at cost, including transaction costs, andare subsequently stated at fair value determined by an independent sworn appraiser, every third year.Fair valueSubsequent to initial measurement investment property is measured at fair value. A gain or loss arising from a changein fair value is included in net profit or loss for the period in which it arises. Fair value gains and losses are transferredfrom accumulated surplus to reserves.1.3 Property, plant and equipmentProperty, plant and equipment are depreciated on a straight line basis at rates that will reduce the gross carryingamount to estimated residual values over the expected useful lives of the assets. Property, plant and equipmentacquired under finance lease agreements are capitalised. Such assets are depreciated on a straight line basis at ratesconsidered appropriate to reduce capitalised cost to estimated residual values over the expected useful lives of theassets. Lease finance charges are amortised over the duration of the finance leases using the effective interest ratemethod.The expected useful lives of the assets are as follows:ItemBuildings and infrastructurePlant and machineryFurniture and fixturesMotor vehiclesOffice equipmentIT equipmentOther property, plant and equipmentAverage useful life25 - 50 years4 years6 - 10 years4 - 5 years4 - 5 years3 years5 yearsLand is not depreciated as it is deemed to have an infinite life. The residual value and the useful life of each asset arereviewed at each financial period-end.On initial recognition, property, plant and equipment is measured at cost. The cost of buildings and infrastructureincludes all direct building costs, allocated overhead costs and capitalised borrowing costs. Subsequent to initialrecognition, costs incurred to add to, replace part of, or perform major services are included in the cost of an item ofproperty, plant and equipment. If a replacement cost is recognised in the carrying amount of an item of property, plantand 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 andequipment are carried at cost.When an item of property, plant and equipment is revalued, any accumulated depreciation at the date of therevaluation is restated proportionately with the change in the gross carrying amount of the asset so that the carryingamount 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 underthe heading of revaluation reserve. However, the surplus is recognised in profit or loss to the extent that it reversesa revaluation decrease of the same asset previously recognised in profit or loss. If an asset’s carrying amount isdecreased as a result of a revaluation, the decrease is recognised in profit or loss. However, the decrease is debiteddirectly to equity under the heading of revaluation reserve to the extent of any credit balance existing in the revaluationreserve 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

EASTERN CAPE DEVELOPMENT CORPORATION 2007/081.4 Investments in subsidiariesSubsidiaries are entities, including unincorporated partnerships and companies without a share capital, that arecontrolled by the Group. Control exists where the Group has the power to govern the financial and operating policies ofan entity so as to obtain benefits from its activities.Consolidated annual financial statementsThe consolidated annual financial statements incorporate the assets, liabilities, income, expenses and cash flows ofthe corporation and its subsidiaries. The results of the subsidiaries acquired or disposed during the year are includedfrom the date of acquisition or up to the date of disposal. Inter-company transactions and balances are eliminated onconsolidation.Corporation annual financial statementsIn the Corporation’s separate annual financial statements, investments in subsidiaries are carried at cost less anyaccumulated 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 instrumentsissued 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 thecombination if the adjustment is probable and can be measured reliably.1.5 Investments in associatesAssociates are entities, including unincorporated partnerships and companies without a share capital, over which theGroup exercises significant influence.Consolidated annual financial statementsAn investment in an associate is accounted for using the equity method, except when the asset is classified as held-forsalein 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’sshare of the profits or losses of the investee after acquisition date. The use of the equity method is discontinued fromthe 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 contingentliabilities over the cost is excluded from the carrying amount of the investment and is instead included as income in theperiod in which the investment is acquired.Corporation annual financial statementsAssociate companies are those companies in which the Corporation holds a long-term equity interest and over which itexercises a significant influence over its financial and operating policies, other than investments in companies acquiredto protect advances or as a conduit for advances.The investments in associate companies are initially recorded at cost. Subsequent to initial recognition, the investmentin the associate is carried at fair value as an available for sale financial asset in accordance with the accounting policyon financial assets. If fair value cannot be measured reliably, the investment is carried at cost. An appropriate provisionis made where there is considered to be a permanent diminution in the value of the investment.77

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008ACCOUNTING POLICIES1.6 Impairment of assetsAn impairment loss on an asset or cash-generating unit is the amount by which the carrying amount, i.e. the amountrecognised 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 valueless costs to sell and its value in use. Value in use is the present value of future cash flows expected to be derived froman asset or cash-generating unit.At each reporting date the carrying amount of the tangible and intangible assets are assessed to determine whetherthere is any indication that those assets may have suffered an impairment loss. If any such indication exists, therecoverable amount of the cash-generating unit to which the asset belongs is estimated. Value in use is estimatedtaking 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, thecarrying amount is reduced to the higher of its recoverable amount and zero. Impairment losses are recognised in profitor loss. The loss is first allocated to reduce the carrying amount of goodwill and then to the other assets of the cashgeneratingunit. Subsequent to the recognition of an impairment loss, the depreciation or amortisation charge for theasset 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 increasedto the revised estimate of its recoverable amount, limited to the carrying amount that would have been recognisedhad 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.1.7 Financial instrumentsFinancial assetsFinancial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes party tothe contractual provisions of the instrument.Financial assets are initially measured at fair value plus transaction costs. However, transaction costs in respect offinancial assets classified as at fair value through profit or loss are expensed.Investments classified as held to maturity are measured at amortized 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. Fairvalue, 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. Anyreversal of impaiment 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 aremade against identified doubtful advances. The aggregate impairment allowances, which are made during the year, lessamounts released and recoveries of advances previously written off are charged to the income statement. Irrecoverableadvances 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 liabilitiesFinancial liabilities are initially measured at fair value plus transaction costs. However, transaction costs in respect offinancial 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 atamortised cost. Financial liabilities that are designated on initial recognition as at fair value through profit or loss aremeasured at fair value, with changes in fair value being recognised in profit or loss.78

EASTERN CAPE DEVELOPMENT CORPORATION 2007/081.8 Share capital and equityOrdinary share capital, preference share capital or any financial instrument issued by the group is classified as equitywhen:• 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 potentiallyunfavourable 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 and preference share capital is classified as equity.Consideration paid or received for equity instruments is recognized directly in equity. Equity instruments are initiallymeasured at the proceeds received less incremental directly attributable issue costs. No gain is recognised in profit orloss 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 compoundinstrument the amount separately determined for the liability component. Transaction costs that relate to the issue of acompound financial instrument are allocated to the liability and equity components of the instrument in proportion tothe allocation of proceeds.Distributions to holders of equity instruments are recognised as dividends within equity in the period in which they arepayable. Dividends for the year that are declared after the balance sheet date are disclosed in the notes.1.9 Government grants and deferred incomeGovernment includes government agencies and similar bodies whether local, national or international. Governmentassistance is action by government designed to provide an economic benefit specific to an entity or range of entitiesqualifying 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 arerecognised in profit or loss on a systematic basis over the periods necessary to match them with the related costs. Whenthey are for expenses or losses already incurred, they are recognised in profit or loss immediately. The unrecognisedportion of project spend at the balance sheet date is presented as deferred income. No value is recognised for othergovernment 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 incomeon a systematic basis over the periods necessary to match the grants with the related costs, which they are intended tocompensate.Government grants related to assets, including non-monetary grants at fair value, are presented in the balance sheet bysetting up the grant as deferred income.1.10 Project grantsThe grants received and associated expenditure are not included in the income statement of the Group but transferreddirectly to individual project fund accounts, which are reflected as a current liability. Interest received on the fundsis accounted for in the fund account unless the Group is entitled thereto according to the agreement. The funds areapplied to either specific expenditure as directed by the funder or in terms of the agreement with the funder.79

