annual report - demarcation.org.za · its function without fear, favour or prejudice. • section 4...

ANNUAL REPORT2016/17

PART A

PART B

PART C

PART D

PART E

PART F

PART G

GENERAL INFORMATION .............................................................0051. ADMINISTRATION AND CORPORATE INFORMATION .........0052. LIST OF ABBREVIATIONS/ ACRONYMS..............................0053. STRATEGIC OVERVIEW ......................................................0064. LEGISLATIVE AND OTHER MANDATES...............................0065. ORGANISATIONAL STRUCTURE ........................................0076. FOREWORD BY THE CHAIRPERSON .................................0087. CHIEF EXECUTIVE OFFICER’S OVERVIEW .........................010

DEMARCATION ACHIEVEMENTS .................................................0131. DEMARCATION PROCESSES .............................................0132. CONFERENCE ON DEMARCATION AND SPATIAL

TRANSFORMATION: 23 AND 24 JUNE 2016 ......................0183. DEVELOPMENT OF A REGIONAL OPERATING MODEL

(REGIONALISATION) ............................................................0224. TECHNICAL ASSESSMENTS ..............................................0255. 2017 TO 2021 REDETERMINATION PLAN ..........................027

PERFORMANCE INFORMATION ..................................................0311. STATEMENT OF RESPONSIBILITY FOR PERFORMANCE

INFORMATION .....................................................................0312. AUDITOR’S REPORT: PREDETERMINED OBJECTIVES .....0313. OVERVIEW OF PERFORMANCE .........................................0314. PERFORMANCE INFORMATION BY PROGRAMME ............0325. SUMMARY OF FINANCIAL INFORMATION ..........................041

GOVERNANCE ...............................................................................0431. INTRODUCTION ..................................................................0432. PORTFOLIO COMMITTEE ...................................................0433. THE BOARD ........................................................................0434. RISK MANAGEMENT ...........................................................0505. INTERNAL CONTROL ..........................................................0506. INTERNAL AUDIT AND AUDIT AND RISK COMMITTEE .......0517. COMPLIANCE WITH LAWS AND REGULATIONS ................0518. FRAUD AND CORRUPTION ................................................0519. MINIMISING CONFLICT OF INTEREST ................................05210. BOARD CHARTER ..............................................................05211. BOARD EVALUATION ..........................................................05212. CODE OF CONDUCT ..........................................................05213. COMPANY SECRETARY ......................................................052

AUDIT AND RISK COMMITTEE REPORT .....................................0531. AUDIT AND RISK COMMITTEE CHARTER ..........................0532. AUDIT AND RISK COMMITTEE MEMBERS, MEETING

ATTENDANCE AND ASSESSMENT .....................................0533. ROLE AND RESPONSIBILITIES ...........................................053

HUMAN RESOURCE MANAGEMENT ...........................................0571. INTRODUCTION ..................................................................0572. HUMAN RESOURCES OVERSIGHT STATISTICS .................057

FINANCIAL INFORMATION ...........................................................0631. STATEMENT OF RESPONSIBILITY ......................................0632. REPORT OF THE CHIEF EXECUTIVE OFFICER ...................0633. REPORT OF THE EXTERNAL AUDITOR ..............................067

ANNUAL FINANCIAL STATEMENTS .............................................073

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GENERAL INFORMATION

1. ADMINISTRATION AND CORPORATE INFORMATION

Registered NameThe Municipal Demarcation Board

Registered AddressEco Origins Office Park, Block C1349 Witch-Hazel StreetHighveld, Centurion0157

Postal AddressPrivate Bag x123Centurion0046South Africa

Telephone+27 12 342 2481

Facsimile+27 12 342 2480

The 2016/17 MDB Annual Report is also available onwww.demarcation.org.za.

