1. vision, mission and strategic objectives 2 - caa.co.za publications/caa annual report...

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c o n t e n t s

1. Vision, Mission and Strategic Objectives 2

3. Chairperson’s Report 4

4. Chief Executive Officer / Commissioner’s Report 6

5. Board 10

6. Corporate Governance 11

7. Executive Management Team 13

8. Performance Information 14

9. Operational Review 18

10. Annual Financial Statements 40

a. Contents page 41

b. Report of the Auditor-General 42

c. Statement of Responsibility 45

d. Report of Accounting Authority 46

e. Statement of Financial Performance 48

f. Statement of Financial Position 49

g. Statement of Changes in Net Assets 50

h. Cash Flow Statement 51

i. Notes to the Cash Flow Statement 52

j. Accounting Policies 53

k. Notes to the Annual Financial Statements 62

11. Acronyms 80

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Vision

To be a credible and dynamic world-class civil aviation regulator.

Mission

To promote and maintain a safe, secure and sustainable civil aviation environment, while adhering to international standards.

To regulate and oversee the functioning and development of the industry in an efficient, cost-effective, and customer-friendly manner.

To promote an enabling environment for transformation and development.

Strategic Objectives

• Comply with legislation and international civil aviation standards and recommended practices• Accelerate transformation and promote a value-based organisation• Improve corporate governance, financial sustainability and empowerment• Attract, develop and retain skilled human capital• Improve internal systems and processes• Increase assistance to improve Africa’s civil aviation capacity• Improve stakeholder relations

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Chairperson’s Report

Introduction

Ten years later and some 402 employees stronger, the South African Civil Aviation Authority (SACAA) is showing clear signs of growth and sustainability. Allow me to once again take this opportunity to present the state of civil aviation safety and security, as well as the development of this industry in South Africa. It is very encouraging and a source of great pride for the SACAA’s Board to be associated with a workforce that portrays a relentless spirit and a burning desire to achieve its goals and deliver a superior service to its client base.

A new strategic thrust

During the reporting period, a new three-year strategic document that spells out the SACAA’s focus areas was developed. In developing the document, attention was given to the need to reflect the Government’s priorities such as economic restructuring, addressing social inequalities and reducing the burden on the general taxpayer.

The SACAA has in the past developed a number of strategic plans; however, all of these plans lacked the Balanced Scorecard that ensures delivery of key performance areas. This situation meant that although there were noble objectives accomplished in a less structured environment, an era has come where a more coordinated effort has to be applied to improve service delivery, efficiencies, development of the organisation and drastic reduction of accidents.

The new strategic document also outlines the organisation’s revised vision, mission and strategic objectives; which were developed in cognizance of the milestones covered and the challenges that lay ahead. The Strategic Plan which is concise and yet articulate in its goals is designed specifically to harness technical and administrative roles. Moreover, the new strategic document also puts emphasis on the promotion of ethical values within the organisation.

Ensuring sustainable industry growth

The SACAA is funded through a user-pay system and 75% of the revenue is collected from commercial airlines through the passenger safety charge and the fuel levy. The numbers coming in from airlines and Airports Company South Africa is a matter of concern. As a result of the prevailing economic environment, the numbers of passengers are declining, and we see more and more airlines prioritising their flights by discontinuing non-profitable routes and maintaining those that yield better profits. This, no doubt, affects our revenue collection and therefore presents a challenge for us in terms of carrying out our mandate to the fullest. Since the SACAA is not immune to the effects of the economic downturn, management has assured the Board that the necessary cost-saving initiatives are being introduced continuously within the organisation, so as not to compromise the regulatory mandate, i.e. ensuring civil aviation safety and security.

Notably, since revising the fee structure, some of the revenue-generating areas experienced a slight increase late in 2008 and early 2009. Whilst consideration is taken not to overburden the industry, necessary care should also be taken to ensure that we are able to deliver on our legislative mandate without compromising safety and security.

Readiness for the FIFA Confederations Cup and 2010 FIFA World Cup

I am happy to report that the South African Civil Aviation Authority has developed an operational plan, in addition to participating in various 2010 FIFA World Cup preparedness committees. Moreover, the exceptional work that the SACAA and other role players put into preparations for the FIFA Confederations Cup serves as testimony to South Africa’s readiness to host the world’s biggest soccer extravaganza, the 2010 FIFA World Cup.

Leading to 2010 and in conjunction with various other role players in the aviation industry as well as security authorities, the Authority is committed to contributing resources to go the extra mile in ensuring that the experience of the international community is positive and will leave a lasting impression of South Africa as a hospitable country.

Strengthening relations with our regional counterparts

The year under review has seen the Authority opening its doors to many of our regional counterparts through information sharing initiatives, benchmarking exercises and familiarisation tours. Our aim is to work together with our neighbours in building a good reputation for civil aviation safety and security in Africa. In this regard, the SACAA has nominated three officials to assist the Southern African Development Community in its COSCAP project and with the harmonization of civil aviation regulations in the region.

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I wish to thank all staff members for their commitment to the cause of the SACAA. I would also like to acknowledge the contribution made by our colleagues in the Department of Transport as well as by fellow Board Members who have shown an unwavering support. On behalf of the Board, I would like to welcome the newly appointed Minister of Transport Mr Sibusiso Ndebele (MP) as well as Mr Jeremy Cronin (MP), Deputy Minister of Transport. Last but not least, on behalf of the Board I wish to extend our gratitude to the previous Board as well as the former Minister of Transport, Mr Jeff Radebe (MP).

Nonkululeko MsomiChairperson of the Board

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Chief Executive Officer / Commissioner’s Report

Navigating a turbulent economic era

At the start of our financial year, the signs of a global economic meltdown were still blurred. While market conditions alluded to an impending crisis, no one could have predicted its severity. Our first indicator of the impending turbulence was reflected in our monthly revenue figures. Based on strong growth in the passenger transport market over recent years, the budget of the SACAA was based on a further 8% growth in passenger movements for the 2008-2009 financial year. By June 2008 we realised that in fact, there was negative growth compared with the same period 12 months before, and we were experiencing revenues of some R2 million below budget each month. An immediate adjustment was made to our recruitment process and a complete overhaul of our inspector scheduling programme was instituted. These actions, together with an overall tightening of financial controls and implementation of various cost-savings measures, enabled the SACAA to reduce expenditure by a commensurate amount. Our annual financials reflect these savings.

In order to offset potential revenue shortfalls for the coming financial year, management considered adjustments to the three revenue streams from which we derive our income. Extensive consultations were held with the industry, who confirmed as acceptable the following measures; an inflation-linked increase of 10% to the passenger safety charge; an increase in the fuel levy of 1,84 cents, bringing the new fuel levy up to 4 cents per litre, and an inflation-linked increase in user charges which will be introduced later in 2009. The SACAA has given the industry the assurance that once the new interactive website is in place, and a number of the current manual administrative processes has been automated, external experts will be engaged to review all of the processes which attract user fees. This will mean that each process will reflect the actual expenditure incurred in providing the service. Aircraft registration would be an example of such a service.

I am happy to be able to report that despite the cost-saving measures that were introduced, our oversight process was significantly enhanced due to the additional inspectors that were recruited in the previous financial year, and audit targets set in all the technical departments were either fully met or significantly exceeded. The feedback from the industry is that the extensive training programme instituted for our entire inspectorate was clearly evident in the quality of the audits carried out. The SACAA also implemented a programme of industry assistance, whereby inspectors, having completed an audit and producing a set of findings, would assist the various organisations with suggestions on how best to close these findings. This programme has been curtailed to some extent by the slowdown in inspector recruitment, but some notable improvements have still been achieved in terms of industry compliance to regulations.

The curbing of aircraft accidents in the General Aviation sector

As reported last year, South Africa’s safety record in the commercial jet transport sector remains at the highest possible level, but we also indicated that the same cannot be said about the general aviation (GA) sector. In June last year, I requested a number of very senior pilots who not only have either an airline, military or flight training background, but who also have extensive general aviation experience, to join me and senior members of the SACAA to form the General Aviation Safety Initiative (GASI). The main objective of GASI is to serve as a think-tank that will devise out-of-the-box solutions to age-old problems within general aviation, which have not been adequately addressed by the hundreds of safety forums and documents that have been produced over the years. We are by and large still seeing the same causes of accidents that were evident 30 to 40 years ago. The work being carried out by the GASI team was made even more relevant by the spate of fatal accidents that occurred in September and October of 2008, in which in two months alone, a total of 56 people lost their lives in general aviation accidents. One of the areas that has been identified as having the greatest potential for reducing GA accidents is that of a single pilot resource management programme, based on the highly successful multi-crew resource management programmes introduced into the airline environment in the late 80s and early 90s.

Another initiative that was spearheaded by the SACAA was the formation of the Recreational Aviation Administration of South Africa (RAASA). RAASA is a non-profit entity tasked with, amongst others, the issuing of “Authorities to Fly” for light sport aircraft and the issuing of national pilot’s licences for micro-lights, gyroplanes and light sport aircraft. The entity will be funded by fees collected from users and by the SACAA for the oversight role that it will carry out on behalf of the Authority. In addition, RAASA will exercise administrative control over recreational activities within the Non Typed Certified Aircraft group. At this stage RAASA will not conduct oversight over non-powered recreational flying activities, which will continue to be administered by the SACAA designated Aviation Recreation Organisations.

These initiatives, together with the significant tightening of standards in the pilot training and aircraft maintenance areas, appear to be having some impact. While it is still too early to claim that sustainable improvements have been observed with respect to the GA accident rate, it is very heartening to note that there has so far been a 50% reduction in GA accidents for the first four months of 2009, when compared with the same period in 2008.

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Compliance with international standards

Following retention of the Category 1 status in terms of the FAA’s International Aviation Safety Assessment programme in December 2007, the SACAA was reassessed in July 2008 to determine the sustainability of the organisation’s safety oversight system, especially the completion of the hiring of inspectors, comprehensive training for numerous new inspectors, implementation of the surveillance plan, and resolution of safety issues. Following the re-audit, the FAA audit team was able to report that the SACAA is in compliance with international standards for aviation safety and will continue to be reported as Category 1.

In terms of the implementation of corrective actions with regard to the ICAO audit that took place in July 2007, the SACAA is pleased to announce that at the end of March 2008, South Africa was 94,6% compliant with all eight critical elements of the ICAO Universal Safety Oversight Programme. Outstanding items relate mostly to regulatory changes that are either before the Minister for signature, or at an advanced stage in the Civil Aviation Regulations Committee process. As can be seen from the following graph, South Africa compares favourably when compared to other countries.

Civil aviation in Africa

It has never been a moot point that on some parts of our continent, civil aviation safety records are alarming. On the other hand, it has been the aspiration of our Government and the SACAA to provide support, where possible, to improve Africa’s civil aviation regulating capacity. In this regard, the SACAA has always been open to the ideal of sharing information and expertise with our counterparts from across the continent. Additionally, in December last year, the National Department of Transport hosted the ICAO Africa-Indian Ocean Regional Air Navigation Conference in Durban, with extensive SACAA participation. Moreover, during the reporting period, the SACAA was able to assist with formal requests for assistance from inter alia, Botswana, Namibia, Lesotho, Tanzania and the Democratic Republic of the Congo.

KEYSA - July 07

Country A

Country B

SA - March 09

Lack of Effective Implementation expressed as % Non-Compliance

% N

on-C

ompl

ianc

e

SA - July 07Country ACountry BSA - Mar 09

PRIMARYAVIATION

LEGISLATION

2516.673.330.00

SPECIFICOPERATING

REGULATIONS

31.1418.2425.8114.97

CIVIL AVIATION SYSTEM &

SAFETY OVERSIGHT FUNCTIONS

27.7217.149.577.66

QUALIFICATION & TRAINING OF

TECHNICAL STAFF30.2318.6

48.862.24

PROCEDURES & TECHNICAL

GUIDANCE

31.8817.4711.188.13

LICENSING & CERTIFICATION OBLIGATIONS

7.0813.4912.053.29

SURVEILLANCE OBLIGATIONS

12.9414.2914.634.71

RESOLUTION OF SAFETY CONCERNS

17.0215.387.552.13

60

50

40

30

20

10

0

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Salient points regarding operational issues

South Africa is a signatory state to the Civil Aviation Organisation’s Convention of 1944 and it is therefore expected to meet its international obligations in terms of ICAO regulations. In order to comply with ICAO’s standards and to achieve its mandate, the SACAA continuously develops relevant legislation that ensures that it delivers on this mandate and recommended best practices. In terms of oversight, this means the overseeing of all personnel and operators within the industry to ensure compliance with applicable regulations and standards. This task is implemented through the various technical units.

Air Safety Operations

The Standing Committee on Regulation Re-write (SCORR) was formed to systematically improve the Civil Aviation Regulations applicable to the Air Safety Operations ambit of responsibility.

The purpose of the Committee is to provide a structured forum to facilitate the production, amendment and withdrawal of regulations governing civil aviation in South Africa and to ensure that any given proposal is considered by all possible SACAA stakeholders prior to submission to the Civil Aviation Regulations Committee (CARCom). The Committee comprises representatives from every operational department within the SACAA, including Air Safety Operations, Aircraft Safety, Air Safety Infrastructure, Aviation Security, Legal, and Risk and Compliance.

The initial task of the Committee is to revise all regulations required to meet the Standards and Recommended Practices as per ICAO Annexes 1, 2 and 6, to the fullest extent possible. This includes Parts 1, 61, 91, 121, 127, 135, 137 and 141. A new regulation governing Corporate Flight Operations is planned to be produced as Part 93.

Following completion of the initial task, the Committee is to monitor all sources that could possibly generate a requirement for a regulation amendment, such as amendments to the ICAO Annexes, and take the necessary action. Another critical point to note is the action taken by the SACAA against certain flight schools and designated examiners for failing to implement the requirements of applicable regulations and procedures. Moreover, a number of convictions have also been obtained against certain individuals who have been caught cheating during examinations.

Aircraft Safety

During the year under review, a number of countries in the region requested assistance from the Aircraft Safety division in relation to conducting certain inspections on aircraft on which they do not have expertise locally. To that end, Airworthiness inspectors participated in such joint audits with counterparts in the region.

Aviation Security

During the year under review, the Aviation Safety division, through the Ministry of Transport, promulgated a new regulation that seeks to regulate hold baggage. The new regulation came into effect on 1 January 2009. This is yet another measure adopted by South Africa in keeping with the international stance of strictly adhering to ICAO’s standards and recommended practices.

At the time of compiling this report, the Aviation Security division was also in the process of soliciting input from stakeholders for two more regulations, Part 109 and Part 110.

Air Safety Infrastructure

Despite experiencing significant challenges regarding its procedure design capacity, the SACAA has managed to validate a significant number of Global Navigation Satellite System procedures, and amend aeronautical charts for the phased transition of aeronautical navigation systems from being land-based to include elements of a space-based system, thereby leading to greater flexibility, reliability and improved accuracy.

