ANNUAL REPORT...Master Plan. The KwaZulu-Natal Master Plan will be anchored by the Agricultural and...

A N N UA L R E P O RT2016/2017

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TABLE OF CONTENTS

PART A – GENERAL INFORMATION ......................................................................2

Our Business ........................................................................................................................................5

Foreword by the Executive Authority ..................................................................................................6

Report by the Chairperson ..................................................................................................................8

Foreword of the Chief Executive Officer ............................................................................................10

Strategic Overview ............................................................................................................................12

Our Services ......................................................................................................................................16

ADA Board Members .........................................................................................................................17

Executive Committee .........................................................................................................................18

PART B - PERFORMANCE INFORMATION ..........................................................19

• Statement of Responsibility ...................................................................................................20

• Overview of the ADA Performance ........................................................................................22

• Program 1 - Finance and Administration ...............................................................................28

• Program 2 - Comprehensive and Capacity Building ...............................................................29

• Program 3 - Enterprise and value Chain development ..........................................................31

• Program 4- Infrastructure Development ................................................................................33

PART C - CORPORATE GOVERNANCE .................................................................37

PART D - HUMAN RESOURCE MANAGEMENT ...................................................49

PART E - ANNUAL FINANCIAL STATEMENTS ....................................................53

• Report of the Auditor General ...............................................................................................54

• Annual Financial Statements .................................................................................................60

• List of Abbreviations / Acronyms ...........................................................................................99

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PA RT A:G E N E R A L I N FO R M AT I O N


2. PUBLIC ENTITY’S GENERAL INFORMATION

REGISTERED NAME: AGRIBUSINESS DEVELOPMENT TRUST

REGISTERED NUMBER: IT 2041/1999

PHYSICAL ADDRESS: 5 CASCADES CRESCENT CASCADES OFFICE PARK MONTROSE PIETERMARITZBURG 3202

POSTAL ADDRESS: PRIVATE BAG X01 MONTROSE PIETERMARITZBURG 3202

TELEPHONE NUMBER: +27 33 347 8600

FAX NUMBER: +27 33 347 0913

EMAIL ADDRESS: [email protected]

WEBSITE ADDRESS: www.ada-kzn.co.za

EXTERNAL AUDITORS: OFFICE OF THE AUDITOR-GENERAL SA

BANKERS: ABSA BANK

COMPANY/BOARD SECRETARY: SIMANGELE MBATHA


1. KEY HIGHLIGHTS

In delivering our strategy in 2016/17 the following were achieved among others;

NON FINANCIAL

629 INDIVIDUALS TRAINED IN PROJECTS

328 JOBS WERE CREATED

82 HA OF SILAGE DEVELOPED

125.2 HA OF VEGETABLES DEVELOPED

11 PROJECTS ASSISTED WITH INFRASTRUCTURE PLANNING

CHALLENGES

FUNDING

UNCERTAIN OPERATING ENVIRONMENT


3. OUR BUSINESS

The Agribusiness Development Agency is a public entity established in 2009 by the Provincial Cabinet to provide support to entrant Black Commercial farmers in a coordinated and integrated manner in the Province of KwaZulu-Natal. The Agency is located under the Department of Agriculture and Rural Development. In driving its mandate the Agency has prioritized the following Key Focus Areas.

FINA

NCE &

ADMINISTRATIONENTERPRISE & VALUE CHAIN

DEVELOPMENT

INFRASTRUCTURE DEVELOPMENTCOPREHENSIVE CAPACIT

Y BUI

LDIN

G


4. FOREWORD BY THE EXECUTING AUTHORITY

I am delighted to present the 2016/17 Annual Report for the

Agribusiness Development Agency (ADA). This Annual Report is

presented against a backdrop of a severe drought that has gripped the

Province since last year. This drought has not only negatively impacted

on farmers, households and the industry as a whole, but has also affected our plans for the year

under review. At the beginning of the financial year we committed ourselves to a more streamlined

ADA with enhanced focus. It is for this reason that we embarked on a strategic review session.

In the year under review the ADA focused on the following key areas: Creating a strong and responsive

entity; alignment to the Department; planning for transition and strengthening administrative

capabilities. We are also delighted to note that the ADA has supported a number of agribusinesses

with infrastructure development to the value of more than R68 million.

The ADA also trained 629 people within the projects and supported a total of eight (8) value addition

agribusinesses noting also that 328 jobs were created. This number is set to increase in subsequent

financial years.

ALIGNMENT TO THE DEPARTMENTIt is also worth mentioning that we are working on the development of the provincial Agricultural

Master Plan. The KwaZulu-Natal Master Plan will be anchored by the Agricultural and Rural

Development Advisory Councils, and will also provide the foundation of a Provincial Irrigation

Infrastructure Plan. This Master Plan must articulate clear and ambitious but achievable objectives

for agriculture in the province. It must have a long range vision for the province on agriculture; it must

spell out clearly the expansion levels of agricultural enterprises both in upward and downstream;

the Master plan must even pre-empt the growth of agricultural value chains so that we level the

playing fields as government. However this Master Plan, in the overall, must re-imagine agriculture

in the province as a backbone of our economy and a major contributor to the GDP.

MR RT MTHEMBU, MPLMEC FOR THE DEPARTMENT OF AGRICULTURE

AND RURAL DEVELOPMENT


ADA’S TRANSITIONThe previous year (2015/16) was a transitionary period for the entity after the alignment process had been concluded with the Department of Agriculture and Rural Development. As if that was not enough, 2016/17 ushered in additional changes and uncertainties for the ADA due to the Review of Public Entities exercise done by the Review of Public Entities Task Team (ROPETT) set up the KwaZulu-Natal Provincial Government. This was further compounded by the austerity measures that were prevalent in the financial year which made it difficult to fill critical vacant positions in time to expedite service delivery. Despite the aforementioned less than conducive environment, the ADA in 2016/17 was able to achieve remarkable successes in playing a catalytic role in supporting agribusiness development in KwaZulu-Natal, albeit less than what had been planned for. For example, the ADA embarked on the Woman and Youth Development Programmes which saw a total 162 youth members attend and receive training within the agricultural sector. The ADA also launched the Women Colloquiums which have made an enormous impact on women-owned and operated agribusinesses within our province. The focus on women and youth culminated in the setting of Women Empowerment Programme (WEP) and a Youth Desk.

Furthermore, in 2016/17 the ADA contributed significantly to the formulation of the National Agro-processing Strategy (now in draft) and the refinement and alignment of the draft KwaZulu-Natal Agro-processing Strategy in collaboration with the Department of Economic Development, Tourism, and Environmental Affairs (EDTEA), Department of Cooperative Governance and Traditional Affairs (COGTA), and the Department of Agriculture and Rural Development (DARD).

Finally, I wish to thank the ADA’s Board of Trustees and its management team for their invaluable efforts over this transitional year. The ADA moves into the new financial year in a good position to better deliver on its mandate and we are all looking forward to what the year ahead may bring.

__________________________Mr RT Mthembu, MPLMEC for the Department of Agriculture and Rural Development


5. REPORT BY THE CHAIRPERSON

Agribusiness plays a vital role in the economies of developing countries. This is the case in South Africa and in KwaZulu-Natal in particular where the agricultural sector accounts for seventy percent (70%) of total employment and twenty five percent (25%) of the GDP. It is my pleasure to state that the Agribusiness Development Agency

(ADA) is one of the notable entities that had a positive contribution to these statistics during the 2016/17 financial year. The ADA continues to strive towards accomplishing its vision of “…a diverse, deracialized, prosperous and sustainable agribusiness in KwaZulu-Natal.”

In our previous annual report I mentioned that the organization was going through changes. Such changes were necessitated by the commitment of the organization, the provincial and national government to ensuring that services rendered are relevant to the changing needs of our beneficiaries. It was also essential to ensure that there is efficiency in the utilization of available resources. One example of such efforts is the Rationalization of Public Entities initiative where all public entities in the province of KwaZulu-Natal (including the ADA) were reviewed in order to ensure their relevance and also reduce expenses.

While there was clarity on the objectives of the project, it still caused some uncertainty among staff members resulting in a high rate of staff turnover. This uncertainty impacted on the stability of the organization resulting in the delayed filling of the vacant position of the Chief Executive Officer. The human resource capacity of the organization was thus compromised, for example the Monitoring and Evaluation Specialist acted as a CEO while holding her formal position. To boot, the Chief Operations Officer (COO) continued to serve in his position while also serving as an Acting CEO. The staff was thus overstretched in the face of an ambitious annual performance plan.

It is with some sense of gratification to state that despite the challenges outlined above, the Agribusiness Development Agency (ADA) continues to make a positive impact on the agribusiness sector. Indeed, a number of lessons have been learnt and vast experience has been acquired. Such enlightening lessons and best practices continue to inform the future plans and enhance the growth of the organization. The ADA continues to make a significant contribution to the sector through working with other partners. During the 2016/17 financial year, the ADA participated in the formulation of a National Agro-processing Strategy and also in the refinement and alignment of the Draft KwaZulu-Natal Agro-processing Strategy. Among our highlights are the following projects:

• The Nkunzana Vegetable Project, a community initiative located in Northern KwaZulu-Natal, focusing on intensive vegetable production.

• Cathedral Peak Winery Project where community members are involved in wine grape farming.

• The Chicory Project in Weenen which is improving and will be moving to a new site.

DR MS MBATHAADA BOARD OF TRUSTEES

CHAIRPERSON


• The Women’s Empowerment Programme which began as a desk but women felt that they needed to participate actively and empower themselves. This programme and that of the youth are very close to the heart of MEC, Mr. Themba Mthembu. He has repeatedly encouraged the ADA to undertake and strengthen these initiatives.

The Women’s Empowerment Programme is currently sourcing external funding from National Lottery and foreign direct investment through the African Agricultural Council (AAC). A total of fifteen (15) of members of the programme will be attending an Agribusiness Indaba, organized by the AAC, that will take place in Cape Town where they will meet interested parties who could partner with them and assist them strengthen their projects.

• The Dalum Project where the ADA has partnered with the Dalum Agribusiness Academy in Denmark in training the youth from KZN on livestock farming. The program took off in 2014. The third cohort of a total of 16 students graduated in Denmark in June 2017. This brings a total of 45 young farmers from the KZN who have graduated from the programme to date. The ADA will be sending another cohort of 18 students during the 2017/18 financial year.

May I take this opportunity to thank the staff of the ADA for their commitment and endurance not withstanding challenges that faced the organization during the financial year under review. While the team was lean and under-resourced, some major accomplishments were made that portrayed the ADA as an important player in the Agribusiness sector.

As this is my final year as Chairperson of the Agribusiness Development Agency (ADA) , may I also take this opportunity to convey my gratitude to my present and past colleagues (members of the board and the Audit Committee) who relentlessly dedicated themselves to the success of the ADA. I appreciate the mutual respect that prevailed in our boardroom and the continuous commitment to clean governance. May you continue to serve South Africa with dedication and integrity.

To the incoming board of trustees, I wish you the best. I believe you will take the baton with enthusiasm in this relay and run the race to the best of your abilities. May the race culminate in the empowerment of our beloved poverty stricken communities.

Sincerely,

__________________________Dr M.S. MbathaADA Board of TrusteesChairperson


6. FOREWORD BY THE CHIEF EXECUTIVE OFFICER

The year 2016/17 was an unprecedentedly difficult year for the Agribusiness Development Agency (ADA). The difficulty was as a result of both exogenous and endogenous factors. The exogenous factors included the Rational of Public Entities that the province of KwaZulu-

Natal embarked upon which saw all state-owned and public entities undergoing a review to ascertain their fitness-for-purpose with the aim of rationalization to improve efficiencies and reduce overlaps and save cost. Furthermore, there were more stringent austerity measures that were introduced in the province in line with cost cutting measures. As a consequence of these austerity measures, a moratorium was placed on the filling of vacant positions, save for permission being received from the Office of the Premier (OTP) through support of the line function MEC and Provincial Treasury. A number of critical positions within the ADA became vacant and were unfilled for a prolonged period and the staff attrition could, in part, be attributed to the uncertainties engendered by the review of public entities and the possible merge of the ADA with other entities under the auspices of the KwaZulu-Natal Department of Agriculture and Rural Development (DARD). Endogenous factors included the fact that ADA employees were under short-term contracts (5 and 1 year employment contracts). The five year contracts that came to an end during the year could only be extended for a further one year, pending the finalization of the review process and this presented untold job insecurity which, in turn, led to some staff members resigning in search of better employment conditions elsewhere. As if that was not enough, a few senior staff members had to take on more responsibilities with some acting in several demanding positions concurrently. There were also two acting Chief Executive Officers during the year under review which compounded service delivery challenges and made the achievement of some predetermined targets unattainable.

In spite of the bleak picture painted in the preceding section, I am proud to state that the ADA – with obstinate and resolute determination of a bulldog, was steadfast in its commitment to deliver impressive service delivery achievements and milestones (under the circumstances). The ADA entrenched its new five year strategic plan which firmly placed the entity and the helm of agribusiness and agro-processing development and support in the KwaZulu-Natal Province. The ADA’s five year strategy seeks to develop an equitable and radically transformed agribusiness sector that contributes to economic growth in the province.

DR TS MKHABELAACTING CHIEF EXECUTIVE OFFICER


The ADA has also firmly positioned itself as a centre of excellence when it comes to agribusiness and agro-processing, not only in KwaZulu-Natal, but in South Africa as a whole and beyond the borders of the republic into the international arena. During 2016/17, the ADA contributed immensely to the development of both the KwaZulu-Natal and National Agro-processing strategies, in the process ensuring alignment of the two strategies. The ADA is a member of the National Agro-processing Forum, jointly convened by the Department of Trade & Industry (DTI) and the Department of Agriculture, Forestry and Fisheries (DAFF) and even hosted the forum in Pietermaritzburg in 2016/17. The ADA also has a flagship international programme for developing a critical mass of appropriately trained young farmers and agribusiness entrepreneurs with Dalum Agribusiness Academy in Denmark. This programme has seen 45 young farmers receive internationally-acclaimed training in agribusiness in Denmark over the last three financial years.

The year 2016/17 has been a productive year and steep learning curve. The ADA implemented a number of high impact catalytic programmes and projects and these are, inter alia: the Women Empowerment Programme; Youth Programme; and training of both direct beneficiaries and other interested entrepreneurs in standards compliance through our partnership with DAFF and the South African Bureau of Standards (SABS) in Hazard Analysis and Critical Control Points (HACCP) and Globalgap which are requirements for any food processor and international marketing (exports), respectively. The ADA also implemented high impact projects in desperate communities and these include the Nkunzana Community Property Association extensive fresh produce production business, which is a restitution project in Magudu in Northern KwaZulu-Natal (around uPhongolo); Ukhahlamba Wine Grape Communal Production project in partnership with the Department of Cooperative Governance and Traditional Affairs (COGTA), DARD, Ukhahlamba Local Municipality and Cathedral Peak Wine Estate.

In this regard, firstly, I would like to extend my sincere gratitude to the Board of Trustees for their continued support and leadership. Secondly, one would be amiss not to mention the ADA staff and management who have been working hard to ensure the realisation of the mandate. Lastly, we recognise that we, cannot achieve this mandate alone but in tandem with our shareholder, the Department of Agriculture and Rural Development (under the leadership of honourable MEC, Mr. Themba Mthembu) through their guidance and constructive leadership, the partnerships established with different stakeholders who transcend the borders of the country as well as our beneficiaries. We appreciate their contribution to building this important vehicle of agribusiness development in the Province.

__________________________Dr T.S. MkhabelaActing Chief Executive Officer


7. STRATEGIC OVERVIEW

7.1 MANDATEADA exists as a catalytic vehicle to facilitate the growth of a strong, transformed, diversified dynamic, competitive and sustainable agribusiness industry in KwaZulu-Natal, in collaboration with the Provincial Government. It serves as a catalyst for agribusiness development in the Province, through focusing on projects that are catalytic in nature and have the following attributes;Benefits beyond direct beneficiariesEconomic SpinoffsEmbrace the whole value chainSpeed up development in the whole geographical area

7.2 VISION“A diverse, deracialized, prosperous and sustainable agribusiness sector in KwaZulu-Natal.”

7.3. MISSION STATEMENTADA strives to promote, establish, facilitate and support the growth of black owned and managed agricultural enterprises along agricultural value chains in KwaZulu-Natal through partnerships with individuals, communities, private sector and other public sector institutions in order to achieve a transformed Agribusiness Sector in KZN.