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008ACCOUNTING POLICIES1.11 ProvisionsProvisions 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;and• 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 ifthe Group settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for thereimbursement 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 measuredas a provision.1.12 RevenueRevenue is measured at the fair value of the consideration received or receivable and represents the amountsreceivable for goods, services and operating lease income provided in the normal course of business, net of valueadded 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 systematicbasis, 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.1.13 Employee benefits1.14 LeasesShort-term employee benefitsEmployee benefits cost include all forms of consideration given in exchange for services rendered by employees. Thecost of providing employee benefits is recognised in profit or loss in the period they are earned by employees. The costof shortterm 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 abscences is recognised as an expense as the employeesrender service that increases their entitlement or, in the case of non-accumulating abscences, when the abscencesoccur. The expected cost of performance bonus payments is recognised as an expense when there is a legal orconstructive obligation to make such payments as a result of past performance.Post-employment benefit obligationsThe cost of providing defined benefits is determined using the projected unit credit method. Valuations are conductedannually. The amount recognised in the balance sheet represents the present value of the defined benefit obligation asadjusted 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 toownership.80

EASTERN CAPE DEVELOPMENT CORPORATION 2007/081.15 TaxOperating leases – lesseeRentals payable under operating leases are recognised in profit or loss on a straight-line basis over the term of therelevant lease, or another basis if more representative of the time pattern of the Group’s benefit. Any contingent rentsare expensed in the period they are incurred.Current taxThe charge for current tax is based on the results for the year as adjusted for income that is exempt and expenses thatare not deductible using tax rates that are applicable to the taxable income.Deferred taxA deferred tax asset is the amount of income taxes recoverable in future periods in respect of deductible temporarydifferences, 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 againstwhich deductible temporary differences can be utilised, unless specifically exempt. It is measured at the tax rates thathave 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 thathave been enacted or substantially enacted at the balance sheet date and is not discounted. A deferred tax liability isthe amount of income taxes payable in future periods in respect of taxable temporary differences. Temporary differencesare 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 theGroup is able to control the reversal of the temporary difference and it is probable that the temporary difference will notreverse 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 itis probable that future taxable profit will be available against which the unused tax losses and unused STC credits canbe utilised.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assetis realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enactedby the balance sheet date.1.16 Key assumptions concerning the future and key sources of estimationThe financial statements are prepared in accordance with and comply with SA GAAP and its interpretations adopted bythe Accounting Practices Board. In the preparation of the financial statements the corporation has assumed certain keysources of estimation in recording various assets and liabilities, as set out below.Credit impairment of loans and advancesThe Group adopted an incurred-loss approach to impairment in accordance with accounting policy 1.6. Impairmentlosses are incurred only if there is objective evidence of impairment as a result of one or more past events that hasoccurred since initial recognition. This necessitates the establishment of ‘impairment triggers’ on the occurrence ofwhich an impairment loss may be recognised.Credit impairment is based on discounted estimated future cashflows on an asset or group of assets, where suchobjective evidence of impairment exists. The discount rates used to calculate the recoverable amount excludeconsideration of any anticipated future credit losses.81

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008ACCOUNTING POLICIESThe group has created a portfolio provision for incurred but not reported (IBNR) losses. The purpose of the IBNRprovision is to allow for latent losses on a portfolio of loans and advances that have not yet been individuallyevidenced. Generally, a period of time will elapse between the occurrence of an impairment event and objectiveevidence of the impairment becoming evident, which is known as the ‘emergence period’. The IBNR provision is basedon the probability that loans that are ostensibly performing at the calculation date are impaired, and objective evidenceof 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 loanportfolios and the loan loss data available to the investment division.Provisions, contingent liabilities and contingent assetsThe group, in the ordinary course of business, enters into transactions that expose the group to tax, legal and businessrisks. Refer to notes 29 and 28 for further information on provisions, contingent liabilities and contingent assets.Fair value of Investment PropertiesFor valuation methodologies utilised to fair value investment properties, refer to note 2.Unlisted investment valuationsThe valuation of unlisted investments is based on the discounted free cash flows of the investments taking into accountthe projected future activities of the entity. These values are established either by independent valuers or managementand are reviewed by the Development Investment Committee.1.17 Borrowing costsBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset arecapitalised as part of the cost of that asset until such time as the asset is ready for its intended use. The amount ofborrowing costs eligible for capitalisation is determined as follows:• Actual borrowing costs on funds specifically borrowed for the purpose of obtaining a qualifying asset less anytemporary investment of those borrowings.• Weighted average of the borrowing costs applicable to the entity on funds generally borrowed for the purpose ofobtaining 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, and• 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 useor sale are complete.All other borrowing costs are recognised as an expense in the period in which they are incurred.82

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 20082 Investment PropertyReconciliation of movementBalance at beginning of yearDisposalsFair value gainOther movements2008R’000671,689(16,297)53,94616Group2007R’000441,886(23,721)62,303191,2212008R’000Corporation449,962(15,957)47,368162007R’000412,680(23,361)60,643-709,354 671,689 481,389 449,962Reconciliation of fair value gain to income statementFair value gain per balance sheetCompensation received for fair value loss on investment property53,9462,50262,303-Fair value gain recognised in profit or loss (note 23) 56,448 62,303 49,870 60,643These properties are situated throughout the Eastern Cape, with the majority of properties concentrated in the areasin and surrounding Mthatha, Butterworth, King William’s Town, East London and Queenstown. The portfolio mainlyconsists of industrial, residential and commercial properties.47,3682,50260,643-Corporation - 2008 Percentage ValueR’000Type of propertiesResidentialCommercialVacant LandIndustrialOtherCorporation - 2007 Percentage ValueR’000Type of propertiesResidentialCommercialVacant LandIndustrialOther4821625-226,396103,46929,104122,026394Number ofproperties59325781319773100 481,389 1,9335136742231,071162,39632,07819,4025,015Number ofproperties65744782717120100 449,962 2,068Investment properties were valued in terms of the accounting policy, which requires a value determined by a swornappraiser every three years. However, certain valuations were not captured on the properties register. Valuations arenormally 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, mainlybecause the properties are vacant or undeveloped land or unoccupied buildings.Freehold title is held by the Corporation for the majority of properties, but not for all. Properties for which freehold titleis not held are recorded when they are managed by the Corporation and result in the receipt of economic benefits andrewards and when the Corporation incurs the risks incidental to ownership.83

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 20082 Investment Property (CONTINUED)Freehold title is held as follows:Corporation - 2008 Percentage ValueR’000CorporationGovernmentTribal landMunicipalityCorporation - 2007 Percentage ValueR’000CorporationGovernmentTribal landMunicipalityPrivately ownedOther/Unknown80974384,94744,10131,69520,646Number ofproperties1,7291312449100 481,389 1,93380875--357,95335,92231,57520,8172,6701,025Number ofproperties1,77213024516823100 449,962 2,068The categories of freehold title are further described as follows:• CorporationFreehold title is registered to the Corporation or one of the former corporations consolidated under the Corporationin terms of the Eastern Cape Development Corporation Act, No 2 of 1997, read with Proclamation 1 of 2001.• GovernmentThe title over land is registered to government. The Corporation is in the process of analysing the properties withinthis group, which comprise mainly entitlement in terms of Proclamation 1 of 2001 by the Premier of the EasternCape.• Tribal landThis group comprises mainly of properties where the Corporation has assumed “Permission to Occupy”. Themajority of these properties are situated on forestry estates and hotels on the Wild Coast.• MunicipalityThe title is registered to different municipalities within the Eastern Cape, but improvements have been made by theCorporation.• Privately ownedThe corporation derives economic benefits and rewards from these properties and incur the risks incidental toownership.• Other / unknownUncertainty exists regarding the ownership of these properties, however the Corporation derives economic benefitsand rewards from them.The Corporation’s right to occupy properties to the value of R 83.3 million (2007: R 78.8 million) included in the above,has not been reduced to writing. However, the Corporation has occupied these properties for a number of years andderives 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 theseproperties and will receive economic benefits in perpetuity. In the unlikely event that the right of occupation is disputedor expires, the valuation of these properties may be overstated. In terms of the accounting policy these rights areassessed on an annual basis and adjustments may be effected to the valuation of these properties if necessary.84