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SACAA decentralisation

The aviation industry has been growing steadily since the inception of the SACAA in its present form more than 10 years ago. Moreover, the SACAA currently conducts its oversight function from its sole office located in Midrand, Gauteng. This scenario is not ideal, as inspectors are dispatched to undertake audits in all the provinces at great expense and with a great deal of unproductive travelling time. Moreover, the non-visibility of inspectors in other provinces results in less effective or consistent oversight, which may lead to ineffectiveness in addressing industry non–compliance.

As a result, the SACAA’s Executive Management Committee (EXCO) took a decision to pursue the possibility of opening regional offices. Board approval has been obtained for the opening of our first regional office in Cape Town, which is expected to commence operations on 1 September 2009 from the Cape Town International Airport. It is planned to initially base between 16 and 20 staff members in Cape Town. Should the functioning of this office prove to be a success, further offices will be opened in Durban and Port Elizabeth.

Colin JordaanCEO/Commissioner

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Board

Nwabisa Mtshali. Agente (Mohau) MotakeCompany Secretary

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Corporate Governance

Introduction

The SACAA is a Schedule 3A national public entity. The Minister of Transport is the Executive Authority for the SACAA. Section 5 of the Act enjoins the Minister of Transport and the SACAA to enter into a written Performance Agreement relating to, among others, the Republic’s requirements in respect of the SACAA’s scope of business, efficiency and financial performance and achievement of objectives and the principles to be followed by the SACAA for purposes of business planning. The Performance Agreement between the SACAA and the Minister of Transport was negotiated and signed by the Chairperson of the Board and the Minister of Transport, during the year under review.

The Performance Agreement reinforces accountability by the SACAA to the Executive Authority. It sets out the deliverables, objectives and key performance indicators (KPIs) with which the SACAA has to comply.

Board

The South African Civil Aviation Act, 1998 (the Act), empowers the Minister of Transport to appoint a Board. The Board is the focal point of governance in the organisation. The SACAA has a properly constituted Board, and the current Board assumed office in May 2008. In line with international best practice, the SACAA has a unitary Board with the Chairperson at the helm of the Board. The Chairperson of the Board is a non-executive member appointed by the Minister of Transport and the position of the Chairperson is distinct from that of the CEO.

The fiduciary and general duties of the Board are set out in the PFMA. The Board approved the Board Charter during the year under review. The Charter sets out the duties and functions of the Board. The Board Charter, with the assistance of the Company Secretary, provides guidance to the Board members in the discharge of their duties, functions and responsibilities.

When the Board assumed office, the newly appointed Members of the Board were properly inducted. The Board maintains the highest standard of integrity, responsibility and accountability to ensure a fair balance between conforming to corporate governance principles and the performance of the SACAA.

To ensure swift decision-making and efficiency across the organisation, the Board has delegated powers to management. To this end, the Board approved a Delegation of Authority to facilitate decision-making across the SACAA. The Board has two (2) subcommittees, namely: Human Resources and Remuneration Committee (HR Committee) and the Finance and Audit Committee (Finance Committee).

The duties and functions of these subcommittees are set out in their respective Terms of Reference. Subcommittees review their Terms of Reference on an annual basis to ensure that they remain current and relevant. During the financial year under review, the subcommittees reviewed their Terms of Reference. Non-executive directors chair the subcommittees and management is invited to the meetings of the subcommittees to clarify and/or give presentation on any operational issues pertaining to the subcommittees. The Ministerial Order of December 2007 merged the position of the CEO and the Commissioner of Civil Aviation, and assigned safety and security functions to the newly created CEO/Commissioner role. This led to the dissolution of the Safety Committee.

The Board members undergo training on a regular basis to broaden their knowledge. The Office of the Company Secretary plays a vital role in ensuring that all the relevant courses are sourced and brought to the attention of the Board for attendance. The Company Secretary keeps the Board abreast of the regulatory and legislative developments.

The Board approved a rolling three-year strategic plan. The strategic plan is an overarching document that drives service delivery and performance management across the organisation. The strategic plan sets out the objectives and key performance indicators for the SACAA. Though the materiality framework, fraud prevention and risk strategy are not incorporated into the strategic plan, the Board submits the materiality framework to the Minister on a quarterly basis, and the fraud prevention plan and the risk strategy were approved by the Board.

The outsourced internal audit function assists the Board in ensuring that there is compliance with the laws, and internal procedures and policies. During the year under review, the Board approved the revised organisational structure; creating the position of Head of Internal Audit to bring the Internal Audit function in-house when the current contract of the outsourced Internal Auditors comes to an end in September 2010.

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Conclusion

The attendance of Board meetings is vital. Board members have to contribute meaningfully and constructively to the business of the organisation. During the year under review, the attendance of Board and committee meetings was as follows:

Scheduled Board meeting attendance for the period 01 April 2008 to 31 March 2009

Current Board

Previous Board

TYPE OF MEETING FINANCE & AUDIT COMMITTEE

HR & REMUNERATION COMMITTEE BOARD

TOTAL MEETINGS 5 (Including special meetings)

5 (Including special meetings)

10 (Including AGM, strategic planning and special meetings)

ATTENDANCEMs N Msomi (Chairperson) (non-member) (non-member) 10

Mr D Golding (FAC Chairperson) 5 1 (Invited) 7

Ms P Riba (HRC Chairperson) 3 5 7

Maj Gnl M Mangethe 1 2 2

Ms S Ngaba (non-member) 3 (1 conference call) 7

Mrs N Mtshali 4 5 7

Mr A Gany 4 (non-member) 6

Mr C Jordaan 5 4 9

TYPE OF MEETING: SAFETY COMMITTEE FINANCE & AUDIT COMMITTEE HR & REMUNERATION COMMITTEE

BOARD

TOTAL MEETINGS 1 1 1 1ATTENDANCE

Mr D Moorosi 1 (member) 1 (invited) 1 (invited) 1 (Chairman)

Mr J Morrison 1 (member) 1 (member) 0 (invited) 1 (member)

Ms B Mohlala 0 (non-member) 1 (member) 1 (Chairman) 1 (member)

Genl T Ntsibande 1 (Chairman) 0 (non-member) 1 (member) 1 (member)

Ms M Magasa 0 (non-member) 0 (Chairman) 1 (member) 1 (member)

Mr C Jordaan 1 (CEO) 1 (CEO) 1 (CEO) 1 (CEO)

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Executive Management Team

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SACAA PERFORMANCE INFORMATION – APRIL 2008 – MARCH 2009 No. Strategic Objectives Key Performance Indicators Targets Performance Results Reason for Variance

1. Ensuring the adequacy of airport and airspace infrastructure leading up to the World Cup.

Progress against 2010 aviation organising committee plans.

Airport capacity in line with LOC projections.

Airspace capacity to handle number of aircraft and flights.

All airport plans reviewed. La Mercy licence expected to be issued in Apr 2010.

RVSM airspace successfully introduced on 25 Sep 2008. No incidents reported to date.

2. Assist with Harmonisation of Aviation Acts.

All proposals to DOT submitted on time.

Final inputs in time for Parliamentary Committee on Transport hearings.

Civil Aviation Bill passed by National Assembly on 19 Nov 2008. Was passed by NCOP in Jan 09. Translation and proof- reading completed by end March 09. Will be submitted to the State President.

Ensure that amendments to ICAO Annexes are being considered and are either implemented by divisions or differences are filed with ICAO.

All State Letters containing annex amendments are considered and responded to within the required timelines.

State Lettersresponses to DOTwithin set targetdates. Regulationsamendmentscompleted within 12months from dateof ICAO amendment ofAnnexure.

SACAA has responded timeously to State Letters 90% of the time on DOT imposed deadlines. Current regulations amendment process unwieldy. Process being reviewed. Regulation amendments required are in progress. All differences were filed and significant differences published in the AIP.

Dedicated office for ICAO compliance became operational only two months into the financial year.

Implementation of the balance of FAA and ICAO Corrective Action Plans.

Corrective Action Plans implemented according to agreed time schedule with ICAO and in time for FAA re-audit in mid-2008.

Various datesaccording to ICAO CAP.

FAA Mid 2008

Corrective actions requiredhave been implemented ontime 90% of the time.The CAR Amendments includedin the 40th amendment must beapproved by the Minister toclose out 13 findings.

All outstanding items werecleared by Jun 08. Successfulre-audit by FAA on 31 Jul 08.Category 1 status retained.

The remaining findings stillopen as a result ofregulation amendmentsgoing through the amendment process.Will be closed during thenext financial year.

Attract skilled technical personnel.

Percentage of technical positions filled vs. required numbers as dictated by Master Surveillance Plans in each division.

90 % of positions filled by 31 October 2008.

All technical positions required for 100% oversight filled by July 08. Target levels for redundancy filled all divisions except Air Safety Operations which is at 95%. Targets have been increased to 65 for 2009/10 and 72 for 2011/12 to build in redundancy.

Achieving 100% compliance in implementing safety and security oversight programmes.

Oversight programme targets met in all core areas.

58 out of 63 SACAA findings cleared by 31 March 2009.

100% of planned oversight audits achieved by March 2009.

36 findings closed. 13 findings will be closed as soon as Minister signs 40th Amendment. Another 7 will be closed by end March 09, bringing the total to 56 of the 63 closed (89%).

(a) Air Safety Operations – all scheduled audits were conducted and all planned ad-hoc audits were exceeded in terms of the plan.

Outstanding findings relate to regulatory changes which are going through the CARCOM process.

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2. (b) Aircraft Safety – the division met its targets with regard to undertaken planned audits.(c) Air Safety Infrastructure – all planned audits conducted and 2 licences were withdrawn.(d) Aviation Security – Out of 356 planned inspections an additional 63 inspections done.

Enforcement of Safety and Security Regulations.

Adequately trained inspectorson enforcement processes andapplicable legislation.

100% of inspectors and new recruits to be trained on enforcement issues.

Enforcement team appointed and enforcement register in place by April 08. Monthly meetings held to update register. All inspectors involved with enforcement have been trained.

Ensure a high quality system for quality assurance of SACAA products and services to improve customer satisfaction.

Improvement of quality assurance system and maintenance of ISO9001 accreditation.

Results of Annual Customer Survey

Robust QualityAssurance System fullyimplemented by 31March 2009.

Decrease in number ofcomplaints.

Report on revised processessubmitted and approved byExco in Dec 08. ISO 9001certification maintained in Sep08 and March 09 followingsurveillance audits. No findingsraised. 6 positive observationsrecorded.

New CRM software introducedin Sep 08. Complaints reviewedby SMs for action within 7days, with escalation to GMwhere required.

Automation of systems and processes to improve efficiencies.

Fully integrated systems. Process Mapping completed in order to define synergies and facilitate technological requirements by 31 March 2009.

Process mapping was completed as planned. Information manager appointed 2 March 2009 and will review and define synergies. Project team in place by April 08 with terms of reference. SharePoint software implemented in Oct 08. Employee self-service program Oct 2008.

Improve Stakeholder Relations. Results of Customer Satisfaction Surveys, Compliments vs. Complaints

Decrease in number of findings. Monthly analysis of complaints discussed at EXCO and action plan developed by the respective General Managers.

New CRM software introduced in September 2008. Complaints reviewed by Senior Managers for action within 7 days, with escalation to General Manager where required. Feedback to EXCO quarterly.

3. Compliance with PFMA. Percentage compliance to PFMA

100% compliance for financial year.

All managers received PFMAbooklets in mid-2008. Trainingarranged by CoSec for Feb 09.

Training arranged to take place in the next financial year.

Compliance with Supply Chain Management Policy.

Reduction in Internal Audit Findings on the Supply Chain Management Policy and Treasury Regulations.

Zero findings by internal audit on supply chain management and adherence to Treasury regulations.

25 staff members trained on Supply Chain Management (SCM) in mid 2008. Compliance reports submitted on time. All 9 previous SCM findings closed. Audit in progress.

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3. Compliance with other policies/Code of Conduct/Code of Ethics

Reduction in internal audit findings on the lack of adherence to policies, etc.

50% reduction in findings over previous year.

Index of policies posted on company server by May 2008. Policies in process of being updated and approved by Exco and the Board. Internal audit in progress.

4. The procurement of goods andservices in line with, among others, the Supply ChainManagement Framework andPolicy and the Broad Based Black Economic Empowerment Act. 50% of budget to be spent on procurement from BBEEEcompliant Service Providers.

Appointment of 70% Service Providers in line with the BBBEE and other relevant Acts, where products can be obtained locally.

100% compliance where possible.

Total BEE spend currently at 60% across the Board. Many goods used by the Authority only available internationally.

5. Recruitment of technical, senior and executive managers in line with the Employment Equity Act.

% of new recruits that are from historically disadvantaged groups, including disabled people.

80% of non-technical recruits to be from these designated groups, pilots and technicians according to availability of suitably qualified candidates from these groups.

Job descriptions and evaluation were carried out for all positions by 31 December. Revision of bands and internal calibration was completed by March 2009. 82% of all new recruits were from designated groups. (For overall status see graph below).

6. Aviation awareness promotion in schools, career guidance forums and radio programmes.

Increased enrolment of historically disadvantaged individuals.

Hosted an average of two career awareness campaigns a month in various provinces under the Joint Aviation Awareness Programme.

An average of 4 career awareness campaigns conducted from Apr 08 to March 09. Campaigns also conducted at an average of 2 airshows per month.

Development of Training Programmes for Black pilots and technicians in conjunction with various government departments.

Progress on establishment of training programmes

Framework in place by March 2009.

A joint 2 day workshop with DoT, DoD, DoE, DPE and DoL, SAA and SACAA was scheduled for 9-10 Feb 2009.

Workshop postponed until after the 2009 elections on 22 April.

7. To maintain Federal Aviation Administration (FAA) Category 1 status.

Number of ICAO findings not closed out and maintenance of Category 1 status.

By 2009. Category 1 Status confirmed in December 2008 following re-audit on 31 Jul 08. SACAA represented on all applicable working groups.

8. Promotion of Aviationat institutions of learning.

Participation in the curriculum development of Schools.

Ongoing. Ongoing.

9. Increased involvement of SACAA in SADC and African and Indian Ocean Islands (AFI) region in aviation development.

Increased participation in SADC and AFI region.

Ongoing. Assistance provided to Botswana (Restructuring of their CAA) and Lesotho (Implementation of GNSS). Namibia & Tanzania (Training). Tanzania and Ethiopia (Familiarization and bench-marking).

The harmonisation of SADC aviation regulations.

Significant output from COSCAP steering Committee.

By March 2009.SACAA to participate in CAC meeting in May 2009.

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ADDITIONAL DIVISION PROGRAMMES

Promote aviation safety and security in SA.

Reduction in the number of accidents.

Public awareness and education of applicable aviation security regulations.

(a) Reduce accident rate by 50% by 2012.

(b) Establishment of a Safety Advisory Panel before end of financial year.

(c) Execution of marketing and promotion campaigns to educate the public by the end of March 09.

Established the General Aviation Safety Initiative (GASI) forum of experts with the aim of developing a plan to reduce the number of accidents. Forum established in November 2008. Accidents reduced from 191 in 2007/8 to 165 in 2008/9.

Safety Advisory Panel in place by November 2008.

Awareness campaign executed successfully in Dec 09.

Promoting easy access to SACAA services.

