Annual Report2012

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ANNUAL REPORT

2011

2012

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SEDA CONSTRUCTION INCUBATOR

2011/2012 ANNUAL REPORT


SEDA Small Enterprise

Development Agency

Umzinyathi District

Municipality

Ethekwini Municipality

Nelson Mandela Bay

Municipality

Department of Cooperative

Governance

and Traditional Affairs

Kwa-Zulu-Natal

Provincial Government

Construction Education

and Training Authority

CIDB Development

through Partnership

Durban Chamber of

Commerce and Industry

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CONTENTS

CHAIRPERSON’S REPORT 4

CHIEF EXECUTIVE OFFICER’S REPORT 5

BOARD OF TRUSTEES 7

INTRODUCTION TO THE SEDA CONSTRUCTION

INCUBATOR 10

HUMAN RESOURCES 11

BACKGROUND 12

CONSTRUCTION INDUSTRY AND SCI RELEVANCE 13

CHALLENGES, ALIGNMENT AND RELEVANCE 14

SCI OPERATIONAL FRAMEWORK 16

PROGRAMME RESULTS 20

REPORT AGAINST KEY PERFORMANCE INDICATORS 20

OUTREACH PROGRAMME IMPACT ASSESMENT 21

SUCCESS STORIES 24

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CHAIRPERSON’S REPORT

The South African construction industry has faced it challenges

in 2011. Some of these challenges have their roots embedded in

the 2008 world recession. However, the SEDA Construction Incubator

has responded well to these challenges and it is gearing up for the

anticipated and / or forecast construction industry growth for 2013

and beyond.

Notwithstanding government attempts to maintain the construction

momentum and drive that was experienced prior to the 2010

World cup, 2011 was at best a competitive year in the construction

sector. The big five South African construction companies had lost

some international orders after the 2008 recession and with the 2010

infrastructure projects ending after June 2010, the sharp focus was

then on government business. Research has shown that emerging

contracts generate their livelihoods from government business,

therefore the SEDA Construction Incubator was bound to be faced

with challenges in, what I have described as, a competitive 2011.

The SEDA Construction Incubator has increased its human resource

compliment, further capacitating its footprint in KwaZulu-Natal and

the Eastern Cape. In addition, in August 2011, a special delegation

of senior SEDA Construction Incubator staff went to the NBIA (National

Business Incubation Association) meeting held, in Brazil, on a

fact finding mission in order to learn and share from the experiences

of other construction incubators. The result of that learning mission

has been a change in the manner that the Construction Incubator

approaches partnerships; pre and post incubation implementation,

in order to better capacitate emerging contractors to a CIDB grading

level of 5 and above.

At the April 2012 meeting, the Board took a decision to implement

a legacy Construction Academy, with the sole purpose of increasing

the technical and human resource capacity of contractors involved in

the SEDA Construction Incubator.

On the strength of the confirmed construction orders for the industry,

it is forecast that 2013 is going to be a vibrant year in the construction

industry. The construction schedules and forecast construction

business, that is being documented by the respective Provincial

Planning Commissions, bode well for the industry. The key challenge

is going to be whether or not the construction development agencies

can generate sufficient human and technical capacity to support

SME’s; taking advantage of international construction opportunities

on the horizon.

I am convinced that the SEDA Construction Incubator, with the support

of SEDA Technology Programme’s recent expansion drive, is

geared to develop a suitably equipped international SME contractor.

Themba Msomi

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2011/2012 ANNUAL REPORT


CHIEF EXECUTIVE OFFICER’S REPORT

The financial year 2011/2012 has been both challenging and exciting

for the SEDA Construction Incubator (SCI) and its clients.

During the year under review SCI produced its first group of graduates

and it is also the third year since the launch of the SCI outreach

programme (a programme designed for grade one contractors piloted

in Dundee.) The impact of the outreach programme will be outlined

later in this report.

As SCI we also acknowledge that the construction industry is a critical

sector with the potential of addressing the developmental needs of

South Africa as it has direct economic, physical and environmental

impacts on citizens. The quality of contracting enterprises and their

overall performance in the economy is critical for the country.

After a period of substantial growth, the construction industry is currently

in the midst of a recession, accompanied by increasing tendering

competition, job losses and decreasing margins. This decreasing

demand is impacting negatively on the pace and depth of transformation

within the industry, and on contractor development and skills

development Against this background, and notwithstanding these

challenges, it is recognised that a key priority is to take the emerging

sector forward in South Africa’s development agenda.

existence of programmes such as SEDA Construction Incubator will

remain relevant for the foreseeable future.

We also admit that some of the objectives have not been met, as we

believe that there is still a lot more that can be done to attract diverse

groups of contractors into the industry. One example is that there is

still a limited number of youth owned construction businesses under

the SEDA Construction Incubator programme. With this in mind, we

will continue working with like-minded institutions to address this

challenge. On the other hand, we have seen an increase in interest

when it comes to women contractors joining the industry and it is

pleasing to see that women owned businesses have been thriving in

the sector. The classical example is Lakesure CC, one of our women

owned construction business that won the most successful graduated

incubatee during the 2011 DTI awards held in Limpompo on the

20 th of October 2011.

In spite of the challenges faced by the construction industry, we are

pleased to announce that the SEDA Construction Incubator has managed

to achieve the targets set by the Board and its funders for the

year ending 31 March 2012. The summary of the results are on the

following page

The construction industry is also faced with challenges to address

and restore skills required by the construction and engineering industries.

In partnership with industry stakeholders, SCI continues to

develop and improve on the current model based on the construction

industry skills requirements. Based on this, we believe that the

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CHIEF EXECUTIVE OFFICER’S REPORT

INDICATOR TARGET ACTUAL

Clients Supported 130 131

SMMEs supported 130 131

SMMEs that survived 1st year 90% 96%

SMMEs that survived 2nd year 85% 89%

No. of Graduations 14 14

Black owned projects/SMME’s in portfolio

Woman owned projects/SMMEs in portfolio

Woman owned projects/SMMEs in portfolio

130 131

65 65

50% 50%

• Small Enterprise Development Agency, Umzinyathi District Municipality,

the KZN Department of Cooperative Governance and

Traditional Affairs, Nelson Mandela Bay Municipality and eThekwini

Municipality for their continued support of the programme.

• All stakeholders including the CIDB, IDT, National Department

of Public Works, KZN Department of Public Works and all other

stakeholders that have made contributions to SCI’s success.

I would like to thank all Board Members for their continued support

and guidance. I also believe that it would be a grave error if I do not

extend my gratitude to SCI staff for their hard work and belief in the

vision of the organisation.

Mthunzi Nyandeni

Jobs (Direct) created 500 683

Jobs (Indirect) created 1050 1992

Casual / Seasonal jobs created 300 797

New prospects entering pipeline 15 25

Total SMME T/O at end of FY 140 M 155 M

The above results could not have been achieved without the assistance

of all stakeholders both internal and external. It is therefore

with this in mind that I would like to extend our gratitude to the following

institutions:

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BOARD OF TRUSTEES

THEMBA MSOMI - MEMBER

(CHAIRPERSON)

Themba holds a Bachelor of Social Science

Degree, with Marketing and Business Administration

as majors, from the University of

Natal, Durban.

Themba has run a consulting firm, served

on the Durban Chamber of Commerce and

Industry board and now works at the eThekwini

Municipality. Whilst at the eThekwini

Municipality Themba has contributed tremendously

towards enterprise development,

economic intelligence and strategy.