7.4 ORGANISATIONAL VALUES AND PRINCIPLESOrganisational values define the key principles and associated behaviours that are required by employees when executing the strategy and functions of the organisation and state what the clients, customers and stakeholders can expect from the organisation.

The values of the ADA are:

INTEGRITY ACCOUNTABILITY EXCELLENCE INNOVATION

We commit ourselves to ensuring our purpose,

practices and values are ethically sound at all

times.

We take accountability for all our actions in

dealing with our Clients and Stakeholders

and are mindful of possible consequences

emanating from our decisions.

We commit to providing quality services and products to all our

clients at all times which are consistent with the

spirit of Batho-Pele.

We commit to strive for continuous improvement

through innovation and by promoting a

learning organisational culture. The ADA will embed these values

through demonstrated leadership, programmes

and systems that develop, recognise and reward the supporting

behaviours


8. STRATEGIC GOALS

GOAL 1Financially productive self-sustaining black agribusiness enterprises in the KZN Province.

GOAL 2Increased incomes along the agribusiness value chain.

GOAL 3Improved market access in the agribusiness sector.

GOAL 4Strengthen the capacity of the entrepreneurs, institutions and the agribusiness sector to perform optimally.

GOAL 5An effective and efficient administration that promotes sound corporate governance and responsive service delivery.

8.1 STRATEGIC OBJECTIVESSTRATEGIC GOALS

A fully capacitated human resources which is able to deliver on its mandates.

Goal 5Sound and stringent financial management and control to achieve a clean opinion annually

Promote good governance and a legally sound organization

Improve the knowledge and skills base of commercial farmers, agribusiness entrepreneurs, professionals and other stakeholders within the Sector

Goal 4 Forge partnerships and networking relationships within the agribusiness value chain

Strengthen Institutional capacity within government and across the Agribusiness Sector

Lobbying and providing evidence based policy briefing to policy makers through research.

Implement a programme to empower black suppliers in the agricultural industry as part of transformation.

Identify and secure potential investors, funders and business opportunities to advance the ADA initiatives and ongoing activities to help facilitate transformation in the agribusiness landscape.


Promote the development and investment in strategic value chains where the Province has potential comparative advantage.

Goal 1, 2 & 3

Improve access to markets and enhance export capacity, import substitution and linkages across priority value chains.

Facilitate and promote investments in the agribusiness sector to foster transformation

Foster the adoption of relevant industry standards by agribusiness enterprises.

To create and sustain jobs directly and indirectly along the agricultural value chain.

Develop and attract youth entrepreneur to the agribusiness sector to foster sustainability.

Facilitate the provision of market development and logistics supportive infrastructure

Goal 1,2 & 3Provide technical support to all infrastructure development projects.

To facilitate investment in agribusiness infrastructure and development.

To diversify the agribusiness industry in KZN through establishing industrial crops and new industries.


8.2 LEGISLATIVE AND OTHER MANDATEThe Agribusiness Development ADA derives its mandates from the following policy and legislative imperatives:

• Cabinet Resolution No. 79 of 29 July 2009 authorizing the establishment of an entity to support entrant commercial black farmers.

• The National Policy Governing the Comprehensive Agricultural Support Programme (CASP).

• Land Reform Policy Guidelines and the Department of Rural Development and Land Reform’s Land Reform Recapitalisation Programme.

• Amended Deed of Trust for the KwaZulu-Natal Agricultural Development Trust (trading as the Agribusiness Development ADA).

• Cabinet Resolution No. 245 of 11 November 2009 transferring the KwaZulu-Natal Development Trust from the Department of Agriculture, Environmental Affairs and Rural Development to the Department of Economic Development.

The ADA will provide agri-business support services to entrant black commercial farmers who have acquired land through the Government’s Land Reform Programme and on a private basis.

It is intended that the ADA will be established under provincial legislation as a Schedule 3 Public Entity. Consequently, the extent and nature of these mandates may be changed following the promulgation of the legislation establishing the ADA.

Further to the above, the ADA is guided by the following legislation in implementing its mandate.

• Constitution of the Republic of South Africa, Act 108 of 1996

• Public Finance Management Act, Act 1 of 1999

• National Treasury Regulations Gazette 23463

• Labour Relations Act, Act 66 of 1995

• Promotion of Access to Information Act, Act 2 of 2000

• Employment Equity Act, Act 55 of 1998

• Promotion of Administrative Justice Act 3 of 2000

• Basic Conditions of Employment Act, Act 75 of 1997

• Companies Act No. 3 of 2011

• Occupational Health and Safety Act, Act 85 of 1993

• Equality and Prevention of Unfair Discrimination Act 4 of 2000


9. OUR SERVICES

The ADA views itself as the center of agribusiness excellence in the Province as it is the only entity designed with a specific purpose of developing the agribusiness sector. In this regard, the ADA working with other government institutions will endeavor to keep abreast of all developments in the sector and create platforms of coordination amongst various role players in order to ensure a coordinated effort.

The ADA achieves its mandate through a number of interventions as follows;

MARKET DRIVEN INFRASTRUCTURE DEVELOPMENT

VALUE CHAIN LINKAGES CREATED AND STRENGTHENED

PARTNERSHIPS AND KNOWLEDGE BASED AGRICULTURE DEVELOPED

TECHNOLOGY AND INNOVATION FACILITATION

POLICY AND ADVOCACY

MARKET LINKAGES


BOARD TRUSTEES AND MEMBERS OF COMMITTEES

DR. M.S. MBATHA• Chairperson of the Board

DR M.E. NGIDI• Deputy Chairperson of the Board

• Projects and Finance Committee Member

• Audit and Risk Committee

ADV. R.R. NIRGHIN• Board member

• Audit and Risk Committee

• Human Resources & Remuneration Committee

MR W.R. DLADLA• Board member


MS. N. ZWANE• Board member


MR Z.I. NGCOBO• Board member

• Audit and Risk Committee member

• HRRC member

MRS P. DABIDEEN• Board member

• Human Resources & Remuneration Committee Chairperson

• Projects and Finance Committee

MS S. MBATHA• Company / Board Secretary

DR D.B MKHWANAZI• Board member

• Projects and Finance Committee Chairperson (till DOD)

• Human Resources & Remuneration Committee


EXECUTIVE COMMITTEE

MANAGEMENT COMMITTEE

BONGANI NTIMBACHIEF INFORMATION OFFICER

MPUME MPANZASPECIALIST MARKETING &

COMMUNICATIONS

LINDA DLADLADEPUTY MANAGER:

SCM

RECHI DLAMINISENIOR PROJECT MANAGER:

CLUSTER 1

PETER SAPSFORDSENIOR PROJECT MANAGER:

CLUSTER 2

MBALI MTAMBOSENIOR PROJECT MANAGER:

CLUSTER 3

SIBONGILE MYAKASENIOR INTERNAL AUDITOR

PHUMLA VILAKAZISPECIALIST: MONITORING &

EVALUATION

THULASIZWE MKHABELACHIEF OPERATIONS OFFICER

THANDEKA NGWENYACHIEF FINANCIAL OFFICER

NOLUTHANDO MKHATHINIMANAGER: FINANCE

MARSHA NELSONDEPUTY MANAGER:

HR

STHEMBISO NGUBANEOFFICE MANAGER


PA RT B:P E R FO R M A N C E I N FO R M AT I O N


10. STATEMENT OF RESPONSIBILITY FOR PERFORMANCE INFORMATION FOR THE YEAR ENDED 31 MARCH 2017

The Chief Executive Officer is responsible for the preparation of the ADA’s performance information and for the judgments made in this information.

The Chief Executive Officer is responsible for establishing and implementing a system of internal control designed to provide reasonable assurance as to the integrity and reliability of performance information.

In my opinion, the performance information reflects the actual achievements against planned objectives, indicators and targets as per the strategic and annual performance plan of ADA for the financial year ended 31 March 2017.

The Agribusiness Development Agency’s performance information for the year ended 31 March 2017 has been examined by the external auditors and their report is presented on page 54 to 98.

The performance information of the ADA set out on page 22 to 36 was approved by the Board

__________________________Dr T.S. MkhabelaActing Chief Executive Officer


11. AUDITOR’S CONCLUSION ON PREDETERMINED OBJECTIVES

The AGSA currently performs the necessary audit processes on the performance information to provide a limited assurance in the form of an audit conclusion. The audit conclusion on the performance against predetermined objectives is included in the audit report.

Refer to page 54 to 98 of the Auditor’s Report, published as PART E : Annual Financial Statements.


12. OVERVIEW OF THE AGRIBUSINESS DEVELOPMENT AGENCY’S PERFORMANCE

EXTERNAL ENVIRONMENTThe world economy’s subdued rate of expansion in 2016, at 3.1%, was the lowest since 2009. Recent developments in the United States and the United Kingdom have added to the concerns over the sustainability of the global growth momentum and its future trajectory. In the United States (US), GDP growth slowed to 1.6% (2.6% in 2015) as household consumption expenditure moderated and private sector fixed investment activity declined markedly. Exports remained under pressure largely due to a strong US dollar and weaker global demand.

In the United Kingdom (UK), the Brexit vote is taking a toll. Economic growth slowed in 2016 and may moderate further over the medium-term. A substantially weaker pound sterling should, however, bolster the country’s export performance. Growth in the eurozone is estimated at 1.7% for 2016. The UK’s decision to withdraw from the European Union is likely to affect the regional bloc’s growth momentum. The Chinese economy expanded by 6.7% in 2016, the weakest performance since 1990, whereas Brazil and Russia again experienced recessionary conditions. India’s GDP continues to expand at a robust pace, with 6.6% growth recorded last year. Sub-Saharan Africa, in turn, has been facing serious headwinds, largely due to generally low commodity prices, weaker domestic demand and reduced fixed investment spending. The regional economy grew by an estimated 1.6% in 2016, the lowest performance in more than two decades.

Although commodity prices recovered to some extent during the year, this was not always supported by market fundamentals. Physical market imbalances prevail in several instances and future movements in US policy rates are expected to have a negative impact on commodity prices. Globally, manufacturing activity is gaining momentum, including in the US, the eurozone and China. The global manufacturing PMI is at a multi-year high. Business and consumer confidence are on the rise in the US, and its economy is operating at close to full capacity. More jobs are being created and the US economy is moving closer to full employment. Economic sentiment in the eurozone is currently at its best level in 6 years and economic growth is now more broad-based across its member states. Stock-markets have been performing generally well, commodity prices have recovered some lost ground, the large emerging economies of Brazil and Russia are likely to emerge from recession, and fears of deflation in the eurozone and China have dissipated. Growth prospects for the global economy are thus set to improve slightly

Growth prospects for the global economy are thus set to improve slightly, but are being clouded by additional layers of uncertainty, specifically the policy stances of the Trump administration in the US regarding issues such as trade, tax, investment and immigration, as well as the UK’s decision to leave the European Union (EU). An increasingly protectionist policy stance in the US would not augur well for the world economy. Although the US economy is forecast to grow at a faster pace due to the fiscal stimulus planned by the new political administration, including tax cuts and spending on infrastructure development, a potential deterioration in trade relations with China and Mexico would have negative implications for global trade and eventually investment flows, affecting the world’s economic performance.

All in all, world economic growth is expected to be on a firmer footing with GDP forecast to expand by 3.4% in 2017 and by 3.6% in 2018. However, the risks to the economic outlook are tilted to the downside.


The South African economy expanded by only 0.3% in 2016, largely due to sharply lower output in the agriculture, mining and electricity sectors. Most other sectors recorded fairly modest rates of expansion. Other than the 2009 recession, when GDP contracted by 1.5%, this was the worst growth performance since 1994. A difficult consumer environment resulted in household consumption expenditure moderating to 0.8% in 2016, from 1.7% in 2015, with a sharp 7.3% drop in spending on durable goods. Household balance sheets are quite stretched due to rising living costs; high levels of indebtedness, difficult access to new credit and higher interest rates; as well as high levels of unemployment and poor employment creation.

A challenging operating environment has not been conducive for fixed investment activity. Gross fixed capital formation fell by 3.9% in 2016, with private sector fixed investment being 6% lower in real terms. Manufacturers have cut back on capital spending in recent years and investment prospects remain largely unsatisfactory for this year. Subdued demand in external markets and a relatively stronger rand saw exports declining marginally in 2016 after 3 years of expansion. Despite the stronger currency, import volumes dropped by 3.7% due to weak consumer and investment demand. Consumer price inflation rose steadily in 2016 to an average of 6.4% for the year. Substantially higher food prices due to severe drought conditions largely underpinned this rising trend.

Consumer price inflation rose steadily in 2016 to an average of 6.4% for the year. Substantially higher food prices due to severe drought conditions largely underpinned this rising trend. Although the Monetary Policy Committee (MPC) raised the repo rate by 75 basis points in the 1st quarter of 2016, rates remained unchanged for the remainder of the year despite a worsening inflation outlook, as the committee was mindful of the economy’s fragile state. The labour absorption capacity of the economy worsened as growth slowed. Only 51 000 new employment opportunities were created in 2016 and the unemployment rate stood at 26.5% by year-end. The current account deficit narrowed to 3.3% of GDP, its best level in 5 years. Weak domestic demand led to sharply lower import volumes, while higher commodity prices supported exports, resulting in a trade surplus of R14.5 billion.

South Africa’s economic prospects remain largely unfavourable in the shorter term. GDP growth is forecast at 1% for 2017, with the pace of expansion likely to gain some momentum in subsequent years.

Household spending should remain constrained in the short-term. Fixed investment activity, in turn, is unlikely to recover meaningfully not only due to the challenging business climate, but also due to the fact that many sectors of the economy have spare production capacity. Difficult trading conditions in global markets and reduced price competitiveness due to a relatively stronger rand may affect South Africa’s export performance in 2017.

The risk of downgrades of the country’s credit ratings still looms large. S&P Global, for example, has expressed concerns over South Africa’s poor economic growth, the performance of its fiscal metrics, including rising government guarantees to financially vulnerable state-owned enterprises, as well as political developments that could weaken government institutions.


SECTORAL COMPOSITION OF THE SOUTH AFRICAN ECONOMY IN 2016

EXTERNAL ENVIRONMENT

Source: IDC, compiled from Stats SA data

Note: Sector share according to GDP at basic prices (current prices)

17%

6% 2%

8%

14%

4% 4%

20%

10%

15%

General government services

Agriculture, forestry

Fishing

Mining and quarrying

Manufacturing

Electricity, gas and water

Construction

Finance, real estate and business services

Transport, storage and communication

Trade, catering and accommodation


13. INTERNAL ENVIRONMENT

Despite the various challenges faced by the organization during the year under review, the ADA recorded some success. The 2016/17 financial year marked the first year in implementing the 5 year strategic plan, which focusses on the agro-processing sector and industrial crops. The organization has made good progress and is gradually adjusting to the change in mandate. Although currently the organization is supporting one agro-processing project, in 2017/18 we envisage that the number of agro-processing projects supported will increase. The ADA remains confident that it`s efforts will make positive impacts in the agribusiness sector and the economy as a whole.

Uncertainties in stable leadership still continue to be a challenge; the organization has not yet appointed a permanent CEO. Furthermore, during the 2016/17 financial year the organization experienced a substantial loss in human resource capacity. This was due to staff resignations, particularly employees in managerial positions and one death. This has led to negative impacts in operational performance, as the lack of capacity was highlighted as a key challenge in the previous financial year.

During the financial year, the organization experienced budget cuts. The funding model used to fund the entity continues to pose a challenge for ADA and project sustainability.


14. SUMMARY OF PROGRAMMES

ADA has four programmes which can be summarized as follows;

PROGRAMME 1: FINANCE AND ADMINISTRATION

The aim of this programme is to ensure good governance and cost effective management and administration. Its main objectives are the provision of finance and supply chain management, office management, information technology, planning, monitoring and evaluation, legal services, marketing and communications.

PROGRAMME 2: COMPREHENSIVE AND CAPACITY BUILDING

The aim of this programme is to enhance the knowledge of the role players within the agribusiness sector through training, mentorship and professionalism in order to strengthen the sector’s social capital base.