Establishment of regional offices.

One (1) regional office by end 2009.

Cape Town regional office project under way.

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Operational Review

SACAA mandate

The mandate of the SACAA is to regulate and oversee the civil aviation industry in South Africa to ensure industry compliance to applicable Civil Aviation Regulations (CARS) and the Standards and Recommended Practices (SARPs) as defined by ICAO. In line with international best practice, the SACAA has embarked on a process of continuous improvement. To this end, many initiatives are highlighted in the report.

SACAA organisational structure

During the reporting period, the Board approved a new strategic plan that entailed a revised vision and mission as well as a new organisational structure. The revised organisational structure features two newly created positions, i.e. Head: Internal Audit as well as General Manager: Risk and Compliance.

SAFETY ADVISORY COMMITTEE

MINISTER OF TRANSPORT

CHIEF EXECUTIVE OFFICER

COMMISSIONER SACAA BOARD

EXECUTIVE:ACCIDENT & INCIDENT

INVESTIGATION

ACCIDENT & INCIDENT INVESTIGATION

HEAD INTERNAL AUDIT

COMPANYSECRETARY

EXECUTIVE: PLANNING & COMMUNICATIONS

EXECUTIVE:LEGAL

GENERAL MANAGER: AIRCRAFT

SAFETY

GENERAL MANAGER:

AIR SAFETYOPERATIONS

GENERAL MANAGER: AVIATIONSECURITY

GENERAL MANAGER:

RISK & COMPLIANCE

EXECUTIVE:HUMAN

RESOURCES

GENERAL MANAGER:FINANCE

GENERAL MANAGER:

INFRASTRUCTURE

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Aviation safety and security oversight

Consolidation of aviation legislation

In the past year, the SACAA, in conjunction with the Department of Transport, drafted the new Civil Aviation Act (“the Act”) and it was passed by Parliament. The President has since assented to the Act, but its effective date is yet to be determined by Proclamation. The Act repeals and consolidates existing aviation laws, which have been fragmented and somewhat jumbled, to give effect to certain International Civil Aviation Conventions.

CARCOM and review of specific operating regulations

The Civil Aviation Regulation Committee held six scheduled meetings during the reporting period and called one special meeting. A total of 44 submissions for the amendment of regulations were tabled during this period. The table below outlines some of the submissions made during this reporting period:

The following Amendments were promulgated during the reporting period:

• Thirty Second Amendment (user fees - Part 187)• Thirty Third Amendment (Parts 61; 91; 183)• Thirty Fourth Amendment (Parts 1; 12; 47; 64; 65; 66; 91; 121; 139; 172 and 176)• Thirty Fifth Amendment (Parts 61 and 62)• Thirty Sixth Amendment (Part 91)• Second Amendment of the Mortgaging of Aircraft Regulations, 1997• Amendment of the Aviation Fuel Levy Determination.

Notes on some of the reviewed regulations

The aircrew licensing regulation, Part 61, was reviewed during the first quarter of 2008 and implemented on 1 July 2008. A consistent effort is being made to ensure that these regulations remain ICAO compliant whilst meeting the needs of the industry.

Previously, there was a huge gap in the regulation of recreational aviation. The promulgation of Part 62, which relates to Recreational Pilot Licensing, will essentially ensure that this part of aviation is effectively regulated, thereby improving general aviation safety.

Changes to the Part 67 regulations dealing with the Commissioner’s powers to suspend medical certificates, extensions to medical certificates, appeals and medical examinations for Class IV applicants were submitted to the Civil Aviation Regulations Committee (CARCOM). In addition, qualification criteria for cabin crew designated examiners and instructors were submitted to CARCOM for consideration and processing.

Due to financial constraints, it has become more difficult for small licensed aerodromes to comply with the regulatory requirements for the applicable Aerodrome Rescue and Fire-Fighting Service. Smaller aerodromes that do not cater for scheduled operations or for a limited number of scheduled operations, seem to be the hardest hit. Realising this predicament, the SACAA saw the need to introduce less complicated requirements which will be incorporated into existing regulations and thus enable small aerodromes to comply, thereby leading to improved safety for the travelling public. In this regard, new regulations and technical standards were developed, submitted through the CARCOM process and public comments solicited and considered before promulgation.

DATE REGULATIONS TABLED23 April 2008 1; 12; 48; 91; 96; 138; 139; 145; 109; 110

03 June 2008 48; 91; 94; 96; 139; 145

25 June 2008 1; 24; 43; 61; 62; 67; 91; 108; 139; 141; 145; 148;172

27 August 2008 138; 187; 174

29 October 2008 141; 62

10 December 2008 1; 61; 91; 121; 187

25 February 2009 24; 43; 65; 108; 139; 187

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In an effort to improve air/ground communications, ICAO best practices require that member states take steps to ensure that air traffic controllers and flight crews involved in flight operations in airspace where the use of the English language is required, are proficient in conducting and comprehending radiotelephony communications in English.

In line with this requirement, the SACAA has introduced English Language Proficiency Level 4 as a requirement for all the air traffic controllers and pilots. In accordance with the new requirements, pilots and air traffic services personnel must demonstrate a minimum proficiency of at least Operational Level 4, in both ICAO Standard Phraseology and plain language, to be issued with, or to maintain their respective licences. The new requirements further indicate that pilots and air traffic services personnel must be tested for English language proficiency at regular intervals to ensure that they remain proficient at the required level.

At the time of compiling this report, the Aviation Security division had submitted the following draft regulations to the Ministry of Transport for approval.

• Training and Certification regulations known as Part 109 and 110 and associated Technical Standards were approved by CARCOM in June and December 2008 respectively. Requisite training and certification technical guidance material, manuals of procedure, application forms, evaluation checklists, processes and procedures were developed in the year under review. These processes are in line with ISO requirements and will also assist the SACAA and the industry to have a uniform application of regulations.

• In accordance with Part 121 and 139 of the CARS, screening of domestic hold baggage became mandatory and all of the country’s 20 designated airports and airlines had to comply. Technical standards were developed and were used to assist the industry with implementation. The implementation was successful, particularly as the SACAA gave guidance and engaged extensively with the affected airports and airlines, culminating in 100% achievement in the implementation time.

Harmonisation of regional aviation regulations

A working group has been established to harmonise regulations amongst the Southern African Development Community (SADC) member states. The SACAA, on behalf of South Africa, is part of the said working group. Harmonising the regulations amongst the SADC member states will be of great benefit to all the countries involved, in that such states will have the same and/or equal standards. This will increase cooperation amongst these states, particularly on issues pertaining to safety and security.

Aviation Medicine activities and review of medical protocols

The Aviation Medicine (AvMed) department, which forms part of the Air Safety Operations division, determines and oversees medical requirements and procedures for the licensing of aviation personnel such as flight crew, pilots and air traffic controllers. The department also determines and oversees aviation medical training programmes; determines and oversees medical service operations on board aircraft and airports; and approves and oversees air ambulance operators. In addition, the department also assists in the investigation of aircraft accidents. During this reporting period, the AvMed department undertook a review of several medical protocols.

Warfarin protocolDuring the year under review, the Warfarin protocol was revised and finalised. This was after the Commissioner of the SACAA had experienced an increase in medical appeals related to the use of this medication. It has been further established that internationally, several aviation authorities have made provision for aviation personnel with medical conditions that required Warfarin.

HIV protocol According to ICAO, the prevalence of HIV infection among aviation personnel is unknown. Due to the high prevalence of HIV/AIDS in South Africa, and the effects of medication used to treat this condition, the SACAA revised its HIV/AIDS protocol to ensure that it was aligned with national and international best practices.

Coronary Artery Disease protocolFollowing an increased number of medical appeals, the Coronary Artery protocol was revised and finalised during the year under review. After extensive research, nationally and internationally, the protocol was reviewed to provide for both inexperienced and experienced personnel, with clauses relating to specific medical restrictions to ensure aviation safety.

The revision of all these protocols has resulted in a decrease in the number of medical appeals. At the time of writing this report, the SACAA’s AvMed department had started the process of reviewing several other protocols in line with concerns raised by the industry and bringing all protocols on par with international standards.

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Cooperative Arrangement for the Prevention of the Spread of Communicable Disease ICAO requires member states to establish a national aviation plan in preparation for a possible outbreak of a communicable disease posing a public health risk, or public health emergency of international concern. South Africa is one of the three countries that has been appointed by ICAO to coordinate initiatives around the Cooperative Arrangement for the Prevention of a Spread of Communicable Disease for the Southern and East Africa region. ICAO will be measuring preparedness at two South African airports in October 2009. This will be an evaluation and not necessarily an audit of preparedness in dealing with a possible pandemic caused by a communicable disease.

AvMed business process developmentThe AvMed department’s proposed business case methods through which the department’s functions can be improved were accepted by EXCO in December 2008. The aim of the exercise is to find effective ways to address the challenges affecting the medical certification processes. On completion of the project, the department will have oversight over all the civilian medical activities in South Africa, as required by ICAO. The AvMed department will also be able to perform routine collection and analysis of medical findings to identify areas of increased medical risk. The department will furthermore be able to conduct periodic auditing of the competence of the medical examiners.

State civil aviation system and safety and security oversight functions

The ICAO Compliance and Coordination section within the Risk and Compliance Division is responsible for monitoring the SACAA’s compliance with ICAO standards and recommended practices on a continuous basis. This section is also the official contact point for liaison with the Department of Transport with respect to ICAO, SADC and other regional aviation activities and fora. This section will in future measure the SACAA’s compliance with the eight (8) critical elements of a safety oversight system by means of compliance audits, to ensure that South Africa’s oversight system is one of the best in the world.

Thirty-eight (38) of the sixty-three (63) audit findings were closed within this reporting period. The Ministerial approval of another fourteen (14) amendments to the Civil Aviation Regulations, which have been finalised during the year, is awaited and will close another 14 audit findings. The SACAA is hard at work to close the remaining eleven findings and aims to have a clean slate by 31 December 2009.

Monitoring safety risk

One of the SACAA’s main functions is the management of an effective roll-out of ICAO’s Safety Management provisions, both within the SACAA and the industry. The SACAA has therefore embarked upon the establishment of the required Safety Programme and has drafted and implemented the regulatory requirements for the successful implementation of Safety Management Systems (SMS) within the industry. Through compliance with these requirements, industry stakeholders such as approved training organisations, air operators, aircraft maintenance organisations, aerodrome operators and air navigation service providers will identify, analyse and control the safety risk within their operations. With effect from 1 January 2010, all SACAA technical departments will be responsible for the acceptance and oversight of the SMS of service providers.

The state of aviation safety in South Africa

Accident and incident investigation

A total of 165 accidents were reported during the period under review. In line with international best practice, all reported accidents and serious incidents are evaluated and categorised as to whether the investigation needs to be conducted on site or information can be obtained by a desk review, i.e. through correspondence with the parties involved. This resulted in 74 on-site investigations where investigators visited the accident scene to gather information and 91 were undertaken by correspondence.

The table and the chart below reflect the total number of reported accidents for the financial years 2006 to 2009.

PERIOD ACCIDENTS FATAL ACCIDENTS FATALITIES SERIOUS INCIDENTS01 April 2006 – 31 March 2007 177 30 47 93

01 April 2007 – 31 March 2008 191 25 45 68

01 April 2008 – 31 March 2009 165 31 85 75

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Although the number of reported accidents was lower compared to the same period for 2008, regretfully the number of fatal accidents had increased with a significant rise in the number of fatalities. This increase is also associated with a fatal accident involving an aircraft registered in South Africa which occurred in the Democratic Republic of the Congo. A total of 17 persons lost their lives in this accident. A significant number of fatal accidents was also reported during October 2008.

ICAO provisions require the notification and submission of accident and serious incident investigation reports to ICAO regarding all occurrences involving aircraft exceeding a take-off mass of 2 250 kg. Where the aircraft mass exceeds 5 700 kg, a copy of the final report shall also be filed with ICAO. During the reporting period, the SACAA’s Accident and Incident Investigation division complied with this requirement and further placed final accident reports on the SACAA website for public access.

In addition, ICAO provisions also require that a member state should maintain an accident and incident database to facilitate the effective analysis of information and to facilitate data exchange. To meet this requirement, the SACAA adopted the European Coordinating Centre for Accidents and Incidents Reporting System a few years ago, and during the year under review continued to improve the content of the database.

During the reporting period, safety recommendations emanating from the accident reports were generally accepted by the Commissioner for Civil Aviation for implementation by the applicable SACAA departments. Just as in previous financial years, the implementation of the safety recommendations was subjected to a monitoring and tracking procedure.

To ensure the continued improvement in the quality of all accident investigations conducted by the SACAA, the Commissioner appointed a five-member Advisory Safety Panel in November 2008. The panel members’ key duties include among others, the review of final reports submitted by the Incident Investigation Committee for adequacy of content, identification of cause(s) and the feasibility of safety recommendations. On finalisation, their reviews, which contain recommendations, are submitted to the Commissioner for Civil Aviation, who then has the prerogative to accept and implement the safety recommendations contained in the reports and trends identified, based on accident statistics.

The Advisory Safety Panel members serve in a voluntary and non-remunerative capacity and they are:

1. Mr. Duke Moroosi2. Mr. Japie Smit3. Mr. Peter Mashaba4. Mr. Kim Gorringe5. Mr. P. van Hoven

The panel commenced its duties in November 2008. Since then, the Advisory Safety Panel has convened at least once a month to review and endorse the submitted accident reports as compiled by investigators. A summary of the Advisory Safety Panel’s activities is outlined below:

DATE OF THE MEETING NO OF REPORTS TABLED NO OF REPORTS APPROVED NO OF REPORTS REFERRED BACK

TOTAL SAFETY RECOMMENDATIONS

November and December 2008 10 4 6 Included in January 2009 meeting

01 April 2006 - 31 March 2007 23 15 8 14

01 April 2007 - 31 March 2008 16 13 3 7

01 April 2008 - 31 March 2009 13 10 3 9

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Following a change in the reporting structure in terms of accidents, the Commissioner for Civil Aviation now reports directly to the Minister of Transport. This therefore excludes the Safety Committee of the SACAA’s Board from any responsibility in respect of the review of final accident reports and the endorsement of safety recommendations developed. This means that reports are now submitted directly to the Commissioner for Civil Aviation.

Another point that should be noted is the fact that the Executive Manager of the Accident and Incident Investigation division left the SACAA in June 2008. With the planned separation of the investigation function from the SACAA, a decision was taken not to fill this vacancy but rather to make use of a contract consultant to act as a caretaker manager until the separation is implemented.

Aerodrome and airside incidents

In terms of aerodrome accidents and incidents, compared to the previous financial year, there has been a decrease in various categories of reported incidents as indicated in the table below.

The decrease highlighted in the table above is as the result of, among others, ad-hoc inspections that were conducted on aerodromes where safety was questionable. Measures used in addressing non-compliance as well as safety workshops that were conducted during the reporting period, could also have played a role in bringing the numbers down.

Mandatory and ad-hoc oversight inspections

The SACAA performs its oversight duties through four technical divisions; namely, Air Safety Operations, Aircraft Safety, Air Safety Infrastructure and Aviation Security.