EASTERN CAPE DEVELOPMENT CORPORATION 2007/083 Property, plant and equipmentGroup 2008 2007LandBuildings and infrastructurePlant and machineryFurniture and fixturesMotor vehiclesOffice machinery and equipmentIT equipmentOther equipmentCost / Valuation17,186560,1602,0703,46880586213,6762,419Accumulateddepreciation-(19,043)(1,738)(2,024)(516)(652)(7,880)(2,065)Carryingvalue17,186541,1173321,4442892105,796354Cost /Valuation16,921404,3991,7592,6907638079,2062,373Accumulateddepreciation-(8,674)(1,717)(1,707)(393)(486)(5,228)(1,765)Carryingvalue16,921395,725429833703213,978608Total 600,646 (33,918) 566,728 438,918 (19,970) 418,948Corporation 2008 2007LandBuildingsFurniture and fixturesMotor vehiclesOffice machinery and equipmentIT equipmentOther equipmentCost / Valuation3,26515,4521,598975697,4461,247Accumulateddepreciation-(1,849)(817)(63)(485)(6,147)(1,041)Carryingvalue3,26513,60378134841,299206Cost /Valuation3,00013,7381,053975247,0831,238Accumulateddepreciation-(1,552)(587)(38)(374)(4,427)(841)CarryingvalueTotal 29,674 (10,402) 19,272 26,733 (7,819) 18,914A register containing the information required by paragraph 22(3) of Schedule 4 of the Companies Act is available forinspection at the registered office of the Corporation.Land, buildings and infrastructureIncluded in the carrying amount of the group’s buildings and infrastructure is East London Industrial Development Zone(Proprietary) Limited infrastructure of R 514 million (2007: R 369 million)Land, buildings and infrastructure are valued by a sworn appraiser every three years. Valuations are normally based oncomparable sales in the area or in the income earning potential of the building.Reconciliation of property, plant and equipment - Group - 20083,00012,186466591502,656397LandBuildings and infrastructurePlant and machineryFurniture and fixturesMotor vehiclesOffice equipmentIT equipmentOther equipmentOpeningbalance16,921395,725429833703213,978608Additions-154,82731277840544,48359Transfers anddisposals265935-----(5)Depreciation Impairment loss Total-(10,370)(22)(313)(115)(164)(2,662)(308)---(4)(6)(1)(3)-17,186541,1173321,4442892105,796354418,948 160,553 1,195 (13,954) (14) 566,72885

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 20083 Property, plant and equipment (CONTINUED)Reconciliation of property, plant and equipment - Group - 2007LandBuildings and infrastructurePlant and machineryFurniture and fixturesMotor vehiclesOffice equipmentIT equipmentOther equipmentOpeningbalance17,153209,775699071573883,901881Additions-380,035-3052731072,091204Transfers anddisposals(232)(191,220)(7)---(6)(18)Depreciation Impairment loss Total-(6,298)(20)(225)(53)(172)(2,007)(459)-3,433-(4)(7)(2)(1)-16,921395,725429833703213,978608233,231 383,015 (191,483) (9,234) 3,419 418,948Reconciliation of property, plant and equipment - Corporation - 2008LandBuildingsFurniture and fixturesMotor vehiclesOffice machinery and equipmentIT equipmentOther equipmentOpeningbalance3,00012,186466591502,656397Additions Transfers Depreciation Total-781545-453638265935------(299)(230)(25)(111)(1,720)(199)3,26513,60378134841,29920618,914 1,742 1,200 (2,584) 19,272Reconciliation of property, plant and equipment - Corporation - 2007LandBuildingsFurniture and fixturesMotor vehiclesOffice machinery and equipmentIT equipmentOther equipmentOpeningbalance3,00011,274528832603,454549Additions Disposals Depreciation Total-1,194104-20793169-----(5)(13)-(282)(166)(24)(130)(1,586)(308)3,00012,186466591502,65639719,148 2,280 (18) (2,496) 18,9144 Investments in subsidariesGroupCorporation2008R’0002007R’0002008R’0002007R’000Investments in subsidiaries at costImpairment of investments in subsidiaries27,405(1,334)27,402(1,334)26,071 26,068Details of the Corporations subsidiaries are disclosed in Annexure 1.86

EASTERN CAPE DEVELOPMENT CORPORATION 2007/085 Investments in associatesReconciliation of carrying amount 2008R’000Investments in associates at costShare of associates’ earnings since acquisitionShare of associates’ losses since acquisitionGroup5,6543,440(3,000)2007R’0005,6541,972(3,000)2008R’000Corporation3,000--2007R’0003,000--6,094 4,626 3,000 3,000Bushmans Sands Development (Proprietary) LimitedAssetsLiabilitiesRevenueLoss for the period22,95869,83616,998(12,344)29,14269,83649,929(14,998)22,95869,83616,998(12,344)22,95869,83649,929(14,998)Unrecognised lossesUnrecognised share of losses for the yearAccumulated unrecognised share or losses(2,469)(10,130)(3,000)(7,727)(2,469)(10,130)(3,000)(7,727)The above information is based on the unaudited financial statements of Bushman Sands Developments (Proprietary)Limited and its wholly owned subsidiary, Bushman Sands Hospitality (Proprietary) Limited, for the year ended 30September 2007. The Group holds a 20% (2007: 20%) interest in the associate.Holiday Inn TranskeiAssetsLiabilitiesRevenueProfit for the period18,2036,47726,1383,00614,5945,87424,3803,311--------The above information is based on the management accounts of Transkei Holiday Inn for the year ended 31 March 2008.The Group holds a 49% (2007: 49%) interest in the associate of which 9% (2007: 9%) is held by the Corporation.6 Loans to / (from) subsidiaries and associatesSubsidiariesEastern Cape Marketing Authority (Proprietary) LimitedCentre for Investment and Marketing in the Eastern CapeUnsecured loan bearing interest at 10.76% per annum with no fixed terms of repayment.Cimvest (Proprietary) LimitedQ-Mec Koi Farm (Proprietary) LimitedTransido (Proprietary) LimitedUmtata Small Industries Complex (Proprietary) LimitedTranskei Share Investment Company LimitedTDC Property Investments (Proprietary) LimitedTransdev Properties (Proprietary) LimitedUnsecured loan bearing interest at 16% per annum with no fixed terms of repayment.Windsor Hotel (Proprietary) LimitedAutomotive Industrial Development CentreMagwa Enterprise Tea (Proprietary) LimitedSubtotalImpairment of loans to subsidiaries-----------3,3453,345(18)--------------110,564(4,893)-82,051384(47,961)3,704(3,769)4622,0013,34545,889(77,653)-11,081(3,864)1,07982,033382(48,167)4,0451804605,000-52,229(75,387)Total loans to / (from) subsidiaries 3,327 - (31,764) (23,158)87

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 20086 Loans to / (from) subsidiaries and associates (continued)Except for the loans with the Centre for Investment and Marketing in the Eastern Cape (Association incorporatedunder section 21) and Transdev Properties (Proprietary) Limited, which bear interest as disclosed above, all loans areunsecured, do not bear interest and have no fixed terms of repayment.AssociatesBushman Sands Developments (Proprietary) LimitedThe loan is secured by surety from the Mantis Group, bears interest at prime plus 1%and is repayable by 30 June 2012.Worthytrade 93 (Proprietary) LimitedCHMF Briquettes (Proprietary) LimitedNan-Shen Foods (Proprietary) LimitedSubtotalImpairment of loans to subsidiaries2008R’00035,946Group4,333--40,279(9,841)2007R’00033,5334,3332837,876(9,129)2008R’000Corporation35,9464,333--40,279(9,841)Total loans to / (from) associates 30,438 28,747 30,438 28,747Non-current assetsNon-current liabilities7 Investments33,765-28,782-55,297(56,623)2007R’00033,5334,333--37,866(9,119)57,620(52,031)33,765 28,782 (1,326) 5,589Available for saleListed sharesUnlisted shares72382,7707304,700-82,770-4,70083,493 5,430 82,770 4,700Held to maturityFixed term investmentsOther investments48,78911,89143,49410,89548,78911,89143,49410,89560,680 54,389 60,680 54,389Total investments 144,173 59,819 143,450 59,089Analysis of available-for-sale investmentsListed shares at fair valueUnlisted shares at costUnlisted shares at fair value7237,77075,0007303,879821-7,77075,000-3,87982183,493 5,430 82,770 4,700Non-current assetsAvailable for saleHeld to maturity83,49360,6805,43054,38982,77060,6804,70054,389144,173 59,819 143,450 59,089Total amount of change in fair value recognised directly in equity (Note 13) 74,173 - 74,180 -88