ZANELE NTOMBELA – BOARD MEMBER

Ms. Ntombela is the owner of ILitha Research

and Management, a 100% black female

owned research and management consulting

firm. Ms. Ntombela is a Social Science

graduate with a post-graduate Diploma in

Personnel Management from the University

of Natal. She is the former Chairperson of

the Board of Trustees for the SEDA Construction

Incubator (SCI), a Board Member of the

Construction Industry Development Board

(CIDB) and an Executive Committee Member

of the Business Woman Association (BWA) in

Durban.

Ms. Ntombela has over the years obtained

diverse expertise in institutional development,

socio-economic research, social development,

strategic management, enterprise

development and human resources development.

She has worked extensively with

government departments, state owned enterprises

and private companies.

SBU BOPHELA - BOARD MEMBER

Sibusiso is a Certificated Associate of the Institute

of Bankers in South Africa – CAIB (SA)

and a registered Professional Construction

Project Manager (Pr CPM) with the South African

Council for the Project & Construction

Management Professions (SACPCMP). He

is also a Resident Principal at BP Projects, a

professional services entity he established in

2006, a Member of the Project Management

Institute (PMI South Africa Chapter), and a

Member of the Institute of Directors Southern

Africa (IoDSA). Amongst other qualifications,

Sbu holds a Bachelors’ Degree in

Technology (Management), Advanced Project

Management Programme (Unisa) and

a Post Graduate Diploma in Business Management

(University of Natal). In June 2010,

Sbu was nominated to the Board of Trustees

of the SEDA Construction Incubator (SCI).

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BOARD OF TRUSTEES

LULAMA MXENGE- BOARD MEMBER

Lulama Mxenge has a Teachers Diploma

from Butterworth Training College, B.

Comm. (Ed) Unitra - 1988, B.Com (Hons) Unisa

– 1991 and Masters in Business Leadership

(MBL) Unisa – 2002.

She taught in different schools in the Eastern

Cape from 1975 to 1989. In 1990, she

joined Algoa College as a lecturer in the Economic

Management Sciences until 1994. She

served as a senior lecturer at the same college

until 2003.

Mrs Mxenge was a trustee of Eastern Cape

Women Finance Trust from 1994-1996 and a

Director and Chairperson of Yakhani Investment

Holdings from 1998-2006. She served

as subject Advisor for Economic Sciences in

the Port Elizabeth Region until 2004.

She is currently a Director: Sector Development

(including Small Businesses) Economic

Development Directorate of the Nelson

Mandela Bay Municipality and serves as Director

on the SEDA Nelson Mandela Bay ICT

Incubator (SNMBICTI) board and SEDA Construction

Incubator.

PAT MASIASE – BOARD MEMBER

Pat Masiase is a graduate in Social Sciences,

A passionate community development

activist, a leader by experience dating back

from university leading student structures

and a well internationally travelled and experienced

business woman with extensive

hands on experience in management in general

and project management and marketing.

She has also worked for Southern Life Insurence,

IEC and Stats SA in the mentioned

different fields.

She is the owner of Bagomutsi Projects and

Karisa Events. Pat currently sits on ANC W33

branch executive, and chairs the LED portfolio,

sits on the NSHM board. She sat on the

SAWIC board and chaired the KZN chapter

2007 to 2010. She currently persuing the

Post Graduate Diploma in Community Development.

P. PILLAY- BOARD MEMBER

Perumal V. Pillay’s career includes leadership

roles at Lan Solutions, where he was

recruited to align technology initiatives with

business goals, standardization and business/system

performance. His work was instrumental

in providing Lan Solutions with

leading internet, database and management

reporting capabilities critical to the success

of production systems and company performance.

While serving as Regional Manager for EDS

Global, he was responsible for supply chain

analysis, process design, supporting complex

systems implementation and applications

development projects for prominent

accounts.

He is currently employed as Manager – CIDB

KZN. He is a qualified Systems Engineer,

holds a Bachelor’s Degree in Business Administration

and a Masters in Business Administration.

He continues to hold a deepseated

interest in technology. He is an active

member of the Institute of Directors and was

appointed to the Board of Trustees of the

SEDA Construction Incubator (SCI) in 2009.

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BOARD OF TRUSTEES

VISION

To be the leader in the development of

competitive construction SME’s through the

provision of innovative support interventions.

Sibusiso Kunene- Board Member

Sibusiso Kunene is currently the Head of

Department: Provincial Affairs in charge

of the entire SEDA delivery network in all

nine provinces. He has held various senior

positions in the private sector as Managing

Director, Production Director, General

Manager in manufacturing industries such

as textiles, clothing, chemicals, aviation and

packaging. He spent four years in Sweden

working for some of the world’s famous

liquid food packaging companies. He has

gained 12 years’ small business development

experience both with the erstwhile

MAC which preceded the creation of SEDA

in 2004.

He is an experienced professional manager

holding a medical degree, National Diploma:

Management and currently studying law. Sibusiso

has travelled to various countries in

Europe, India, China, Taiwan, the Americas

and Africa both for personal and business

purposes.

Mthunzi Nyandeni - CEO

Mthunzi has been a role player in the development

field for more than twelve

years. Prior to joining the SEDA Construction

Incubator, he held various positions in Ithala

Development Finance Corporation including

Senior Analyst, Portfolio Manager, Regional

Manager, Credit Risk and Divisional Manager

and Business Finance Manager. Mthunzi also

worked for First National Bank as the Business

Development Officer.

Mthunzi has B.Com Honours Degree, Credit

Diploma, Advanced Credit Diploma and a

Certificate in Project Management.

He is currently a Board Member of the Southern

African Business and Technology Incubation

Association (Sabtia) and an accredited

trainer of Infodev (Division of the World

Bank).

MISSION

To enhance the capacity of construction

SME’s through the structured infusion

of business, technical and technology

interventions which leads to sustainable

businesses, significant job creation and a

positive contribution to the South African

Economy.

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INTRODUCTION TO THE SEDA CONSTRUCTION INCUBATOR

OUR VALUES

Integrity

Accountability

Reliability

Respect

Team Work

Commitment

Professionalism

OVERALL OBJECTIVE

The incubator will provide support to selected participants for a period of three years by which time each Emerging

Contractor should have advanced by at least one financial level above their entry point on the CIDB register and be

capable of operating unassisted in the open market.

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HUMAN RESOURCES

SCI has a board of trustees which oversees the management of the

programme. The day to day operations of the organisation are

managed by the CEO, who is supported by the Cluster Manager, the

Mentorship Manager and the Finance and Administration and Business

Development Manager. All managers supporting the CEO are

responsible for performance of their own respective departments.

SCI STAFF PROFILE AS AT 31 MARCH 2012

Black White

Staff Category Male Female Male Female Total

Management 2 3 0 0 5

Specialists 4 1 0 0 5

Support 7 10 0 0 17

TOTAL 13 14 0 0 27

Based on Board approval the above structure will be reviewed as and

when required depending on the operational needs of the organisation.

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BACKGROUND

Established in 2006, SEDA Construction Incubator (SCI) is a government

funded development programme mandated to develop

and mentor emerging construction companies in South Africa. The

core business of SCI is to develop emerging contractors through the

infusion of both technical and business administration skills that are

aligned with the introduction of technology in order to enhance the

efficiency and efficient management of their businesses.

The Incubator is aimed at providing support to selected participants

for a period of 3 years by which time each Emerging Contractor

should have advanced by at least one financial level above their entry

point on the CIDB register and be capable of operating unassisted

in the open market. Should a particular contractor not wish to advance

more than one CIDB financial grading, an alternative primary

indicator will be agreed, possibly “gross income/turnover” if multiple

smaller projects are deemed to be the niche market of the particular

contractor.