Oversight inspections conducted by the Air Safety Operations division

This section outlines audits and oversight statistics relating to the period between April 2008 and March 2009.

The table below depicts all the annual audits undertaken by the various units of the Air Safety Operations division.

CATEGORY 2007-2008 2008-2009 PERCENTAGEApron Equipment and Aircraft 33 27 18%

Apron Equipment 58 56 3,45%

Apron Equipment and Facility/Property 41 30 27%

Apron Equipment and Vehicle 61 45 26,23%

Vehicle 40 27 32,5%

Runway Incursions 06 03 50%

Fuel Spillages 86 69 25%

PART 121 AIR OPERATORS



CABIN SAFETY PART 141 AVIATION TRAINING

ORGANISATION2008/09 PLANNED 55 171 68 41 252

2008/09 COMPLETED 55 171 68 41 252

2007/08 COMPLETED 71 131 62 43 221

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As the table above indicates, in the previous year Part 121 Air Operators undertook more audits as compared to the 55 audits completed in the current reporting period. This was due to the decline in numbers of Part 121 Air Operators. On the other hand, in the current reporting period, Part 135 undertook a total of 171 audits, i.e. 40 more audits as compared to the previous reporting period. In terms of Cabin Safety, the number of audits decreased to 41 compared to the 43 conducted during the previous year. This is as the result of the closing down of certain Part 121 Air Operators. Overall, there was an increase in the number of audits undertaken during this reporting period under Part 127 Air Operators as well as Part 141 Aviation Training Organisations.

Ad-hoc oversight inspections Air Safety Operations units

Having successfully undertaken all the mandatory inspections ahead of schedule, the various Air Safety Operations units further conducted ad-hoc inspections as outlined in the table below. Most significantly, the various units conducted more ad-hoc inspections than initially planned.

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DESIGNATED FLIGHT EXAMINERS

DESIGNATED EXAMINERS (CABIN CREW)

AVIATION MEDICAL FLIGHT INSPECTION UNIT

OVERSIGHT/AUDITS PLANNED 162 46 33 154

OVERSIGHT/AUDITS COMPLETED 162 46 33 154

Statistics relating to the Designated Flight Examiners, Designated Examiners (Cabin Crew), Aviation Medical and Flight Inspection units

Mandatory oversight inspections by the Aircraft Safety division

The Aircraft Safety division’s Part 121 unit conducts oversight of aircraft maintenance organisations that are approved to conduct maintenance on large passenger transport aircraft. As the table below depicts, this unit was able to exceed its targets of conducting all mandatory inspections by conducting a total of 60 mandatory audits, whereas the target was 57.

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The division’s Part 127 unit conducts the oversight of aircraft maintenance organisations that are approved to conduct maintenance on all helicopters across the board, large and small. As per the table below, the unit met its surveillance targets by conducting 67 mandatory audits, thereby exceeding the target of 66 audits.

Airworthiness Part 127 Unit - Helicopters

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The division’s Part 135 unit conducts the oversight of aircraft maintenance organisations that are approved to conduct maintenance on small and general aviation aircraft below 5,700kg. During the year under review, the Part 135 unit conducted 110 mandatory inspections against a target of 112 as per the table below. The two outstanding audits were scheduled for completion in April 2009.

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Mandatory oversight inspections by the Aircraft Certification department

The division’s Part 148 unit in the Aircraft Certification department conducts the oversight of manufacturing organisations. During the year under review, the unit conducted a total of 35 mandatory audits, exceeding the yearly target of 34 mandatory audits as outlined in the table below.

The graph below shows the activities of the Aircraft Registration unit with regard to the registration of aircraft. Statistics show that a total of 627 aircraft were added to the aircraft register during the year under review. This figure exceeds the annual target of registering 540 new aircraft.

Certification Part 148 Unit – Manufacturing Organisations

1

2

1

3

3

3

3

3

3

7

5

7

4

3

4

3

3

3

4

3

4

3

3

3

1

3

1

0

1

1

2

3

2

3

2

3

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TYPE OF INSPECTION 2008/2009TARGET ACTUAL VARIANCE

Aerodrome Annual Licence Renewal 135 133 2 licences were withdrawn

Ad-hoc Inspections 23 23 nil

Heliports/Helipads On demand 05 nil

MONTH: APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MARTotals: 7 7 8 28 4 4 14 7 0 6 12 10

Generally, the audits currently being undertaken have increased tremendously in terms of depth and scope. This has resulted in upping the compliance of the industry with the applicable Civil Aviation Regulations. Furthermore, most audit findings and non-compliances are being scrutinised and monitored to ensure that they are fully resolved by the industry.

Mandatory oversight inspections by the Aircraft Safety Infrastructure division

Aerodrome Licence Renewal inspections were carried out in accordance with the Aerodrome Safety Oversight Plan. In order to support aerodromes that were struggling with compliance issues and to ensure effective enforcement, additional surveillance inspections were also conducted.

The table below illustrates a summary of inspections conducted during the reporting period.

Mandatory oversight inspections by the Aviation Security division

The Dangerous Goods department achieved their target for oversight activities and exceeded the target by 17%. Out of 356 targeted audits a total of 419 were actually conducted.

The Cargo Security department managed to undertake stakeholder visitations almost every month, as outlined in the table below.

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Furthermore, the division had planned to conduct 356 inspections on various operators, but managed to conduct an additional 63 inspections. These inspections involved aviation training organisations, cargo operators, ramp handlers as well as airlines and airports. The increase can also be attributed to the fact that the AvSec division, as part of its strategic initiative, was to allocate regions to inspectors, making them responsible for all operators in that particular region. This allowed for continuity and also streamlined the focus to operators allocated per inspector.

As the table above indicates, the section had initially planned to conduct 165 inspections on various operators, but managed to conduct 159 inspections. The shortfall was as the result of a shortage of staff during the period under review.

During the reporting cycle, the division’s Training and Certification department planned for no inspections. However, the department managed to conduct 17 visits at various training centres and airports.

Enforcement measures undertaken

During the financial year in question, when compared to the previous one, there have been fewer court cases against the SACAA, and this can be attributed largely to the efficiency and effectiveness of the resuscitated enforcement mechanism. By ensuring that enforcement actions taken are legally and factually justified and that procedures are appropriately followed, the SACAA managed to substantially reduce court actions. On average, in the previous year there were approximately four court actions brought against the SACAA, relating to enforcement actions. The number has since dropped to only two, during this reporting period. Furthermore, the SACAA is witnessing tremendous improvement with regard to voluntary compliance, thereby leading to less enforcement actions having to be taken. Whereas in the previous financial year approximately 42 enforcement actions had to be taken, in this financial year these have been reduced to only 17.

Some of the enforcement actions taken were as follows:• Three (3) instructor ratings were suspended, two (2) of which were subsequently cancelled.• Six (6) cases were reported to the South African Police Service.• Three (3) pilot’s licences were suspended, 1 of which was subsequently cancelled.• Two (2) pilots were disqualified from writing examinations for a period of 18 months.• One (1) Aircraft Maintenance Organisation was suspended.• One (1) Aviation Training Organisation’s licence was suspended and the approval was returned to the SACAA.• One (1) Aircraft Maintenance Engineer’s licence was suspended. • Two (2) aerodrome licences were withdrawn.

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Strategic projects

Flight Inspection System

Despite experiencing significant challenges regarding procedure design capacity, the SACAA has managed to validate a significant number of Global Navigation Satellite System procedures, and amend aeronautical charts for the phased transition of the aeronautical navigation system from being land-based to include elements of a space-based system, thereby leading to greater flexibility, reliability and improved accuracy.

Rapid Intervention Vehicle

The concept of a Rapid Intervention Vehicle equipped with a premix foam solution and dry chemical powder system was introduced to some of the aerodromes. Some aerodromes saw the benefit of purchasing such a system because of the following reasons:• The vehicle and equipment are relatively cheap.• The vehicle is fast as it carries less than one ton in weight.• Operation of the fire-fighting mechanism is a simple process of opening two or, at most, three valves.• No fire-pump, power take-off or foam induction system that can become faulty and as such rendering the vehicle unserviceable.• The team operating this vehicle would require only basic training.

Trailer Premix Foam System

A further concept that was introduced and implemented successfully at aerodromes located in game farms was the trailer unit, which uses the same premix foam system as the Rapid Intervention Vehicle. The only difference in this case is that some aerodromes opted to use a small engine and fire-pump combination instead of using nitrogen gas as an expellant. This system is also beneficial because:• The trailer can be towed to where it is needed by any vehicle fitted with a towing hook;• The team operating this unit would require only basic training;• Only limited maintenance of the trailer and fire-fighting system is required; and• No corrosion to the water / foam tank.

Integrated Aeronautical Information Package

In its efforts to transition from a paper-driven environment to an electronic system, the SACAA has most of the Integrated Aeronautical Information Package elements now available on the SACAA website. This includes Aeronautical Information Publication Supplements, Aeronautical Information Circulars, the Checklist of valid NOTAM and Summaries, and Aeronautical Charts. In addition, plans are under way to replace the paper publication of the Integrated Aeronautical Information Package with a CD.

Industry development

Unmanned Aircraft Systems In direct response to calls from the industry, the SACAA’s Aircraft Safety division established the Unmanned Aircraft Systems unit to ensure that the investigation and smooth integration of unmanned aircraft systems into the civilian domain is given the necessary oversight. Globally, there is a growing trend to utilise unmanned aircraft systems for various applications within the civilian aviation sector. During this reporting period, the SACAA developed a policy which is being considered with the various stakeholders before it’s cascaded to the relevant structures for consideration.

Transport sector HIV Strategy

During the reporting period, the SACAA’s Aviation Medicine department was also requested to partake in assisting the National Department of Transport with drafting an HIV Strategy for the transport sector. A framework for the development of HIV policies in the workplace was also formulated.

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Industry transformation and growth

Licensing of civil aviation personnel

The SACAA has issued a total of 22 442 active aviation personnel licences, of which a total of 5376 were licences issued for the first time during the reporting period. There has been a 6% increase in the number of licences issued during this reporting period in comparison with the 2007/2008 financial year. The SACAA categorises the number of issued licences in terms of gender and race as depicted in the table below.

African Male Coloured Male Indian Male White Male

Aeroplane Licence

South African National

Foreign National


Foreign National


Foreign National


Foreign National

Total2008/09

Private Pilot 11 105 7 8 9 89 467 105 801

Commercial Pilot

17 68 4 9 10 42 294 58 502

Airline Transport Pilot

9 6 2 1 3 0 153 34 208

Total 37 179 13 18 22 131 914 197 1511


Helicopter Licence


Foreign National


Foreign National


Foreign National


Foreign National

Total2008/09

Private Pilot 6 18 3 0 2 0 157 21 207

Commercial Pilot

3 9 4 0 1 0 75 14 106

Airline Transport Pilot

0 0 0 0 0 0 29 5 34

Total 9 27 7 0 3 0 261 40 347


Other Licences


Foreign National


Foreign National


Foreign National


Foreign National

Total

Student Pilot 41 169 13 6 26 72 1229 144 1700

Cabin Crew 64 11 13 0 11 0 48 1 148

Microlight Pilot 2 8 0 0 0 0 162 12 184

Hot Air Balloon Pilot

0 1 0 0 0 0 3 0 4

Gyroplane Pilot 0 0 0 0 0 0 34 1 35

Maintenance Engineers

16 12 5 0 1 0 131 7 172

Flight Engineers

0 0 0 0 0 0 0 1 1

Validations 0 39 0 0 0 5 67 135 246

Total 123 240 31 6 38 77 1674 301 2490

African Female Coloured Female Indian Female White Female

Helicopter Licence


Foreign National


Foreign National


Foreign National


Foreign National

Total2008/09

Private Pilot 3 8 0 1 3 6 44 7 72

Commercial Pilot

1 9 1 1 10 42 26 5 95

Airline Pilot 1 0 1 0 0 0 18 0 20

Total 5 17 2 2 13 48 88 12 187

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Air traffic controller’s licence holders

The SACAA’s Air Traffic Services department issues licences for air traffic controllers and assistants, and approvals for the operation of air traffic service units at 21 airports. Two organisations are also approved for Air Traffic Services training. As can be seen from the graph below, the numbers of air traffic controllers and assistants have grown steadily since 2002 with a marked slow down over the last two years. This is primarily due to a brain drain.


Helicopter Licence


Foreign National


Foreign National


Foreign National


Foreign National

Total2008/09

Private Pilot 3 1 0 0 0 0 26 2 32

Commercial Pilot

0 2 0 0 0 0 8 0 10

Airline Pilot 0 0 0 0 0 0 1 0 1

Total 3 3 0 0 0 0 35 2 43


Other Licences


Foreign National


Foreign National


Foreign National


Foreign National

Total

Student Pilot 15 24 1 1 2 1 141 20 205

Cabin Crew 188 41 42 0 30 0 264 5 570

Microlight Pilot 0 0 0 0 0 0 4 0 4

Hot Air Balloon Pilot

0 0 0 0 0 0 0 0 0

Gyroplane Pilot 0 0 0 0 0 0 1 0 1

Maintenance Engineers

1 0 0 0 0 0 1 0 2

Flight Engineers

0 0 0 0 0 0 0 1 1

Validations 0 0 0 0 0 0 1 14 15

Total 204 65 43 1 32 1 412 40 798

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Stakeholder management

Promotion of aviation careers and opportunities

As in previous financial years, the SACAA in partnership with the Joint Aviation Awareness Programme (JAAP) member organisations conducted aviation career awareness campaigns in six of the nine provinces in South Africa, namely Gauteng, Northern Cape, Limpopo, Free State, KwaZulu-Natal and the North West. The JAAP initiative has ensured that key organisations maximise on available resources to create aviation career awareness, particularly amongst historically disadvantaged learners.

Perception management and information dissemination through the media

The SACAA has enjoyed a neutral relationship with the media over the years. It has been found that in the past few years, the attitude of the media towards the SACAA has moved towards the positive side. In addition, it has been established that the industry is also seeing most of SACAA’s executives as thought leaders in many aviation-related topics and would therefore seek to engage them when topical issues require debating. Though most of the media coverage has been on accidents, during the reporting period the media has made concerted efforts to solicit comment from the SACAA on pertinent issues relating to the aviation industry. This attests to the fact that the media now regards the SACAA as a critical player in the aviation industry. It also conveys a positive message about the strengthening of a mutually beneficial relationship between the media and the SACAA.

Safety and security promotions

Various campaigns directed at the industry were organised and executed with the different core divisions with a view to promoting aviation safety and security. The SACAA’s Safety and Security Promotions department visited flying clubs in the Free State and Gauteng province with a view to sharing information and also creating a platform where safety presentations can be delivered. In addition, the various units and the Commissioner gave regular presentations at various flying clubs and industry organisations’ events across the country. This was a welcomed gesture by the flying clubs, in particular, as they had previously regarded the regulator as an enforcement agent with whom they could not engage on other matters which affect them.

This Safety and Security Promotions department also exhibited at various air shows around the country and this gesture is seen as a positive one by the industry, as it gives the SACAA a face and visibility amongst them.