EASTERN CAPE DEVELOPMENT CORPORATION 2007/087 Investments (CONTINUED)Pledged as securityInvestments to the value of R26 million (2007: R26 million) are pledged as security for interest-bearing borrowings asper Note 14.8 Deferred taxDeferred tax asset/ (liability)Fair value gains on investment propertyUnutilised tax creditsOther temporary differencesNon-current assetsNon-current liabilities2008R’000Group(1,925)9641612007R’000(1,388)9863392008R’000Corporation---2007R’000(800) (63) - -1,125(1,925)1,194(1,257)(800) (63) - ---------9 Loans advancedLoans advancedImpairment allowanceLoans advanced (amortised cost)Non-current assetsCurrent assets210,173(101,904)338,211(236,311)210,160(101,904)338,199(236,311)108,269 101,900 108,256 101,88856,19052,07952,32749,57356,17752,07952,31549,573108,269 101,900 108,256 101,88810 Trade and other receivablesTrade receivablesPrepaymentsVAT receivableOther receivablesAnalysis of carrying amountTrade receivablesGross carrying amountImpairment allowanceOther receivablesGross carrying amountImpairment allowance18,796134,52411,40010,2181612,5926,3528,367--5,9556,654--6,37834,733 29,178 14,322 13,032213,148(194,352)188,951(178,733)174,084(165,717)155,856(149,202)18,796 10,218 8,367 6,65418,816(7,416)10,443(4,091)13,371(7,416)10,469(4,091)11,400 6,352 5,955 6,37889

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200811 Cash and cash equivalentsCash and cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investmentor other purposes. Cash and cash equivalents include cash on hand, bank deposits, investments in money marketinstruments and comprise:Bank balancesShort-term deposits2008R’000Group137,116298,1742007R’00073,775273,2782008R’000Corporation5,936298,1742007R’00014,842273,278435,290 347,053 304,110 288,120Committed to projects (Note 18) 143,787 159,097 137,610 152,92012 Share capitalAuthorised50 billion “A” shares of 1 cent each50 billion “B” shares of 1 cent each500,000500,0005,0005,000500,000500,0005,0005,0001,000,000 10,000 1,000,000 10,000Reconciliation of number of shares issued:Reported as at 01 April 2007Share capital receivedIssued“A” shares of 1 cent each“B” shares of 1 cent each239,37331,497193,82345,550239,37331,497193,82345,550270,870 239,373 270,870 239,373135,435135,435119,687119,686135,435135,435119,687119,686270,870 239,373 270,870 239,37313 ReservesDuring the year, the Corporation’s authorised share capital was increased to R 1 billion comprising equal proportions of“A” and “B” shares.Pre-incorporation reservePre-incorporation reserves represent the net book value of asset 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 currentand prior years that refer to the value of assets taken over.Property revaluation reserveThe property revaluation reserve represents the total revaluation of land and buildings and fair value adjustments oninvestment properties.Fair value adjustment available-for-sale-assets reserveFair value reserves comprise all fair value adjustments that are recognised directly in equity and / or transfers fromretained earnings. When an asset or liability is derecognised, the portion of the fair value reserve relating to that assetor liability is transferred to profit or loss.90

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0813 Reserves (continued)Pre-incorporation reserveProperty revaluation reserveFair value adjustment available-for-sale-assets reserveAnalysis of carrying valueProperty revaluation reserveBalance at beginning of yearTotal fair value adjustment on investment properties transferred from retained earnings2008R’000377,324248,54274,173Group2007R’000378,315194,595-2008R’000Corporation384,265222,00574,1802007R’000385,255174,637-700,039 572,910 680,450 559,892194,59553,947132,29162,304174,63647,369113,99460,643248,542 194,595 222,005 174,63714 Interest bearing borrowingsAt amortised costDevelopment Bank of South Africa 19,084 20,505 19,084 20,505The above borrowings are secured by investments as disclosed in note 7. Details of the loans are set out in Annexure 2.Non-current liabilitiesAt fair value 17,601 17,343 17,601 17,343Current liabilitiesAt fair value 1,483 3,162 1,483 3,16215 Retirement BENEFIT obligation19,084 20,505 19,084 20,505The Corporation provides retirement benefits to employees by contributing to the Eastern Cape DevelopmentCorporation pension fund. The pension fund was created on conversion of the Eastern Cape Development Corporationprovident fund to a pension fund during the year. An actuarial valuation of the fund was conducted at conversion andthe 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 isresponsible for 50% of the contributions to medical aid funds of retired employees.Post retirement medical benefitsPresent value of the retirement benefit obligationUnrecognised actuarial losses at year end14,092(3,336)9,656-14,092(3,336)9,656-10,756 9,656 10,756 9,656Amounts included in profit or loss for the periodEmployee costsCurrent service costInterest cost5387425096655387425096651,280 1,174 1,280 1,17491

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200815 Retirement BENEFIT obligation (CONTINUED)Changes in present valueOpening balancePost-retirement medical benefits included in employee cost expenseContributions paid2008R’0009,6561,280(180)Group2007R’0008,6531,174(171)2008R’000Corporation9,6561,280(180)2007R’0008,6531,174(171)10,756 9,656 10,756 9,656Past service (accrued) liabilityPrincipal actuarial assumptionsHealth care costs inflationDiscount rate usedPresent value of accrued liabilityActive membersCAWMs liability8.00%9.00%11,2952,7975.75%7.75%7,3622,2948.00%9.00%11,2952,7975.75%7.75%7,3622,29414,092 9,656 14,092 9,656Future service liabilityPrincipal actuarial assumptionsHealth care costs inflationDiscount rate usedAccrued liabilityActive membersCAWMs liability8.00%9.00%8,672-5.75%7.75%5,750-8.00%9.00%8,672-5.75%7.75%5,750-8,672 5,750 8,672 5,75016 Deferred incomeNon-current liabilitiesCurrent liabilities675,689188,643534,19091,915-37,495-25,688864,332 626,105 37,495 25,688Analysis per group companyEastern Cape Development CorporationEast London Industrial Development Zone (Proprietary) Limited37,495826,83725,688600,41737,495-25,688-864,332 626,105 37,495 25,688Analysis of movement in deferred income East London IndustrialDevelopment Zone (Proprietary) LimitedBalance at beginning of yearGrants receivedInterest on grant fundsOutput VAT on grants receivedReleased to incomeAdjustments600,417316,8507,736(38,911)(56,176)(3,079)272,383387,282-(29,909)(45,090)15,751826,837 600,417 - -------------Government grants deferred to the extent that they are unspent92

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0817 Trade and other payablesAccrued bonusAccrued expensesAccrued leave payProvision for penalties and interestDeposits receivedOther payablesTrade payablesVAT payable2008R’0001,5527135,4484501,31618,33425,8515,201Group2007R’0001,6236435,146450-25,56520,6289,4862008R’000Corporation1,0724404,033--17,0156054682007R’0001,1103774,124--14,3236778,91858,865 63,541 23,633 29,529Provision for penalties and interestThe provision for penalties and interest on income tax represents management’s best estimate of the potentialliability of certain subsidiaries where there is uncertainty whether applications for exemption from income tax will besuccessful.18 Project grants19 RevenueProject grants 143,787 159,097 137,610 152,920Details of the project grants are presented in Annexure 3Rendering of servicesRental incomeInterest received - loans advanced4,43367,21921,3214,36052,21319,513-50,89021,321-49,25119,51392,973 76,086 72,211 68,76420 Operating lossOperating profit for the year is stated after accounting for the following:Operating leases chargesPremises• Contractual amountsEquipment• Contractual amountsProfit on sale of property, plant and equipmentProfit (loss) on sale of investment propertyLoss on recognition of financial instrumentsImpairment on property, plant and equipmentDepreciation on property, plant and equipmentEmployee costsResearch and developmentImpairment on loans to group companiesImpairment on loans advancedImpairment on trade and other receivablesDirect property operating expenditure1,7438821,1742,4241,9317751,8591,9002,625 3,598 2,706 3,7591843(142)1413,95475,8541,08874021,47119,45740,08811(2,717)-(3,419)9,23274,295174(1,342)16,67316,97042,898-833(142)-2,58453,922-2,98821,47119,84138,498-(2,717)--2,49656,167-8,03016,67316,87128,49993