Particular emphasis will be placed during the contractors’ third (and

final) year of tenure on consolidating capacity in preparation for his/

her exit from the Incubator. This will involve building capacity and

skills around the individual contractor’s identified weaknesses, further

developing business strategies which take advantage of his/her

strengths, ensuring that administrative and management protocol

follows accepted norms, production systems are operational etc.

areas identified. The Incubation model is one of the interventions,

if not the only one that can make significant impact when it comes

to addressing issues of development of emerging contractors in the

South Africa.

Based on this background, most construction businesses (SMME)

see the construction incubator as one of the solutions with regard to

skills shortage. The majority of client bodies believe that it is a sound

option when it comes to the development of emerging contractors

and what is appreciated the most about the model is the level of formality

it brings to the industry.

Under the SCI model, there are three areas of focus for the mentorship:

Civil, General Building and Electrical. They will typically include

roads, drainage, township services, community halls, clinics and recreation

facilities, but may also include mechanical and electrical engineering

projects.

SCI provides three phases of development for emerging contractors:

tender phase support, construction phase support and general administration.

There is no doubt that there is a great need for meaningful and structured

intervention when it comes to emerging contractors in the

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CONSTRUCTION INDUSTRY AND SCI RELEVANCE

In order for the SEDA Construction Incubator to understand its role

in the contractor development space, it is essential that board, management

and staff in the incubator have a reasonable understanding

of the construction industry. Based on this, a benchmark exercise was

undertaken during the year 2011/212.

The Incubator was initiated to address a need to unlock growth constraints

and develop sustainable businesses of previously disadvantaged

construction companies. The incubator provides the industry

with an answer for the elevation and development of the capacity

of emerging contractors. It provides a comprehensive programme

with meaningful empowerment through focusing on performance

and skills capacity of businesses. The incubator was established as a

regional programme in Durban, KwaZulu-Natal with an initial intake

of seven Durban based contractors. As a direct result of its value-add

in the industry, the programme has grown to five incubators with

branches spread between KwaZulu-Natal and the Eastern Cape. This

growth and the elevation of SCI in the industry as a major player in

enterprise development necessitates that the programme benchmark

itself against other similar development programmes for sustainability.

The challenges, based on the review of the various current and past

experiences and initiatives, provide lessons and good practice principles

that should be considered by development organisations

wishing to initiate or manage similar programmes. The principles will

minimise duplication, mitigate risks and provide a platform of experiential

learning so as to evolve such programmes to address and anticipate

likely bottlenecks and challenges.

If appropriately managed and planned, a successful CDP should result

in the formulation and implementation of more successful programmes

and provide the required outcomes and impact. We believe

that the incubator is geared to achieve exactly that.

CHALLENGES, ALIGNMENT AND RELEVANCE

CHALLENGES

There are common challenges facing emerging contractors across

the board and they include inter alia the following:

• Lack of construction and business skills - many contractors lack

business and financial management skills, as well as the project

management, estimating, tendering and technical skills specific

to construction.

• Financial constraints and limited access to funding, trade credit,

guarantees and performance bonds, and high interests when

these are available.

• High turnover among skilled workers owing to uncertainties in

job opportunities.

• The short term nature (project by project) of the work makes

it hard to develop and implement long-term strategies and

growth plans.

• Bureaucratic or overly complicated contract award and contract

administration procedures.

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CONSTRUCTION INDUSTRY AND SCI RELEVANCE

• Intense competition, especially in the lower scales of construction

enterprises, and difficulty in competing with larger construction

firms.

• Insufficient resources to provide a safe and decent working environment.

• Lack of professional advisors and consultants, and where these

were available the reluctance to use them due to perceived expensive

fees, a lack of finance and/or awareness.

• Lack of capital equipment such as vehicles, heavy machinery,

and scaffolding.

• Uncertainties in supplies and prices of materials, allied with generally

non-existent or poor relationships with suppliers.

ALIGNMENT AND RELEVANCE

Just like any other Contractor Development Programme, SCI attempts

to address the challenges faced by emerging contractors by

providing development support and creating an enabling environment

for growth.

While it is difficult to rank challenges faced by contractors in order of

priority, as they vary depending on individual contractors, the lack

of access to funding for projects and poor financial management

skills, the intense level of competition within the industry associated

with lack of continuous work opportunities, and the lack of adequate

project management or construction skills are the most commonly

recurring.

The SEDA Construction Incubator review indicates that an alignment

already exists between its programme and practices and the National

Contactor Development Programme. The best practice principles

outline that a successful Contractor Development Programme will be

determined by:

• A clear rationale for the programme laid out in a business plan

covering the objectives, proposed implementation plan and resources

required.

• Political and administrative commitment for the programme reflected

by long-term financial commitments and seconding of

sufficient skilled staff and resources.

• Appropriate size of the programme matching with the resources

available.

• Contractor selection - clear entry criteria and selection processes

that lead to contractors with the best potential being selected

must be thoroughly thought through to avoid unnecessary legal

challenges. The selection of contractors should be closely

aligned with the rationale for the programme and the absorptive

capacity of the programme.

• Provision of projects - where possible the programme should

make construction projects available to contractors, preferably

introducing some element of competition within the participating

contractors, to provide a forum for mentoring and practical

skills development. This should be done while taking into account

the requirements of the relevant legislation.

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• Mentorship and training/skills development models - a Contractor

Development Programme must identify the development

needs of individual learner contractors and provide means

to do so. Mentorship and training/skills development are essential

aspects of this and should be built into every programme

with clear deliverables, timelines and delivery indicators.

• Monitoring and evaluation - this is essential for the programme

to determine its success, and should be done on an ongoing basis.

Allied to this, there should also be clear guidelines on when

contractors are deemed to be developed and the resultant exiting

criteria and processes.

SCI uses the above guidelines in the development and review of the

SCI programme.

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SCI OPERATIONAL FRAMEWORK

The key objectives of the SCI programme are to:

1) Provide contractors with the required support to become

successful and sustainable businesses able to compete in

the market.

2) Provide business technology incubation services for emerging

contractors.

3) Provide sufficient technical training, coaching and mentoring

to enable participating contractors to successfully complete

their projects. Contractors are assessed in the skills

used to complete the projects that they have won through

own endeavours.

The focus of the SCI is clear: this Contractor Development Programme

supports contractors through mentorship, training and coaching

to enable them to grow and become competitive businesses. The

growth is assessed by improving their grading designations within a

period of three years.

SCI’S FUNDING MODEL

The SCI Programme is currently funded by the DTI through the

SEDA Technology Programme (STP), EThekwini Municipality, Nelson

Mandela Bay Municipality and the Umzinyathi District Municipality.

The model seeks to increase the funding base to include different

stakeholders to ensure continuous support for the programme.

Contractors pay for services, for instance in the Durban branch contractors

pay low market rates for office space and extra space is rented

out to other enterprise development initiatives. The aim is to secure

different sources of income to support and sustain the incubator.

THE MODEL

SCI has a structured training and mentorship programme focusing

on the different stages of infrastructure projects implementation.

Training and support is provided in the following stages:

Pre Tender or Tendering Process

Aim is to help contractor’s price tenders correctly with clear profit

margins factoring in all expenses.

Pricing of the tenders is not the only aspect of tendering. The attributes

of the tender, such as suitability to task and grade, capability,

etc need to be taken into account.

Award or Pre Construction

Aim is to assist the contractor in preparing for occupation of the site.

After receiving the award, there are certain steps in preparation that

have to be taken prior to the commencement of construction.

Construction Management

Aim is to ensure the proper and professional management and administration

of projects.