Culture of excellence in service delivery

Defect Reporting and Monitoring oversight

During the year under review, the SACAA established the Defect Reporting and Monitoring unit under the Aircraft Safety division to ensure that all defects recorded by the maintenance industry are collected and disseminated to the relevant manufacturers and aviation authorities to ensure that their recurrence is prevented. The industry has increased its utilisation of this defect reporting mechanism which is a mandatory requirement in terms of ICAO standards and recommended practices.

Examination systems

The SACAA’s Examinations section administered all pilot, flight engineer, cabin crew and aircraft maintenance engineer examinations during the year. A third daily examination session was implemented in December 2008, in order to assist with the backlog of students wishing to write the examinations. Between December 2008 and 31 March 2009 a total of 3088 additional examination papers were written, clearly indicating an increase in the demand for examinations.

Furthermore, examination system security has been dramatically improved for both on-line and out-station examinations and new security measures were introduced for invigilation and examination venues.

Flight Instructor on-line examinations

The SACAA assisted industry by discontinuing the biannual hand-written flight instructor examinations by instituting electronic examinations conducted on-line at approved training organisations. These examinations may now be written from Monday to Friday during SACAA business hours.

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Establishment of an Information Management department

During the 2007/2008 financial year initial steps were taken to improve systems and processes in the SACAA. Consequently, the year 2008/2009 saw significant achievements in streamlining processes specifically in relation to information management. This was marked by the establishment of the Information Management department to enhance the current capacity of the Records Management and the Technical Library sections through the creation of a new Business Improvement section to ensure the following:• efficient and effective management of business processes;• proper management of Master Data;• compliance to statistical reporting requirements of ICAO, the Auditor-General and the Department of Transport; and • Creation of a Business Intelligence function within the SACAA.

In addition, a Senior Manager: Information Management was appointed during this reporting period.

Monitoring and measuring service standards

A project to develop service standards for all functions within the SACAA was completed during the reporting period. Service standards have been approved and implemented across the SACAA. A review of all policies and procedures older than two years have been initiated and the affected procedures were updated. The SACAA Information Management System is certified to the ISO 9001 International Quality Standard. Two surveillance audits were carried out by the certification body during the year under review. The SACAA’s Information Management System met the requirements of the prevailing standards and therefore retained its certification.

Customer Satisfaction Survey

The Client Services section within the Client, Licensing and Examination Service department is responsible for front-line services to the SACAA walk-in customers. It further manages customer feedback and queries received from customers regarding SACAA services and activities. The number of transactions performed for walk-in clients at the customer service centre for this reporting period was 31677; this is an increase of 21% from the previous reporting period.

In addition, a Customer Relationship Management System has been put in place and the following customer feedback results have been captured for the year:

36

Summary: Queries, Complaints & Compliments July 08 - Mar 09

Query Complaint Compliment TotalSubject Q2 Q3 Q4 Total Q2 Q3 Q4 Total Q2 Q3 Q4 TotalAirworthiness 2 2 7 11 4 4 5 13 1 2 3 6 26Licensing 12 12 10 34 3 3 0 6 0 1 3 4 44Aviation Personnel Standards 1 2 10 13 5 5 1 11 0 0 0 0 19Procurement 0 0 0 0 0 1 0 1 0 0 0 0 1Flight Operations 1 2 4 7 4 4 2 10 0 1 1 2 11Aviation Medicine 0 1 0 1 1 1 1 3 0 0 1 1 5Finance 0 0 0 0 0 1 0 1 0 0 0 0 1

Aircraft Certification 1 2 4 7 2 2 1 5 0 0 1 1 13IT 0 0 0 0 0 1 0 1 0 0 0 0 1Aircraft Registry 0 0 2 2 0 1 0 1 0 1 1 2 5Client Services 4 4 5 13 0 0 0 0 2 2 2 6 19CEO Office 0 0 1 1 0 1 0 1 0 0 4 4 6Examinations 2 2 6 10 2 2 0 4 1 2 1 4 18Accident & Incident Investigation 0 1 0 1 0 0 0 0 0 1 0 1 2Airports 0 0 2 2 0 0 0 0 0 0 0 0 2Air Traffic Services 0 0 1 1 0 0 0 0 0 0 0 0 1Legal 0 0 1 1 0 0 0 0 0 0 0 0 1Total 104 57 31 192

54.17% 29.69% 16.15% 100.00%

Operational and administrative efficiency

Robust performance management system

The SACAA Performance Management system has been reviewed to ensure optimum alignment with the SACAA’s strategic objectives. The revised system has been implemented and is based on the balanced scorecard principles and focuses on measurable objectives.

An electronic Performance Management system has been procured and will be used going forward to manage the SACAA balanced scorecard and performance management.

eRecords and Data Management Systems

The 2008/9 period also saw significant improvement in the Records Management function with the development of a new SACAA File Plan, the development of the Records Management Policy and of business requirements for an electronic Records Management system that will be implemented in the next reporting period.

Business requirements have been developed for the procurement of an electronic Records and Document Management system. A Microsoft solution for document management has been investigated by Information Technology, but the records management abilities of the system must still be tested and confirmed.

The business requirements for an SACAA Business Intelligence system were developed in the last quarter of the year and a system is expected to be in place by the end of the next reporting period. This system will be highly dependable on the available data and one of the major projects in Information Management planned for 2009/10 is a data governance project which will include the identification of data needs and the review and cleansing of master data within all SACAA systems.

37

Technical Library

The overall management of the Technical Library has been improved to incorporate additional controls for document loans and plans are under way to put it on par with its peers in the industry. The successful implementation of a bar coding system for the efficient and effective management of library material, retrieval and loaning functions has been launched in this year and is targeted to be completed within the next six months. Electronic subscriptions for technical documents have been renewed within the year to ensure continued compliance with the ICAO requirement for access to these docu-ments.

Implementation of the procurement module

The division managed to install and train all the users on the new procurement module. The implementation or roll-out plan will start in the new financial year. The module will assist us in tracking and tracing the turn-around time from the time when the requisition is made until the delivery of goods and services. The reporting will be done in line with the required regulations governing procurement.

Development of competencies and employee wellbeing

Technical personnel statistics, qualification and training

The increase in the number of technical personnel is attributable to the projected increase in activity, resulting in the proportionate increase in oversight capacity. While there has been aggressive recruitment, the inspector turnover rate is quite high due to the global skills shortage, particularly for inspectors and pilots. The table below outlines training targets.

CORE AREA 2007/8 2008/9 TARGETAir Safety Operations 54 63 80

Air Safety Infrastructure 21 26 32

Aviation Security 22 34 48

Aircraft Safety 75 92 100

Accident and Incident Investigations 16 16 20

38

CAA DEMOGRAPHICS – MARCH 2009

GENDER AFRICANS COLOURED INDIAN WHITE SUBTOTAL TOTAL

No. % No. % No. % No. % No. %

CE/EM/GMs MALE 5 50.00 0 0.00 0 0.00 3 30.00 8 80.00 10

FEMALE 1 10.00 0 0.00 0 0.00 1 10.00 2 20.00

Senior Managers MALE 7 41.18 1 5.88 2 11.76 2 11.76 12 70.59 17

FEMALE 4 23.53 0 0.00 0 0.00 1 5.88 5 29.41

Managers MALE 14 36.84 0 0.00 1 2.63 9 23.68 24 63.16 38

FEMALE 10 26.32 1 2.63 1 2.63 2 5.26 14 36.84

Professional MALE 61 32.80 3 1.61 10 5.38 68 36.56 142 76.34 186

FEMALE 33 17.74 1 0.54 2 1.08 8 4.30 44 23.66

Technical MALE 7 50.00 0 0.00 2 14.29 0 0.00 9 64.29 14

FEMALE 4 28.57 0 0.00 1 7.14 0 0.00 5 35.71

Administrators MALE 27 20.93 3 2.33 2 1.55 1 0.78 33 25.58 129

FEMALE 70 54.26 6 4.65 2 1.55 18 13.95 96 74.42

Elementary MALE 6 75.00 0 0.00 0 0.00 0 0.00 6 75.00 8

FEMALE 2 25.00 0 0.00 0 0.00 0 0.00 2 25.00

TOTAL 251 15 23 113 402 402

Disability MALE 1 3FEMALE 1 1

Report of Employment Equity targets and achievements

Remuneration structures

The SACAA embarked on a project to revise the job profiles of SACAA positions, re-evaluate all positions and redesign SACAA salary scales. All SACAA job profiles were revised to ensure that they are up to date and reflect the responsibilities of the various positions. The revised job profiles were used as input to re-evaluate all positions. Positions were graded in accordance with the widely used Paterson job evaluation system. Market-related pay scales were designed that would enable consistent decision-making regarding all salary decisions going forward. This will ensure internal equity, and will also serve the purpose of external equity, since the scales have reference to external market pay practices.

Flight Instructor’s examiner programme

A Flight Instructor’s examiner programme was successfully implemented. This programme consists of regular workshops held in Gauteng, Cape Town, Port Elizabeth and Durban. The aim of these workshops is to set the required standard amongst those examiners who have been approved to conduct initial and upgrade tests for flight instructors.

Aerodrome Inspector training

During the financial year 2008-2009, inspectors within the Aerodrome and Facilities unit undertook the following training:

• Safety Management System (IATA)• Regulatory Audit Procedures (SACAA)• Human Factors (IATA)• Ramp Decision Error Aid workshop presented by Boeing.

Technical guidance material

Technical Guidance Material for use by flight inspectors during the certification process was compiled in order to standardise both internal and external processes. All inspectors were trained accordingly. Technical Guidance Material was also compiled for use by applicants in order to facilitate a smooth application and certification process.

39

Employee Wellness Programme

Based on the monthly reports provided by the independent service provider the SACAA’s Employee Assistance Programme (EAP) is used optimally by employees. The value add provided by this service is one way of ensuring that employees get emotional, psychological and professional advice when they need it.

The Wellness Committee organised a Wellness Day in conjunction with Discovery Health, our medical aid service provider, and ICAS, the EAP service provider. Participation was encouraging from the different age groups of employees.

The SACAA also registered as a corporate member with the South African Blood Services as a regular blood donor. Employees welcomed this idea and we have already hosted two sessions successfully.

Internal staff activities

The organisation celebrated its 10th birthday anniversary on 18 November 2008. This celebration would not have been complete without the presence of some of our key clients and stakeholders.

A Sports Day was organised on a Saturday for staff members and their families to commemorate World Aids Day and 16 Days of Activism against Women and Children. During this reporting period, the organisation sponsored various sporting activities e.g. corporate races, soccer tournaments and aerobics activities as part of instilling the principle that a healthy mind can result in a very productive workforce. The organisation boasts a gymnasium facility which is not yet fully equipped but is fully utilised by various staff members twice a day under the supervision of a gym instructor who has been contracted by the organisation.

Financial sustainability

Black Economic Empowerment

A supply chain management policy has been implemented in line with the national legislative framework governing the procurement of goods and services. We have prioritised the implementation of BBBEE. We have set our current target on BBBEE spend to 60% for the current financial year. We have managed to exceed our target by 18.15%. See the graphical representation of the procurement expenditure below.

The BBBEE targets have been increased since 2006 from 40% to 60% in the current reporting period. With the average trend in the aviation industry being 26%; the SACAA increased its threshold in order to have a positive effect on BBBEE. We are proud to announce that we managed to achieve 78.15% against our 60% target due to the supplier development programme that we are implementing.

BBBEE Spend80

70

60

50

40

30

20

10

0

BBBEE Spend

2006 2007 2008

40

ANNUAL FINANCIAL STATEMENTS31 MARCH 2009

41

c o n t e n t s

Contents

Report of the Auditor-General 42

Statement of Responsibility 45

Report of Accounting Authority 46

Statement of Financial Performance 48

Statement of Financial Position 49

Statement of Changes in Net Assets 50

Cash Flow Statement 51

Notes to the Cash Flow Statement 52

Accounting Policies 53

Notes to the Annual Financial Statements 62

42

Report of the Auditor-General to Parliament on the Financial Statements and Performance Information of the South African Civil Aviation Authority for the year ended 31 March 2009

Report on the Financial Statements

Introduction

1. I have audited the accompanying financial statements of the South African Civil Aviation Authority which comprise the statement of financial position as at 31 March 2009, and the statement of financial performance, the statement of changes in net assets and the cash flow statement for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 46 to 79.

The accounting authority’s responsibility for the financial statements

2. The accounting authority is responsible for the preparation of these financial statements in accordance with the basis of accounting determined by the National Treasury, as set out in the accounting policies on page 53 to 61, and in the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA), and the South African Civil Aviation Authority Act (Act No. 40 of 1998) (SACAA Act) and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

The Auditor-General’s responsibility

3. As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with section 4 of the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA), and section 17 of the SACAA Act, my responsibility is to express an opinion on these financial statements based on my audit.

4. I conducted my audit in accordance with the International Standards on Auditing read with General Notice 616 of 2008, issued in Government Gazette No. 31057 of 15 May 2008. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

5. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

7. In my opinion the financial statements present fairly, in all material respects, the financial position of the South African Civil Aviation Authority as at 31 March 2009 and its financial performance and its cash flows for the year then ended, in accordance with the basis of accounting determined by the National Treasury, as set out in the accounting policies on page 53 to 61, and in the manner required by the PFMA.

Basis of accounting

8. Without qualifying my opinion, I draw attention to the accounting policies to the financial statements on page 53 to 61, which describes the basis of accounting. The public entity’s policy is to prepare financial statements on the basis of accounting determined by the National Treasury.

Other matters

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

43

Governance framework

9. The governance principles that impact the auditor’s opinion on the financial statements are related to the responsibilities and practices exercised by the accounting authority and executive management and are reflected in the key governance responsibilities addressed below:

Key governance responsibilities

10. The PFMA tasks the accounting authority with a number of responsibilities concerning financial and risk management and internal control. Fundamental to achieving this is the implementation of key governance responsibilities, which I have assessed as follows:

No. Matter Y N

Clear trail of supporting documentation that is easily available and provided in a timely manner

1. No significant difficulties were experienced during the audit concerning delays or the availability of requested information. X

Quality of financial statements and related management information

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

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

Timeliness of financial statements and management information

4. The annual financial statements were submitted for auditing as per the legislated deadlines in section 55 of the PFMA X

Availability of key officials during audit

5. Key officials were available throughout the audit process. X

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

6. Audit committee

• The public entity had an audit committee in operation throughout the financial year. X

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

• The audit committee substantially fulfilled its responsibilities for the year, as set out in section 77 of the PFMA and Treasury Regulation 27.1.8. X

7. Internal audit

• The public entity had an internal audit function in operation throughout the financial year. X

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

• The internal audit function substantially fulfilled its responsibilities for the year, as set out in Treasury Regulation 27.2. X

8. There are no significant deficiencies in the design and implementation of internal control in respect of financial and risk management. X

9. There are no significant deficiencies in the design and implementation of internal control in respect of compliance with applicable laws and regulations. X

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

11. A risk assessment was conducted on a regular basis and a risk management strategy, which includes a fraud prevention plan, is documented and used as set out in Treasury Regulation 27.2.

