Annual Report2012

ANNUAL REPORT 

2011 

2012 

1 

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 


2 


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 

3 



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 


4 


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 

5 



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: 


6 


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). 

7 




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. 


8 



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. 

9 



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. 


10 


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. 

11 



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 


12 


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. 

13 



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. 


14 


• 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. 

15 



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. 


16 



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 

17 




• 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. 


18 


19 



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 


20 



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. 

21 




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 


22 

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


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% 

23 



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 


• Building of school toilets 


• 

Current Projects 

• Construction of Ntongade Toilets 


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. 


24 



ULUTSHA CONSTRUCTION 

Area of Specialisation 

Grading 


General Building 

4GB PE 

• Extension and renovation of Walmer Wellness Centre 

Contract Value: R3,2m 

• Construction of a mortuary in Port Alfred Hospital 


• Construction of Tshangani Clinic 



• 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. 



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

25 




SILVERTRON 203 CC 

AREA OF SPECIALISATION 

GRADING 


Civil and General Building 

1CEPE, 1SQ PE and 4GB PE 

• Renovations and Completion Popopo School 


• New Bityi ECDC 

Contract value: R2.2m 


• 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. 




26 


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 



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 


28 


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 

29 



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 


30 


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. 

31 



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 


32 


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 

33 



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 


34 


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. 

35 



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. 


36 


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 




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 


38 



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 




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 


40 


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 



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 


42 


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 


SKILLS DEVELOPMENT LEVY 

SPECIALIST WORKS 

SMALL ENTERPRISE DEVELOPMENT AGENCY 

SMALL MICRO MEDIUM ENTERPRISES 

SEDA TECHNOLOGY PROGRAMME 

UMZINYATHI DISTRICT MUNICIPALITY 

UNEMPLOYMENT INSURANCE FUND 

43 



HEAD OFFICE - DURBAN 

127 Alice Street 

Durban 

KwaZulu Natal 

4001 

South Africa 

Tel : +27 31 309 4940 /2/3 


44

Annual Report2012

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