Construction Foreman (Supervisory) Interaction

Aim is to help the interaction with the Site Foreman, consultants and

all role players in the construction process, while allowing the contractor’s

management team a certain amount of independence and

autonomy. One of the key links in the construction chain is the interaction

between the staff and the owner, which is best handled by a

suitably qualified foreman or site supervisor.

Business Operations & Planning

Aim is to provide business management skills and knowledge so that

contractors are able to manage their businesses and ensure sustainability.

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SCI OPERATIONAL FRAMEWORK

Exit and graduation strategy

SCI has a 240 point evaluation system that is used to evaluate the

performance of contractors. The performance evaluation system is

closely linked to the training modules in order to ensure that there is

a link to the actual scope of work on site. This is a very useful system

that helps contractors to understand the relevance of what they learn

in class to the real practical world of work on site.

The upward progress of the contractor along the CIDB Grades and

an evaluation from the CETA form the major indicator of the performance

of the incubator as well as that of the individual contractor. It

should be noted, that improvement in the CIDB grading status of a

contractor does not directly measure the improvement in the contractor’s

ability to carry out building and construction works. Should

a particular contractor not wish to advance more than one CIDB financial

grading, an alternative primary indicator will be agreed, possibly

gross income/turnover if multiple smaller projects are deemed

to be the preference of the particular contractor.

The exit criteria are:

• Completion of 3 Year Tenure or Turnover

• Voluntary exit

• Non Performance of Contractors

SCI’s monitoring and evaluation

SCI has a monitoring and performance assessment tool for all the

contractors who participate in the incubation programme. This tool

is designed to link with the Key Performance Indicators reports for

the programme. Performance is measured against the following development

indicators:

1. Creation of sustainable jobs.

2. Creation of sustainable businesses.

3. Impact on the reduction of client risk.

4. Development and transfer of skills.

5. Impact on the reduction of poverty in areas contractors in

the incubation centre operate.

6. Delivery of quality infrastructure.

7. Growth in black owned businesses

Knowledge Management

The ambit of Knowledge Management, within Operational Planning,

provides the mandate to use Information and Communication Technologies

as a mechanism of both an administrative and a technical

nature. By providing this, SCI adds value in our endeavors to achieve

the objectives of the mission and vision within the Master Plan. This

is deployed in the form of Information and Communication tools.

Various office automation tools have been deployed to enhance

Knowledge Management in the context of contractor development

within the industry as Mentors and Training Providers seek to address

those needs in the most economically viable method as possible. The

software that has been identified to aid in various aspects of construction,

such as specification, pricing and management, includes

the following:

Networked Computer Resource Centres with:

• Centralised printing, with faxing and scanning facilities

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SCI OPERATIONAL FRAMEWORK

• Software resources are:

• AutoSpec (specification of materials and manufacturers’

contact details).

• Merkels industry standard e-book on construction pricing

and production.

• JBCC electronic guide to the JBCC Contract – Public &

Private usage.

• Web environment (Internet access).

• GANTT Project – Free Open Source Project Management

Software.

• MS Word and MS Excel .

• Included within the system are:

• Off-site backup facility

• Permanent internet connectivity.

• Further development projects still envisaged are:

• VPN and Web environment deployed to offices (Internet

sites, extranet, and intranet).

• Customer Relationship Management software (CRM).

• Enterprise Resource Planning (ERP).

• Document Management System.

• Office space furnished and with internet access (approx. 16 to

20sqm).

• Boardroom facilities.

• Training Room/Resource Centre.

• Computers for general use.

THE FOOTPRINT

There has been political will and administrative support for the

SCI’s Contractor Development Progarmme. This is demonstrated

by the fact that all incubator centres are implemented in partnership

with a municipality. Administrative support from DTI and the municipalities

ensures the continuous support of the programme over a period

of time. The funding model is based on the MTF of three years

but the incubation programme is long term.

Political and administrative support breakdown:

1) Durban branch: Ethekwini Municipality provided a building

at a discounted rental and SEDA provides operational

funding.

2) Kwamashu branch: Ethekwini Municipality provides capital

and operational funding.

3) Dundee branch: Umzinyathi District municipality provides

operational and capital funding.

4) Nelson Mandela Bay branch: Nelson Mandela Bay Municipality

provides operational funding and SEDA provides

top-up operational funding.

5) Mthatha branch: SEDA provides operational funding.

In short, the incubator functions as a comprehensive Resource Centre

for associated contractors. The resources available range from skills

provided by staff and consultants, to administration back-up, and legal

and technical information. This vision of the incubator as a one

stop resource centre is one which needs to be pursued at all times.

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT


19

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PROGRAMME RESULTS

Before outlining results for the programme, it is important to highlight

the set goals and objectives of the SEDA Construction Incubator

Programme. Every three years the Board and Management of

SCI hold a strategic planning session and the purpose of the session

is to achieve the following:

• Set three year strategic objectives.

• Asses risk profile and mitigation strategies.

Over and above the three year review, an annual strategic review is

conducted so to:

• Assess the milestones.

• Undertake a gap assessment and remedies.

• Look at intermediary interventions.

• Where necessary come up with alternative strategies to achieve

the set goals and objective.

REPORT AGAINST KEY PERFORMANCE INDICATORS

Over and above set objectives, the SEDA Construction Incubator has set objectives as set by the funders and the Board of Trustees.

SET KEY INDICATORS FOR 2011/2012 AGAINST OUTCOMES

Outputs Q1 Q2 Q3 Q4 31/03/2012

Quantitative Targets Actuals 11/12FY

# Clients Supported 130 125 125 111 131 131

# SMMEs supported 130 125 125 111 131 131

% SMMEs that survived 1st year 90% 96% 96% 95% 95% 96%

% SMMEs that survived 2nd year 85% 89% 89% 89% 89% 89%

No Of Graduations 14 14 14

# black owned projects/SMME’s in portfolio 130 125 125 111 131 131

# woman owned projects/SMMEs in portfolio 65 56 56 65 65 65

% woman owned projects/SMMEs in portfolio 50% 45% 45% 59% 50% 50%

# Jobs (Direct) created 500 125 128 181 249 683

# Jobs (Indirect) created 1050 315 326 571 780 1992

# Casual / Seasonal jobs created 300 75 82 273 367 797

# new prospects entering pipeline 15 25 25

Total SMME T/O at end of FY 140 35M 25M 50M 45M 155M

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT


PROGRAMME RESULTS

OUTREACH PROGRAMME

IMPACT ASSESMENT

As mentioned earlier in this report, SCI introduced an outreach

programme with the objective of assisting grade one contractors

. As we are approaching the third year since the programme was

introduced, SCI conducted a survey to assess the impact of the programme.

The results of the survey are outlined below.

The purpose of the survey was mainly to get feedback from contractors

as to how the programme had an impact on businesses and lives

as a whole. The survey was aimed at identifying the gaps from the

contractors’ point of view. To do this we decided not to use the sample

but the full list and we are pleased that 96% of the contractors

participated in the survey.

The survey was conducted on the 27th of February 2012 and the

questions were based on the following:

• Demographics which included age, level of education and

social impact.

• Effect on the standard of living.

• Knowledge transfer.

• View on continuation of the construction incubator programme.

Demographics

Age of Participants

12

10

8

6

4

2

0

25-34 35-44 45-54 55+

This section is aimed at outlining the different ages of contractors in

the programme and the results are in the adjacent diagram.

Age Number %

15-24 0 0

25-34 8 29

35-44 8 29

45-54 11 39

55+ 1 4

Total 28 100

The above graphs indicate that the majority of contractors are between

the ages of 45 to 54 which amounts to 11 contractors followed by ages

between 25-34 and 35-44. Youth composition forms about 29% of the

total group and in our view this is satisfactory.