X

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

Follow-up of audit findings

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

14. SCOPA resolutions have been substantially implemented. X

Issues relating to the reporting of performance information

15. The information systems were appropriate to facilitate the preparation of a performance report that is accurate and complete. X

16. Adequate control processes and procedures are designed and implemented to ensure the accuracy and completeness of reported performance information. X

17. A strategic plan was prepared and approved for the financial year under review for purposes of monitoring the performance in relation to the budget and delivery by the SACAA against its mandate, predetermined objectives, outputs, indicators and targets per Treasury Regulation 29.1 and 30.1.

X

18. There is a functioning performance management system and performance bonuses are only paid after proper assessment and approval by those charged with governance. X


44

Report on other legal and regulatory requirements

Report on performance information

11. I have reviewed the performance information as set out on pages 14 to 17.

The accounting authority’s responsibility for the performance information

12. The accounting authority has additional responsibilities as required by section 55(2)(a) of the PFMA to ensure that the annual report and audited financial statements fairly present the performance against predetermined objectives of the public entity.

The Auditor-General’s responsibility

13. I conducted my engagement in accordance with section 13 of the PAA read with General Notice 616 of 2008, issued in Government Gazette No. 31057 of 15 May 2008.

14. In terms of the foregoing my engagement included performing procedures of an audit nature to obtain sufficient appropriate evidence about the performance information and related systems, processes and procedures. The procedures selected depend on the auditor’s judgement.

15. I believe that the evidence I have obtained is sufficient and appropriate to report that no significant findings have been identified as a result of my review.

Appreciation

16. The assistance rendered by the staff of the South African Civil Aviation Authority during the audit is sincerely appreciated.

Pretoria

31 July 2009


45

Statement of Responsibilityfor the year ended 31 March 2009

The Board which is the Accounting Authority of the South African Civil Aviation Authority (SACAA) is responsible for the preparation, integrity and fair presentation of the annual financial statements.

The annual financial statements for the year ended 31 March 2009 presented on pages 40 to 79 have been prepared in accordance with:

• The Public Finance Management Act No. 1 of 1999;• Standards of Generally Recognised Accounting Practice; • South African Statements of Generally Accepted Accounting Practice; and• International Financial Reporting Standards.

They are based on appropriate accounting policies which have been consistently applied and which are supported by reasonable and prudent judgments and estimates. The going concern basis has been adopted in preparing the annual financial statements. The Board has no reason to believe that the SACAA will not be a going concern in the foreseeable future based on forecasts and available cash resources.

The Board is also responsible for the SACAA’s system of internal controls. These are designed to provide reasonable, but not absolute, assurance as to the reliability of the annual financial statements and to adequately safeguard, verify and maintain accountability of assets. These controls are monitored throughout the SACAA by management and employees, in an attempt to address the segregation of authority and duties with available resources. Processes are in place to monitor internal controls, to identify material breakdowns and implement timely corrective action.

The Board and SACAA Management treat corporate governance matters seriously and whenever any instances of non-compliance to regulation are uncovered or reported, appropriate disciplinary measures in terms of policy and legislation are instituted.

The annual financial statements were approved by the Board on 31 July 2009 and are signed on its behalf:

Ms N Msomi Mr D Golding Chairperson ChairpersonSACAA Board Finance and Audit Committee

46

Report of the Accounting Authority for the year ended 31 March 2009 Introduction The Accounting Authority presents its eleventh report in terms of the South African Civil Aviation Authority Act, 1998 (Act No. 40 of 1998) and the Public Finance Management Act, 1999 (Act No. 1 of 1999 as amended) (PFMA), which forms part of the audited financial statements for the year ended 31 March 2009. The South African Civil Aviation Authority (SACAA) is listed as a Schedule 3A National Public Entity in terms of the PFMA. The Accounting Authority is of the opinion that the SACAA complies with the provisions of the PFMA.

Nature of business The SACAA is a statutory body whose primary function is to control and regulate civil aviation in South Africa and to oversee the safety and security of the aviation industry. The SACAA was established as a juristic body in terms of The South African Civil Aviation Authority Act, 1998, (Act 40 of 1998). This, together with the South African Civil Aviation Authority Levies Act, 1998 (Act 41 of 1998) and the South African Civil Aviation Aircraft Passenger Safety Charge Regulations 2001, enables the SACAA to impose a passenger safety charge on scheduled operations, a fuel levy for non-scheduled operations and general aviation, and charges for services to the aviation industry, allowing it to generate revenue to fund its operations. The SACAA continues to conduct aviation accident and incident investigations on behalf of the National Department of Transport (NDoT) and receives an annual payment for these services.

Corporate governance The Accounting Authority subscribes to the values of good corporate governance and recognises the need to conduct the enterprise with integrity and in accordance with generally accepted corporate practices. The members of the Accounting Authority confirm that during the year the SACAA has complied with the relevant aspects of best practice of corporate governance.

Statements of responsibility The Accounting Authority is responsible, to the best of its knowledge, for the maintenance of adequate accounting records, the preparation and integrity of the financial statements and related information. The Auditors are required to report on the fair presentation of financial statements by the entity. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the PFMA and the South African Civil Aviation Authority Act, 1998 (Act No 40 of 1998). The Accounting Authority is responsible for the organisation’s system of internal controls. These are designed to provide reasonable assurance as to the reliability of the financial statements, and to adequately safeguard, verify and maintain accountability of assets, and to prevent and detect misstatements and losses. Nothing has come to the attention of the Accounting Authority to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred during the year under review.

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

Financial results The South African Civil Aviation Authority recorded a deficit of R13,609,707 for the year compared to a surplus of R631,371 for the FY 2007/08.

The performance can be attributed to the following influencing factors:

47

As a result of the general global economic downturn, the industry experienced an unforeseen decrease in air travel. This had a significant effect on revenue. Reported revenue was R227.6 million compared with budgeted revenue of R264.7 million (a shortfall of 14%). The revenue for the year was supplemented by other income of R10.3 million which consisted mainly of funds received from the NDoT for providing accident and incident investigation resources for the NDoT. There was, however, an under-recovery of costs for these activities amounting to R3.2 million, and this further contributed to the deficit.

In order to maintain International Civil Aviation Organisation (ICAO) and Federal Aviation Administration (FAA) compliance, the entity has filled a number of highly technical positions. As a result, employee expenses have increased by 28.3% to R156.1 million for the year. Overall, expenditure increased by 23.5% to R259.6 million, year on year.

Despite the various increases in expenditure, the entity managed to implement cost reduction initiatives which resulted in total expenditure of R259.6 million compared to budgeted expenditure of R278.4 million.

At the end of the financial year under review, the entity held cash reserves and investments of R98.1 million.

Number of Employees The average number of employees during the period was 402 (2008:364). Materiality Framework The SACAA has a materiality framework whereby all material and significant information is disclosed to the Finance Board on a biannual basis.

Accounting Authority The members of the Accounting Authority in office at the date of this report and during the period under review are as follows: Appointment date Former board member retired Mr MD Moorosi (Chairman) Appointed 1 May 2005 Retired 30 April 2008Ms M Magasa Appointed 1 May 2005 Retired 30 April 2008Ms BM Mohlala Appointed 1 May 2005 Retired 30 April 2008Major- General TA Ntsibande Appointed 1 May 2005 Retired 30 April 2008Mr JT Morrison Appointed 1 May 2005 Retired 30 April 2008 Captain C Jordaan (CEO) Appointed 10 December 2007 Ms TN Msomi (Chairperson) Appointed 1 May 2008 Ms PSV Ngaba Appointed 1 May 2008 Ms P Riba Appointed 1 May 2008 Mr DK Golding Appointed 1 May 2008 Major-General MMM Mangethe Appointed 1 May 2008 Ms N Mtshali Appointed 1 May 2008 Mr AA Gany Appointed 1 May 2008 Ex Officio member from DoT.

48

Statement of Financial Performancefor the year ended 31 March 2009

Revenue

Other income

Employee expenses

Depreciation

Amortisation

Other expenses

Deficit from operations

Investment income

Interest paid

Net (deficit)/surplus

Notes

1

2

3

4

5

6

7

2009R

227,630,616

10,349,299

(156,091,317)

(6,810,348)

(831,560)

(95,946,742)

(21,700,052)

8,090,345

-

(13,609,707)

2008R

179,073,548

29,167,429

(121,619,910)

(7,331,549)

(1,098,548)

(80,251,960)

(2,060,990)

3,408,836

(716,475)

631,371

49

Statement of Financial Positionat 31 March 2009

ASSETS Non-current assets Property, plant and equipment

Intangible assets Current assets Investments Trade and other receivables Cash and cash equivalents TOTAL ASSETS NET ASSETS & LIABILITIES Capital and reserves Non-distributable reserves Accumulated funds Current liabilities Trade and other payables Provisions Operating lease liability TOTAL NET ASSETS & LIABILITIES

Notes

9

10

11

12

13

14

15

16

17

2009R

31,687,173

30,598,974

1,088,199

121,231,384

77,257,547

23,149,148

20,824,689

152,918,557

102,075,272

53,275,518

48,799,754

50,843,285

25,716,841

15,580,560

9,545,884

152,918,557

2008R

33,627,793

32,057,234

1,570,559

127,594,663

24,585,855

58,992,202

44,016,606

161,222,456

113,013,287

53,275,518

59,737,769

48,209,169

26,208,504

13,500,099

8,500,566

161,222,456

50

Statement of Changes in Net Assetsfor the year ended 31 March 2009

Balance as at 31 March 2006

Fair value adjustment through equity

Restated net deficit for the year

Net deficit for the year as previously stated

Prior year error corrections

Restated balance as at 31 March 2007


Fair value adjustment released to income statement

Net surplus for the year



Net loss for the year


Represented by:

Capital funding by Government

Government subsidies received

Accumulated funds

Asset replacement reserve

Total

Notes

11

11

Accumulated Funds

R

65,436,602

(400,811)

(7,801,623)

(5,548,422)

(2,253,201)

57,234,168

1,890,740

(18,510)

631,371

59,737,769

2,671,692

(13,609,707)

48,799,754

7,931,000

49,404,915

(8,536,161)

-

48,799,754

TotalR

118,712,120

(400,811)

(7,801,623)

(5,548,422)

(2,253,201)

110,509,686

1,890,740

(18,510)

631,371

113,013,287

2,671,692

(13,609,707)

102,075,272

51,206,518

49,404,915

(8,536,161)

10,000,000

102,075,272

Non-distributable reserves

R

53,275,518

-

-

-

-

53,275,518

-

-

-

53,275,518

-

-

53,275,518

43,275,518

-

-

10,000,000

53,275,518

51

CASH FLOW FROM OPERATING ACTIVITIES Receipts: Receipts from customers & Department of Transport

Interest received Payments: Payments made to suppliers & employees Interest paid Net cash inflow/(outflow) from operating activities CASH FLOW FROM INVESTING ACTIVITIES Additions to property, plant and equipment Additions to intangible assets Additions to held to maturity investments Proceeds from disposal of property, plant and equipment Proceeds on liquidation of investment Net cash (outflow)/inflow from investing activities NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR

Notes

A

9

10

11

11

B

2009R

281,913,314

273,822,969

8,090,345

(249,379,987)

(249,379,987)

-

32,533,327

(5,352,215)

(373,029)

(50,000,000)

-

-

(55,725,244)

(23,191,917)

44,016,606

20,824,689

2008R

172,293,050

168,193,853

4,099,197

(186,669,164)

(185,952,689) (716,475)

(14,376,114)

(9,735,043)

(1,634,513)

-

115,227

46,375,283

35,120,954

20,744,840

23,271,766

44,016,606

Cash Flow Statementfor the year ended 31 March 2009

52

Notes to the Cash Flow Statementfor the year ended 31 March 2009

A. RECONCILIATION OF LOSS FOR THE YEAR TO CASH UTILISED IN OPERATIONS (Deficit)/surplus for the year Adjustment for: Depreciation Amortisation Interest received Change in fair value of investments Loss/(profit) on sale of property, plant and equipment Increase in operating leases liability Increase in provisions Net cash (outflow)/inflow before working capital changes Working capital changes: Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Cash generated (utilised) in operations

B. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on hand, balances with banks and investments in money market instruments. Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts: Funds on call and on deposit Bank balances and cash Cash and cash equivalents

2009R

(13,609,707)

6,810,348

831,560

-

23,956

1,045,318

2,080,461

(2,818,064)

35,351,391

35,843,054

(491,663)

32,533,327

10,887,928

9,936,761

20,824,689

2008R

631,371

7,331,549

1,098,548

690,361

(80,098)

1,872,677

4,771,969

16,316,377

(30,692,491)

(39,967,026)

9,274,535

(14,376,114)

39,831,242

4,185,364

44,016,606

53

Accounting Policiesfor the year ended 31 March 2009

Basis of Accounting The financial statements have been prepared in South African rands on the historical cost basis except where otherwise stated, and in accordance with the Public Finance Management Act, 1999 (Act 1 of 1999) as amended, the South African Statements of Generally Accepted Accounting Practices (GAAP) including any interpretations of such statements issued by the Accounting Practices Board, with effective Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting Standards Board replacing the equivalent GAAP statements as follows:

Standard of GRAP GRAP 1: Presentation of financial statements GRAP 2: Cash flow statements GRAP 3: Accounting policies, changes in accounting estimates and errors

Standard of GAAP

AC101: Presentation of financial statements

AC118: Cash flow statements

AC103: Accounting policies, changes in accounting estimates and errors

Currently the recognition and measurement principles in the above GRAP and GAAP statements do not differ or result in material differences in items presented and disclosed in the financial statements. The implementation of GRAP 1, 2 & 3 has resulted in the following changes in the presentation of the financial statements: Terminology differences:

Standard of GRAP Statement of financial performance Statement of financial position Statement of changes in net assets Net assets Surplus/deficit Accumulated surplus/deficit Contributions from owners Distributions to owners

Replaced statement of GAAP

Income statement

Balance sheet

Statement of changes in equity

Equity

Profit/loss

Retained earnings

Share capital

Dividends

54

Accounting Policies (continued)for the year ended 31 March 2009

At the date of authorisation of these annual financial statements, the following Standards and Interpretations were in issue but not yet effective.