To mobilize resources to assist the ADA initiatives, programmes and ongoing activities in its endeavors to facilitate transformation in the agribusiness landscape.

To strengthen the public sectors capacity to support the development aimed at improving policies that guide actions.

PROGRAMME 3: ENTERPRISE AND VALUE CHAIN DEVELOPMENT

This programme is aimed at creating through institutional reforms and incentives, an environment which is favourable for farmers and agribusiness entrepreneurs to unlock business opportunities upstream and downstream the value chain and to access markets.

PROGRAMME 4: INFRASTRUCTURE DEVELOPMENT

This programme is aimed at releasing the physical constraints for the sectors development through the provision of physical infrastructure of the appropriate scale and time.


15. DEPARTMENTAL REVENUE AND EXPENDITURE

15.1 REVENUE

Source of revenue EstimateActual

Amount Collected

Over/Under Collection Estimate

Actual Amount

Collected

Over/Under Collection

DARD 153601 94581.2 -59019.8 111 277.00 99 500.00 -11 777.00

COGTA 14550 14550 0 9 582.00 6 150.00 -3 432.00

Other Income 75 59.6 -15.4 35.00 38.00 3.00

Interest Revenue 1500 1813.704 313.704 1 000.00 927.24 -72.00

Project Management Fees 785 0 -785

Total 170511 111004.5 -59506.5 121 894.00 106 615.24 -15 278.00

15.2 EXPENDITURE

Programme Name Budget Actual Expenditure

Over/Under Expenditure Budget Actual

ExpenditureOver/Under Expenditure

Finance & Administration 50609 37319.03 13289.966 46114 40328 5786

Capacity Building & Mentorship 3000 949.139 2050.861

Enterprise & Value Chain development 500 400.46 99.54

Infrastructure Development 116402 63554.32 52847.683 75780 53211 22569

Total 170 511 102 223 68 288 121 894 93 539 28 355


16. PROGRAMME 1: FINANCE AND ADMINISTRATION

PURPOSETo ensure good governance and cost effective management and administration. Its main objectives are the provision of finance, office management, information technology, monitoring and evaluation and legal services.

STRATEGIC OBJECTIVESFully capacitated human resources able to deliver on its mandateSound and stringent financial management and controlPromote good governance and a legally sound organisation

KEY PERFORMANCE INDICATORS, PLANNED AND ACTUAL ACHIEVEMENTSPerformance Measure Target Actual Reason for Variance

Number of staff trained 45 41 Staff Attrition and vacancies reduced the

number of employees available for training

Develop financial sustainability strategy

Strategy approved by 31 July 2016 Nil

This indicator could not be achieved due to uncertainty surrounding the future state of the ADA. At the time there was the Rationalisation of Public Entities and possible amalgamation of all entities under DARD.

Develop and implement change

management strategy

Strategy approved by Jun 2016 Nil

Process to appoint a service provider to draft the organogram and the strategy was withdrawn due to the review of state owned entities and the proposed amalgamation of DARD entities

Clean audit opinion Clean audit Nil Awaiting outcome of the audit

ADA Bill Promulgated ADA Bill Promulgated by 31 March 2017 Nil

The draft ADA Bill has been finalized by both the ADA and DARD legal departments and approved by the MEC. It now awaits its tabling at the Legislature by the Executive Authority at the opportune time.

New Board of Trustees appointed

New trustees appointed by 30 November 2016

Nil

Shortlisting process was completed in November 2016 however the process is the responsibility of the shareholder and outside the control of the ADA.

Agribusiness Forum established

Agribusiness forum established b 31

August 2016Nil

The ADA is currently reviewing the relevance of this forum in light of existing structures such as Agribusiness Chamber (ABC/Agbiz)

Women and Youth Desk established

Women and Youth Desk established by

August 2016

AchievedADA women`s summit

held


PROGRAMME 2: COMPREHENSIVE CAPACITY BUILDING

PURPOSE

To ensure that black commercial farmers are appropriately skilled

STRATEGIC OBJECTIVE

Key Result Area PerformanceIndicator

Actual performance against target Actual % Achieved Reason for Variance

target

Comprehensive Capacity Building

Number of individuals trained in projects

50 348 696%

Number of prospective clients trained

20 14 70% Budget constrains

Number of workshops and seminars facilitated

3 2 67%

Brand Development programme was not achieved, hence the workshop could not be facilitated.

Agribusiness capacitation strategy developed

Approved by December 2016 Nil

The capacity building manager position has not been filled

Number of projects with management services

4 3 75%

The Thokazi project initially seemed to require management services, however after feasibility done we realized that it was not intended for management services.

Number of Masters students funded 2 Nil 0%

The call for applications was published however the responses were poor. The bursaries will be awarded in the 2017/18 financial year.

Number of study tours hosted 2 3

The communal wine project in Winterton (Okhahlamba) requestyed a study tour to the Eastern Cape Province to learn lessons there.

Number of training partnerships established with institutions/ experts

4 Nil 0%

The capacity building manager position has not been filled and the entity was operating with less than the ideal number of staff compliment.


Key Result Area PerformanceIndicator

Actual performance against target Actual % Achieved Reason for Variance

target

Elective/ Module on Agribusiness developed and signed

MOU with prospective University signed by October 2016

Nil 0%

The capacity building manager position has not been filled.

Agribusiness Schools program developed

MOU with prospective university signed

Nil 0%

The reviewed DARD strategy brought about a new approach where each senior official will adopt a school, thus the need for the MOU fell away.

Number of schools participating in the Agribusiness schools program

20 10 50%

The programme has been discontinued in line with the new DARD strategy on adopting schools by individual officials as opposed to the organization approach.

Number of research papers published and presented

3 Nil 0%

Two papers were submitted and are still undergoing peer-review by the respective journals. The author could only complete two draft papers due to being overstretched as he has multiple responsibilities within the ADA.

Supplier/ Enterprise Development Program Developed

Developed by Mar 2017 Nil 0%

The program is incomplete. It is awaiting finalization and the outcome of the BBBEE verification process to input into the program, approved Cabinet Resolution of the procurement Indaba-2015. In January there was promulgation of the revised PPPFA Regulations- issued by National Treasury which would also require to be incorporated on the program and due for implementation from 01 April 2017.


PROGRAMME 3: ENTERPRISE AND VALUE CHAIN DEVELOPMENT

PURPOSEThis programme is aimed at creating, through institutional reforms and incentives, an environment which is favourable for farmers and agribusiness entrepreneurs to unlock business opportunities upstream and downstream the value chain and to access markets.

STRATEGIC OBJECTIVE

Key Result Area

PerformanceIndicator

Actual Performance against Targets %

Achieved Reason for VarianceTarget Actual

Enterprise and Value Chain development

Number of projects supported 31 25 80%

The ADA could only identify, assess and support 25 projects. Other projects were still at planning and/or engineering design stages. Support to one project (eThala Biofuels) was terminated due to high risks identified and non-compliance on the part of the beneficiaries.

Izithelo project – could not be achieved as the municipality could not confirm the availability of the facilities at the Municipal Market. The project had no site for their agro-processing facility. The project was then put on hold, in order for it to secure a site.

Makhathini Project - The Project was withdrawn in July 2016 due to changes in leadership and DARD’s mandate. Please see email for evidence attached of letter.

Nkwali Project - Service provider was appointed to site and drill borehole but was unable to deliver. Service provider requested variation on original order to implement a new drilling technique. Service Provider’s contract was terminated.


Key Result Area




Msinga Goat ProjectEngineers were appointed however the agreement was cancelled and funds were reallocated from the project. It was suggested that a study tour be conducted to establish if a goat abattoir would be feasible for the Msinga Area.

Muden Project - ideally falls under the Jobs Fund project. Jobs were created for Muden community via Technoserve.

Value of investment in black owned agribusiness enterprises

R80.5 mil R68 501 801 85%

Delays in projects implementation as projects list was signed late and unforeseen delays for the implementation of Thokazi Abattoir due to inefficient engineers from Treasury.

Value chain development strategy developed

Developed by Dec 2016 Nil 0%

Awaiting the finalization of the National Agro processing Strategy that the ADA is part of drafting.

Number of participants in the brand development program

3 Nil 0% This could not be achieved due to budget constraints.

Number of business entities established 2 2 100%

Number of jobs created 282 283 100.3%

Number of youth participating in the youth entrepreneurship development program

10 35 350%


PROGRAMME 4: INFRASTRUCTURE DEVELOPMENT

PURPOSEThis programme is aimed at releasing the physical constraints for the sectors development through the provision of physical infrastructure of the appropriate scale and time.

STRATEGIC OBJECTIVE

Key Result Area




Infrastructure Development

Number of projects supported with logistics support

3 6 200%

Number of enterprises linked to markets 1 1 100%

Market intelligence software application developed

Developed by Mar 2017

Nil 0%

The main partner (Department of Science and Technology) is required to work through DARD. It was not possible to obtain the commitment of the provincial partner to move forward.

Number of projects assisted with infrastructure planning

12 11 92%

Engineers were initially sourced via Department of Treasury for the Thokazi Project, however the service provider did not deliver that came through from Department of Treasury. ADA had to start processes to appoint a new engineer to undertake the work, hence the target was not reached.

Number of feasibility studies completed 3 2 100% MEC of DARD cancelled the

Mnzinyathi Project in July 2016.

Number of abattoirs established 4 Nil 0%

A study tour was undertaken to determine appropriate project focus and scope based on its feasibility outcome (Msinga Goat abattoir).The projects are still at the initial planning phase as the engineers were appointed at the end of March (Nkwali and Thokazi).

Number of agro processing facilities equipped

2 1 50%Delays in the appointment of a contractor to construct the citrus pack-house.

Number of vegetable agro processing facilities established

2 Nil 0%

Facilities at the municipal market. The project had no site for the agro processing. To relook at this project in the 2017/18 year.


Key Result Area




Ha. Of silage developed 70ha 82ha 117%

Ha. Of essential oils planted 18ha Nil 0%

Delays on the funds transfer to SEOBI, but the engineers have been appointed for the irrigation designs and installation.

Number of silos established 1 1 100%

Wine bottling facilities established

Developed by Mar 2017

Nil 0%

The project was delayed by planning activities involved in the project. However, this indicator will be achieved in the second quarter of 2017/18 financial year.

Tons of Chicory roasted 15tons Nil 0%Waiting for the EIA process to be conducted in order to get authorization.

Number of vegetable pack houses developed 2 Nil 0% Insufficient budget to implement

the project.

Value of investment in infrastructure and planning

R63 mil R420 737 803.30 668%


17.1 ACHIEVEMENTS

The ADA has achieved the following during the financial year;

Secured three off-take agreements for Nkunzana. Nkunzana is still in operation even after the original JV collapsed.

Off-take agreement with Pick n Pay for Mpangisweni citrus products.

Entered into a service level agreement with SEOBI which is an essential oil incubator nationally.

Established and implemented cluster/program approach which is expected to have more impact as compared project approach.

Merging two Dabhazi cooperatives to form one company called Maphophoma milling company and being able to proceed with the project implementation.

After the introduction of social facilitation, Nkandla Essential Oils project is back into production and new entrants into the Nkandla essential oil program are coming through.

ADA through cluster III has hosted agricultural professionals study tour in collaboration with National Agricultural Marketing Council, Western Cape Dept. of Agriculture and Western Cape University.

Construction of Mpangisweni citrus pack-house is about 70% completed.

ADA, through cluster III, have undertaken KZN agro-processing conference and visited Chicory project which attracted number of stakeholders in the agro processing space.

Women empowerment partnership with private sector

- The establishment of Women Empowerment Programme gave birth to a strategic partnership with Women of Africa. Women of Africa are in the process of conducting a Gap Analysis exercise with women in agribusiness to determine the state of business readiness. It is expected that this exercise would equip women not only with the right knowledge, skills and expertise but with the much needed confidence to run thriving and sustainable business enterprises as well. The programme would also encapsulate the need for brand development programme.

- Through this partnership, one of the beneficiaries of Cappeny Estates has acquired a Proudly South African endorsement for the strawberries produced on the farm. Proudly SA has extended an invitation to Cappeny Estates to participate in the Proudly SA village in October.


17.2 CHALLENGES

Insufficient staff within the clusters.

Social conflict among the project beneficiaries.

Insufficient budget for projects to be implemented fully.

Unavailability of service providers for some specialized services.


PA RT C:CO R P O R AT E G OV E R N A N C E


18. INTRODUCTION

Corporate governance embodies processes and systems by which public entities are directed, controlled and held to account. In addition to legislative requirements based on a public entity’s enabling legislation, and the Companies Act, corporate governance with regard to public entities is applied through the precepts of the Public Finance Management Act (PFMA) and run in tandem with the principles contained in the King’s Report on Corporate Governance.

EXECUTIVE AUTHORITY

The MEC for Agriculture and Rural Development is responsible for providing oversight over the ADA.

19. THE ACCOUNTING AUTHORITY / BOARD

BOARD OF TRUSTEES

The role and Function of the ADA Board:

The Board of Trustees of the ADA is the Accounting Authority for the entity. All non-executive members of the board are appointed in accordance with Chapter 4 of the Amended Trust Deed of the Agribusiness Development Agency and are accountable to the shareholder.

In fulfilling its function, the Board exercises its leadership role by:

• Steering the entity and setting its strategic direction;

• Approving policies and planning that give effect to the direction provided;

• Overseeing and monitoring of implementation and execution by management; and

• Ensuring accountability for organisational performance by means of, among others, reporting and disclosure.

DELEGATIONS

Through the different well-structured Board Committees, the Board delegates certain functions but without abdicating its own responsibilities. Delegation is formal and it involves:

• Formal terms of reference which are established and approved and reviewed annually for each committee of the Board,

• The committees are appropriately constituted with due regard to the skills required by each committee,

• And a framework for delegating authority to management has been established and approved by the Board.

COMMENTARY ON THE BOARD CHARTER

The purpose of the Charter is to regulate the parameters within which the board operates and to ensure the application of the principles of good corporate governance in all dealings by, in respect of and on behalf of the entity.


In keeping with the principles of good corporate governance, the Board Charter is reviewed annually. Under the current year of review, the Charter was reviewed and approved.

Composition of the Board

Name Designation Date appointed

Date resigned Qualifications

No. of Meetings

held

No. of Meetings attended

Dr MS Mbatha Chairperson Reappointed

on 01/11/2013

Post-Doctoral Studies on Social and Economic Policies.

PhD in Social Welfare Policy, Master of City Planning.

Master of Social Sciences.

B.A. Honours in Social Work

10 10

Dr ME Ngidi Deputy Chairperson 01/11/2013

PhD in Poultry Science, Master’s Degree in Dairy Science.

Bachelor of Science in Agriculture. Diploma in Animal Health and Extension

10 10

Adv. RR Nirghin Member

Reappointed on

01/11/2013

Bachelor of Arts

Bachelor of Laws LLB10 8

Dr DB Mkhwanazi Member 01/11/2013 Deceased on

02/07/2016

Master of Business Administration, B.A.

Post Graduate Diploma in Marketing. Graduate Diploma in Company Direction

10 2

Mr WR Dladla Member 01/11/2013

Diploma in Agriculture.

Bachelor of Agriculture.

Hon. Bachelor of Agricultural Economics

10 8

Mr ZI Ngcobo MemberReappointed

on 01/11/2013

Bachelor of Business Administration 10 9

Mrs P Dabideen Member 01/11/2013

Bachelor of Procuration (B.Proc). AIPSA Dip in Insolvency Law.

Adv. Diploma in Insolvency Litigation. Diploma in Business Rescue

10 9

Ms N Zwane Member 010/11/2013

M.Sc. Agricultural Science.

Diploma in Agricultural Science.

B.Sc. Chemistry/ Botany.

10 7


BOARD COMMITTEES

Committee No. of meetings held

No. of members Name of members

Human Resource and Remuneration Committee 4 5

Mrs P Dabideen – ChairpersonMs N ZwaneAdv. RR NirghinMr ZI NgcoboDr DB Mkhwanazi

Projects and Finance Committee 4 5

Ms N Zwane – ChairpersonMrs P DabideenMr WR DladlaDr ME NgidiDr DB Mkhwanazi

Audit and Risk Committee 4 6

Mr I Simjee – ChairpersonMr BA NgcoboMr SL NdlovuMr ZI NgcoboAdv. RR NirghinDr ME Ngidi

Remuneration of board members • How remuneration of Board members is determined;• Those members that are not remunerated;• Other expenses e.g. Travel , reimbursed by the public entity• State the amount of remuneration paid to each board member.