Level of Education

None

Grade 1-6

Grade 7-12

Degree/Diploma

Other

This section is aimed at outlining the different levels of education

of contractors in the programme and the results are in the adjacent

diagram.

This table clearly demonstrates the need for programmes such as the

incubator programme as it may result in participants gaining post

matric skills and knowledge.

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PROGRAMME RESULTS

Social Impact

1-3 Years

3-6 Years

7-12 Years

12-18 Years

18-26 Years

asked under this section were basic and rated between strongly disagree

to strongly agree. Based on the adjacent diagram it is comforting

to note that at least 26 out of 30 participants agree that the programme

has improved their standard of living with two participants

disagreeing. The way forward would be to investigate the elements

that made the two participants say that the programme did not improve

their standard of living.

Knowledge Transfer

15

This section is aimed at outlining the number of dependents supported

by contractors in the programme and their ages. It should

be noted this section excludes the number of jobs created through

the programme which will be discussed under return on investment.

The adjacent diagram shows that contractors support about 140

dependents excluding owners and jobs created through the programme.

The fact that about 51 of the 140 dependents are young

adults is an indication of the high level of unemployment amongst

young adults in the area. An ideal situation would be that these grow

to the extent that job opportunities are created in areas in which they

reside.

Standard of living improvement

12

9

6

3

0

This section is aimed at establishing relevance and the quality of

training provided. The questions asked under this section were

basic and rated between strongly disagree to strongly agree.

Strongly disagree

Disagree

Don’t Know

Agree

Strongly Agree

This section is aimed at how the programme has changed the standard

of living of contractors in the programme. The questions

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT

Quality of Training

Number %

Strongly Disagree 0 0

Disagree 0 0

Don’t know 0 0

Agree 15 54

Strongly Agree 13 46

Total 28 100


PROGRAMME RESULTS

Based on the diagram and the table on the adjacent page, it is comforting

to note that all participants agree that the training provided

was relevant and of acceptable quality.

Recommendations on continuation of the construction incubator

programme

Contractors were also asked about the relevance of the incubator

programme and where they recommend that the programme

continues. All participants were of the view that the incubator should

continue assisting contractors residing in uMzinyathi District Municipality.

This was mainly based of the following;

1. A new group will benefit from the same knowledge they

have gathered.

2. Give assistance to those that do not have projects yet.

3. Post incubation assistance.

THE SUMMARY IS SHOWN IN THE FOLLOWING TABLE

RECOMMENDATION FOR CONTINUING THE INCUBATOR

View Number Percentage

Yes 28 100%

No 0 0%

28 100%

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SEDA CONSTRUCTION INCUBATOR

2011/2012 ANNUAL REPORT


SUCCESS STORIES

WANDILE TRADING

Area of Specialisation

Grading

Completed Projects

General Building

5GB PE

• Rehabilitation of storm damaged school- IDT

Contract Value: R3.4m

• Construction of KwaMbuza Clinic- Melmont

Contract Value: R5.3m

• Building of school toilets

Contract Value: R6.75m


Current Projects

• Construction of Ntongade Toilets

Contract Value: R2.5m

BACKGROUND

Wandile Trading is a 100% black female owned company formed in

2002. The company has completed numerous construction projects

since its inception. The company is now grade 5GB PE in building

construction. The owners plan to take the business to a formidable

position in the local South African market, specializing in governmental

and private tenders, through the SCI mentorship programme.

SEDA Construction Incubator Interventions

• Project tools and techniques.

• Project initiation and development.

• Advice on Pricing of Bill of Quantities.

• Preparation of health and safety plans.

• Cost and Quality as well as Health and Safety on site.

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT


SUCCESS STORIES

ULUTSHA CONSTRUCTION

Area of Specialisation

Grading

Completed Projects

General Building

4GB PE

• Extension and renovation of Walmer Wellness Centre

Contract Value: R3,2m

• Construction of a mortuary in Port Alfred Hospital

Contract Value: R2,5m

• Construction of Tshangani Clinic

Contract Value: R2,5m

Current Projects

• Zwide Community Centre

Contract Value: R4m

BACKGROUND

The company was established in 2006 and is a partnership between

Shaqiq Sirkothotte and Amina Tyler. They joined SCI in 2010 with the

hope of gaining more construction knowledge and improving technical

skills. Both partners have a financial background. When they

joined the incubator they were a Grade 3GB; 1CE company. Now they

are a Grade 4GB awaiting a 5GB on the CIDB register. This company

has added much value in youth development, job creation and has

improved a lot on the quality of work they produce. SCI has been

helping them with pricing, mentorship and offering relevant training.

SEDA Construction Incubator Interventions

• Project tools and techniques.

• Project initiation and development.

• Advice on Pricing of Bill of Quantities.

• Preparation of health and safety plans.

• Cost and Quality as well as Health and Safety on site.

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SEDA CONSTRUCTION INCUBATOR

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SUCCESS STORIES

SILVERTRON 203 CC

AREA OF SPECIALISATION

GRADING

Completed Projects

Civil and General Building

1CEPE, 1SQ PE and 4GB PE

• Renovations and Completion Popopo School

Contract Value: R2.1m

• New Bityi ECDC

Contract value: R2.2m

Current Projects

• Zimpofu JSS Abluition facilities –

Contract Value: R 900 000

• Eliqolweni JSS Abluition facilities

Contract Value: R459 000

BACKGROUND

Silvertron 203 CC is a multi-disciplinary construction company providing

construction services in civil and building construction, repairs

and renovations to existing structures and development of residential

properties.

The company was established in 2004 by two sisters, Nomsa and

Nombulelo Buyeye. The two ladies with no prior training or involvement

in the industry started with sub-contracting work from other

construction firms in an endeavour to acquire skills for self-development

in the construction industry. Silvertron 203 CC joined the programme

on the 1st November 2010. The company’s main challenges

were lack of mentorship on site, no office space, little or no business

and mentorship and lack of industry training.

Seda Construction Incubator Interventions

• Sourcing of suppliers.

• Advice on tackling critical path tasks on the project.

• Identification of tender opportunities.

• Advice on Pricing of Bill of Quantities.

• Preparation of health and safety plans.

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT


AWARDS

NATIONAL CIDB AWARDS

The annual Construction Industry Development Board’s (CIDB’s)

National Women in Construction Excellence Awards, presided

over by former Public Works Minister Gwen Mahlangu-Nkabinde,

was held at the SAX Arena in Centurion in August 2011.

The ceremony celebrates the achievements of female contractors in

the construction industry, and awards are presented to contractors

with over 51% women ownership in three different categories.

These awards encourage women to distinguish themselves through

performance excellence, as a proven record of performance on

projects is a key element of evaluation in selecting award winners.

Clients play a significant role in verifying a contestant’s suitability,

and are important in developing women contractors by creating

opportunities for female participation in contractor development

programmes. Over 120 women-owned companies in nine provinces

participated in the awards, with company sizes ranging from CIDB

grades one to six.

DTI AWARDS

The fifth DTI Awards were held in Limpopo on 20 October 2011.

At the ceremony Minister of Trade and Industry, Dr Rob Davies

recognised and rewarded technological innovation.

The purpose of the DTI Technology Awards is to raise awareness

about the benefits of using technology to improve the competitiveness

of enterprises. The awards recognise individuals and organisations

that have contributed towards technology development and

innovation in South Africa. They are also aimed at inspiring and

encouraging creativity and technological innovativeness amongst

business people by rewarding those that make use of technology to

advance their business.