Standard Annual periods beginning on or afterIFRS 2 (AC 139) – Share Based Payments 1 January 2009

IFRS 3 (AC 140) – Business Combinations 1 July 2009

IFRS 8 (AC 145) – Operating Segments 1 January 2009

IAS 1 (AC101) – Presentation of Financial Statements 1 January 2009

IAS 23 (AC 114) – Borrowing Costs 1 January 2009

IAS 27 (AC 132) – Consolidated and Separate Financial Statements 1 July 2009

IAS 28 (AC 110) – Investments in Associates 1 July 2009

IAS 31 (AC 119) – Interests in Joint Ventures 1 July 2009

IAS 39 (AC 133) – Financial Instruments: Recognition and Measurement 1 July 2009

IFRIC 13 – Customer Loyalty programmes 1 July 2008

IFRIC 15 – Agreements for the Construction of Real Estate 1 January 2009

IFRIC 16 – Hedges of a Net Investment in a Foreign Operation 1 October 2008

IFRIC 17 – Distributions of Non-cash Assets to Owners 1 July 2009

IFRIC 18 – Transfers of Assets from Customers Transfers received on or after 1 July 2009

The directors anticipate that the adoption of these Standards and Interpretations in future periods will not have a material impact on the financial statements. Some amendments have been made to existing Standards and the directors anticipate that these will not have a material impact on the financial statements. Revenue recognition The invoiced value of sales and services rendered, excluding value added tax, in respect of trading operations is recognised at the date services are provided. The Safety Charge is based on the number of passengers on scheduled services departing from all airports in the country. This data is obtained from all the airports in South Africa and the various airline companies. Fuel levies are based on fuel supplied by fuel companies to the General Aviation Operators and Charter Operators. This is based on the litres audited by the fuel company auditors. Accident and incident investigation fees are based on the number of accidents and incidents that are investigated and the revenue generated varies according to the nature and extent of the investigation. User fees are generated from examinations, licence renewals, certifications, airworthiness and calibrations. This revenue is recognised when the service is rendered. Government grants are not recognised until there is reasonable assurance that the organisation will comply with the conditions attached to them and the grants will be received. Government grants of which the primary condition is that the organisation should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the statement of financial position and transferred to surplus/deficit on a systematic and rational basis over the useful lives of the related assets. Other government grants are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the organisation with no future related costs are recognised in surplus or deficit in the period in which the grant becomes receivable.

55


Revenue recognition (continued) The organisation has recognised the government grants immediately (no deferral) as there are no conditions attached thereto. The organisation is therefore unconditionally entitled to the grant awarded on the award date. Investment income comprise interest income and is accrued on a time proportion basis, taking into account the principal outstanding and the effective interest rate over the period to maturity.

Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of SACAA at their fair value at the inception of the lease. The assets are capitalised if the minimum lease payments are 85% or more of the assets’ fair value at inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to surplus or deficit, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the SACAA’s general policy on borrowing costs (see below). Leased assets are depreciated over lesser of the useful life and the lease period. Rentals payable under operating leases are charged to surplus or deficit on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. The classification of the lease is determined using IAS 17 (AC 105) (Leases).

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. To the extent that variable rate borrowings are used to finance a qualifying asset and are hedged in an effective cash flow hedge of interest rate risk, the effective portion of the derivative is deferred in equity and released to the statement of financial performance when the qualifying asset impacts profit or loss. To the extent that fixed rate borrowings are used to finance a qualifying asset and are hedged in an effective fair value hedge of interest rate risk, the capitalised borrowing costs reflect the hedged interest rate. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in the statement of financial performance in the period in which they are incurred.

Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses.

56


Property, plant and equipment (continued)

Depreciation is charged so as to write off the cost or valuation of assets to its residual value over the estimated useful lives, using the straight-line method as indicated under critical and accounting judgments below. Residual values and estimated useful lives are assessed on an annual basis. The gain or loss arising on the disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of financial performance. Impairment of assets At each balance sheet date, the organisation reviews the carrying amounts of its tangible assets and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indications exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using the pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in surplus or deficit unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation decrease. When an impairment loss subsequently reverses the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increase carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of impairment loss is recognised immediately in surplus or deficit unless the relevant asset is carried at a revalued amount in which case the reversal of the impairment loss is treated as a revaluation increase. Financial instruments Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed below: Financial assets Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest method The effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as at FVTPL.

57

Financial instruments (continued)

Financial assets at FVTPL Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at FVTPL. A financial asset is classified as held for trading if: it has been acquired principally for the purpose of selling in the near future; orit is a part of an identified portfolio of financial instruments that the Entity manages together and has a recent actual pattern of short-term profit-taking; orit is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; orthe financial asset forms part of an entity of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Entity’s documented risk management or investment strategy, and information about the entity is provided internally on that basis; orit forms part of a contract containing one or more embedded derivatives, and IAS 39 (AC 133) Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in note 18. Held-to-maturity investments Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that the Entity has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortized cost using the effective interest method less any impairment, with revenue recognised on an effective yield basis. Available-for-sale financial assets Unlisted shares and listed redeemable notes held by the Entity that are traded in an active market are classified as being AFS and are stated at fair value. Fair value is determined in the manner described in note 19. Gains and losses arising from changes in fair value are recognised directly in equity in the investments revaluation reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is included in profit or loss for the period.

Financial instruments Dividends on AFS equity instruments are recognised in profit or loss when the Entity’s right to receive the dividends is established. The fair value of AFS monetary assets denominated in a foreign currency determined in that foreign currency and translated at the spot rate at the balance sheet date. The change in fair value attributable to translation differences that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in equity.

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest 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.


58



Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For unlisted shares classified as AFS, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For all other financial assets, including redeemable notes classified as AFS and finance lease receivables, objective evidence of impairment could include:- significant financial difficulty of the issuer or counterparty; or- default or delinquency in interest or principal payments; orit becoming probable that the borrower will enter bankruptcy or financial re-organisation. For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Entity’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of AFS equity securities, impairment losses previously recognised through profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised directly in equity.

Derecognition of financial assets The Entity derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Entity neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Entity recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Entity retains substantially all the risks and rewards of ownership of a transferred financial asset, the Entity continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Financial liabilities Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

59


Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if:it has been incurred principally for the purpose of repurchasing in the near future; orit is a part of an identified portfolio of financial instruments that the Entity manages together and has a recent actual pattern of short-term profit-taking; orit is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; orthe financial liability forms part of an entity of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Entity’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; orit forms part of a contract containing one or more embedded derivatives, and IAS 39 (AC 133) Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in note 18. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Derecognition of financial liabilities The Entity derecognises financial liabilities when, and only when, the Entity’s obligations are discharged, cancelled or they expire.


60


Employee benefits The entity participates in a defined contribution fund, which is governed by the Pension Fund Act 1956, (Act no. 24 of 1956) and in which all employees participate. Current contributions to the retirement benefit fund are charged to surplus or deficit in the period incurred. Critical accounting judgments and key sources of estimation uncertainty In the process of applying the organisation’s accounting policies, which are described above, management has made the following judgments that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below). Residual values For the current year residual values were taken into consideration when calculating depreciation and these values will be assessed annually. Useful lives Included in the aircraft are the following components with the respective remaining useful lives:

The following rates are used for the depreciation of plant, property and equipment:

Leave pay accrual

Employee entitlements to annual leave are recognised when it accrues to employees. An accrual, based on total employment cost is raised for the estimated liabilities as a result of services rendered by employees up to the date of the statement of financial position. Performance bonus provision The value of the bonus entitlements is calculated based on the bonus scheme established by the South African Civil Aviation Authority, the value of which is dependent on the employees’ grade and performance.

AirframeLeft engineRight engineAvionicsUndercarriageInterior

200916 years

780 hours634 hours

1 year 19 897 cycles

7 years

200817 years

1 182 hours1 035 hours

2 years8 465 cycles

8 years

AircraftCalibration equipmentFurniture & fittingsComputer equipmentMotor vehiclesIntangible Assets Intangible assets consist of computer software and have a finite useful life. These items are amortized over three years.

2009Refer above

15 years6 years3 years5 years3 years

2008Refer above

15 years6 years3 years5 years3 years

61

Critical accounting judgments and key sources of estimation uncertainty (continued) Provision for doubtful amounts Management assessed the recoverability of each debtor’s balance and provided in full for any doubtful amounts. Fair value methods and assumptions The fair value of financial instruments not traded in an organized financial market, is determined using a variety of methods and assumptions that are based on market conditions and risk existing at the date of the statement of financial position, including independent appraisals and discounted cash flow methods. The fair value determined is adjusted or any transaction costs necessary to realise the assets or settle the liabilities. The carrying amounts of financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair value. Asset replacement reserve The asset replacement reserve which is part of non-distributable reserves, represents a portion of surpluses generated during the financial year based on asset replacement needs and funds availability. This reserve is created to enable the organisation to maintain an asset base that is in line with the aviation safety mandate. Related parties The entity operates in an economic environment currently dominated by entities directly or indirectly owned by the South African Government. As a result of the constitutional independence of all three spheres of the South African Government, only parties within the national sphere of the South African Government will be considered to be related parties.

Irregular, unauthorised, fruitless and wasteful expenditure Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of any applicable legislation, including:- The Public Finance Management Act 1999 (Act No 1 of 1999) as amended, or- Any legislation providing for procurement procedures in Government . Unauthorised expenditure is expenditure that has not been budgeted, expenditure that is not in terms of the conditions of an allocation received from another sphere of Government or organ of state and expenditure in the form of a grant that is not permitted in terms of the Public Finance Management Act (Act No 1 of 1999). Fruitless and wasteful expenditure means expenditure that was made in vain and could have been avoided had reasonable care been exercised. All irregular, unauthorised, fruitless and wasteful expenditure is accounted for as expenditure in the statement of financial performance and where recovered, it is subsequently ac-counted for as revenue in the statement of financial performance.


62

Notes to the Annual Financial Statementsfor the year ended 31 March 2009

1. REVENUE Revenue comprise the following: Aircraft passenger safety charge User fees Fuel levy 2. OTHER INCOME Other income comprise the following: Accident and incident investigations Grant received from the Department of Transport Examination cancellations and tender document fees Sundry income (Loss)/profit on sale of assets Insurance claims received Bad debts recovered Foreign exchange differences 3. EMPLOYEE EXPENSES Staff remuneration (Including executive directors’ fees - see note 8.1 and 8.2) Provident fund Medical aid Bonus Consultants, contractors and temporary staff

2009R

169,917,122

52,843,369

4,870,125

227,630,616

7,464,000

-

262,552

2,521,422

(23,956)

124,351

930

-

10,349,299

107,227,836

18,102,717

6,689,534

15,668,448

8,402,782

156,091,317

2008R

129,261,982

46,646,650

3,164,916

179,073,548

7,112,000

21,750,000

141,598

-

80,098

69,928

-

13,805

29,167,429

81,900,823

13,782,632

4,847,348

12,097,225

8,991,882

121,619,910

63

Notes to the Annual Financial Statements (continued)for the year ended 31 March 2009

4. DEPRECIATION Aircraft Calibration equipment Furniture and fittings Computer equipment Motor vehicles Leasehold improvements

5. AMORTISATION Computer Software

2009R

1,984,821

811,150

603,688

3,402,070

(373,912)

382,531

6,810,348

831,560

2008R

2,183,782

810,645

756,188

3,065,806

207,047

308,081

7,331,549

1,098,548

64


6. OTHER EXPENSES Staff costs - other than remuneration Premises Communication costs Operating costs Public relations Travel costs Repairs and maintenance Internal audit fees External audit fees Legal fees Regulation Development Aero club Administration costs SARS: penalties and interest Operating lease expenses ICAO Project Strategic Projects Bad debts written off Adjustment to bad debts provision

2009R

19,996,922

6,469,433

13,615,424

6,894,552

2,461,209

14,117,666

5,760,666

1,233,586

1,490,364

2,042,478

1,991,701

542,224

233,854

-

10,262,973

4,734,771

-

-

4,098,919

95,946,742

2008R

12,547,186

5,120,268

11,672,717

3,332,489

2,702,331

9,536,164

5,431,813

364,085

102,220

2,423,899

792,085

407,558

412,936

226,464

10,967,465

13,008,482

115,619

823,071

265,108

80,251,960

65


7. INVESTMENT INCOME Fair value adjustments - Old Mutual Life Assurance Company (South Africa) Limited

Fair value gain on withdrawal of investment Fair value loss transferred from equity on withdrawal of investment Interest - Safety debtors Interest - Bank accounts

2009R

-

- -

527,530

7,562,815

8,090,345

2008R

(690,361)

(708,871) 18,510

-

4,099,197

3,408,836

66


8. RELATED PARTIES (continued) 8.1 Executive Management’s fees - 2009

Captain CF Jordaan (CEO)Mr DN Maphumulo (CFO)Mr A RichmanMr GH BestbierMr NR MagoaiMr O ChakarisaMr S LesoroMr S NtakaMs GNB KhozaMr MG IndiaMs L StolsMr R Van Zyl

Salary

1,698,946 680,000 799,231 753,477 773,327 841,448 754,592 733,644 745,888 815,914 666,125 948,464

10,211,056

Provident Fund

315,000 120,000 149,100 137,689 142,188 146,093 131,898 133,520 136,627 143,985 123,149

-

1,679,249

Medical Aid

45,669 - 45,669 40,695 46,986 - - 36,303 40,875 - 25,077 -

281,274

Lump sum /leave pay /

bonus

40,378 - - 8,335 - 145,051 17,487 -

61,929 734,335 -

1,007,515

Total

2,099,993 800,000 994,000 940,196 962,501 1,132,592 903,977 903,467 923,390 1,021,828 1,548,686 948,464

13,179,094

*

**

***

Mr S Ntaka (included in the table above) has been suspended from service with pay effective 31 October 2008.Mr MG India (included in the table above) is on secondment to the National Department of Transport.

Executive Management’s fees - 2008

Captain CF Jordaan (CEO)Mr ZG Myeza (CEO) (resigned December 2007)Mr DN Maphumulo (CFO)Mr R Naidoo (CFO) (services terminated July 2007)Mr A RichmanMr GH BestbierMr GZ ThwalaMr NR MagoaiMr O ChakarisaMr S LesoroMr S NtakaMs GNB Khoza

Salary

534,353 855,330 170,000 287,904 66,720 206,185 766,393 350,532 217,175 331,500 601,157 200,439

4,587,688

Provident Fund

78,750 75,000 30,000 35,910 12,425

99,187 138,683 123,113 98,937 58,500 112,350 97,120

959,975

Medical Aid

11,064 69,670

16,192 3,688 36,777 21,396 42,459

32,823 41,187

275,256

Lump sum /leave pay /

bonus

4,389,147 33,918

1,056,071 248,500 209,000 197,399 218,750 226,500 98,235 200,000 177,650

7,055,170

Total

624,167 5,389,147

233,918 1,396,077 331,333 551,149 1,123,871 734,854 542,612 488,235 946,330 516,396

12,878,089

Included in the above fees is a settlement amount of R3 909 146 that was paid to the former Chief Executive Officer as a result of the termination of his contract before the end of its term.