Name Remuneration Committee Other allowance

Other re-imbursements Total

Dr Martha Mbatha-Chairperson 500 953.00 Board Committee - - 500 952.76

Dr. Edwin Ngidi -Deputy chairperson 250 475.00 Board

Committee - - 250 475.12

Adv. Ranjiv Nirghin 101 763.00 Board Committee - - 101 763.34

Meson Zwane 101 763.00 Board Committee - - 101 763.34

Mr. Bongani Donald Mkhwanazi 50 881.00 Board Committee - - 50 881.34

Ms. Preetha Dabideen 76 323.00 Board Committee - - 76 322.67

Mr Zama Ngcobo 101 763.00 Board Committee - - 101 763.34

Mr Wakhe Richards Dladla 101 763.00 Board Committee - - 101 763.34

Mr Ismail Simjee-Chairperson 86 440.00 Audit Committee - - 86 440.30

Mr. Aubrey Ngcobo 38 160.00 Audit Committee - - 38 159.91


Name Remuneration Committee Other allowance

Other re-imbursements Total

Mr Sihle Ndlovu 28 620.00 Audit Committee - - 28 619.95

Adv. Nirghin 38 160.00 Audit Committee - - 38 159.91

Mr Zama Ngcobo 38 160.00 Audit Committee - - 38 159.91

Dr. Edwin Ngidi 38 160.00 Audit Committee - - 38 159.91

MP Dabideen-Chairperson 58 936.00 Human

Resource Committee

- - 58 935.58

Mr. D Mkhwanazi 6 710.00 Human

Resource Committee

- - 6 710.10

Ms N Zwane 26 840.00 Human

Resource Committee

- - 26 840.20

Adv. R Nirghin 26 840.00 Human

Resource Committee

- - 26 840.20

Mr Zama Ngcobo 26 840.00 Human

Resource Committee

- - 26 840.20

Mr. B Donald Mkhwanazi-Chairperson 14 734.00

Project and Finance

Committee - - 14 733.79

Mr Wakhe Richards Dladla 26 840.00 Project and

Finance Committee

- - 26 840.20

Dr. Edwin Ngidi 26 840.00 Project and

Finance Committee

- - 26 840.20

Ms. Preetha Dabideen 20 130.00 Project and

Finance Committee

- - 20 130.20

Ms. N Zwane -Chairperson 50 911.00 Project and

Finance Committee

- - 50 911.00

1 839 007.00 - - 1 839 007.00


20. RISK MANAGEMENT

20.1 RISK MANAGEMENT REVIEWADA applies the risk management framework approved by the National Treasury to identify, evaluate, monitor and report on the risks identified by management and the Board. The risk identification process is aligned to the approved strategic plan document of the organization.

The organization ensures that risks are identified at both the strategic and operational levels. Where controls are found to be inadequate, action plans are formulated to strengthen these controls in order to bring the risks to acceptable levels.

The Audit and Risk Committee plays an oversight role over risk management matters of the organization by reviewing management reports and provide guidance to strengthen internal controls during its meetings that occur every quarter.

During the 2016/2017 financial year, the organization made a significant progress by extending its risk management activities to projects to ensure that the risks that threaten the survival of supported projects are mitigated before they stifle positive interventions made by the organization to improve the agricultural sector in the province.

21. INTERNAL AUDIT AND AUDIT & RISK COMMITTEE

21.1 RISK BASED AUDIT AS PER THE INTERNAL AUDIT PLAN• Supply chain management• Asset HR• Management EPMPS

LEGISLATIVE AUDITS• Review of quarterly and final performance information• Review of the financial statement

21.2 INTERNAL AUDIT AND AUDIT COMMITTEES

21.2.1 INTERNAL AUDIT

KEY ACTIVITIES AND OBJECTIVES OF THE INTERNAL AUDIT• To be an independent, objective, assurance and consulting activity that is designed to add value

and improve the operations of ADA.

• To assist the management of ADA to accomplish their objectives by bringing a systematic and disciplined approach in evaluating and improving the effectiveness of internal controls, governance and risk management processes.


KEY ACTIVITIES AND OBJECTIVES OF THE AUDIT COMMITTEE• The Audit Committee serves as an independent governance structure whose function is to

provide an oversight role on the systems of internal control, risk management and governance

• The Audit Committee assists the Accounting Officer in the effective execution of his responsibilities with the ultimate aim of the achievement of the organisation’s objectives

COMPLIANCE WITH LAWS AND REGULATIONSCompliance with legislation is one of the prioritized management areas within the ADA and in all activities. At all times ADA management strives to ensure proper procedures are followed and the policies of ADA are adhered to.

The manager for Legal Services is tasked with the responsibility to monitor compliance with applicable prescripts and report to the CEO on the status of compliance across the institution. During the period under review, compliance checklists were developed for the assessment of compliance with prioritized prescripts.

The Legal Services Unit has developed a comprehensive contract register which assist ADA in ensuring that the management and compliance with contracts. The Section will ensure as ADA progress that there is 100% compliance with the PFMA, King Code, PPPFA and other legislative prescripts.

FRAUD AND CORRUPTIONDuring the annual risk assessment exercise, management identifies areas where fraud and corruption is likely to occur. Policies and procedures are enhanced to minimize the likelihood of occurrence of these fraudulent and corrupt activities within the organization. The ADA staff members have a direct access to senior management, chairperson of the audit committee and chairperson of the board whenever they wish to report activities of this nature. The management and members of the board have a duty to investigate the reported suspected activities in order to bring the perpetrators to book. The ADA has gone a step further by establishing a fraud hotline which individuals can use to report any activities of fraud and corruption while remaining anonymous should they choose to do so.

MINIMISING CONFLICT OF INTERESTIn order to minimise conflict of interest the Agribusiness Development Agency has enforced that all its senior officials and those that sit on its bid committees sign a declaration of business interest form annually and at each Bid meeting. In instances where a member has identified a possible area of conflict, they have to recues themselves from the meeting.a. SCM officials and other role players in SCM are familiarized with the code of conduct; of which

conflict of interest is mentioned as one of the pillars. The officials are required to acknowledge by signing the code of conduct and also declaration of interest forms on each and every bid committee meetings/any ad hoc meetings intended for deliberating on SCM issues. Whenever there is a conflict of interest, the individual will disclose and be recused from the deliberations.

b. With regards to conflict of interest – service providers/suppliers; the issue of conflict of interest is contained as one of the special conditions of bid. The clause states that bidders should not perform any assignment that would be in conflict with their prior or current obligations to other clients, or that may place them in a position of not being able to carry out the assignment in the best interest of the Agency. In addition, the service providers/suppliers are required to disclose information by signing the following declarations;


- SBD 4 Form “declaration of interest”; - SBD 9 Form “Certificate of independent bid determination”, and - SBD 8 Form “Declaration of Bidders’ past SCM practices.

* In all of the above, the onus to disclose lies with the individual/ service provider. Currently, the entity does not have an automated system in place for identifying issues of conflict of interest. However if it is found that there was a misrepresentation of information; the bidder is notified and the company and its directors gets listed on National Treasury’s list of restricted suppliers for a certain period.

CODE OF CONDUCTThe conduct of board members and employees of the organisation is governed by the ADA Code of Ethics and Conduct, which has been approved by the board and circulated to all employees. The ADA Code of Ethics outlines ethical values that underpin ethical behaviour across the ADA. To foster implementation of the Code of Ethics and Conduct, an Anti-Corruption Strategy, which forms part of the risk management process, has been approved by the board to provide a framework for the management of ethics risks across the ADA.

The Anti-Corruption Strategy makes provision for protected disclosure of corrupt activities such as theft, fraud, dishonesty, harassment or any other unethical behaviour through the Code of Ethics and Conduct Fraud Hotline (0800 212 124).

The Office of the CEO Legal Services has been entrusted with the responsibility to facilitate the management of conflict of interest, by ensuring that board members and eligible employees declare their business interests annually. Declared business interests are recorded in the register of interests, which is also utilized in the development of related transactions report. The Board member declarations are also lodged with the Executive Authority.

Declaration of interests is done by ADA during interviews, bid adjudication, bid evaluation and other management meetings. Any related parties transactions for the period under review are reported in the annual financial statements section of this report. Through its anti-corruption campaign, the ADA has also joined the world in saying, ‘No’ to corruption by being part of the ‘Corruption:

In an effort to strengthen its contribution towards building an ethical South Africa, the ADA has partnered with the Ethics Institute of South Africa (Ethics SA). This partnership puts an obligation on ADA management to lead by example and ensure that their decisions are transparent and beyond reproach. It also provides every ADA employee with an opportunity to pledge their commitment to prevent and combat corruption in their area of responsibility.

HEALTH, SAFETY AND ENVIRONMENTAL ISSUESThe care-ways group was appointed as a service provider to assists the organization by conducting wellness programmes to enhance the well-being of employees and create a conducive working environment. In the previous financial year the Care-ways Group coordinated the Men’s health Day and the Women’s Day’ wellness programmes both these events focused primarily on living a healthy lifestyle. The Occupational health and welfare policy was approved by the Board. The Department is liaising with the Department of Labour to assist with capacity in this regard. In the interim the ADA has appointed Safety Officers who will under training in all areas of occupational health.

COMPANY SECRETARYThe role of the Company Secretary or Board Secretary is to ensure compliance with statutory and regulatory requirements as well as ensuring that decisions of the Board of Trustees are implemented.


The Company Secretary also ensures that the Board of Trustees comply and operate within the law by keeping them informed of their legal responsibilities and good governance. She is also responsible for the coordination and administration of the different Board Committees, namely; the Audit and Risk Committee, the Human Resources and Remuneration Committee and finally, the Projects and Finance Committee.

21.2.2 CORPORATE SOCIAL INVESTMENT WOMEN EMPOWERMENT PROGRAMMEWomen Empowerment programme has been established with a group of 60 women in agriculture and agribusiness. The colloquium held with the target audience and relevant stakeholders interrogated the draft strategy which resulted to a compilation of an action plan envisaged to address specific challenges faced by women in the agribusiness sector with workable solutions.

Strategic partnership has been formed with the private sector to assist with capacity building in ensuring business readiness.

YOUTH EMPOWERMENT PROGRAMMEYouth Empowerment programme has been established with a group of 40 young farmers and agribusiness entrepreneurs including those who participated in the Young Farmers Development Programme 2015. The social dialogue revealed the level of enthusiasm that KZN youth has in participating in the agricultural sector.

The projects that require financial support were presented by project owners and an action plan was produced. The groups were appropriately segmented.

A need for a Youth Innovation Sub-Programme was recommended. The agricultural sector is in need of young disruptors.

AGRIBUSINESS SCHOOLS DEVELOPMENT PROGRAMME Schools gardening project

Notwithstanding the revised approach on the agribusiness schools development program, that being, senior officials to adopt a school as opposed to organisational approach. It ought to be reported that 2016/17 saw the programme gaining momentum as the number of schools supported increased from 15 to 31. The impact spreads to community involvement in relation to subsistence farming as the learners are encouraged to practice farming in their home gardens. This practice does not only promote agricultural activities in schools but invigorates community interest in growing their own food particularly poverty stricken families and communities.


22. REPORT ON THE AUDIT AND RISK COMMITTEE FOR THE YEAR ENDED 31 MARCH 2017

INTERNAL AUDIT AND AUDIT COMMITTEES

OBJECTIVEThe audit and risk committee serves as an independent body to assist the Board with its responsibility for safeguarding assets, maintaining effective and efficient internal controls, risk management, reviewing the financial information and overseeing the preparation of the financial statements.

AUDIT COMMITTEE MEMBERS AND ATTENDANCEThe audit and committee consists of 3 independent, suitably experienced and external members and 3 Board members listed hereunder and meets at least every quarter as per its approved terms of reference.

During the financial year ended 31 March 2017, the following meetings were held:Members Name Qualifications Designation Meeting Attendance

12 MAY ‘16 24 AUG ‘16 30 NOV ’16 13 MAR ’17

Mr. I Simjee CA(SA) CIA Chairperson √ √ √ √

Mr. A Ngcobo BSc. and LLB Member √ √ √ √

Mr. S Ndlovu MBA, CIMA Advanced Diploma Member √ - √ √

Adv. R Nirghin BA LLB degree Member √ √ - √

Mr. Z Ngcobo BBA Member √ √ √ √

Dr ME Ngidi PhD in Poultry Science, Master’s Degree in Dairy Science

Member √ √ √ √

The Acting Chief Executive Officer, Chief Financial Officer and senior management (per invitation) and representatives from both external and internal audit attend the committee meetings.

AUDIT COMMITTEE RESPONSIBILITIESThe Audit Committee reports that it has complied with its responsibilities arising from Section 38 (1)(a) of the PFMA and Treasury Regulations 3.1.13. The Audit Committee also reports that it has adopted formal terms of reference as its audit committee charter and has regulated its affairs in compliance with this charter. The audit committee has reviewed its charter during the year and has made amendments which were subsequently approved by the Board of Trustees. The Committee has discharged its responsibilities as contained in the Charter.

EFFICIENCY AND EFFECTIVENESS OF INTERNAL CONTROLSThe system of internal control employed by the entity to financial and risk management is partially effective, efficient and transparent. In line with the PFMA and the recommendations from the King III Report on Corporate Governance requirements, Internal Audit provides the Audit Committee and management with assurance that the internal controls are appropriate and effective. This is achieved by means of the risk management process, as well as the identification of corrective actions and


suggested enhancements to the controls and processes. From the various reports of Internal Audit, the Audit Report on the annual financial statements and the management report of the Auditor-General South Africa, it was noted that certain matters were reported indicating deficiencies in the system of internal control. It is of crucial importance that the issues reported should receive ongoing attention and focus by management in order to effect qualitative administration and financial management within the entity. Management has committed to implement corrective action and this will be closely monitored by the Audit Committee.

INTERNAL AUDITThe Audit Committee considers the internal audit function to be under-resourced and unable to operate optimally, given its current resources and budget, in order to adequately fulfill its mandate and address the risks pertinent to the entity.


23. REVIEW OF ANNUAL FINANCIAL STATEMENTSThe Audit Committee has noted with concern the qualified opinion expressed by the Auditor-General in his report on the Annual Financial Statements. The Audit Committee urges management to implement corrective action to address the issues which form the basis for the qualified opinion. These include:• adequate oversight, monitoring and reconciliation of project expenditure incurred by

implementing agents;• the correct accounting and recording of project expenditure to avoid any material misstatements

in the annual financial statements;• Corrective measures to improve the usefulness and reliability of reported performance

information.

THE AUDIT COMMITTEE HAS ALSO;• Reviewed and discussed the audited Annual Financial Statements, to be included in the annual

report, with the Auditor General, management and the accounting officer;• Reviewed significant adjustments resulting from the audit; and• Concluded that the going concern premise is appropriate in preparing the Annual Financial

Statements.

RISK MANAGEMENTThe Committee has been encouraged by efforts made by management in implementing the recommendations included in the risk management review report by the independent consulting firm and by putting in place effective risk management strategies. The Audit Committee will continue to monitor on an ongoing basis the implementation plan and the corrective action by management to resolve the identified shortcomings.

PERFORMANCE MANAGEMENTThe Committee has taken note of the findings of the Auditor-General on performance information during the year under review. Management has been urged to develop a comprehensive plan to address the issues of usefulness and reliability of reported performance information. The committee shall further commit to guiding management in developing effective structures and mechanisms to mitigate a future re-occurrence of the issues as reported by the office of the Auditor General.

INVESTIGATIONDuring the year the investigation into a number of HR management and miscellaneous issues that commenced in the previous year was completed by the independent forensic firm and the final report was issued. The forensic report made a number of recommendations to the Board. The Audit Committee has reviewed the report and the action taken by the Board in implementing the recommendations. The Committee is of the opinion that the action taken by the Board is wholly inadequate and this has been communicated to the Board.