SEDA Construction Incubator won the award for the Incubator of the

Year. Lakeshore Trading 102 (SCI client) won the award for the most

successful graduated incubatee. The two runner-ups, Velile Business

Enterprise and Sinotho Electrical and Civil Contractors (also a SCI client)

are also SCI graduates.

In the category for Contractors in Development Programmes- Category

3-4, both winners were SCI incubatees. Sinohlase Construction

won with Abangani Projects as a runner up. Sinohlase Construction

run by Nokuthula Sibisi entered the incubator at 1GBPE and 1CEPE.

They are now at 4CEPE and 5GBPE. Abangani Projects is run by Philisiwe

Mthethwa and she entered the incubator at 1GBPE and 1CEPE.

The company is now on 1GBPE and 4CEPE.

27

SEDA CONSTRUCTION INCUBATOR

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Country of incorporation and domicile: South Africa

Trust registration number: IT 183/2008

Type of trust

To promote and assist small businesses in the field of construction

Trustees

T. Msomi (Chairperson)

M.W. Nyandeni (Chief Executive Officer)

S.E.G. Bophela P.D. Masiase Z.N. Ntombela L. Mxenge P.V. Pillay J.J. Ravjee

Business address

127 Johannes Nkosi Street

Durban

4001

Postal address

Postnet Suite 02 Private Bag x504 Northway 4065

Bankers

ABSA Bank

Registered office

8th Floor

135 Musgrave Road

Durban

4001

Auditors

Aitken Lambert Elsworth Inc Chartered Accountants (S.A.)

Registered Auditors

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT


REPORT OF THE INDEPENDENT AUDITORS

We have audited the accompanying annual financial statement of

the SEDA Construction Incubator Trust, which comprise the trustees’

report, the statement of financial position as at 31 March 2012, the

statement of comprehensive income, the statement of changes in equity

and the statement of cash flows for the year then ended, a summary of

significant accounting policies and other explanatory notes.

Trustees’ Responsibility for the Financial Statements

The trust’s trustees are responsible for the preparation and fair presentation

of the annual financial statement in accordance with International

Financial Reporting Standards for Small and Medium-sized Entities. This

responsibility includes: designing, implementing and maintaining internal

control relevant to the preparation and fair presentation of annual

financial statements that are free from material misstatement, whether

due to fraud or error; selecting and applying appropriate accounting

policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these annual financial

statements based on our audit. We conducted our audit in accordance

with International Standards on Auditing. These standards require that

we comply with ethical requirements and plan and perform the audit to

obtain reasonable assurance whether annual financial statements are

free from material misstatement.

An audit involves performing procedures to obtain audit evidence about

the amounts and disclosures in the annual financial statement. The procedures

selected depend on the auditor’s judgement, including the assessment

of the risks of material misstatement of the annual financial

statement, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entity’s

preparation and fair presentation of annual financial statement in order

to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness

of the entity’s internal control. An audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of accounting

estimates made by the trustees, as well as evaluating the overall

presentation of the annual financial statement.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for audit opinion.

Opinion

In our opinion, the annual financial statement present fairly, in all material

respects, the financial position of the trust as of 31 March 2012, and

of its financial performance and its cash flows for the year then ended

in accordance with International Financial Reporting Standards for Small

and Medium-sized Entities.

Supplementary Information

We draw your attention to the fact that the supplementary information

does not form part of the annual financial statement and is presented as

additional information. We have not audited this information and accordingly

do not express an opinion thereon.

Aitken Lam Bert Elsworth Inc Chartered Accountants (S.A.) Registered Auditors

Durban 04 June 2012

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SEDA CONSTRUCTION INCUBATOR

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TRUSTEES’ RESPONSIBILITIES AND APPROVAL

The trustees are required to maintain adequate accounting records

and are responsible for the content and integrity of the annual financial

statement and related financial information included in this report. It

is their responsibility to ensure that the annual financial statement fairly

presents the state of affairs of the trust 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 International Financial Reporting Standards for Small

and Medium-sized Entities. The external auditors are engaged to express

an independent opinion on the annual financial statement.

The annual financial statements are prepared in accordance with International

Financial Reporting Standards for Small and Medium-sized Entities

and are based upon appropriate accounting policies consistently applied

and supported by reasonable and prudent judgements and estimates.

The trustees acknowledge that they are ultimately responsible for the

system of internal financial control established by the trust and place

considerable importance on maintaining a strong control environment.

To enable the trustees to meet these responsibilities, the board sets standards

for internal control aimed at reducing the risk of error or loss in

a cost effective manner. The standards include the proper delegation of

responsibilities within a clearly defined framework, effective accounting

procedures and adequate segregation of duties to ensure an acceptable

level of risk. These controls are monitored throughout the trust and all

employees are required to maintain the highest ethical standards in ensuring

the trust’s business is conducted in a manner that in all reasonable

circumstances is above reproach. The focus of risk management in the

trust is on identifying, assessing, managing and monitoring all known

forms of risk across the trust. While operating risk cannot be fully eliminated,

the trust endeavours to minimise it by ensuring that appropriate

infrastructure, controls, systems and ethical behaviour are applied and

managed within predetermined procedures and constraints.

The trustees are of the opinion, based on the information and explanations

given by management, that the system of internal control provides

reasonable assurance that the financial records may be relied upon for

the preparation of annual financial statements. However, any system of

internal financial control can provide only reasonable, and not absolute,

assurance against material misstatement or loss.

The trustees have reviewed the trust’s cash flow forecast for the year to 31

March 2013 and, in light of this review and the current financial position

they are satisfied that the trust has or has access to adequate resources to

continue in operational existence for the foreseeable future.

Although the board are primarily responsible for the financial affairs of

the trust, they are supported by the trust’s external auditors.

The external auditors are responsible for independently reviewing and

reporting on the trust’s annual financial statement.

The annual financial statement has been examined by the trust’s external

auditors and their report is presented on page 36

The annual financial statement set out on page 31 to 41, have been prepared

on a going concern basis, were approved by the board on 04 June

2012 and were signed on their behalf by :

Trustee

Trustee

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT


TRUSTEES’ REPORT

The trustees submitted their report for the year ended 31 March 2012.

This report forms part of the audited financial statements.

REVIEW OF ACTIVITIES

Main business and operations

Established in 2006, SEDA Construction Incubator (SCI) is a government

funded development programme mandated to develop and

mentor emerging construction companies in South Africa. The core business

of SCI is to develop emerging contractors through the infusion of

both technical and business administration skills that are aligned with

the introduction of technology in order to enhance the efficiency and efficient

management of their business. Prior to 2008, SCI was called SEDA

Ethekweni Construction Incubator. The main reason for the name change

was to allow the incubator to extend its service offerings to other areas

beyond the eThekwini boundaries. Generally, the trust operates branches

in Durban, Dundee, Mthatha, Port Elizabeth and Kwa-Mashu. The growth

that SCI has experienced over its five years of existence has also filtered

down to its clients. The organisation started with seven clients in 2007

and to date it supports 131 clients throughout its branch network. In

March 2007, there were only four employees but as at the end of March

2012 the centre boasts 26 full-time employees, and a cumulative client

turnover amounting to R155 million. Over the past 5 years, the board and

SCI’s management have been improving the training model through strategic

planning workshops aimed at ensuring that the organisation operates

within its mandate at all times.

The state of affairs of the trust are fully set out in the attached annual

financial statement and do not, in our opinion, require any further comment.

The net deficit of the trust for the year was R 622 531 (2011: surplus R

104 031).

POST BALANCE SHEET EVENTS

The trustees are not aware of any matter or circumstance arising since the

end of the financial year which would impact on the financial information

contained herein.