67


8. RELATED PARTIES (continued)

8.2 Board Members Miss M Magasa Miss BM Mohlala Mr JT Morrison Major-General TA Ntsibande Mr MD Moroosi Ms P Riba Major-General MMM Mangethe Mr DK Golding Ms N Mtshali Ms S Ngaba Ms T Msomi (Chair) 8.3 Public entities and transaction value received/(paid) Department of Transport (Accidents and Incidents) Department of Transport (Secondments) Telkom (Masts) Air Traffic and Navigation Services (Calibration) Airports Company of South Africa ( Licences) South African Airways (Safety Fees) SA Express (Safety Fees) South African Air Force (Calibration) South African National Defence Force (Fuel) South African Police Services (AIPs - Info) Denel (Certification and Maintenance) National Parks Board (Aerodrome Licence) Eskom (Mass Towers) South African Revenue Services (PAYE, SDL) Telkom (Telephone and IT) Government Printers Auditor General - Audit Fees

2009R

7,9557,955 7,955 7,955

10,608 94,668 94,668

94,668 94,668 94,668

125,620

641,388

7,464,000 1,761,926 9,980 10,390,759

305,549 77,964,631

12,837,295 595,923

(82,506) 611,353

156,313 10,750 11,147 (31,989,291)

(3,401,014) (542,287) (829,791)

75,274,737

2008R

95,463 95,463 95,463 95,463 127,284

- - - - - -

509,136

28,862,000 1,570,813 -

7,250,133 978,478 58,864,492 6,684,543 2,225,321 (18,270) 5,280 309,459 10,210 33,350

(21,026,480) (3,841,012) - -

81,908,317

68


8. RELATED PARTIES (continued)

8.4 Balances owing by/(to) public entities as at 31 March 2009 Department of Transport (Grant received) Department of Transport (Secondments) South African Airways Denel (Certification and Maintenance) Air Traffic and Navigation Services South African Police Services South African Air Force Eskom (Mass Towers) National Parks Board South African Revenue Services (PAYE, SDL) Government Printers Airports Co of South Africa - East London

2009R

- - 384,975 10,655 944,246 2,261 (6,990)

3,447 2,131 (2,223,410) (144,256) (2,747)

(1,029,688)

2008R

21,750,000 1,570,813 5,472,500 - - - - - -

(24,043)

28,769,270

69


9. PROPERTY, PLANT AND EQUIPMENT

Cost

2009AircraftCalibration equipmentFurniture and fittingsComputer equipmentMotor vehiclesLeasehold improvements


Accumulated depreciation



Movements/ Disposals

R

- (36,185) (236,122) (2,496,976) - -

(2,769,283)

- - (15,048) (11,751) (122,280)

-

(149,079)

Movements/ Disposals

R

- 30,788 (227,839) (2,572,105) - -

(2,769,156)

- 197,975 43,371 (253,398) (101,898) -

(113,950)

Closing balance R

20,471,322 12,141,673 9,655,813 16,104,696 1,410,993 2,295,187

62,079,684

20,471,322 12,159,668 8,055,202 15,454,807 1,060,566 2,295,187

59,496,752

Closing balance R

8,274,475 6,662,994 5,101,851 10,219,043 531,735 690,612

31,480,710

6,289,654 5,821,056 4,726,002 9,389,078 905,647 308,081

27,439,518

Opening balance

R

20,471,322 12,159,668 8,055,202 15,454,807 1,060,566 2,295,187

59,496,752

20,471,322 12,159,668 6,619,668 9,571,450 1,088,680 -

49,910,788

Opening balance R

6,289,654 5,821,056 4,726,002 9,389,078 905,647 308,081

27,439,518

4,105,872 4,812,436 3,926,443 6,576,670 800,498 -

20,221,919

Additions R

- 18,190 1,836,733 3,146,865 350,427 -

5,352,215

- -

1,450,582 5,895,108 94,166 2,295,187

9,735,043

Depreciation R

1,984,821 811,150 603,688 3,402,070 (373,912)

382,531

6,810,348

2,183,782 810,645 756,188 3,065,806 207,047 308,081

7,331,549

70


9. PROPERTY, PLANT AND EQUIPMENT (continued) Net book value Aircraft Calibration equipment Furniture & fittings Computer equipment Motor vehicles Leasehold improvements

2009R

12,196,847 5,478,679 4,553,962 5,885,653 879,258 1,604,575

30,598,974

2008R

14,181,668 6,338,612 3,329,200 6,065,729 154,919 1,987,106

32,057,234

71


10. INTANGIBLE ASSETS Cost opening balance Additions Reclassification Cost closing balance Amortisation opening balance Amortisation Reclassification Amortisation closing balance Net book value Intangible assets comprise application software not integral to the functioning of computer hardware.

11. INVESTMENTS Available-for-sale Old Mutual Life Assurance Company (South Africa) Limited Opening balance Withdrawal Fair value loss on withdrawal of investment Closing balance The investment was liquidated before the maturity date during September 2007 as per the board decision of November 2006. Held to Maturity Investment

Held to Maturity Investments comprise the following:1 - ABSA Bank - Fixed Deposit; Amount - R 10 Million; Fixed Interest Rate - 9.9%; Maturity Date - 27 Oct 20092 - Investec Bank - Fixed Deposit; Amount - R 20 Million; Fixed Interest Rate - 10.05%; Maturity Date - 30 Oct 20093 - Standard Bank - Fixed Deposit; Amount - R 20 Million; Fixed Interest Rate - 9.9%; Maturity Date – 5 Nov 2009

2009R

6,807,358

373,029

(87,021)

7,093,366

(5,236,799)

(831,560)

63,192

(6,005,167)

1,088,199

-

-

-

-

50,000,000

2008R

5,172,845

1,634,513

-

6,807,358

(4,138,251)

(1,098,548)

-

(5,236,799)

1,570,559

47,084,154

(46,375,283)

(708,871)

-

-

72


11. INVESTMENTS (continued) Momentum Group Limited Opening balance Fair value gain through equity Closing balance The investment matures in November 2009 and has a guaranteed maturity value of R28,603,744. The investment bears interest at the yield to maturity rate of 6,45%. The investment was taken out in the form of a life insurance policy over the life of Mr India. The SACAA is the sole beneficiary to the above life insurance policy. Total investment

2009R

24,585,855

2,671,692

27,257,547

77,257,547

2008R

22,695,115

1,890,740

24,585,855

24,585,855

73


12. TRADE AND OTHER RECEIVABLES Trade receivables Provision for doubtful debts Unallocated receipts Other receivables: Sundry debtors Deposits Prepayments Accrued interest Staff advances

Current 0 to 30 days 31 to 60 days Over 61 days Of the trade receivables balance at the end of the year, R1.8 million is due from the largest customer. There are no other customers who represent more than 5% of the total balance of trade receivables. As at 31 March 2009, trade receivables at nominal value of R11 475 127 (2008: R7 384 918) were impaired and provided for. Movements in the provision for impairment of receivables were as follows: Balance at the beginning of the year Raised during the year Utilised during the year Balance at the end of the year The receivable’s impairment was estimated based on irrecoverable amounts and reference to the past default. The concentration of credit risk is limited due to the customer base being unrelated. Accordingly management believes that there is no further credit provision required in excess of the current allowance for doubtful debts. The provision is management’svt best estimate as management thinks that the balance of R3,748,256 is recoverable.

2009R

19,677,692

31,491,820 (11,475,127)

(339,001)

3,471,456 351,012

598,999 1,549,113 832,274 140,058

23,149,148

13,841,855

1,858,835 567,747 15,223,383

31,491,820

7,384,918 4,090,209 -

11,475,127

2008R

55,496,756

66,139,678 (7,384,918) (3,258,004)

3,495,446

420,930 598,999 2,436,465 - 39,052

58,992,202

42,314,266 4,203,353 3,106,834 16,515,225

66,139,678

7,119,810 1,097,179 (832,071)

7,384,918

74


13. CASH AND CASH EQUIVALENTS Cash and balances with banks Short term deposits Cash shown as current assets 14. NON-DISTRIBUTABLE RESERVES Assets transferred from the National Department of Transport at inception Asset replacement reserve 15. TRADE AND OTHER PAYABLES Trade payables 13th Cheque accrual Income received in advance Sundry accruals Salaries control account Safety Charge creditors Leave pay accrual The leave pay accrual has been included in trade and other payables. In the prior year it was disclosed as a provision. 16. PROVISIONS Performance bonus (current) Opening balance Utilised during the year Raised during the year Closing balance The performance bonus provision is based on performance assessments done and is subject to the approval of the board and therefore the timing of the outflows is uncertain.

2009R

9,886,761

10,887,928 50,000

20,824,689

43,275,518

10,000,000

53,275,518

7,065,637

538,226

1,456,328

4,611,781

4,878,284

1,992,336

5,174,249

25,716,841

13,500,099

(13,587,989)

15,668,450

15,580,560

2008R

4,170,261

39,831,242 15,103

44,016,606

43,275,518

10,000,000

53,275,518

10,930,110

407,600

938,834

3,696,386

2,161,015

1,915,216

6,159,343

26,208,504

10,531,975

(9,129,101)

12,097,225

13,500,099

75


17. OPERATING LEASE LIABILITY The operating lease liability relates to the smoothing of the lease in terms of IAS 17.

18. OPERATING LEASE COMMITMENTS The organisation has commitments for future operating lease payments as per the lease agreements for the rental of property as detailed below: Payable within one year Payable after one year, but within five years Payable after five years

2009R

9,545,884

10,797,961

37,084,566

13,509,077

61,391,604

2008R

8,500,566

9,893,778

38,116,996

23,274,608

71,285,382

19. FINANCIAL INSTRUMENTS Categories of Financial Instruments 2009 Financial Assets Available-for sale Investments Held to Maturity Investments Loans and receivables Cash and cash equivalents Trade and other receivables Due to system constraints, it is not possible to disclose receivables >1 year. Financial Liabilities Trade and other payables Percentage profile

> 1 yearR

-

-

-

-

- -

0%

TotalR

27,257,547

50,000,000

20,824,689

23,149,148

25,716,841 146,948,225

100%

0-1 yearsR

27,257,547

50,000,000

20,824,689

23,149,148

25,716,841 146,948,225

100%

Notes

11

11

13

12

15

76


19. FINANCIAL INSTRUMENTS (continued) 2008

Financial Assets

Available-for sale Investments

Loans and receivables Cash and cash equivalents

Trade and other receivables

Due to system constraints, it is not possible to disclose receivables >1 year.

Financial Liabilities

Trade and other payables

Percentage Profile

Capital risk management

As the SACAA is not exposed to debt, there is no meaningful debt to equity ratios such as gearing ratios to be disclosed.

Financial risk management objectives

Management meet on a regular basis to analyse interest rate exposures and evaluate treasury management strategies against revised economic forecasts. Compliance with policies and exposure limits is reviewed by management on a continuous basis. Management believe, to the best of their knowledge, that there are no significant undisclosed financial risks.

These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Market risk

The entity’s activities are of such a nature that it does not materially expose the SACAA to financial risks of changes in foreign currency exchange rates and interest rates as referred to below. Market risk exposures are closely monitored by management.

There has been no change to the entity’s exposure to market risks or the manner in which it manages and measures the risk.

> 1 yearR

24,585,855

-

-

- 24,585,855

16%

TotalR

24,585,855

44,016,606

58,992,202

26,208,504 153,803,167

100%

0-1 yearsR

-

44,016,606

58,992,202

26,208,504 129,217,312

84%

Notes

11

13

12

15

77


19. FINANCIAL INSTRUMENTS (continued) Foreign currency risk management The SACAA incurs currency risk as a result of expenses in foreign currencies, hence exposure to exchange rate fluctuations arise. The currency in which SACAA primarily deals is US Dollars. No forward cover is taken out for these transactions. Management considers the foreign currency risk to be insignificant. Interest rate risk management SACAA has adopted a policy of investing the majority of surplus cash in fixed investments options as a means to safeguard and mitigate interest rate risk. This risk is further managed through the fact that the surplus funds are invested with reputable financial institutions. Credit management Credit risk refers to the risk that a counterparty would default on its contractual obligations resulting in financial loss to the entity. The entity has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. Account facility There are two categories of services to consider for granting credit: a) Those services for which the cost can be determined up front. b) The services for which the cost can only be determined after the service has been delivered. Default Default occurs when: a) Credit limits are exceeded; and or b) Payments are not received within the approved period. In such cases the necessary collection measures must be taken with due regard to the financial risk connected to a specific debtor account. Collection measures will include inter alia: legal action and handing over the account to debt collectors. As at 31 March 2009, the entity did not consider that any significant concentration of credit risk existed in the receivables book which had not been adequately provided for. The table below provides an analysis of credit risk exposure inherent in the loans and receivables book at the year end reporting dates, reconciled to the carrying value of net trade receivables as reported in note 12

78


19. FINANCIAL INSTRUMENTS (continued) 2009

Current balances Overdue balances Total Impairment provision

2008

Current balances Overdue balances Total Impairment provision

Indirect Charges

14,338,192 5,682,255 20,020,447 (3,667,851)

(1,795,927)

Total

13,841,855 17,649,965 31,491,820 (11,475,127)

42,314,266 23,825,412 66,139,678 (7,384,918)

Direct Charges

(496,337) 11,967,710 11,471,373 (7,807,276)

23,788,241 15,372,667 39,160,908 (5,588,991)

Definitions

Direct charges include regulatory fees and calibration fees.Indirect charges include passenger safety fees and fuel levies.

Liquidation

As soon as it becomes known that a debtor has been placed into provisional liquidation/sequestration or has been placed into final liquidation/sequestration, the credit facility is automatically revoked. Interest is charged from the date of last payment to the date of final liquidation/sequestration and the debt is written off as irrecoverable in terms of the delegation of authority.

Liquidity risk management

Liquidity risk refers to the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Management is satisfied that the entity will be able to settle their financial liabilities (payables and provisions) in the normal course of business. The liquidity ratio below illustrates:

Current Assets Current Liabilities

2009R

121,231,384 (50,843,285)

2.4 : 1

2008R

127,594,663 (48,209,169)

2.6 : 1

79

20. CONTINGENT LIABILITIES Pending Litigation

These contingent liabilities relate to estimated legal or settlement costs with regard to legal cases for or against the SACAA.

21. TAXATION No provision for South African Normal Taxation has been made as SACAA is exempted in terms of section 10 (1) (CA) (1) of the Income Tax Act.

Notes to the Annual Financial Statements (continued)for the year ended 31 March 2009 2009

R

1,270,500

2008R

-

80

Acronyms

SACAA South African Civil Aviation AuthorityAIP Aeronautical Information PackageAVMED Aviation Medicine AVSEC Aviation SecurityCARCom Civil Aviation Regulations CommitteeCARS Civil Aviation Regulations COSCAP Cooperative Arrangement for the Prevention of a Spread of Communicable Disease by Air TravelCRM Customer relationship managementDoD Department of DefenceDoE Department of EducationDoL Department of LabourDoT Department of TransportDPE Department of Public EnterprisesEM Executive ManagerEXCO Executive Management CommitteeFAA Federal Aviation AdministrationGA General AviationGASI General Aviation Safety InitiativeGM General ManagerGNSS Global Navigation Satellite SystemsHR Human ResourcesICAO International Civil Aviation OrganizationJAAP Joint Aviation Awareness Programme KPIs Key Performance IndicatorsLOC Local Organising CommitteeMP Member of ParliamentNCOP National Council of Provinces NDoT National Department of TransportNOTAM Notice To AirmenPAA Public Audit Act, 2004PFMA Public Finance Management Act, 1999RAASA Recreational Aviation Administration of South AfricaRVSM Reduced Vertical Separation MinimumSAA South African AirwaysSARPs Standards and Recommended Practices SCM Supply Chain ManagementSCORR Standing Committee on Regulations Re-writeSMS Safety Management Systems SMs Senior Managersthe ACT South African Civil Aviation Act, 1998

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