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200821 Auditors’ remuneration2008R’000Group2007R’0002008R’000CorporationFees - for audit services 1,599 1,176 1,376 96822 Investment revenue2007R’000Dividend revenueAssociates - Local 101 2,099 44 2,053Interest revenueBankInvestment income98531,1582,74920,212-32,5296,24416,32932,143 22,961 32,529 22,57332,244 25,060 32,573 24,62623 Fair value adjustments through profit or lossInvestment property 56,448 62,303 49,870 60,64324 Finance costsInterest expenseLate payment of tax2,628441,9352372,850-1,935-2,672 2,172 2,850 1,93525 TaxationCapitalisation of borrowing costsThe group did not incur any finance charges on qualifying assets and accordingly borrowing costs capitalised during theyear amount to R Nil (2007: R Nil).Major components of tax expenseCurrentLocal income tax - current period 912 674 - -DeferredOriginating and reversing temporary differencesArising from prior period adjustments68552(117)48- -737 (69) - -1,649 605 - -94

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0825 Taxation (continued)Reconciliation of the tax expenseReconciliation between accounting profit and tax expense.Accounting profitTax at the applicable tax rate of 29% (2007:29%)2008R’00054,20215,719Group2007R’00025,5307,4042008R’000Corporation37,91510,9952007R’00015,0534,365Tax effect of adjustments on taxable incomeChange in rate of taxOther temporary differencesFair value gains not subject to capital gains taxExempt income(8)27(627)(13,462)-(104)(9)(6,686)---(10,995)---(4,365)1,649 605 - -The Corporation has been granted exemption from South African normal taxation in terms of Section 10(1)(cA)(i) of theIncome Tax Act.Certain subsidiaries have applied for exemption from South African normal taxation, to which no response has beenreceived from the South African Revenue Service. A provision for taxation has been raised in those subsidiaries wheretax exemption is not expected to be obtained.26 Cash generated from / (used in) operationsProfit before taxationAdjustments for:Depreciation and amortisation(Profit) / loss on sale of assetsIncome from equity accounted investmentsDividends receivedInterest receivedFinance costsFair value adjustmentsMovements in retirement benefit assets and liabilitiesImpairment allowance for doubtful advances and debtsGain on release from debtProvision for doubtful performance guaranteesLoss on recognition of financial assetsChanges in working capital:InventoriesTrade and other receivablesTrade and other payablesDeferred income54,20213,968(843)(1,469)(101)(52,359)2,672(56,448)1,28043,154(2,949)(1,486)14243(22,128)(4,678)238,22725,5315,8142,717(1,622)(2,099)(42,369)2,172(62,303)1,17432,393-(91)-2444,253(28,334)320,42037,9152,584(833)-(44)(52,745)2,850(49,870)1,28045,786-(1,486)142-(21,157)(5,899)11,80815,0532,4962,717-(2,053)(41,980)1,935(60,643)1,17441,664-(91)--(1,027)(11,069)1,670211,227 257,900 (29,669) (50,154)27 Tax paidBalance at beginning of the yearCurrent tax for the year recognised in income statementBalance at end of year(3,401)(912)3,922(3,332)(674)3,401------(391) (605)95

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200828 ContingenciesThe Corporation has exposure to litigation of R 1.3 million (2007: R 1.2 million) against it. The legal claims are expectedto be settled in the course of the next twelve months.29 CommitmentsAuthorised capital expenditureAlready contracted for but not provided for• Purchase of sharesTranskei Share Investment Company• Loans approved not yet disbursedThis committed expenditure will be financed from existing cash resources.2008R’0001,29128,608Group2007R’0001,29512,5222008R’000Corporation1,29128,6082007R’0001,29512,522Operating leases - as lessee (expense)Minimum lease payments due• within one year• in second to fifth year inclusive3,0508,0031,4758262,5997,5901,024-11,053 2,301 10,189 1,024Operating lease payments represent rentals payable by the group for certain of its office properties, office equipmentand cellular phones. Leases related to office properties and office equipment are negotiated for an average term of fiveyears. Leases related to cellular phones are negotiated for an average term of two years. All rentals are incurred undernon cancellable operating leases. No contingent rent is payable.30 Comparative figuresCertain comparative figures have been reclassified to conform with changes in presentation in the current year. Theeffects of the reclassification are as follows:Balance sheetDeferred tax assetInvestments in associatesLoans to subsidaries and associatesInventoriesTrade and other receivablesCurrent tax receivableCash and cash equivalentsRetirement benefit obligationDeferred income - non-current liabilityDeferred tax liabilityCurrent tax payableTrade and other payablesDeferred income - current liability-------------1,194(287)35(88)(611)5942(9,656)(534,190)(1,152)34810,956534,190--------------------------Income statementRevenueInvestment incomeOther incomeGrant incomeOperating expenses-----(10,687)10,233557(557)(386)-----(10,233)10,233(150)150-96

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0831 Prior period errorsGrant incomeA subsidiary, East London Industrial Development Zone, incorrectly accounted for interest on grant funds as income.The grant agreement specifies that interest earned on these funds may only be used for the purposes of the grant andthese amounts should consequently be accounted for in the same manner as the underlying grant. This resulted in anincrease of R 6,477,817 (2006: R 9,273,299) in deferred income for the year ended 31 March 2007 and a decrease ofR 3,078,913 (2006: R Nil) in tax expense for the same period. Further, a reduction in minority interest of R 535,384resulted from the above adjustments for the year ended 31 March 2007.Property, plant and equipmentDuring the year, the Corporation performed a comprehensive revision of its equipment registers. This resulted in adecrease in depreciation expense of R 1,260,100 for the year ended 31 March 2007 and the derecognition of certainequipment amounting to R 2,728,138 for the year ended 31 March 2006.Investments in associatesDuring the previous financial year, the Group accounted for its investment in a hotel group based on limited financialinformation. Additional information became available during the current financial year and resulted in an increase ofR 1,908,700 (2006: R 351,330) in investments in associates and income from equity-accounted investments.Interest revenueIn accordance with the accounting policy, the Corporation recognises income only to the extent that an inflow ofeconomic benefits is probable. Interest revenue of R 10,233,000 was incorrectly recognised on impaired rental debtorsfor the year ended 31 March 2007. Consequently, interest revenue of R 10,233,000 was derecognised for that period.The consolidated annual financial statements have been restated to correct the effects of these errors. This resulted inthe following adjustments.Balance sheetInvestment propertyProperty, plant and equipmentInvestment in associatesTrade and other receivablesAccumulated lossMinority interestDeferred tax liabilityCurrent tax payableTrade and other payablesDeferred incomeEffect on 2007Effect on periods priorto 2007Effect on 2007Effect on periods priorto 2007R’000 R’000 R’000 R’000-1,2601,909(1,641)-535(105)3,097(45)(6,477)1,000(2,728)351-(1,000)---(317)(9,273)-1,260---------(2,728)--------Decrease /(increase) in accumulated loss (1,467) (11,967) 1,260 (2,728)Income statementRevenueOther incomeDepreciation expenseOperating expensesIncome from equity accounted investmentsIncome tax expenseMinority interest expense10,2336,477(1,260)(8,547)(1,909)(2,992)(535)-9,273-3,045(351)--10,233-(1,260)(10,233)---(Decrease) /increase in accumulated loss 1,467 11,967 (1,260) 2,728---2,728---97