TRUSTEES

The trustees of the trust during the year and to the date of this report are

as follows:

T. Msomi (Chairperson), M.W. Nyandeni (Chief Executive Officer), S.E.G.

Bophela, P.D. Masiase, Z.N. Ntombela, L. Mxenge, P.V. Pillay, J.J. Ravjee

SECRETARY

The trust has not appointed a secretary. All secretarial matters have been

attended to by the trust’s auditors, Messers Aitken Lambert Elsworth,

whose business and postal addresses are

8th Floor P.O Box 50309

135 Musgrave Road Musgrave

Durban 4062

AUDITORS

Aitken Lambert Elsworth Inc are the auditors of the trust and are available

for re-appointment at the 2012 annual general meeting.

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STATEMENT OF FINANCIAL POSITION

2012

2011

Note(s)

R

R

Assets

Non-Current Assets

Property, plant and equipment 2 1 517 870 2 180 313

Current Assets

Trade and other receivable 136 503 95 260

Prepayment 99 779 99 765

Grant receivable 800 000

Cash and cash equivalent 3 505 061 1 296 550

1 541 343 1 491 575

Total Assets 3 059 213 3 671 888

Capital and Liabilities

Capital and reserves 4

Trust capital 100 100

Unexpended surplus 2 442 631 3065162

2 442 731 3 065 262

Liabilities

Non-Current Liabilities

Deferred income 5 87 057 131 634

Current Liabilities

Trade and other payable 6 484 851 375 783

Deferred income 5 44 574 99 209

529 425 474 992

Total Liabilities 616 482 606 626

Total Capital and Liabilities 3 059 213 3 671 888

SEDA CONSTRUCTION INCUBATOR

32

2011/2012 ANNUAL REPORT


STATEMENT OF COMPREHENSIVE INCOME

Note(s)

2012

R

2011

R

Revenue 7 9 100 000 9 700 000

Other income 420 363 405 158

Operating expense (10 168 841) (10 078 472)

Operating (deficit) surplus 8 (648 478) 26 686

Investment income 9 25 947 77 345

(Deficit) surplus for the year (622 531) 104 031

STATEMENT OF CHANGES IN EQUITY

Trust capital

R

Unexpended

surplus

R

Total equity

R

Balance at 01 April 2010 100 2961 131 2 961 231

Changes in equity

Surplus for the year 104 031 104 031

Total changes - 104 031 104 031

Balance at 01 April 2011 100 3 065 162 3 065 262

Changes in equity

Deficit for the year (622 531) (622 531)

Total changes - (622 531) (622 531)

Balance at 31 March 2012 100 2 442 631 2 442 731

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STATEMENT OF CASH FLOWS

Note(s)

2012

R

2011

R

Cash flows from operating activities

Cash generated/(utilised) from operations 11 181 250 445 300

Investment income 25 947 77 345

Net cash from operating activities 207 197 522 645

Cash flows from investing activities

Purchase of property, plant and equipment 2 (228 191) (1 702 361)

Sale of property, plant and equipment 2 29 505 9 299

Government grant receivable (800 000) -

Net cash from investing activities (998 686) (1 693 062)

Cash flows from financing activities

Net movement of income received in advance - (2 000 000)

Net cash from financing activities - (2 000 000)

Total cash movement for the year (791 489) (3 170 417)

Cash and cash equivalents at the beginning of the period 1 296 550 4 466 967

Cash and cash equivalents at the end of the period 3 505 061 1 296 550

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT


ACCOUNTING POLICIES

PRESENTATION OF ANNUAL FINANCIAL

STATEMENTS

The annual financial statement have been prepared in accordance with

International Financial Reporting Standards for Small and Medium-sized

Entities. The annual financial statement have been prepared on the historical

cost basis, and incorporate the principal accounting policies set

out below.

These accounting policies are consistent with the previous period.

PROPERTY, PLANT AND EQUIPMENT

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

asset when:

It is probable that future economic benefits associated with the item will

flow to the trust and the cost of the item can be measured reliably.

Property, plant and equipment are carried at cost less any accumulated

and any impairment losses.

Leasehold improvements are capitalised at cost and written off over the

period of the lease.

Depreciation is calculated on the straight-line method to write off the

cost of each asset, or the revalued amounts, to their residual values over

their estimated useful lives as follows:

Item

Furniture and fitting:

Motor vehicles

Office equipment

Average useful life

6 years

5 years

3/5/6 years

Computer equipment

3 years

Computer software

2 years

Leasehold improvements

3 years

FINANCIAL INSTRUMENTS

Initial recognition

Financial instruments carried on the balance sheet include cash and bank

balances, investments, receivables, trade creditors, leases and borrowings.

The particular recognition methods adopted are disclosed in the

individual policy statements associated with each item.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are

subsequently measured at amortised cost less any accumulated impairment.

Trade and other payables

Trade payables are initially measured at fair value, and are subsequently

measured at amortised cost, using the effective interest rate method.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits,

and other short-term, highly liquid investments that are readily convertible

to a known amount of cash and are subject to an insignificant risk

of changes in value. These are initially and subsequently recorded at fair

value.

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REPORT OF THE INDEPENDENT AUDITORS

PROVISIONS

Provisions are recognised when:

• the trust 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.

REVENUE

Revenue from the rental of property and office space is recognised

when all the following conditions have been satisfied:

Interest is recognised, in profit or loss, using the effective interest rate

method.

BORROWING COSTS

Borrowing costs are recognised as an expense in the period in which

they are incurred.

TAXATION

No provision has been made for taxation on any operating surpluses

as the trust is considered to be a Public Benefit Organisation as envisaged

by the Income Tax Act.

• the trust has transferred to the buyer the significant risks and

rewards of ownership of the goods;

• the trust retains neither continuing managerial involvement to

the degree usually associated with ownership nor effective control

over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the

transaction will flow to the trust; and

• the costs incurred or to be incurred in respect of the transaction

can be measured reliably.

Revenue is measured at the fair value of the consideration received

or receivable and represents the amounts receivable for goods and

services provided in the normal course of business.

SEDA CONSTRUCTION INCUBATOR

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2011/2012 ANNUAL REPORT


NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2. PROPERTY, PLANT AND EQUIPMENT

Cost / Valuation

2012 2011

Accumulated

depreciation

Carrying value

Cost / Valuation

Accumulated

depreciation

Carrying value

Furniture and fitting: 858 962 (372 119) 486 843 812 552 (222 486) 590 066

Motor vehicles 544 349 (317 000) 227 349 544 349 (208 130) 336 219

Office equipment 591 244 (397 160) 194 084 503 671 (207 971) 295 700

Computer equipment 798 363 (727 863) 70 500 749 569 (497 626) 251 943

Computer software 190 775 (188 199) 2 576 176 243 (159 537) 16 706

Leasehold improvements 918 782 (382 264) 536 518 918 782 (229 103) 689 679

Total 3 902 475 (2 384 605) 1 517 870 3705 166 (1 524 853) 2 180 313

Leasehold improvements represent the cost of renovating premises in Port Elizabeth leased at a favourable rental from Transnet Limited. This cost will be expensed

as depreciation over the initial period of the lease, being three years.