CONCLUSIONThe audit committee concurred with and accepted the Auditor General’s conclusions on the Annual Financial Statements for the year ended 31 March 2017 and recommends that the audited Annual Financial Statements be adopted by the Board.

I would like to take this opportunity to thank the members of the Audit Committee for their support and dedication in fulfilling their responsibilities. Furthermore, I would like to thank the Board of Trustees for their continued support through the year.

__________________________I SimjeeChairperson28 July 2017


PART D:HUMAN RESOURCE MANAGEMENT


24. HUMAN RESOURCE MANAGEMENT

EXPENDITURE

TABLE 1.1 - PERSONNEL COST BY PROGRAMME

Programme Total Expenditure for the entity (R’000)

Personnel Expenditure (R’000)

Personnel exp. as a % of total

exp. (R’000)

No. of employees

Average personnel cost per employee

(R’000)

Finance & Administration 102 222 953.00 23 171 715.00 23% 55 421 303.91

Total R102 222 953.00 R23 171 715.00 23% 55 421 303.91

TABLE 1.2 - PERSONNEL COST BY SALARY BAND

Level Personnel Expenditure (R’000)

% of personnel exp. to total personnel cost

(R’000)

No. of employees

Average personnel cost per employee

(R’000)

Board Pay 1 839 007 8% 24 76 625

Top Management 2 320 262 10% 4 580 066

Senior Management 3 707 081 16% 2 1 853 541

Professional qualified 3 806 784 24% 3 1 268 928

Skilled 6 567 760 38% 19 345 672

Semi-skilled 4 930 821 18% 27 182 623

TOTAL 23 171 715 79 4 307 454

TABLE 1.3 - PERFORMANCE REWARDS

Programme Performance rewards Personnel Expenditure (R’000)

% of performance rewards to total personnel cost (R’000)

Top Management

No performance rewards were paid

Senior Management

Professional qualified

Skilled

Semi-skilled

Unskilled

TOTAL


TABLE 1.4 - TRAINING COSTS

Directorate/ Business Unit

Personnel Expenditure

(R’000)

Training Expenditure

Training Expenditure as a

% of trainingNo. of

employees trained

Avg training cost per

employee(R’000) Cost.

Board Pay 1 839 007.00 84 673.39 5% 24 3 528.06

Top Management 2 320 262.00 26 035.00 1% 4 6 508.75

Senior Management

3 707 081.00 9 355.86 0% 2 4 677.93

Professional qualified

3 806 783.98 59 842.41 2% 3 19 947.47

Skilled 6 567 759.99 299 347.44 5% 19 15 755.13

Semi-skilled 4 930 821.03 141 095.90 3% 27 5 225.77

TOTAL 23 171 715.00 620 350.00 79 55 643.11

TABLE 1.5 - EMPLOYMENT AND VACANCIES

Programme 2016/2017No. of Employees

2016/2017 Approved Posts

2016/2017Vacancies % of vacancies

Top Management 4 5 1 5%

Senior Management 2 7 5 28%

Professional qualified 3 7 4 23%

Skilled 19 25 6 34%

Semi-skilled 27 15 2 10%

Unskilled

TOTAL 55 54 17 100%

TABLE 1.6 - EMPLOYMENT CHANGES

Salary Band Employment at beginning of period Appointments Terminations Employment at end

of the period

Top Management 4 0 2 2

Senior Management 3 0 2 1

Professional qualified 11 0 0 11

Skilled 19 0 4 15

Semi-skilled 7 14 6 15

Unskilled

Total 44 14 14 44


TABLE 1.7 - REASONS FOR STAFF LEAVING Reason Number % of total no. of staff leaving

Death 1 7%

Resignation 9 64%

Dismissal 0

Retirement 0

Ill health 0

Expiry of contract 4 29%

Other

Total 14 100%

TABLE 1.8 - LABOUR RELATIONS: MISCONDUCT AND DISCIPLINARY ACTIONNature of disciplinary Action Number

Verbal Warning N/A

Written Warning N/A

Final Written warning N/A

Dismissal N/A


PART E: ANNUAL FINANCIAL STATEMENTS


25. ANNUAL FINANCIAL STATEMENTS

Report of the auditor-general to the KwaZulu-Natal Provincial Legislature on Agribusiness Development Agency Trust

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OPINION 1. I have audited the financial statements of the Agribusiness Development Agency Trust as set out

on pages 61 to 98, which comprise the statement of financial position as at 31 March 2017, the statement of financial performance, statement of changes in net assets and cash flow statement for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.

2. In my opinion, except for the possible effects of the matter described in the basis for qualified opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Agribusiness Development Agency Trust as at 31 March 2017, and its financial performance and cash flows for the year then ended in accordance with the South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA).

BASIS FOR QUALIFIED OPINION PROJECT EXPENDITURE3. I was unable to obtain sufficient appropriate audit evidence for project expenditure paid to

an implementing agent, as the entity did not maintain appropriate records of the relevant transactions. I was unable to confirm these expenses by alternative means. Consequently, I was unable to determine whether any adjustments were necessary to project expenditure stated at R68, 50 million (2016: R60, 30 million) in the statement of financial performance. Additionally there was a resultant impact on the surplus for the period and on the accumulated surplus.

4. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the auditor-general’s responsibilities for the audit of the financial statements section of my report.

5. I am independent of the entity in accordance with the International Ethics Standards Board for Accountants’ Code of ethics for professional accountants (IESBA code) and the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA code.

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

EMPHASIS OF MATTER7. I draw attention to the matter below.

IRREGULAR EXPENDITURE8. As disclosed in note 26.1 to the financial statements, irregular expenditure to the amount of R2,

8 million was incurred, as a proper tender process had not been followed.


RESPONSIBILITIES OF THE ACCOUNTING AUTHORITY FOR THE FINANCIAL STATEMENTS9. The board of trustees which constitutes the accounting authority is responsible for the preparation

and fair presentation of financial statements in accordance with SA Standards of GRAP and the requirements of the PFMA and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

10. In preparing the financial statements, the accounting authority is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless there is an intention to liquidate the entity or to cease operations, or there is no realistic alternative but to do so.

AUDITOR-GENERAL’S RESPONSIBILITIES FOR THE AUDIT OF FINANCIAL STATEMENTS 11. My objectives are to obtain reasonable assurance about whether financial statements as

a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

12. A further description of my responsibilities for the audit of the financial statements is included in the annexure to the auditor’s report.


26. REPORT ON THE AUDIT OF THE ANNUAL PERFORMANCE REPORTINTRODUCTION AND SCOPE 13. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the

general notice issued in terms thereof I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

14. My procedures address the reported performance information, which must be based on the approved performance planning documents of the entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters.

15. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected programmes presented in the annual performance report of the entity for the year ended 31 March 2017:

Programmes Pages in the annual performance report

Programme 2 - Comprehensive capacity building 1 - 2

Programme 3 - Enterprise and value chain development 2 - 3

Programme 4 - Infrastructure development 3 - 4

16. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete.

17. The material findings in respect of the usefulness and reliability of the selected programmes are as follows:

PROGRAMME 2: COMPREHENSIVE CAPACITY BUILDING VARIOUS INDICATORS

18. The source information and evidence for the achievement of the planned indicator was not clearly defined, as required by the framework for managing programme performance information for the following indicators:

n Number of research papers published and presented n Number of training partnerships established with institutions/ experts


PROGRAMME 3: ENTERPRISE AND VALUE CHAIN DEVELOPMENTValue of investment in black owned agribusiness enterprise (valued above R2 million)

19. I was unable to obtain sufficient appropriate audit evidence for the reported achievement of the value of investment in black owned agribusiness enterprise (valued above R2 million). This was due to limitations placed on the scope of my work and no supporting evidence provided for the achievement of the target. I was unable to confirm the reported achievement by alternative means. Consequently, I was unable to determine whether any adjustments were required to the reported achievement of R68, 5 million.

PROGRAMME 4: INFRASTRUCTURE DEVELOPMENTVALUE OF INVESTMENT IN INFRASTRUCTURE PLANNING

20. The reported achievement for the target of R63 million (project expenditure) was misstated as the evidence provided indicated project expenditure including infrastructure planning of R68,5 million as disclosed in the annual financial statements and not R0 as reported in the annual performance report.

OTHER MATTERS 21. I draw attention to the matters below:

Achievement of planned targets

22. The annual performance report on pages xx to xx for information on the achievement of planned targets for the year and explanations provided for the under/overachievement of targets. This information should be considered in the context of the material findings on the usefulness and reliability of the reported performance information in paragraphs 18-20 of this report.

Adjustment of material misstatements

23. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements were on the reported performance information of comprehensive capacity building, enterprise and value chain development and infrastructure development. As management subsequently corrected only some of the misstatements, I reported material findings on the usefulness and reliability of the reported performance information.

27. REPORT ON AUDIT OF COMPLIANCE WITH LEGISLATION

INTRODUCTION AND SCOPE 24. In accordance with the PAA and the general notice issued in terms thereof, I have a responsibility

to report material findings on the compliance of the entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

25. The material findings in respect of the compliance criteria for the applicable subject matters are as follows:

ANNUAL FINANCIAL STATEMENTS26. The financial statements submitted for auditing were not prepared in accordance with the

prescribed financial reporting framework and supported by full and proper records as required


by section 55(1)(a) and (b) of the PFMA. Material misstatements identified by the auditors on project expenditure were not adequately corrected and the supporting records could not be provided subsequently, which resulted in the financial statements receiving a qualified audit opinion.

PROCUREMENT AND CONTRACT MANAGEMENT27. A contract with a transaction value above R500 000 was procured without inviting competitive

bids, as required by treasury regulation 16A6.1.

OTHER INFORMATION

28. The accounting authority of the Agribusiness Development Agency Trust is responsible for the other information. The other information comprises the information included in the annual report. The other information does not include the financial statements, the auditor’s report thereon and those selected programmes presented in the annual performance report that have been specifically reported on in the auditor’s report.

29. My opinion on the financial statements and findings on compliance with legislation with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon.

30. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected programme presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information obtained prior to the date of this auditor’s report, I conclude that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard.

INTERNAL CONTROL DEFICIENCIES31. I considered internal control relevant to my audit of the financial statements, reported

performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance thereon. The matters reported below are limited to the significant internal control deficiencies that resulted in the basis for qualified opinion, the findings on the annual performance report and the findings on compliance with legislation included in this report.

LEADERSHIP32. The accounting authority did not exercise adequate oversight responsibility regarding financial

and performance reporting and compliance with applicable legislation as the financial statements and the annual performance report submitted for auditing contained material misstatements.

FINANCIAL AND PERFORMANCE MANAGEMENT

33. Management did not ensure that regular, accurate and complete performance reports were prepared and supported by reliable information. This was due to vacancies in the performance monitoring and evaluation unit.


34. Management did not implement proper record keeping in a timely manner to ensure that complete, relevant and accurate information was accessible and available to support financial and performance reporting. The action plans of management were not timeously implemented to ensure deficiencies were addressed from the prior year.

OTHER REPORTS

35. I draw attention to the following investigations conducted by an independent consulting firm that had, or could have, an impact on the matters reported in the entity’s financial statements, reported performance information, compliance with applicable legislation and other related matters. These reports did not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation.

INVESTIGATIONS36. An independent consulting firm conducted investigations into a range of human resource

management issues and miscellaneous allegations that were reported to the audit committee during the previous financial year. These investigations were completed in the current year. Management had referred the matters to their legal representatives for further action.

Pietermaritzburg

3 August 2017

A U D I T O R - G E N E R A L

S O U T H A F R I C A

Auditing to build public confidence


ANNEXURE – AUDITOR-GENERAL’S RESPONSIBILITY FOR THE AUDIT1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain

professional scepticism throughout my audit of the financial statements, and the procedures performed on reported performance information for selected programmes and on the department’s compliance with respect to the selected subject matters.

FINANCIAL STATEMENTS2. In addition to my responsibility for the audit of the financial statements as described in the

auditor’s report, I also:

• Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 department’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the accounting officer.

• Conclude on the appropriateness of the accounting officer’s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists relating to events or conditions that may cast significant doubt on the KwaZulu-Natal Department of Agriculture and Rural Development’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor’s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of the auditor’s report. However, future events or conditions may cause a department to cease operating as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE3. I communicate with the accounting officer regarding, among other matters, the planned scope

and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit.

4. I also confirm to the accounting officer that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and, where applicable, related safeguards.


1. FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2017

INDEXThe reports and statements set out below comprise the financial statements presented to the:

INDEX PAGEResponsibility of the Trustees............................................................................................................72

Statement of Financial Position .........................................................................................................73

Statement of Financial Performance .................................................................................................74

Statement of Changes in Net Assets .................................................................................................75

Cash Flow Statement .........................................................................................................................76

Statement of comparison in Budget and Actual ................................................................................77

Accounting Policies .....................................................................................................................78 - 94

Notes to the Financial Statements .......................................................................................... 94- 114


CORPORATE INFORMATION

Registration number IT 2041/1999

Registered office 5 Cascades Crescent Cascades Office Park Montrose KwaZulu-Natal Pietermaritzburg 3202

Postal address Private Bag X01 Cascades Montrose 3202

Trustees Dr MS Mbatha ME Ngidi, R Nirghin, N Zwane BD Mkhwanazi - Deceased in July 2016 P Dabideen SA Ndlela - Resigned in December 2015 IZ Ngcobo WR Dladla

Auditors Auditor - General South Africa

Preparer The financial statements were internally compiled by: Ms. T Ngwenya - Chief Financial Officer and approved by the Board of Trustees

Bankers ABSA Bank 4 Frosterley Park, La Lucia Ridge, Durban

Nature of business and principal activities The Agribusiness Development Agency is a public entity that was established in 2009 to serve as a special purpose vehicle to drive socio-economic transformation in the agricultural and agribusiness sector in KwaZulu-Natal.

The Agency provides holistic agricultural support services to entrant commercial farmers, focusing mainly on previously disadvantaged farmers, who have acquired land through the government’s Land Reform Programme and on private basis. The ADA also aims to develop strategies to address inequities, create opportunities for the farmers to participate in the value chain, provide access to markets and foster sustainability in the agricultural sector.


2. RESPONSIBILITY OF THE TRUSTEES

The Trustees are responsible for the maintenance of adequate accounting records. It is their duty to ensure that the preparation of financial statements is done efficiently. Integrity is insisted upon in all of the functions of the Trustees. Auditors have the responsibility of reporting on the fair representation of the financial statements.

The financial statements have been prepared in accordance with South African Standards of Generally Recognised Accounting Practice and in the manner required by the Public Finance Management Act.

The Trustees are also responsible for the Trust’s systems of internal financial control as well as to ensure that appropriate accounting policies supported by reasonable and prudent judgment and estimates, are applied on a consistent and going concern basis. The system of internal control is designed to provide reasonable, but not absolute assurance as to the reliability of the financial statements and to adequately safeguard, verify and maintain accountability of assets, and to prevent and detect misstatement and loss. The Trustees, are of the opinion, based on the information and explanations given and on comment by the independent external auditors on the results of their statutory audit, that the Trust’s internal accounting controls are adequate, so that the financial records may be relied upon for preparing the financial statements and maintaining accountability for assets and liabilities. The Trustees believe that the Trust’s assets are protected and used as intended in all material respects with appropriate authorisation. Nothing has come to the attention of the Trustees to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review.

In preparing the financial statements, the Trust has used appropriate accounting policies, supported by reasonable judgments and estimates, and has complied with all applicable accounting standards.

The financial statements have been prepared on the going concern basis, since the Trustees have every reason to believe that the Agency has adequate resources in place to continue in operation for the foreseeable future.