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200832 Related partiesRelationshipsSubsidiaries Refer to Annexure 1ShareholderDepartment of Economic Development and Environmental Affairs(DEDEA)DirectorsRefer to paragraph 13 to the Director’s Report.Key management and other senior managersEastern Cape Development CorporationM.D. Matshamba (Chief Executive Officer)M. Daca (Executive Manager: Finance)C. Biermann (Executive Manager: Development Investments)East London Industrial Development Zone (Proprietary) LimitedS. 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) LimitedJ. Manilal (Acting Chief Executive Officer)Related party balancesSubsidiaries and associatesRelated party balances with subsidiaries and associates are disclosed in Note 6: Loans to / (from) subsidiaries andassociates.Other related partiesThe Corporation acquires equity investments in certain entities to which it has advanced loan funds as security for theseloans or as part of its investment strategy. Outstanding balances with these entities were as follows:Related Party Preference shares Other receivables Loan balance Accumulated impaimentBorder CopiersRoad Safety ApparelMagwa Tea Enterprise (Proprietary) LimitedS&P KareedouwIkhala AloesZingisi Forest Products-----3,061--3,402---6,5444325341,5361,181-(1,100)(432)(3,936)-(1,181)-3,061 3,402 10,227 (6,649)Related party transactionsSubsidiaries and associatesInterest from subsidiariesInterest received from associatesImpairment expense - loans to associatesManagement feesRent paid to subsidiaries2008R’000Group2007R’0002008R’000Corporation-2,413(772)6641,5022007R’0006,152----Details in respect of directors’ fees are disclosed in note 33 to the annual financial statements and paragraph 13 to theDirectors’ Report.98

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0832 Related parties (CONTINUED)Eastern Cape Provincial Government EntitiesThe Corporation leases properties to the following Eastern Cape provincial government entities at market relatedrentals:GroupCorporation2008R’0002007R’0002008R’0002007R’000Rent billingsProvincial GovernmentEastern Cape Provincial LegislatureDepartment of Sports, Arts, Recreation and CultureDepartment of TransportDepartment of Public WorksDepartment of Health40104397616136943568145420 378Compensation to key management and other senior managersShort-term employee benefits 9,419 8,376 4,659 4,354Contributions to post employment benefit fundEmployerEmployee3,4631,8313,4111,5123,2821,7143,2501,5125,294 4,923 4,996 4,762Other related partiesThe Corporation acquires equity investments in certain entities to which it has advanced loan funds as security for theseloans or as part of its investment strategy. Transactions with these entities during the period were as follows:Related partyBorder CopiersMagwa Tea Enterprise (Proprietary) LimitedS&P KareedouwZingisi Forest Products33 Directors’ emolumentsNon-executiveInterestreceived614-79-Dividendsreceived---42Impairmentexpense(1,100)(3,936)--693 42 (5036)2008 Fees OtherexpensesFor service as directors 245 180 425Total2007 Fees OtherexpensesFor service as directors 529 512 1,041TotalFurther details in respect of director’s fees are disclosed in paragraph 13 to the Director’s Report.99

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200834 Financial risk managementOverviewA comprehensive Investment Policy is used to ensure that all the market risks to which the group is exposed areunderstood and managed. Governance structures are in place to achieve effective independent monitoring andmanagement 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 andequity investments is being effectively managed and reported and that all policy, risk limits and relevant market riskissues 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 cashequivalents.ObjectivesThe group market risks are managed by the Board and Audit Committee through a number of executive managementcommittees. These risks include fair value interest rate risk, currency risk, credit risk, liquidity risk and cash flow interestrate risk.The Group seeks to minimize the effects of the negative impact of these risks by ensuring compliance with Boardapproved 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 financialinstitutions.• 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 riskprofiles or parameters approved by the board.Capital managementThe Group manages its capital to ensure that entities in the Group will be able to continue as a going concern whilemaximising the return to stakeholders through the optimisation of capital levels. The Group’s overall strategy remainsunchanged from 2007.The capital structure of the Group consists of cash and cash equivalents, disclosed in note 11, and equity attributable toequity 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 ofborrowings.Risk exposure arising from financial instrumentsLiquidity riskThe Group is exposed to liquidity risk through its operational and banking activities. Liquidity risk is measured in termsof a Board approved Investment Policy with appropriate dashboard liquidity risk measures on the basis of which the riskis managed by the Finance function.Interest rate riskThe 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. TheGroup monitors and ensures that the interest rate risk profiles are in line with limits and benchmarks stipulated in thepolicy.100

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0834 Financial risk management (continued)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 maturityinvestments and loans advanced. A 1% decrease in the interest rate applicable to these financial instruments wouldresult in a R 1,841 million decrease in net interest income with an equivalent decrease in retained earnings.Credit riskCredit risk consists mainly of cash deposits, cash equivalents and trade debtors. The corporation only deposits cashwith major banks with high quality credit standing and limits exposure to any one counter-party. Trade receivablescomprise a widespread customer base. Management evaluated credit risk relating to customers on an ongoing basis.Foreign exchange riskThe Group has no material exposure to foreign exchange risk.Equity price riskThe Group is exposed to equity risk through its investment in a number of entities as disclosed in note 7.Concentration riskThe 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 apercentage 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 Groupcould be exposed to liquidity risk in the event of an over exposure in non - tradable instruments like held to maturityassets. The Group could also be exposed to interest rate risk due to over exposure in any investment cluster.35 Categories and fair value of financial instruments35.1 Categories of financial instrumentsFinancial assets by category - Group - 2008InvestmentsLoans advancedTrade and other receivablesCash and cash equivalentsDesignatedat fair valuethroughprofit or loss---435,290Held tomaturity60,680---Loans andreceivables-108,26934,733-Available forsale financialassets83,493---Total CarryingAmount144,173108,26934,733435,290Total 435,290 60,680 143,002 83,493 722,465Financial assets by category - Group - 2007InvestmentsLoans advancedTrade and other receivablesCash and cash equivalentsDesignatedat fair valuethroughprofit or loss---347,053Held tomaturity54,389---Loans andreceivables-101,90029,178-Available forsale financialassets5,430---Total CarryingAmount59,819101,90029,178347,053Total 347,053 54,389 131,078 5,430 537,950101

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200835 Categories and fair value of financial instruments (CONTINUED)Financial liabilities by category - Group - 2008Interest bearing borrowingsTrade and other payablesAmortisedcost19,08458,865Total CarryingAmount19,08458,865Total 77,949 77,949Financial liabilities by category - Group - 2007Interest bearing borrowingsTrade and other payablesAmortisedcost20,50563,541Total CarryingAmountTotal 84,046 84,046Financial assets by category - Corporation - 2008InvestmentsLoans advancedTrade and other receivablesCash and cash equivalentsDesignatedat fair valuethroughprofit or loss---304,110Held tomaturity60,680---Loans andreceivables-108,25614,322-Available forsale financialassets82,770---20,50563,541Total CarryingAmount143,450108,25614,322304,110Total 304,110 60,680 122,578 82,770 570,138Financial assets by category - Corporation - 2007InvestmentsLoans advancedTrade and other receivablesCash and cash equivalentsDesignatedat fair valuethroughprofit or loss---288,120Held tomaturity54,389---Loans andreceivables-101,88813,032-Available forsale financialassets4,700---Total CarryingAmount59,089101,88813,032288,120Total 288,120 54,389 114,920 4,700 462,129Financial liabilities by category - Corporation - 2008Interest bearing borrowingsTrade and other payablesAmortisedcost19,08423,634Total CarryingAmountTotal 42,717 42,717Financial liabilities by category - Corporation - 2007Interest bearing borrowingsTrade and other payablesAmortisedcost20,50529,52919,08423,634Total CarryingAmountTotal 50,034 50,03420,50529,529102