Reconciliation of property, plant and equipment - 2012

Opening

Balance

Additions Disposals Depreciation

Closing

Balance

Furniture and fittings 590 066 46 410 - (149 633) 486 843

Motor vehicles 336 219 - - (108 870) 227 349

Office equipment 295 700 94 455 (5 860) (190 211) 194 084

Computer equipment 251 943 72 793 (13 140) (241 096) 70 500

Computer software 16 706 14 533 - (28 663) 2 576

Leasehold improvements 689 679 - - (153 161) 536 518

2 180 313 228 191 (19 000) (871 634) 1 517 870

Reconciliation of property, plant and equipment - 2011

Opening

Balance

Additions Disposals Depreciation

Closing

Balance

Furniture and fittings 352 077 362 067 - (124 078) 590 066

Motor vehicles 289 787 152 756 - (106 324) 336 219

Office equipment 286 687 149 978 (6 726) (134 239) 295 700

Computer equipment 401 265 107 791 (8 833) (248 280) 251 943

Computer software 46 691 10 987 - (40 972) 16 706

Leasehold improvements - 918 782 - (229 103) 689 679

1 376 507 1 702 361 (15 559) (882 996) 2 180 313

37

SEDA CONSTRUCTION INCUBATOR

2011/2012 ANNUAL REPORT


NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2012

R

2011

R

3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of:

Cash on hand 784 975

Bank balances 483 566 681 623

Short-term deposits 20 711 613 952

505 061 1 296 550

4. TRUST CAPITAL

Capital account

Balance at beginning of year 100 100

5. DEFERRED INCOME

Government grants

Non-current liabilities 87 057 131 634

Current liabilities 44 574 99 209

131 631 230 843

6. TRADE AND OTHER PAYABLES

Trade payable: 175 611 74 455

Accrued expenses 248 751 257 551

Amounts received in advance 54 889 43 777

Deposits 5 600 -

484 851 375 783

7. REVENUE

SEDA Technology Programme 9 100 000 9 700 000

SEDA CONSTRUCTION INCUBATOR

38

2011/2012 ANNUAL REPORT


NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2012

R

2011

R

Grants received

Nelson Mandela Bay Metropolitan Municipality 500 000 1 200 000

SEDA Technology Programme - Normal Operations 4 600 000 4 600 000

- Nelson Mandela Bay 300 000 2 000 000

Umzinyathi District Municipality 1 900 000 1 900 000

Ethekwini Municipality 1 800 000 -

9 100 000 9 700 000

8. OPERATING (DEFICIT) SURPLUS

Operating surplus for the year is stated after accounting for the following:

Operating lease charges

Premises

Contractual amount 413 450 402 114

Loss on disposal of property, plant and equipment 10 505 6 260

Depreciation on property, plant and equipment 871 634 882 998

Employee costs 5 266 157 4 964 641

Trustees emoluments 67 333 66 667

9. INVESTMENT INCOME

Interest revenue

Bank 25 947 77 345

10. AUDITORS' REMUNERATION

Audit fees - current 49 704 46 227

Other services 3 234 10 175

52 938 56 402

39

SEDA CONSTRUCTION INCUBATOR

2011/2012 ANNUAL REPORT


NOTES TO THE ANNUAL FINANCIAL STATEMENTS

2012

R

2011

R

11. CASH GENERATED FROM OPERATIONS

(Deficit) surplus before taxation (622 531) 104 031

Adjustments for:

Depreciation 871 634 882 998

Profit on disposal of assets (10 505) 6 260

Interest received (25 947) (77 345)

Changes in working capital:

Trade and other receivables (41 243) 57 397

Prepayments (14) 8 865

Trade and other payables 109 068 (432 548)

Deferred income (99 212) (104 358)

181 250 445 300

SEDA CONSTRUCTION INCUBATOR

40

2011/2012 ANNUAL REPORT


DETAILED INCOME STATEMENT

2012

R

2011

R

Revenue

Grants received 9 100 000 9 700 000

Other income

Rental income 182 480 248 300

Recoveries 20 205 -

Sundry income 207 173 156 858

Interest received 25 947 77 345

Profit on disposal of assets 10 505 -

446 310 482 503

Operating expenses

Accounting fees - 74 895

Auditors remuneration 52 938 56 402

Bank charges 17 013 12 919

Board members’ expense 132 307 110 041

Computer consumable 138 651 154 371

Consulting fees 19 893 -

Depreciation 871 634 882 998

Electricity and water 142 644 103 558

Employee and mentor cost 5 266 157 4 964 641

Fines and penalties - 98

Flowers 50 -

Increase in provision for doubtful debts 87 101 136 395

Insurance 94 965 87 598

Legal expense 67 292 27 178

License renewals - 9 895

Loss on disposal of assets - 6 260

Marketing and advertising 110 406 494 703

Motor vehicle expenses 69 326 20 804

Office decorations 2 923 3 204

Postage 13 472 21 926

Printing and stationery 84 705 63 759

41

SEDA CONSTRUCTION INCUBATOR

2011/2012 ANNUAL REPORT


DETAILED INCOME STATEMENT

2012

R

2011

R

Project expense 1 079 544 1 077 993

Rental expense 413 450 402 114

Repairs and maintenance 239 197 91 540

Security 277 026 282 291

Small tools 9 695 8 097

Staff welfare 92 704 93 181

Stakeholder relationship costs 57 859 59 090

Subscriptions 47 372 55 557

Telephone and fax 228 765 198 145

Travel - local 431 099 374 921

Travel - overseas 53 320 137 231

Trustees’ emoluments 67 333 66 667

10 168 841 10 078 472

(Deficit) surplus for the year (622 531) 104 031

SEDA CONSTRUCTION INCUBATOR

42

2011/2012 ANNUAL REPORT


ACRONYMS

BEE

CCC

CE

CETA

CIDB

CIETS

CDP

ECDP

EM

EPWP

GB

INK

ME

NDPW

NMBMM

PDI

PI

SAFCEC

SAQA

SAQI

SARS

SAWIC

SCI

SDL

SE

Seda

SMME

Stp

UDM

UIF

BLACK ECONOMIC EMPOWERMENT

CONSTRUCTION CONTACT CENTRES

CIVIL ENGINEERING

CONSTRUCTION EDUCATION AND TRAINING AUTHORITY

CONSTRUCTION INDUSTRY DEVELOPMENT BOARD

CIVIL ENGINEERING INDUSTRIES TRAINING SCHEME

CONTRACTOR DEVELOPMENT PROGRAMME

EMERGING CONTRACTORS DEVELOPMENT PROGRAMME

ETHEKWINI MUNICIPALITY

EXPANDED PUBLIC WORKS PROGRAMME

GENERAL BUILDING

INANDA – NTUZUMA – KWAMASHU NODAL AREA

MECHANICAL ENGINEERING

NATIONAL DEPARTMENT OF PUBLIC WORKS

NELSON MANDELA BAY METROPOLITAN MUNICIPALITY

PREVIOUSLY DISADVANTAGED INDIVIDUAL

PROFESSIONAL INDEMNITY

SOUTH AFRICAN FEDERATION of CIVIL ENGINEERING CONTRACTORS

SOUTH AFRICAN QUALIFICATIONS AUTHORITY

SOUTH AFRICAN QUALITY INSTITUTE

SOUTH AFRICAN REVENUE SERVICES

SOUTH AFRICAN WOMEN IN CONSTRUCTION

SEDA CONSTRUCTION INCUBATOR

SKILLS DEVELOPMENT LEVY

SPECIALIST WORKS

SMALL ENTERPRISE DEVELOPMENT AGENCY

SMALL MICRO MEDIUM ENTERPRISES

SEDA TECHNOLOGY PROGRAMME

UMZINYATHI DISTRICT MUNICIPALITY

UNEMPLOYMENT INSURANCE FUND

43

SEDA CONSTRUCTION INCUBATOR

2011/2012 ANNUAL REPORT


HEAD OFFICE - DURBAN

127 Alice Street

Durban

KwaZulu Natal

4001

South Africa

Tel : +27 31 309 4940 /2/3

SEDA CONSTRUCTION INCUBATOR

44

2011/2012 ANNUAL REPORT

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