Websitewww.demarcation.org.za

External AuditorsAuditor-General: South Africa

BankersABSA Bank Limited

Company SecretaryAdvocate Kgabo Gabriel Mapotse

2. LIST OF ABBREVIATIONS/ ACRONYMS

AGSA Auditor-General of South AfricaAFS Annual Financial StatementsAPP Annual Performance PlanBoard The Board established in terms of Section 2 of

the Municipal Demarcation Act and composed of members appointed by the President of the Republic of South Africa

CEO Chief Executive OfficerCFO Chief Financial OfficerCoGTA Cooperative Governance and Traditional AffairsCSG Chief Surveyor GeneralERM Enterprise risk managementFFC Financial and Fiscal CommissionGCIS Government Communication Information SystemGIS Geographical Information SystemIEC Independent Electoral CommissionIUDF Integrated Urban Development FrameworkLM Local municipalityMDA Municipal Demarcation Act 27 of 1998MDB Municipal Demarcation Board (the organisation)MEC Member of the Executive CouncilMINMEC Ministers and Members of Executive CouncilMSA Municipal Structures Act 117 of 1998MTEF Medium Term Expenditure FrameworkNDP National Development PlanNPC National Planning CommissionNT National TreasuryPFMA Public Finance Management Act 1 of 1999SALGA South African Local Government AssociationSANSA South African National Space AgencySCM Supply chain managementStatsSA Statistics South AfricaWSP Workplace Skills Plan

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3. STRATEGIC OVERVIEW

VisionThe Board’s vision is to be “the leading demarcation and spatial knowledge hub”.

MissionTo produce municipal and ward boundaries that are functional, beyond reproach and contribute towards a responsive spatial configuration, including municipal capacity assessments that lay the foundation for a developmental local government.

Values• Independence• Fairness, transparency and integrity• Stakeholder engagement• Knowledge sharing• Good governance

Strategic outcome orientated goals• Facilitate spatial and economic transformation through

determination and redetermination of municipal boundaries.

• Enhance participatory democracy through municipal ward delimitation.

• Assess the capacity of metropolitan, district and local municipalities.

• Strengthen research and knowledge management.• Improved public participation through enhanced citizen

engagement and communication.• Ensuring good governance and sound financial

management, supported by an effective and efficient organisation, with relevant organisational processes, systems and practices in place.

4. LEGISLATIVE AND OTHER MANDATES

The Constitution of the Republic of South Africa Act 108 of 1996• The Board is mandated in terms of sections 155(3)(b)

and 157(4)(a) to determine municipal boundaries, and to delimit wards independently.

Local Government: Municipal Demarcation Act 27 of 1998• Section 3 provides that the Board is a juristic person, is

independent and must be impartial, and must perform its function without fear, favour or prejudice.

• Section 4 provides that the Board must determine municipal boundaries in accordance with this Act and other appropriate legislation enacted in terms of Chapter 7 of the Constitution, and must render an advisory service in respect of matters provided for in this Act and other appropriate legislation.

Local Government: Municipal Structures Act 117 of 1998• Delimit wards in compliance with Schedule 1 of the Act.• In terms of Section 85, the Board must consider the

capacity of district and local municipalities to perform their function and to exercise their powers, and provide advice to Members of the Executive Council (MECs) responsible for local government.

• Section 6 empowers the Board to declare district management areas and to withdraw such declarations.

Cabinet resolutions• In 1998, Cabinet resolved that departmental service

delivery boundaries must be aligned to constitutional boundaries (national, provincial and local) and should be finalised by departments in consultation with the Municipal Demarcation Board (MDB).

Policy mandates• Assistance to government departments to align their

service delivery boundaries to municipal boundaries.

Court rulings• Several court rulings have been made on MDB decisions.

None of those rulings had any impact on operations or service delivery obligations of the MDB. Instead, the courts have consistently affirmed the independence and vindicated the MDB on both procedural and substantive fairness.