The financial statements set out on pages 5 to 33 were approved by the board of Trustees on 03 August 2017 and are signed on their behalf by:

__________________________Dr M.S. MbathaChairperson of the ADA Board of Trustees


Statement of Financial Position as at 31 March 2017

Figures in Rand Note(s) 2017 2016

Assets

Current Assets

Receivables from non-exchange transactions 7 793 547 760 019

Prepaid expense 6 140 021 184 243

Deposits 17 118 27 118

Cash and cash equivalents 3 26 488 085 25 273 080

27 438 771 26 244 460

Non-Current Assets

Property, plant and equipment 2 2 610 455 3 282 389

Intangible assets 4 4 220 270 4 899 708

6 830 725 8 182 097

Total Assets 34 269 496 34 426 557

Liabilities

Current Liabilities

Finance lease obligation 11 6 166 45 692

Operating lease liability 5 3 880 102 2 925 204

Payables from exchange transactions 10 4 658 116 8 372 853

Unspent conditional grants and receipts 12 13 500 163 12 756 152

Provisions 8 735 355 593 561

22 779 902 24 693 462

Non-Current Liabilities

Finance lease obligation 11 - 6 166

Total Liabilities 22 779 902 24 699 628

Net Assets 11 489 594 9 726 929

Net Assets

Contributed capital 9 5 000 5 000

Accumulated surplus 11 484 590 9 721 930

Total Net Assets 11 489 590 9 726 930


Statement of Financial Performance


Revenue

Project management fees 16 785 000 -

Other income 16 59 600 38 321

Interest received 16 356 942 -

Government grants & subsidies 16 109 843 951 104 426 702

Total revenue 111 045 493 104 465 023

Expenditure

Assets written off 31 072 86 504

Depreciation and amortisation 2&4 1 676 490 1 604 826

Employee related costs 13 23 367 898 24 666 232

Finance costs 10 097 21 655

General Expenses 17 10 370 808 9 691 222

Operating lease rental 5 066 829 5 064 825

Project expenditure 18 68 501 801 60 306 239

Repairs and maintenance 41 958 201 228

Total expenditure 109 066 953 101 642 731

Operating surplus 1 978 540 2 822 292

Gain (loss) on disposal of assets and liabilities 15 740 (25 315)

Loss on foreign exchange (231 620) (68 530)

(215 880) (93 845)

Surplus for the year 1 762 660 2 728 447


Statement of Changes in Net Assets

Figures in Rand Contributed capital

Accumulated surplus

Total net assets

Balance at 01 April 2015 Changes in net assets Restated surplus for the year

5 000

-

6 993 483

2 728 447

6 998 483

2 728 447

Total changes - 2 728 447 2 728 447

Balance at 01 April 2016 Changes in net assets Surplus for the year

5 000

-

9 721 930

1 762 660

9 726 930

1 762 660

Total changes - 1 762 660 1 762 660

Balance at 31 March 2017 5 000 11 484 590 11 489 590

Note(s)


Cash Flow Statement


Cash flows from operating activities

Receipts

Sundry income 59 600 38 321

Interest received 1 813 704 927 238

Transfers and subsidies 12 109 131 200 105 649 989

111 004 504 106 615 548

Payments

Employee costs (23 171 715) (24 879 726)

Suppliers (86 221 550) (72 846 981)

Finance costs (10 097) (21 655)

(109 403 362) (97 748 362)

Net cash flows from operating activities 19 1 601 142 8 867 186

Cash flows from investing activities

Purchase of property, plant and equipment 2 (213 625) (1 008 117)

Proceeds from sale of property, plant and equipment 2 29 700 7 802

Purchase of other intangible assets 4 (156 520) (1 792 715)

Net cash flows from investing activities (340 445) (2 793 030)

Cash flows from financing activities

Finance lease payments (45 692) (20 728)

Net increase/(decrease) in cash and cash equivalents 1 215 005 6 053 428

Cash and cash equivalents at the beginning of the year 25 273 080 19 219 652

Cash and cash equivalents at the end of the year 3 26 488 085 25 273 080


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ACCOUNTING POLICIES

1. PRESENTATION OF FINANCIAL STATEMENTSThe financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board (ASB).

These financial statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention as the basis of measurement, unless specified otherwise. They are presented in South African rands.

The following GRAP Standards were approved by Accounting Standards Board but are not yet effective GRAP 20 Related Parties Disclosure

GRAP 32 Service Concession Arrangements: Grantor GRAP 34 Separate Financial Statements

GRAP 35 Consolidated Financial Statements

GRAP 36 Investments in Associates and Joint Ventures GRAP 37 Joint Arrangements

GRAP 38 Disclosure of Interest in Other Entities GRAP 108 Statutory Receivables

GRAP 109 Accounting by principal and Agents GRAP 110 Living and Non-Living Resources

The above standards will be adopted when they become effective from the 1st of April 2017 (except for those standards that are not are not applicable to the Entity)

The entity has opted to apply GRAP 20 in formulating disclosure on related parties.

• The cash flow statement is prepared in accordance with the direct method.

• Specific information has been presented separately on the statement of financial position such as:- Receivables from non-exchange transactions,- Payables from non-exchange transactions

• Disclosure of any amount and nature of any restrictions on cash balances is required.

A summary of the significant accounting policies, which have been consistently applied in the preparation of these financial statements, are disclosed below.

1.1 GOING CONCERN ASSUMPTIONThese financial statements have been prepared based on the expectation that the entity will continue to operate as a going concern for next 12 months.

1.2 TRADE AND OTHER RECEIVABLESThe entity measures a financial asset and financial liability initially at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial liability. Transaction costs are added to financial instrument carried at amortised cost.


1.3 CASH AND CASH EQUIVALENTSCash and cash equivalents include cash on hand, deposits held at call accounts with banks and investments in money market instruments.

1.4 ACCOUNTING ESTIMATES AND ASSUMPTIONSIn preparing the financial statements, management is required to make estimates and assumptions that affect the amounts presented in the financial statements and related disclosures. Use of available information and the application of judgement are inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the financial statements. Significant judgements include:

1.4.1 USEFUL LIVES OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETSThe entity depreciate or amortises its property, plant and equipment and intangible assets over the estimated useful lives of the assets, taking into account the residual values of the assets at the end of their useful lives, which is determined when the asset becomes available for use. The useful lives and residual values of the assets are based on industry knowledge and reviewed annually.

1.5 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)The useful lives of items of property, plant and equipment have been assessed as follows:

ITEM AVERAGE USEFUL LIFEFurniture and fixtures 7 - 9 yearsMotor vehicles 5 - 8 yearsComputer equipment 6 - 8 yearsFinance Lease 2 - 3 yearsOther fixed assets 3 - 5 years

The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

Reviewing the useful life of an asset on an annual basis does not require the entity to amend the previous estimate unless expectations differ from the previous estimate.

The depreciation charge for each period is recognised in surplus or deficit unless it is included in the carrying amount of another asset.

Items of property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in surplus or deficit when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.


1.6 INTANGIBLE ASSETSAn asset is identifiable if it either:• is separable, i.e. is capable of being separated or divided from an entity and sold, transferred,

licensed, rented or exchanged, either individually or together with a related contract, identifiable assets or liability, regardless of whether the entity intends to do so; or

• arises from binding arrangements (including rights from contracts), regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

2. INITIAL RECOGNITIONIntangible assets are initially measured at cost

3. INITIAL MEASUREMENTAn intangible asset is recognised when:• it is probable that the expected future economic benefits or service potential that are attributable

to the asset will flow to the entity; and

• the cost or fair value of the asset can be measured reliably.

The entity assesses the probability of expected future economic benefits or service potential using reasonable and supportable assumptions that represent management’s best estimate of the set of economic conditions that will exist over the useful life of the asset.

Where an intangible asset is acquired through a non-exchange transaction, its initial cost at the date of acquisition is measured at its fair value as at that date.

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life.

The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.

Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets.


4. SUBSEQUENT MEASUREMENTAmortisation is provided to write down the intangible assets, on a straight line basis, no residual value as follows:

Item Useful lifeComputer software 3 - 8 years

4.1 FINANCIAL INSTRUMENTSA financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity.

A financial asset is:• cash;

• a residual interest of another entity; or

• a contractual right to:

- receive cash or another financial asset from another entity; or

- exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity.

Financial assets are measured at amortised cost using the effective interest rate method, less any impairment. Interest income is recognised by applying the effective interest rate except for short-term receivables when the recognition of interest would be immaterial.

A financial liability is any liability that is a contractual obligation to:

• deliver cash or another financial asset to another entity; or

• exchange financial assets or financial liabilities under conditions that are potentially unfavourable to the entity.

Financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis, except for short-term trade payables where the recognition of interest will be immaterial.

5. INITIAL MEASUREMENT OF FINANCIAL ASSETS AND FINANCIAL LIABILITIESThe entity measures a financial asset and financial liability initially at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

6. SUBSEQUENT MEASUREMENT OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

The entity measures all financial assets and financial liabilities after initial recognition using the following categories:

• Financial instruments at fair value.


7. LEASES

FINANCE LEASES - LESSEEInitial recognition and measurementFinance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease.

Subsequent measurementMinimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance of the liability.

Any contingent rents are expensed in the period in which they are incurred.

8. OPERATING LEASES - LESSOROperating lease revenue is recognised as revenue on a straight-line basis over the lease term.Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease revenue.

The aggregate cost of incentives is recognised as a reduction of rental revenue over the lease term on a straight-line basis. The aggregate benefit of incentives is recognised as a reduction of rental expense over the lease term on a straight-line basis. Income for leases is disclosed under revenue in statement of financial performance.

9. OPERATING LEASES - LESSEEOperating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability.

9.1 IMPAIRMENT OF CASH-GENERATING ASSETSCash-generating assets are those assets held by the entity with the primary objective of generating a commercial return. When an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates a commercial return.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Recoverable amount of an asset or a cash-generating unit is the higher its fair value less costs to sell and its value in use.


9.2 IMPAIRMENT OF NON-CASH-GENERATING ASSETSCash-generating assets are those assets held by the entity with the primary objective of generating a commercial return. When an asset is deployed in a manner consistent with that adopted by a profit-orientated entity, it generates a commercial return.

Non-cash-generating assets are assets other than cash-generating assets.

Impairment is a loss in the future economic benefits or service potential of an asset, over and above the systematic recognition of the loss of the asset’s future economic benefits or service potential through depreciation (amortisation).

Recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs to sell and its value in use.

10. IDENTIFICATIONWhen the carrying amount of a non-cash-generating asset exceeds its recoverable service amount, it is impaired.

The entity assesses at each reporting date whether there is any indication that a non-cash-generating asset may be impaired. If any such indication exists, the entity estimates the recoverable service amount of the asset.

Irrespective of whether there is any indication of impairment, the entity also test a non-cash-generating intangible asset with an indefinite useful life or a non-cash-generating intangible asset not yet available for use for impairment annually by comparing its carrying amount with its recoverable service amount. This impairment test is performed at the same time every year. If an intangible asset was initially recognised during the current reporting period, that intangible asset was tested for impairment before the end of the current reporting period.

10.1 CONTRIBUTED CAPITALContributed capital is the initial contribution made by the Kwazulu-Natal Provincial government.

10.2 EMPLOYEE BENEFITSPost-employment benefits: Defined contribution plans

Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

When an employee has rendered service to the entity during a reporting period, the entity recognise the contribution payable to a defined contribution plan in exchange for that service:

• as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the reporting date, an entity recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and

• as an expense, unless another Standard requires or permits the inclusion of the contribution in the cost of an asset.


Where contributions to a defined contribution plan do not fall due wholly within twelve months after the end of the reporting period in which the employees render the related service, they are discounted. The rate used to discount reflects the time value of money. The currency and term of the financial instrument selected to reflect the time value of money is consistent with the currency and estimated term of the obligation.

10.3 PROVISIONSProvisions are recognised when:

• the entity has a present obligation as a result of a past event;

• it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; and

• a reliable estimate can be made of the obligation.

Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 25. All the provisions are short-term in nature and thus ignore the effect of discounting.

10.4 REVENUERevenue comprises gross inflows of economic benefits or service potential received and receivable by an entity, which represents an increase in net assets, other than increases relating to contributions from owners.

11. RECOGNITIONRevenue comprises of revenue from exchange and non-exchange transactions. Exchange transactions involve the receipts of revenue in exchange for which the entity renders services, sells goods, or permits the use of an entity asset. Non Exchange transactions involve the receipt of revenue by the entity giving approximate equal value in return.

Accounting policy on revenue describes the conditions under which revenue is recorded by the management of the entity. In making their judgements, management considered the detailed criteria for the recognition of revenue as set out in GRAP 9, Revenue from Exchange Transactions and GRAP 23 Revenue from non-exchange transactions, when services are rendered, whether the service has been rendered. The management of the entity is satisfied that recognition of the revenue in the current year is appropriate.

12. GRANTS AND OTHER DONOR INCOMEConditional government grants and other donor funding are recognised as revenue:

• in the period in which revenue is receivable when grants are not subject to restrictions;

• in the period in which the revenue is receivable when the grants are subject to restrictions but not subject to conditions;

• Incrementally against expenditure when the unspent portions of the grants must be refunded if the grant conditions are not met. A liability is raised in respect of the grant;

• On project completion when the grants must be refunded in full and the entire grant conditions are met. A liability is raised in respect of the grant.


13. INTEREST EARNED ON GRANT INCOMEInterest earned on grant monies received is reflected as “amounts owing to funders” in a case where specific permission is required from the funder before it can be expended on project activities. When approval is granted, interest earned is transferred to conditional grants and recognised as revenue in accordance with the principles set out in the paragraphs above.

14. UNSPENT GRANTSWhen grants are received they are initially recognized as a liability. Once the entity has complied with all the conditions of the grant received, the grant is reallocated from liability and recognised in the statement of financial performance.

15. OTHER INCOMERevenue from the sale of bid documents is recognised upon receipt of the cash.

15.1 BORROWING COSTSBorrowing costs are interest and other expenses incurred by an entity in connection with the borrowing of funds. Borrowing costs are recognised as an expense in the period in which they are incurred.

15.2 IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITUREIrregular expenditure means expenditure incurred in contravention of, or not in accordance with a requirement of any applicable legislation. Fruitless and wasteful expenditure refers to expenditure that was made in vain and would have been avoided had reasonable care been exercised. Irregular and fruitless and wasteful expenditure is recognised against the specific class of events to which it relates and if and when incurred in a note to the financial statements when it has been identified.

The recovery of irregular, fruitless and wasteful expenditure is based on legislated procedures, and is recognised when the recovery thereof from the responsible officials is probable. The recovery of irregular, fruitless and wasteful expenditure is treated as other income.

15.3 BUDGET INFORMATIONEntity subject to budgetary limits in the form of appropriations or budget authorisations (or equivalent), which is given effect through authorising legislation, appropriation or similar.

General purpose financial reporting by entity shall provide information on whether resources were obtained and used in accordance with the legally adopted budget.

The approved budget is prepared on a cash basis and presented by economic classification linked to performance outcome objectives.

The approved budget covers the fiscal period from 2016/04/01 to 2017/03/31.

The financial statements and the budget are on the different basis of accounting therefore a comparison with the budgeted amounts for the reporting period have been included in the Statement of comparison of budget and actual amounts.

Changes between the approved and final budget are a consequence of reallocations within the budget.


15.4 RELATED PARTIESThe entity operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities within the provincial sphere of government are considered to be related parties.

Management are those persons responsible for planning, directing and controlling the activities of the entity, including those charged with the governance of the entity in accordance with legislation, in instances where they are required to perform such functions.

Close members of the family of a person are considered to be those family members who may be expected to influence, or be influenced by, that management in their dealings with the entity.

Only transactions with related parties where the transactions are not concluded within normal operating procedures or on terms that are no more or no less favourable than the terms it would use to conclude transactions with another entity or person are disclosed.

15.5 EVENTS AFTER REPORTING DATEEvents after reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Two types of events can be identified:

• those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and

• those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date).

The entity will adjust the amount recognised in the financial statements to reflect adjusting events after the reporting date once the event occurred.

The entity will disclose the nature of the event and an estimate of its financial effect or a statement that such estimate cannot be made in respect of all material non-adjusting events, where non-disclosure could influence the economic decisions of users taken on the basis of the financial statements.

15.6 COMMITMENTSItems are classified as commitments where the entity commits itself to future transaction that will results in the future outflow of resources. Commitments represent both goods and services that have been approved and contracted for where the expenditure has been approved and the contract has been awarded at the reporting period.

15.7 RISK MANAGEMENTIt is the policy of the entity to disclose information that enables the users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed on the reporting date. Risk and exposure are disclosed as follows:


16. CREDIT RISKEach class of financial asset is disclosed separately.

Maximum exposure to credit risk not covered by collateral is specified. Financial assets covered by collateral are specified.