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0835 Categories and fair value of financial instruments (CONTINUED)35.2 Fair value of financial instrumentsCarryingAmount2008 2007Fair valueCarryingAmountFair valueGroup R’000 R’000 R’000 R’000Financial assetsInvestments- Fixed term investments- Other investments- Listed shares at fair value- Unlisted shares at fair value- Unlisted shares at costLoans advancedTrade and other receivablesCash and cash equivalents48,78911,89172375,0007,770108,26934,733435,29048,78911,89172375,000-Refer 35.3.4Refer 35.3.1435,29043,49410,8957308213,879101,90029,178347,05343,49410,895730--Refer 35.3.4Refer 35.3.1347,053722,465 571,693 537,950 402,172Financial liabilitiesInterest bearing borrowingsTrade and other payables19,08458,865Refer 35.3.4Refer 35.3.120,50563,541Refer 35.3.4Refer 35.3.177,949 - 84,046 -CorporationFinancial assetsInvestments- Fixed term investments- Other investments- Unlisted shares at fair value- Unlisted shares at costLoans advancedTrade and other receivablesCash and cash equivalents48,78911,89175,0007,770108,25614,322304,11048,78911,89175,000-Refer 35.3.4Refer 35.3.1304,11043,49410,8958213,879101,88813,032288,12043,49410,895--Refer 35.3.4Refer 35.3.1288,120570,138 439,790 462,129 342,509Financial liabilitiesInterest bearing borrowingsTrade and other payables19,08423,633Refer 35.3.4Refer 35.3.120,50529,529Refer 35.3.4Refer 35.3.142,717 - 50,034 -35.3 Determination of fair value35.3.1 Financial instruments with short-term maturitiesAt year end the carrying amounts of cash and cash equivalents, accounts receivable and accounts payableapproximated their fair values due to the short-term maturities of these assets and liabilities.35.3.2 Unlisted shares carried at fair valueDuring 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 valuationperformed by an independent external firm of accountants and auditors.103

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200835 Categories and fair value of financial instruments (CONTINUED)35.3.3 Unlisted shares carried at costIn accordance with the accounting policy on available-for-sale financial assets, certain unlisted shares are carried atcost as their fair values could not be reliably determined, due to a lack of an active market for these instruments.35.3.4 Held to maturity investments, loans advanced and interest bearing borrowingsThe fair values of these financial instruments are determined based on discounted cash flow techniques, taking accountof market related discount rates appropriate to the instrument and economic conditions current at the balance sheetdate. At this date, the fair value of the financial instruments approximated their carrying values.36 New standards, amendments and interpretationsStandards, amendments and interpretations effective in 2008IFRS 7, ‘Financial instruments: Disclosures’, and the complementary amendment to IAS 1, ‘Presentation of financialstatements – Capital disclosures’, introduces new disclosures relating to financial instruments and does not have anyimpact on the classification and valuation of the group’s financial instruments, or the disclosures relating to taxationand trade and other payables.IFRIC 8, ‘Scope of IFRS 2’, requires consideration of transactions involving the issuance of equity instruments, wherethe identifiable consideration received is less than the fair value of the equity instruments issued in order to establishwhether or not they fall within the scope of IFRS 2. This standard does not have any impact on the group’s financialstatements.IFRIC 10, ‘Interim financial reporting and impairment’, prohibits the impairment losses recognised in an interim periodon goodwill and investments in equity instruments and in financial assets carried at cost to be reversed at a subsequentbalance sheet date. This standard does not have any impact on the group’s financial statements.Standards, amendments and interpretations effective in 2008 but not relevant to the groupThe following standards, amendments and interpretations to published standards are mandatory for accountingperiods beginning on or after 1 April 2007 but they are not relevant to the group’s operations:• IFRS 4, ‘Insurance contracts’;• IFRIC 7, ‘Applying the restatement approach under IAS 29, Financial reporting in hyper-inflationary economies’; and• IFRIC 9, ‘Re-assessment of embedded derivatives’.• IFRIC 11 IFRS 2 Group and Treasury Share TransactionsNew standards, amendments and interpretations effective in future periodsNew standardsThe following standards, mandatory for the group’s accounting periods commencing on or after 1 April 2008, have notbeen early-adopted by the group:IFRS 8 Operating SegmentsIFRS 8 requires an entity to adopt a management approach to reporting the financial performance of its operatingsegments. Generally, the information to be reported would be what management is currently using internally forevaluating segment performance and deciding how to allocate resources to operating segments. The application of theIFRS is not expected to change the disclosure and measurement basis applied to segment reporting by the group and isnot expected to have a significant impact on the group. The group will apply IFRS 8 from its effective date, which is forannual periods commencing on or after 1 January 2009.104

EASTERN CAPE DEVELOPMENT CORPORATION 2007/0836 New standards, amendments and interpretations (CONTINUED)Revised standardsThe 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 27Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interest in Joint VenturesThe revised IFRS 3 retains the basic requirements of IFRS 3 (2004) to apply acquisition accounting for all businesscombinations within the scope of the IFRS 3, to identify the acquirer and to determine the acquisition date for everybusiness combination. The most significant change is a move from a purchase price allocation approach to a fair-valuemeasurement principle. The revision applies to business combinations for which the acquisition date is on or after thebeginning of the first annual reporting period beginning on or after 1 July 2009.The revision is applicable prospectively and will not affect past business combinations.IAS 1 Presentation of Financial Statements: Comprehensive revision including requiring a statement of comprehensive incomeThe changes made to IAS 1 require information in financial statements to be aggregated on the basis of sharedcharacteristics and introduce a statement of comprehensive income. The revision includes changes in titles of financialstatements to reflect their functions more clearly. 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 revisedstandard on its effective date.IAS 23 Borrowing CostsThe revision removed the option of immediately recognising as an expense borrowing costs that relate to assets thattake a substantial period of time to get ready for use or sale. The revision is effective for annual periods commencing onor after 1 January 2009. The group will adopt the revised standard on its effective date.IFRS 2 Share-based Payment: Amendment relating to vesting conditions and cancellationUnder IFRS 2, a failure to meet a condition, other than a vesting condition, is treated as a cancellation. IFRS 2 specifiesthe accounting treatment of cancellations by the entity, but does not give guidance on the treatment of cancellations byparties other than the entity. The amendment requires cancellations by parties other than the entity to be accounted forin the same way as cancellations by the entity. The amendment is effective for annual periods commencing on or after 1January 2009. The standard is irrelevant and will have no effect to the group.IAS 1 Presentation of Financial Statements: Amendment relating to disclosure of puttable instruments and obligations arising onliquidationThe 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 withinequity. The amendment is effective for annual periods beginning on or after 1 January 2009.The group will apply theamendment from its effective date.InterpretationsThe following interpretations of existing standards are not yet effective and have not been early-adopted by the group:IFRIC 12 Service Concession ArrangementsThe interpretation clarifies the application of existing IFRSs by concession operators for obligations under concessionarrangements and rights received in service concession arrangements. The group will apply the requirements of theinterpretation from its effective date, which is for annual periods commencing on or after 1 January 2008.The group is not party to concession arrangements. As such, IFRIC 12 is not expected to have any impact on the group.105

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08NOTES TO THECONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 200836 New standards, amendments and interpretations (CONTINUED)IFRIC 13 Customer Loyalty ProgrammesThe interpretation clarifies the application of IAS 18 to customer loyalty programmes. The interpretation requires anentity that grants loyalty award credits to allocate some of the initial proceeds from the initial revenue-generatingtransaction to the award credit as a liability (entity’s obligation to provide award). The award is accounted for as aseparate revenue generating transaction. The interpretation is effective for annual periods commencing on or after 1 July2008.The group has no customer loyalty programmes currently and the interpretation will have no effect on the group.IFRIC 14 IAS 10 The Limit on a Defined-benefit Asset, Minimum Funding Requirements and their InteractionThe interpretation addresses the implication of minimum funding requirements on the recognition of a defined-benefitobligation. The interpretation is effective for annual periods commencing on or after 1 January 2008.The group will adopt the interpretation on its effective date. Currently, the group’s defined-benefit plan is not fundedfrom separate plan assets. No effect is anticipated on adoption of the interpretation.106