Reference to the relevant legislation and regulations governing the Board’s operationsThe following legislation and regulations are applicable:• Local Government: Municipal Demarcation Act 27 of 1998• Local Government: Municipal Structures Act 117 of 1998• Local Government: Municipal Systems Act 32 of 2000• Generally Recognised Accepted Practice• Income Tax Act 58 of 1962• Value-Added Tax Act 89 of 1991• Public Finance Management Act 1 of 1999, as amended• Treasury Regulations, March 2005, issued in terms of

the Public Finance Management Act

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• Preferential Procurement Policy Framework Act 5 of 2000• All practice notes on Supply Chain Management Act• Employment Equity Act 55 of 1998• Basic Conditions of Employment Act 75 of 1997• Labour Relations Act 88 of 1998

• Promotion of Administrative Justice Act 1 of 2000• Promotion of Access to Information Act 2 of 2000

Name of controlling entity• The MDB is an independent institution and is accountable

to Parliament.

5. ORGANISATIONAL STRUCTURE

Chairperson: Municipal Demarcation Board

Ms MJJ Thupana

Board SecretaryAdv KG Mapotse

Chief Executive OfficerMr KT Sigidi

Internal Audit

Chief Operating OfficerMr A Ramagadza

Chief Financial OfficerMr NB Patel

Executive Manager:Corporate Services

Adv T Mekuto

*Mr NB Patel resigned in April 2017 and Mr CE Moloto was appointed as Acting Chief Financial Officer.

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6. FOREWORD BY THE CHAIRPERSON

MS JANE THUPANA

It gives me great pleasure to present to you the MDB Annual Report for the year 2016/17. This report comes at a time when the MDB has experienced many significant changes and achieved substantial milestones.

For the first time since its inception, the MDB held a consultative conference. This consultative event, with the theme ‘Demarcation and spatial transformation’ took place on 23 and 24 June 2016. A number of stakeholders participated and the discussions highlighted the necessity for the MDB to focus on the needs for, among others, legislative reform, a regional presence, and the strengthening of public

participation and education as central and continuous components of the demarcation processes.

The challenges tackled by the conference included public unhappiness about demarcation decisions, even when courts consistently affirmed the decisions of the Board.

As one of the Constitutional institutions in the country, the MDB has played a pivotal role in accomplishments towards the establishment of democratic and accountable local government. The MDB has been essential in accelerating spatial integration, as a number of municipalities were

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amalgamated following redetermination processes concluded in 2013 and 2015. The conclusion and handover of wards to the Independent Electoral Commission (IEC) ensured that successful local government elections were conducted by the electoral body on 3 August 2016.

In spite of certain challenges, including that of LIM345 in Limpopo, where communities threatened to boycott elections, elections were successfully held in all areas. In the build-up to the elections, the MDB attended to a myriad of queries from communities that were unclear about their new ward boundaries, which threatened to disrupt elections. However, the Board was successful in addressing the challenges of these communities.

The Board, at its meeting in December 2016, resolved not to conduct any major redeterminations of municipal boundaries in the run-up to the 2021 local government elections. This includes amalgamations, annexations and categorisations. Only corrections of the technical misalignment of municipal boundaries will be considered. Applications for fundamental redemarcation and recategorisation of municipalities will not be prioritised. The process towards 2021 involves minor adjustments to align municipal boundaries to either cadastral boundaries, natural or man-made features, such as farms or rivers roads, or to address split communities. Through this programme, the MDB will ensure that the quality of boundaries is improved, clearly defined and legally defensible.

The redetermination of municipalities will need to be considered in the context of the challenges facing the local government sector, one of which is demarcation. The Board believes strongly that matters of municipal finance, municipal powers and functions, municipal capacity and representation impact on the ability of municipalities to meet their constitutional obligations. Gaps and weaknesses in the current demarcation legislation are also a key factor and the Board has submitted comprehensive proposals to

the Department of Cooperative Governance and Traditional Affairs (CoGTA). These include a proposal that major municipal boundary changes be considered only every 10 years, linked to the census and to minimise disruptions in the municipal planning processes.