17. LIQUIDITY RISKLiquidity risk is the risk that the entity will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

Liquidity risk is managed by ensuring that all assets are reinvested at maturity at competitive interest rates in relation to cash flow requirements. Liabilities are managed by ensuring that all contractual payments are met on a timeous basis and if required, additional new arrangements are established at competitive rates to ensure that cash flow requirements are met.

A maturity analysis for financial liabilities (where applicable) that shows the remaining undiscounted contractual maturities is disclosed in the notes to the annual financial statements.

17.1 EVENTS AFTER REPORTING DATEEvents after the reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Two types of events can be identified:

• those that provide evidence of conditions that existed at the reporting date (adjusting events after the reporting date); and

• those that are indicative of conditions that arose after the reporting date (non-adjusting events after reporting date).

Events after the reporting date that have been classified as adjusting events have been accounted for in the annual financial statements. The events after the reporting date that are classified as non-adjusting events after reporting date are disclosed.

17.2 PREPAID EXPENSESAmounts prepaid are recognised in the Statement of Financial Position when the payments are made and are derecognised as and when the goods or services are received or the funds are utilised. Prepayments outstanding at the end of the year are carried in the Statement of Financial Position at cost.

17.3 EMPLOYEE COSTSThe cost of short term benefit is recognised during the period in which the employees render the related service. The provision for employee entitlements to salaries and annual leave represent the amount which the entity has a present obligation to pay as result of employee’s service provided for at the reporting date. The provision and accrual has been calculated at undiscounted amount on current salary rates

17.4 EXPENDITUREExpenditure is recognised on an accrual basis.


NOTES TO THE FINANCIAL STATEMENTSFigures in Rand 2017 2016

2. Property, plant and equipment 2017 2016

Cost Accumulat-

ed Depre-ciation

Carrying Amount Cost

Accumulat-ed Depre-

ciation

Carrying Amount

Finance lease asset 80 708 (73 919) 6 789 201 443 (128 161) 73 282

Computer equipment 3 249 112 (1 795 089) 1 454 023 3 261 407 (1 581 438) 1 679 969

Motor vehicles 1 420 995 (1 154 796) 266 199 1 420 995 (978 769) 442 226

Furniture and fixtures 1 727 516 (939 955) 787 561 1 722 327 (776 130) 946 197

Other fixed assets 328 956 (233 073) 95 883 297 092 (156 377) 140 715

Total 6 807 287 (4 196 832) 2 610 455 6 903 264 (3 620 875) 3 282 389

An obligation relating to finance lease is disclosed in Note 11.

Reconciliation of property, plant and equipment - 2017Opening balance Additions Write off Disposals Deprecia-

tion Total

Finance lease asset 73 282 - - (3 659) (62 834) 6 789

Furniture and fixtures 946 197 20 509 (7 730) - (171 415) 787 561

Motor vehicles 442 226 - - - (176 027) 266 199

Computer equipment 1 679 969 150 117 (21 004) (10 302) (344 757) 1 454 023

Other fixed assets 140 715 42 999 (2 337) - (85 494) 95 883

3 282 389 213 625 (31 071) (13 961) (840 527) 2 610 455


Reconciliation of property, plant and equipment - 2016Opening balance Additions Write off Disposals Deprecia-

tion Total

Finance lease asset 58 571 80 708 (3 676) - (62 321) 73 282

Furniture and fixtures 897 655 204 475 (5 525) - (150 408) 946 197

Motor vehicles 618 254 - - - (176 028) 442 226

Computer equipment 1 405 905 695 101 - (33 117) (387 920) 1 679 969

Other fixed assets 187 620 27 833 (4 549) - (70 189) 140 715

3 168 005 1 008 117 (13 750) (33 117) (846 866) 3 282 389

3. Cash and cash equivalents

Operational Account 4 109 001 1 875 520

KZN Department of Agriculture and Rural Development Call Account 7 570 948 19 461 586

KZN Department of Economic Development, Tourism and Environmental Affairs Call Account 6 304 230 29 485

Department of Rural Development and Land Reform Call Account - COGTA 8 503 906 3 906 489

26 488 085 25 273 080

Cash on hand 2 207 225

The entity had a balance of R2 207 in petty cash at the end of 31 March 2017.

4. Intangible assets2017 2016

Cost Accumulat-ed Amorti-

sation

Carrying Amount

Cost Accumulat-ed Amorti-

sation

Carrying Amount

Computer software 8 026 403 (3 806 133) 4 220 270 7 869 881 (2 970 172) 4 899 708

Reconciliation of intangible assets - 2017Opening balance Additions Amortisa-

tion Total

Computer software 4 899 710 156 520 (835 960) 4 220 270

Reconciliation of intangible assets - 2016

Opening balance Additions Transfers Amortisa-

tion Total

Computer software 3 937 708 1 792 715 (72 754) (757 961) 4 899 708


5. Prepaid Expenses

Prepayments of Software Licenses 140 021 184 243

6. Receivables from non-exchange transactions

Receivables from non-exchange transactions 793 547 760 019

Receivables are as a result of staff salary overpayment, the amount is being recovered on a monthly basis.

A debt of R742 233 was raised in respect of the payment to the service provider whose banking details were forged and changed in correctly in the prior year. The amount was recalled by the bank and credited into ADA’s bank account in April 2016. A forgery case that was opened is still under investigation

8. Provisions

Reconciliation of provisions - March 2017

Opening Balance Leave Movement Total

Other provisions 593 561 141 794 735 355

Reconciliation of provisions - 2016

Other provisions 475 007 118 554 593 561

9. Contributed capital

Issued

Initial contribution 5 000 5 000

10. Payables from exchange transactions

Trade payables 244 365 675 936

Payments received in advanced - contract in process - 2 000

Accrued expenses 4 413 751 7 691 061

Leave accrual - 3 856

4 658 116 8 372 853


Figures in Rand 2017 2016

11. Finance lease obligation

Minimum lease payments due

- within one year 6 500 55 789

- in second to fifth year inclusive - 6 500

6 500 62 289

less: future finance charges (334) (10 431)

Present value of minimum lease payments 6 166 51 858

Present value of minimum lease payments due

- within one year 6 166 45 692

- in second to fifth year inclusive - 6 166

6 166 51 858

Non-current liabilities - 6 166

Current liabilities 6 166 45 692

6 166 51 858

11. Finance lease obligation - ADA leased Ipads from 27 February 2014 for 2 years at an interest rate of 17% per annum and

lease installments amounted to R7 182. The lease came to an end in February 2016

- The ADA leased cell phones on 21 April 2015 for 2 years. Capital lease installments of R3 349 are payable monthly in arrears. The effective interest is charged at 3.2% per month. Ownership will pass to ADA at the end of the lease term

- Another two year cell phone lease commenced on 31 August 2015. Capital lease installments of R1 299 are payable monthly in arrears. The effective interest is charged at 1.78% per month. Ownership will pass to ADA at the end of the lease term.

12. Grant register

2017 Opening balance Receipts Interest Payments Closing

balance

KZN Department of Agriculture and rural Development

8 849 664 94 581 200 1 052 575 (100 537 469) 3 945 970

KZN Department of Cooperative Governance and Traditional Affairs

3 906 488 14 550 000 404 187 (9 306 482) 9 554 193

12 756 152 109 131 200 1 456 762 (109 843 951) 13 500 163



2016 Opening balance Receipts Interest Payments Closing

balance

KZN Department of Cooperative Governance and Traditional Affairs

3 442 517 6 150 000 120 524 (5 806 553) 3 906 488

KZN Department of Agriculture and rural Development

7 275 818 99 499 989 694 006 (98 620 149) 8 849 664

KZN Department of Economic Development, Tourism and Environmental Affairs

4 010 001 - 112 707 (4 122 708) -

14 728 336 105 649 989 927 237 (108 549 410) 12 756 152

An amount of R4 122 708 was refunded back to KZN Department of Economic Development, Tourism and Environmental Affairs. The funds were for the implementation of the Cut-flower project. The project will now be implemented by Dube Tradeport.

13. Employee related costs

Basic salaries 14 312 825 15 707 290

Workmen’s Compensation 296 747 -

Movement in leave provision accrual 141 794 (213 494)

Salaries -PAYE 4 954 319 5 502 213

Pension 1 827 061 1 669 003

Board Committee Fees 1 839 009 2 001 220

Leave provision (3 857) -

23 367 898 24 666 232

14. Employee benefit obligations

Defined contribution plan

It is the policy of the ADA to provide pension benefits to all its employees. The pension fund February 2014. Benefit came Into effect

The entity is under no obligation to cover any unfunded benefits.

The total entity contribution to such schemes 238 013 2 809 113

The amount recognised as an expense for defined contribution plans is 1 827 061 1 669 001



14. Employee benefit obligations (continued)

The amount recognised as an expense for defined contribution plans is 1 827 061 1 669 001

15. Taxation

No provision has been made for taxation as the Trust is exempt from income tax.

16. Revenue

Project management fees 785 000 -

KZN Department of Cooperative Governance and Traditional Affairs 9 306 482 5 806 553

KZN Department of Agriculture and Rural Development 100 537 469 98 620 149

Other income 59 600 38 321

Interest Received 356 942 -

111 045 493 104 465 023

The amount included in revenue arising from exchanges of goods or services are as follows:

Project management fees 785 000 -

KZN Department of Cooperative Governance and Traditional Affairs 9 306 482 5 806 553

KZN Department of Agriculture and Rural Development 59 195 319 54 568 216

Other income 59 600 38 321

Interest received 356 942 -

69 703 343 60 413 090

The amount included in revenue arising from non-exchange transactions is as follows:

Transfer revenue

Government grants & subsidies 41 342 150 44 051 933


17. General expenses

Advertising 155 416 168 514

Audit fees 755 610 1 078 977

Bank charges 18 617 21 266

Catering 155 300 95 562

Cleaning 414 619 399 681

Computer Expenses 627 752 636 186

Computer Software Licenses 779 065 399 265

Consulting 1 022 484 946 533

Courier and postage 2 510 11 572

Electricity and water 351 522 625 145

Insurance 184 869 193 912

Legal Fees 512 310 25 826

Marketing 506 698 618 028

Motor vehicle expenses 302 955 241 878

Office Consumables 4 656 5 286

Other expenses 12 613 5 829

Photocopying and printing 384 146 239 229

Publications 278 703 50 130

Recruitment costs 15 269 -

Security 568 683 531 479

Small assets 39 775 -

Staff Wellness 197 517 142 465

Stationery 134 789 326 019

Subscriptions 94 655 59 785

Telephone and fax 925 776 1 063 817

Training 620 350 325 698

Travel and subsistence 1 304 149 1 479 140

10 370 808 9 691 222



18. Schedule of grants and expenditure

Project expenditureopening balance 01 April 2016 Project

Project allocation

2016/2017

Current year expenditure

31 March 2017

Project closing

balance 31 March 2017

Amajuba Grain - 309 678 - 309 678Asisukume Msinga - COGTA 388 280 (371 596) - 16 684Babanango 364 101 (364 101) - -Bayonne Dairy farm 96 490 1 248 420 1 293 051 51 859Buffelshoek 26 622 126 658 71 416 81 864Cappeny Estates - 5 600 000 4 384 244 1 215 756Cathedral Peak Outgrower - 7 205 780 6 524 928 680 852Cathedral Peak Winery - 585 000 585 000 -Celokuhle 851 094 1 430 694 618 587 1 663 201Cowboy Abattoirs 467 540 (448 297) 146 695 (127 452)Cut flower - DEDT 16 371 (16 371) - -Dabhazi/Maphophoma Mill - 3 812 247 938 675 2 873 572DEDT Capacity building (16 366) 16 366 - -Development farmer support programme 132 027 (132 027) - -

Distressed Farmers 22 122 179 896 - 202 018Empangisweni Trust 427 203 4 908 242 4 422 945 912 500Empangisweni Trust-COGTA 3 500 000 4 500 000 4 109 108 3 890 892eThala Biofuels - 1 600 000 19 256 1 580 744Emadungeni Piggery-COGTA - 4 850 000 - 4 850 000Eston Family trust 2 571 - - 2 571Falin Investments - 204 882 - 204 882Greenville Trading 5 285 (5 285) - -Inkandla Essential Oils 768 385 2 144 138 275 175 2 637 348Ishikishiki 175 779 (18 586) 47 679 109 514Izibusiso 99 027 (99 027) - -Jobs fund - 10 000 000 10 000 000 -Kgotsofalang 106 200 (106 200) - -KZN Essential oils - 9 523 477 5 023 478 4 499 999Lanfine farm 147 412 (134 402) - 13 010Maize Milling plants/ Dhabhazi 336 037 (336 037) - -


Manguzi/Kwangwanase Fish Farming - COGTA 150 000 (150 000) - -

Manyiseni 18 433 91 560 - 109 993Mboma Poultry 239 881 (239 881) - -Middelrus cluster 140 985 (85 439) 55 119 427Milking Goat project 649 379 (649 379) - -Mkhumbana 1 170 715 4 705 006 5 306 834 568 887Mkoloni 515 609 (304 595) 179 338 31 676Mthethwa Processing - 1 000 000 288 180 711 820Muden Outgrower 1 123 245 (1 123 245) - -Msinga Goat Abattoir - 350 000 - 350 000Nkwali - 357 792 60 665 297 127Nkunzana/Just Veggies 570 4 073 430 3 581 666 492 334Nofisa 1 2 099 999 125 266 1 974 734Ntuso Farm 1 044 - - 1 044Peanut butter - 500 000 520 778 (20 778)Qwabe Vegetable Post Harvest Facility 972 (972) - -Pig farmers Co-Op 60 000 (60 000) - -Rapid dawn 463 316 (396 732) - 66 584Thokazi 100 000 975 602 115 602 960 000Siyaphambili Tannery - 2 000 000 152 171 1 847 829Sugarcane Value Chain study 500 000 (17 300) 482 700 -Summerhill (471 825) 3 548 925 629 289 2 447 811Siyathokoza Comm Trust 126 549 (126 549) - -Umzinyathi Agri-hub 929 343 (34 580) 894 627 136Okhahlamba Community Vineyard - COGTA 585 000 4 615 000 4 979 353 220 647

Vuna Seeds - 2 467 000 2 467 000 -Weenen Chicory 1 135 205 2 893 489 1 640 820 2 387 874Young Farmers Training Programme 472 915 10 975 059 7 212 557 4 235 417Zululand Grain (695 301) 695 301 - -Programme 2- Comprehensive capacity building - 3 000 000 949 139 2 050 861

Programme 3- Enterprise and value chain development - 500 000 400 460 99 540

15 132 216 97 873 040 68 501 801 44 503 455


Project expenditure by classification 2017 Total Expenditure

Employee Costs 7 915 663

Travel & accommodation 1 572 120

Production inputs 22 517 299

Production implements 16 899 055

Training 1 007 371

Engineering services 2 700 229

Farm Management service 4 217 606

Operating expenses 2 883 362

Feasibility study 1 624 706

Construction 7 164 390

68 501 801


19. Cash generated from operations

Surplus 1 762 660 2 728 447Adjustments for:Depreciation and Amortisation 1 676 490 1 604 826Loss on sale of assets and liabilities (15 740) 25 315

Movements in operating lease assets 954 898 1 257 482

Movements in provisions (141 794) 213 494

Asset written off 31 072 86 504

Changes in working capital:

Decrease/(Increase) Receivables from non-exchange transactions (33 528) (753 563)

(Increase) / Decrease in Prepaid expenses 44 222 (184 243)

Decrease/(Increase) in deposits 10 000 -

(Decrease)/Increase in Payables from exchange transactions (3 431 149) 5 861 113

(Decrease)/Increase in Unspent conditional grants and receipts 744 011 (1 972 189)

1 601 142 8 867 186


20. Going concernWe draw attention to the fact that at 31 March 2017, the entity had accumulated surplus of 11 484 590 and that the entity’s total assets exceed its liabilities by 11 489 590.

The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

The ability of the entity to continue as a going concern is dependent on a number of factors. The most significant of these is that the members continue to procure funding for the ongoing operations for the entity and that the subordination agreement referred to in note 16 of these financial statements will remain in force for so long as it takes to restore the solvency of the entity.