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008SUPPLEMENTARY INFORMATION1 SubsidiariesCorporationName of SubsidiaryIssued sharecapitalRPercentageshareholdingShares at costless provisionRIndebtednessless provisionR’0002008ConsolidatedTDC Property Investments (Pty) LtdTransdev Properties (Pty) LtdCentre for Investment and Marketing in the Eastern Cape (CIMEC)Cimvest (Pty) LtdTranskei Share Investment Company LimitedAIDC Development Centre Eastern Cape (Pty) LtdTransido (Pty) LtdUmtata Small Industries Complex (Pty) LtdEast London Industrial Development Zone (Pty) LtdWindsor Hotel (Pty) LtdEastern Cape Marketing Authority (Pty) Ltd4,0002,000-120232,7571001,330,2004001,0001002100100100100987510010074100100-2,000--26,069,01675--74010023,454(3,769)10,564(4,893)(47,961)2,0017,048--462126,071,933 (33,093)2007ConsolidatedTDC Property Investments (Pty) LtdTransdev Properties (Pty) LtdCentre for Investment and Marketing in the Eastern Cape (CIMEC)Cimvest (Pty) LtdQ-Mec Koi Farm (Pty) LtdTranskei Share Investment Company LimitedAIDC Development Centre Eastern Cape (Pty) LtdTransido (Pty) LtdUmtata Small Industries Complex (Pty) LtdEast London Industrial Development Zone (Pty) LtdWindsor Hotel (Pty) LtdEastern Cape Marketing Authority (Pty) Ltd4,0002,000-120120232,7571001,330,2004001,0001002100100100100100987510010074100100-2,000---25,989,64375--7401,00024,04518011,081(3,864)-(48,168)5,0008,530--38-25,993,460 (23,158)Non-consolidation of equity interests exceeding 50%Certain of the Group’s equity investments have not been included in the consolidated annual financial statements asthe Group does not exercise any control over their operations. The entities affected are Coega Development Corporation(Proprietary) Limited, Magwa Enterpise Tea (Proprietary) Limited and TIDC (Association incorporated under section 21)Ikhala Aloe has not been consolidated as the shareholding was only acquired as security and the company’s financialinformation is not material to the Group.Entities which were not equity-accountedCertain equity investments in which the Group holds 20% or more of the equity have not been equity accounted as theinvestments were only acquired to protect loan advances. The entities affected are Border Copiers and S&P Kareedow.Availability of informationA 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 31March 2008 not being available.Share certificatesThe corporation currently does not hold share certificates to substantiate its shareholding in one of its subsidiariespending the resolution of certain legal and administrative matters. The subsidiary affected is Transdev (Proprietary)Limited.107

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008SUPPLEMENTARY INFORMATION2 Interest bearing borrowingsGroup Installment Date of final payment Interest rate(%)2008 2007R’000 R’000 R’000Development Bank of South AfricaLoan 14042/101Loan 13942/201Loan 13942/301Loan 13942/4013501612304522012201120162011101010103,6061,1634,03210,2834,3051,4884,48310,2291,193 19,084 20,505CorporationDevelopment Bank of South AfricaLoan 14042/101Loan 13942/201Loan 13942/301Loan 13942/4013501612304522012201120162011101010103,6061,1634,03210,2834,3051,4884,48310,2291,193 19,084 20,505108

EASTERN CAPE DEVELOPMENT CORPORATION 2007/083 Project grantsGroup Opening balance Transfer payments Interest Written off / transfers Payments Closing balanceAB350CoegaDBSA FundDEDEADRISAEU ProjectMagwa TeaPremier’s fundTreasury/SteinhofELIDZMthatha Taxi Rank31,3003,4652,99734,6565,3916,5614,80832269,597--12,000--47,500--2,50014,66730,300192,00016,000------------(5)(2,997)--(6,561)(2,812)----(21,430)(3,460)-(27,527)(260)-(4,496)(14,757)(53,972)(192,000)-21,870--54,6295,131--23245,925-16,000Total 2008 159,097 314,967 - (12,375) (317,902) 143,787Total 2007 63,211 369,115 437 3,383 (277,049) 159,097CorporationAB350CoegaDBSA FundDEDEADRISAEU ProjectMagwa TeaPremier’s fundTreasury/SteinhofELIDZMthatha Taxi Rank31,3003,4652,99728,4795,3916,5614,80832269,597--12,000--47,500--2,50014,66730,300192,00016,000------------(5)(2,997)--(6,561)(2,812)----(21,430)(3,460)-(27,527)(260)-(4,496)(14,757)(53,972)(192,000)-21,870--48,4525,131--23245,925-16,000Total 2008 152,920 314,967 - (12,375) (317,902) 137,610Total 2007 57,034 369,115 437 3,383 (277,049) 152,920AB350The Corporation has been appointed as an implementing agent to revive bus transportation in the rural areas aroundTranskei. The funds were advanced by the Department of Roads and Transport for this purpose.Coega Development Corporation (Proprietary) Limited (Coega)The fund represents amounts transferred to the Rapid Infrastructure Development Agency, a division of Coega.DBSA FundThe balance of the fund represents an amount of R3 million received from the Development Bank of Southern Africa tofinance the Imonti Kei SDI as well as the Greater Algoa Initiatives, less payments made in respect of the initiatives.Department of Economic Development and Environmental Affairs (DEDEA) and Provincial TreasuryThe fund represents grants from DEDEA and Provincial Treasury, to be administered on their behalf. It is utilised to assistlocal business service centres, manufacturing technology centres and local economic development units in the EasternCape. 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 forwardto ELIDZ. These payments are merely channeled through the Corporation to ELIDZ.109

EASTERN CAPE DEVELOPMENT CORPORATION 2007/08CONSOLIDATED ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2008SUPPLEMENTARY INFORMATIONEuropean Union (EU) ProjectThe funds were transferred for lending to community projects in the province. The corporation was appointed by the EUand Treasury to act as agents for the management of these funds.Magwa Enterprise Tea (Proprietary) Limited (Magwa Tea)The Corporation has been appointed as implementing agent to revive Magwa Enterprise Tea. The Department ofAgriculture and the Department of Economic Development and Environmental Affairs advanced funds for this purpose.Premier’s FundThe fund was created by the Office of the Premier. Transfers to beneficiary institutions are only made on specificinstructions from the Office of the Premier.SteinhofThe funds are for infrastructure upgrade in Ugie for the Steinhof milling plant. The Corporation is an implementing agentfor these funds.Mthatha Taxi RankThe Mthatha Taxi Rank fund is held to be used to fund the development of a taxi rank in Mthatha by the Eastern CapeDepartment of Roads and Transport.110

HEAD OFFICEOcean Terrace Park, Moore Street, Quigney, EAST LONDONPO Box 11197, Southernwood, East London, Eastern Cape,South Africa, 5213Telephone: +27(0)43 704 5600 • Facsimile: +27(0)43 704 5700BUTTERWORTH24 High Street, BUTTERWORTHPO Box 117, Butterworth, Eastern Cape, South Africa, 4960Telephone: +27(0)47 401 2700 • Facsimile: +27(0)47 491 0443KING WILLIAM'S TOWN75 Alexander Road, KING WILLIAM'S TOWNPO Box 498, King William’s Town, Eastern Cape,South Africa, 5600Telephone: +27(0)43 604 8800 • Facsimile: +27(0)43 642 4199MTHATHA7 Sissons Street, Fort Gale, MTHATHAPrivate Bag X5028, Mthatha, Eastern Cape, South Africa, 5099Telephone: +27(0)47 501 2200 • Facsimile: +27(0)47 532 3548PORT ELIZABETH152 Cape Road, Mill Park, PORT ELIZABETHPO Box 1331, Port Elizabeth, Eastern Cape, South Africa, 6000Telephone: +27(0)41 373 8260 • Facsimile: +27(0)41 374 4447QUEENSTOWN22 Cathcart Street, QUEENSTOWNPrivate Bag X7180, Queenstown, Eastern Cape, South Africa, 5320Telephone: +27(0)45 838 1910 • Facsimile: +27(0)45 838 2176PRINTED ON:COVER: Sappi Nevia Triple Green 250 gsmSECTION DIVIDERS: Sappi Nevia Triple Green 170 gsmINNER PAGES: Sappi Nevia Triple Green 130 gsmSappi Nevia Triple Green is made up of 60% sugar cane fibre andis chlorine free and as a result supports sustainable afforestation.

www.ecdc.co.za