Furthermore, the MDB has launched a plan to aid in the broader programme of deepening democracy through public awareness, education and participation through various outreach initiatives. The plan will assist the MDB to explore better ways of collaborating with, and involving, the citizens in its processes.

I take this opportunity to thank our stakeholders for their continued support during the past year and, in particular, those who were at the forefront of ensuring that the Board hosts a successful conference. These stakeholders include the sponsors and the presenters whose recommendations can be found in the Board’s latest strategy.

Finally, I extend my gratitude to my team at the MDB; a team whose mission it has been to ensure that the Board delivers its mandate lawfully, transparently and to the best of its ability. This gratitude extends to both my fellow board members and staff members of the organisation. All that has been achieved thus far could not have been attained without your hard work, commitment and dedication. I am honoured to be part of such a brilliant team.

Ms Jane ThupanaChairpersonMunicipal Demarcation Board31 May 2017

“ I extend my gratitude to my team at the MDB; a team whose mission it has been to ensure that the Board delivers its mandate lawfully, transparently and to the best of its ability. This gratitude extends to both my fellow Board members and staff members of the organisation. ”

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7. CHIEF EXECUTIVE OFFICER’S OVERVIEW

MR MUTHOTHO SIGIDI

As I present this Annual Report of the MDB for the year 2016/17, I am privileged to report on a year in which the Board, through its work, has continued to transform municipal spaces through redetermination of municipal boundaries. We are mindful that this is no ordinary task, but an important contribution, if only in a small way, to the achievement of a developmental local government that should fulfil its constitutional obligations and, at the same time, impact positively on the lives of citizens.

The 2016/17 financial year was very eventful, and the Board applied a number of lessons it learnt during the 2015/16 financial year. A highlight was the hosting by the Board in June 2016 of the first conference on demarcation and spatial transformation, which the chairperson alluded to in her foreword.

The aim of the conference was to facilitate dialogue among key stakeholders on local and international municipal demarcation trends, sustainability and viability of municipalities, public and stakeholder participation, ward delimitations, municipal capacity assessments and metropolitan systems of governance.

The event - attended by more than 500 delegates from government, research, academic and political institutions, institutions supporting democracy and ordinary members of the public - confirmed the challenges and further cemented the lessons that we continue to learn in the transformation of our municipal spaces.

Its success is evidenced by the newly found verve that the Board is displaying in taking the mandate to a different level. The conference was followed by a strategic planning session, which defined and crafted a new path for the Board to ensure that it continue to improve the way in which it carries out its mandate.

AchievementsThe period under review was characterised by efforts to develop systems and processes not only for the improvement of performance but to ensure that the MDB becomes more efficient. That is an ideal we will continue to pursue into the new financial year.

During 2016/17, the boundaries of all 213 local municipalities were technically assessed to inform the Board’s 2017 to 2019 municipal boundary redetermination process. During

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the process, more than 1 000 cases of misaligned municipal boundaries were identified. Misaligned boundaries are instances where the municipal boundary is either not aligned to cadastral boundaries or splits farms and/or settlements.

Furthermore, a framework on public participation for boundary redetermination process was developed, which will be of utmost importance in the boundary redetermination process. Additional valuable communication channels have been established with government communicators’ forum and social media channels, including the creation of a blog, and a presence on Instagram and Linked-In platforms, which will facilitate communication purposes during re-determination.

The MDB has developed a regionalisation model that will cascade the work of the institution and allow it to operate at a provincial level. The model is also aimed at, among others, enhancing local participatory democracy to afford the public easier access to the MDB, strengthening public participation and education; increasing understanding of regional and local dynamics, and facilitating a systematic shift from reliance on municipalities to forging and driving MDB engagements and activities.

Internally, great strides have been made to populate the organisational structure - the occupancy rate of funded positions increased from 69.7% to 84.4% by year-end. More still needs to be done and gaps will continue to be closed during 2017/18.

To leverage expertise and resources from other institutions, the MDB concluded three collaborative agreements, with North-West University, the Human Sciences Research Council (HSRC) and the Public Affairs Research Institute (PARI).