21. Reconciliation of budget surplus with Financial StatementsThe budget is approved on a cash basis by functional classification. The approved budget covers the year from 1 April 2016 to 31 March 2017. The financial statements are prepared on an accrual basis using a classification of the nature of expenses in the statement of financial performance. The financial statements differ from the budget, which is approved on a cash basis.

Reconciliation of cash between the accrual and cash basisThe amounts in the financial statements were adjusted from the accrual basis to a cash basis and reclassified by classification to be on the same basis as the final approved budget. The amounts of these adjustments are identified in the following table. Reconciliation between the actual amounts on a comparable basis as presented in the statement of comparison of budget and actual amounts and the actual amounts in the cash flow statement for the year that ended 31 March 2016 is presented below.

GRAP 24 Reconciliation OperatingActivities

Financing activities

Investing activities Total

Actual amount comparable basis as presented in the budget and actual comparative statement

8 781 554 (10 097) (340 445) 8 431 012

Entity differences (7 180 412) (35 595) - (7 216 007)

1 601 142 (45 692) (340 445) 1 215 005

22. Budget differencesMaterial differences between budget and actual amounts

1. Project Management Fees - The amount was invoiced but not paid by the end of the year.

- The Budget was adjusted to accommodate the Project Management fee that is for the implementation of the Local Economic Development projects on behalf of KZN Cooperative Governance and Traditional Affairs


2. Interest received - Interest is recognised once the funds are spent in line with the conditions of the agreement.

- The interest collected was higher than budgeted because of the low level of expenditure the funds were more funds in the bank accounts

3. Grant RevenueThe invoices for the last quarter were not paid by DARD this resulted in an under collection.

4. Employee CostsThe entity had various vacant positions resulting from a number of staff that resigned during the course of the year.

5. Finance charges - The over expenditure resulted from the ADA incurring leases that were higher than anticipated

in respect of finance leases

- The budget was decrease because two finance leases came to an end in the financial year.

6. Capital expenditure - The budget was adjusted in order to accommodate emergency repairs to restore the servers

and increase the storage space. Such repairs were still in progress by year end.

- The budget was increased in order to make a provision for the repairs that had to be undertaken to the server.

Figures in Rand 2017 201622. Budget differences (continued)

7. Project expenditureThe under expenditure resulted from various infrastructure projects that were in progress by year end. There were four vacant positions within the projects department which has impacted the entity’s spending ability at year.

23. Commitments

Approved and Contracted forCapital Expenditure -

Operational Expenditure 16 276 360 12 156 238

16 276 360 12 156 238

24. Related party relationships and transactions

24.1 Related party relationships

24.1.1 Mjindi Farming (Pty) Ltd


24. Related party relationships and transactions (continued)

Mjindi Farming is a related party to the ADA as they are both controlled by the DARD.

24.2 Related party transactions

24.2.1 Department of Agriculture and Rural Development (DARD)Revenue 94 581 200 99 500 000

DARD is the sole shareholder of the Agribusiness Development Agency (ADA).The ADA received the funding for operations and project implementation in the form of transfers from DARD. Operational expenditure is funded through equitable share while projects are funded through a conditional grant.

1.1.2 Ikhono

Expenditure - 94 050

Ikhono communications is a related party to the ADA because Dr. Don Mkhwanazi who is an ADA board member is also a strategic advisor at Ikhono Communications.

1.1.3 Agricultural Economic Association of South Africa (AESA)

Expenditure 60 000 -

Dr Thulasizwe Mkhabela (Chief Operations Officer) and Acting CEO is a Vice President at AESA.

Related party relationships and transactions (continued)24.2.4 Management remuneration for the period ended 31 March 2017

Salary Pension Other allowance Closing

Dr TS Mkhabela - Acting Chief Executive Officer (CEO) 1 139 763 85 482 112 929 1 338 174

Ms. TBM Ngwenya- Chief Financial Officer (CFO) 1 099 617 82 471 - 1 182 088

Mr. FX Mbuli - Legal & Corp. Services Manager 143 949 5 969 - 149 918

Ms. VR Dlamini - Project Manager 977 997 73 350 - 1 051 347

Ms. MFN Mtambo - Project Manager 587 930 38 227 - 626 157

Mr. P Sapsford - Project Manager 332 161 23 876 - 356 037

Ms. C Vilakazi - Specialist PM & E 964 091 - 200 755 1 164 846

Mr. T Mnguni 122 647 9 199 26 930 158 776

5 368 155 318 574 340 614 6 027 343

- Dr TS Mkhabela was appointed as Acting CEO from 1 October 2016 to March 2017- Ms. C Vilakazi was appointed as Acting CEO from 01 March up to 30 September 2016.- Mr. P Sapsford resigned at 31 July 2016.- Mr. FX Mbuli resigned at 13 May 2016.- Ms. Mbali Mtambo resigned at 31 October 2016.- Mr. T Mnguni appointed as Acting Project Manager from 01 February 2017.


24.2.5 Management remuneration for the period ended 31 March 2016 Salary Pension Other

allowanceClosing

balance

Ms. C Vilakazi - Acting Chief Executive Officer (CEO) 927 011 57 938 138 392 1 123 341

Dr TS Mkhabela - Chief Operations Officer (COO) 1 095 926 82 194 81 056 1 259 176

Ms. TBM Ngwenya - Chief Financial Officer (CFO) 1 057 324 79 299 - 1 136 623

Mr. FX Mbuli - Legal & Corp. Services Manager 955 030 59 689 - 1 014 719

Ms. VR Dlamini - Project Manager 927 011 69 526 - 996 537

Ms. MFN Mtambo - Project Manager 845 129 63 385 - 908 514

Mr. P Sapsford - Project Manager 955 029 71 627 32 884 1 059 540

6 762 460 483 658 252 332 7 498 450

- Dr TS Mkhabela was Acting CEO from 01 April 2015 to 30 September 2015.

- Ms. C Vilakazi was appointed Acting CEO from 01 October 2015

- Mr. P Sapsford was Acting COO from 01 April to 30 September 2015




2017 Board Board Fees Travel Total

Dr MS Mbatha - (Chairperson) 500 953 - 500 953

Dr ME Ngidi - (Deputy Chairperson) 250 475 - 250 475

Adv. RR Nirghin 101 763 - 101 763

Ms. N Zwane 101 763 - 101 763

Dr BD Mkhwanazi 50 882 - 50 882

Ms. P Dabideen 76 323 - 76 323

Mr. IZ Ngcobo 101 763 - 101 763

Mr. WR Dladla 101 763 - 101 763

1 285 685 - 1 285 685

2017 Audit and Risk Committee (ARC) ARC Fees Travel Total

Mr. Simjee - (Chairperson) 86 440 - 86 440

Mr. S Ndlovu 28 620 - 28 620

Mr. ABZ Ngcobo 38 160 - 38 160

Adv. RR Nirghin 38 160 - 38 160

Mr. IZ Ngcobo 38 160 - 38 160

Dr ME Ngidi 38 160 - 38 160

267 700 - 267 700

2017 Human Resource and Remuneration Committee (HR & R) HR & R Fees Travel Total

Ms. P Dabideen (Chairperson) 58 936 - 58 936

Dr BD Mkhwanazi - Deceased in July 2016 6 710 - 6 710

Adv. RR Nirghin 26 840 - 26 840

Ms. N Zwane 26 840 - 26 840

Mr. IZ Ngcobo 26 840 - 26 840

146 166 - 146 166



2017 Project and Finance Committee (PFC) PFC Fees Travel Total

Ms. Nonjabulo Zwane - (Chairperson) 50 912 - 50 912

Dr BD Mkhwanazi 14 734 - 14 734

Mr. WR Dladla 26 840 - 26 840

Dr E Ngidi 26 840 - 26 840

Ms. Preetha Dabideen 20 130 - 20 130

139 456 - 139 456

TOTAL 1 839 007 - 1 839 007

2016 Board Board Fees Travel Total

Dr MS Mbatha - (Chairperson) 500 953 - 500 953

Dr ME Ngidi - (Deputy Chairperson) 250 476 9 220 259 696

Adv. RR Nirghin 101 763 - 101 763

Ms. N Zwane 76 322 - 76 322

929 514 9 220 938 734

Figures in Rand 2017 201624. Related party relationships and transactions (continued)Ms. SA Ndlela 101 763 - 101 763Dr BD Mkhwanazi 101 763 - 101 763Ms. P Dabideen 101 763 - 101 763Mr. IZ Ngcobo 76 322 - 76 322Mr. WR Dladla 101 763 - 101 763

1 412 888 9 220 1 422 108

2016 Audit and Risk Committee (ARC) ARC Fees Travel TotalMr. Simjee - (Chairperson) 86 440 - 86 440Mr. W Nel 9 539 - 9 539Mr. S Ndlovu 38 160 - 38 160Mr. ABZ Ngcobo 38 160 - 38 160Adv. RR Nirghin 38 160 - 38 160Mr. IZ Ngcobo 38 160 - 38 160Dr ME Ngidi 38 160 - 38 160

286 779 - 286 779


2016 Human Resource and Remuneration Committee (HR & R) HR & R Fees Travel Total

Mr. SA Ndlela - (Chairperson) 44 203 - 44 203Dr BD Mkhwanazi 34 864 - 34 864Ms. P Dabideen 20 130 - 20 130Mr. IZ Ngcobo 6 710 - 6 710Adv. RR Nirghin 26 840 - 26 840

132 747 - 132 747

2016 Project and Finance Committee (PFC) PFC Fees Travel Total

Dr BD Mkhwanazi - (Chairperson) 58 935 - 58 935

Mr. WR Dladla 26 840 - 26 840

Dr E Ngidi 26 840 - 26 840

Ms. Preetha Dabideen 26 840 - 26 840

Ms. Nonjabulo Zwane 20 130 - 20 130

159 585 - 159 585

TOTAL 1 991 999 9 220 2 001 219

25. Contingencies

25.1 Contingent liabilities

Current year and prior year contingencies - 59 568

25.1.1 Pension Contribution

25.1.2 Litigation by the service provider - 3 691 600

- 3 751 168

25.1.1 The board resolved that the payments in respect of pension contribution that were halted from February 2016 will not be paid back to employees. Therefore no contingent liability existed in respect of pension contribution as at 31 March 2017.

25.1.2 A service provider withdrew the matter and offered to pay the cost for taking ADA to court without reasonable cause.

25.2 Contingent assets

Contingent Assets 44 614 -

A contingent asset of R44 614.00 arose from the previous case with the service provider was dismissed with costs in favor of ADA. The matter was not yet finalised by year end.


Figures in Rand 2017 2016 26. Irregular and fruitless and wasteful expenditure26.1 Irregular expenditureOpening balance 80 699 927 80 136 921Add: Irregular Expenditure - current year 1 788 905 563 006Irregular expenditure for prior year identified in a current year 1 100 000 -Less: Amounts recoverable (not condoned) - -

Less: Amounts not recoverable (not condoned) - -Irregular expenditure awaiting condonation 83 588 832 80 699 927

Irregular expenditure of R688 905.00 was incurred as a result of services being sourced by way of a deviation which the Auditor General found to be irregular in the prior year. The R2.2 million disclosed above is due noncompliance with SCM processes on appointment of an implementing agency.

Irregular expenditure for the current year has been submitted to the Treasury for condonation No further action was taken.

26.2 Fruitless and wasteful expenditureOpening balance 97 060 94 450Add: Irregular Expenditure - current year 963 2 610Total 98 023 97 060

Fruitless and wasteful expenditure is due to interest charged by suppliers on invoices paid late. The amount has been submitted to Treasury for condonation. No further action was taken.

27. Events after the reporting periodThere were no events after reporting date.


28. Financial instruments disclosure Categories of financial instruments 2017

Financial assets

At fair value At amortised Total cost

Other receivables from non-exchange transactions 8 547 - 8 547

Operational / Main account 4 109 001 - 4109 001

KZN Department of Agriculture and Rural Development Call Account 7 570 948 - 7 570 948

KZN Department of Economic Development, Tourism and Environmental Affairs Call Account 6 304 230 - 6304 230

Department of Rural Development and Land Reform Call Account 8 503 906 - 8503 906

Deposits 17 118 - 17 118

26 513 750 - 26513 750

Financial liabilities

At fair value At amortised Total cost

Trade and other payables from exchange transactions 244 365 - 244 365

Accruals 4 413 751 - 4 413 751

Operating lease liability 3 880 102 - 3 880 102

Finance lease 6 166 - 6 166

8 544 384 - 8 544 384



Financial instruments disclosure (continued)2016Financial assets

At fair value At amortised Total costOther receivables from non-exchange transactions 760 019 - 760 019Operational / Main account 1 875 520 - 1875 520KZN Department of Agriculture and Rural Development Call Account 19 461 586 - 19 461 586

KZN Department of Economic Development, Tourism and Environmental Affairs Call Account 29 485 - 29 485

Department of Rural Development and Land Reform Call Account 3 906 489 - 3 906 489

26 033 099 - 26 033 099Financial liabilities

At fair value At amortised Total costTrade and other payables from exchange transactions 675 936 - 675 936Accruals 7 671 061 - 7 671 061Operating lease liability 2 925 204 - 2 925 204Finance lease 45 692 6 166 51 858

11 317 893 6 166 11 324 059

Credit riskThe entity does not have a huge debtors’ book. Its exposure to credit risk is minimal. The items indicated under trade and other receivables refer to employee’s debt and one supplier as indicate in event after reporting period. The cash and cash equivalents are deposits placed with high credit financial institutions. The deposits comprise of grants received from the Department reflected in the cash and cash equivalent note. The entity limits its exposure by dealing with well-established financial institutions. The entity does not have significant exposure to an individual debtor or counter party.

Liquidity riskThe entity’s exposure to liquidity risk is minimal as it is 100% funded by the Department of Agriculture and Rural Development. The annual budgets are approved at the beginning of each fiscal year and draw-downs are requested at the beginning of each quarter. Cash flows are monitored monthly against budgets and adjustments are made where necessary. Risk management assessments are conducted annually to assist with identifying any possible cash flows, liquidity or other risks.

Interest rate riskAlthough the entity’s funds are subject to interest rate risk, these funds are placed with reputable financial institutions. The entity does not hedge any of its funds, but monitors the fluctuations in interest rates and obtains advice from bank officials on a regular basis.

Foreign exchange riskAlthough the entity’s funds are subject to foreign exchange fluctuation risk, due to Young Farmers project where student are taken to Denmark to study, the payment of these funds are done by the reputable financial institution.


LIST OF ABBREVIATIONS/ ACRONYMSADA Agribusiness Development Agency

CASP Comprehensive Agricultural Support Programme

CEO Chief Executive Officer

CFO Chief Financial Officer

CGA Citrus Growers Association

COO Chief Operating Officer

CPA Communal Property Association

DBSA Development Bank of Southern Africa

DARD Department of Argiculture and Rural Development

DEDT Department of Economic Development and Tourism

DRD&LR Department of Rural Development and Land Reform

DTI Department of Trade and Industry

FSA Forestry South Africa

GATT General Agreement on Tariffs and Trade

GDP Gross Domestic Product

GDPR Gross Domestic Product per Region

GFI Gross Farm Income

HDI Historically Disadvantaged Individual

INR Institute of Natural Resources

JV Joint Venture

KZN KwaZulu-Natal

Kwanalu KwaZulu-Natal Agricultural Union

LRAD Land Redistribution for Agricultural Development

M&E Monitoring and Evaluation

MEC Member of the Executive Council

MTEF Medium Term Expenditure Framework

NAFU National African Farmers Union

NYDA National Youth Development ADA

PFMA Public Finance Management Act

PGDS Provincial Growth and Development Strategy

SLA Service Level Agreement

SPV Special Purpose Vehicle


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PR197/2016 • ISBN: 978-0-621-44660-9Title of Publications: KZN Agribusiness Agency (ADA) Annua Report: 2016/2017

AG R I B U S I N ES S D E V E LO P M E N T AG E N C YTel: +27 33 347 8600 • Fax: +27 33 347 0913Email: [email protected] • Web: wwwada-kzn.co.zaPrivate Bag X01 • Montrose • Pieteraritzburg • 32025 Cascades Crescent • Cascades Office ParkMontrose • Pietermaritzburg • 3202

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