The MDB achieved 17 (65%) of its 26 predetermined performance indicators and realised all of its strategic objectives for the year under review.

Future plansThe 2017/18 financial year brings with it an enormous task. We will need to consider the experiences and lessons learnt in the demarcation processes conducted before the 2016 local government elections, and implement mechanisms to mitigate potential challenges.

In addition, the Board will correct the technical misalignment of municipal boundaries from 2017 to 2019, with the ward delimitation process starting in 2019 to 2020 in anticipation of the 2021 national elections.

Institutional challengesAt the start of the year, the MDB’s was undercapacitated to deliver on its mandate, as not all 43 funded positions on the organisational structure were filled. For the greater part of the year, we operated without the following senior managers: the Chief Executive Officer, Executive Manager: Corporate Services, the Human Resources Manager, and managers for research, legal, and stakeholder and communication. The first three positions have now been filled and, for the first time since its inception, the MDB has two researchers and is currently finalising the appointment of a manager for the research unit. The process of filling the other vacancies is also underway. The capacitation of the Information Technology Unit will also ensure that the MDB is on par with its sister organisations in information communication and technology (ICT) infrastructure and development. Another positive step is the training and multiskilling of existing staff to build capacity.

Against this backdrop, the Board will continue to pursue the regionalisation model to address the regional footprint challenge identified in the last report. This sits at the heart of the Board’s continued efforts to find innovative ways to fulfil its constitutional mandate. However, the ever-increasing reality is that inadequate financial support, exacerbated by the demand for a regional footprint, will put extreme pressure on the Board’s ability to do its work effectively.

We are aware of the outcomes of the external audit process and we intend to correct all the findings, having developed a clear plan during 2016.

AppreciationIn my short time with the MDB, I have been greatly impressed with the support and strategic direction provided by the board in ensuring the institution’s vision of being the ‘leading demarcation authority’ is realised. My interaction with MDB staff has been limited thus far, but I am extremely encouraged by the commitment and enthusiasm with which they have performed their duties.

Mr Muthotho SigidiChief Executive OfficerMunicipal Demarcation Board31 May 2017

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DEMARCATION ACHIEVEMENTS1. DEMARCATION PROCESSES

The municipal boundary redetermination process responding to the Minister of CoGTA Section 22 request was completed in October 2015. The delimitation of wards for the 2016 local elections was concluded in December 2015 upon completion of the outer boundary process. The final ward boundaries were handed over to the IEC on 15 December 2015 to afford the electoral body enough time to prepare for the local elections on 03 August 2016.

1.1. Community protest actions in 2016After concluding the two processes, the MDB received many queries regarding the final municipality and ward boundaries. These queries were received and recorded through the MDB’s internal query system, through intelligence reports, from CoGTA and from the IEC during voter registration processes. Some communities sought clarity while others were not happy with their municipal or ward boundaries.

The MDB responded to all queries by providing information or clarity on all the processes conducted in affected areas. The table below lists the number of queries received and dealt with.

Table1: List of queries regarding municipal boundaries

PROVINCE COMPLAINT MUNICIPALITIES MDB RESPONSE

Eastern Cape Flagstaff Community Forum remains dissatisfied with demarcation. Threats to boycott voter registration a possibility.

Ngquza Hill Local Municipality (EC153).

The community was informed that no municipal boundary redetermination affecting this municipality was finalised in either 2013 or 2015.

Eastern Cape Ntabankulu aggrieved community members elected not to participate in the voter registration process in protest against the redemarcation of Ntabankulu to form part of the Alfred Nzo District Municipality (DC44).

Ntabankulu Local Municipality (EC444).


Free State Request for a municipal boundary redetermination to include Dewetsdorp Farms from Mohokare Local Municipality (FS163) into Mangaung Metropolitan Municipality (MAN).

MAN and Mohokare Local Municipality (FS163).

The community was informed that the period for redetermination of municipal boundaries was closed until further notice.

KwaZulu-Natal Complainant had confused the municipal boundary redetermination and the ward delimitation processes, and implied that the MDB had redetermined the boundary of Mandeni Local Municipality (KZN291).

Mandeni Local Municipality (KZN291).


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PROVINCE COMPLAINT MUNICIPALITIES MDB RESPONSE

Limpopo Request for a meeting to discuss municipal boundary issues affecting Greater Letaba Local Municipality (LIM332).

LIM332 The MDB honoured the meeting with LIM332, advising that the period for redetermination of municipal boundaries was closed until further notice.

Limpopo The Bungeni Traditional Council was unhappy with the redetermination of municipal boundaries splitting its traditional area.

Makhado Local Municipality (LIM344) and New Local Municipality (LIM345).

The MDB honoured the meeting with representatives of the Traditional Council and resolved to respond to all of issues raised.

Limpopo The Vuwani Community was unhappy with the redetermination of municipal boundaries affecting Thulamela Local Municipality (LIM343), Makhado Local Municipality (LIM344) and New Local Municipality (LIM345).

LIM343, LIM344) and LIM345.

At the time of the query, the matter was subject to court proceedings.

Limpopo Complaint about being relocated from Mpumalanga to Limpopo.

Elias Motsoaledi Local Municipality (LIM472)

The MDB told the community that the provincial government of Limpopo deals with such matters.

North West Request for a meeting to discuss municipal boundary issues affecting Lekwa-Teemane Local Municipality (NW396), Dr Ruth Segomotsi Mompati District Municipality (DC39), Maquassi Hills Local Municipality (NW404) and Dr Kenneth Kaunda District Municipality (DC40).

NW396, DC39, NW404 and DC40.

The MDB was unable to honour the meeting and informed the role-players that the process for boundary redeterminations was closed until further notice.

Table2: List of queries/complaints regarding ward boundaries

PROVINCE WARD(S) COMPLAINT MUNICIPALITIES MDB RESPONSE

Eastern Cape N/A Query regarding voting districts.

Dr Beyers Naude Local Municipality (EC101).

The matter was referred to the IEC as custodian of voting districts.

Eastern Cape 11 Request for a meeting to discuss the configuration of Ward 11 in Matatiele Local Municipality (EC441).

EC441 The MDB was unable to honour the meeting, but clarified the process followed and provided an analysis of submissions and objections received.

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Eastern Cape 4, 10 Complaint about the configuration of Ward 4 and Ward 10 in Raymond Mhlaba Local Municipality (EC129).

EC129 The MDB clarified the process followed and provided an analysis of the submissions and objections received.

Eastern Cape 1, 3 Complaint about the configuration of Ward 1 and Ward 3 in Enoch Mgijima Local Municipality (EC139).

EC139 The MDB clarified the process followed and provided an analysis of submissions and objections received.

Eastern Cape 12 Request for a meeting to discuss wards that are not to their satisfaction in Umzimvubu Local Municipality (EC442).

EC442 MDB was unable to honour the meeting, but clarified the process followed and provided an analysis of submissions and objections received.

Free State 21 Complaint about the configuration of Ward 21 in Maluti-a-Phofung Local Municipality (FS194).

FS194 The MDB clarified the process followed and provided an analysis of submissions and objections received.

Free State 43 Request for a meeting to discuss Ward 43 in Mangaung Metropolitan Municipality (MAN).

MAN The MDB was unable to honour the meeting, but clarified the process followed and provided an analysis of submissions and objections received.

Gauteng 65 Violent protests over the registration weekend, with the community complaining that its hostel was split by the ward boundary and and that they were not consulted.

City of Johannesburg (CoJ)

The MDB attended a meeting facilitated by speaker of the CoJ and met with stakeholders. A site visit to the hostel was conducted and it was found that the ward boundary does not split the hostel as the community claimed.

Gauteng 40, 41 Certain community members in Meadowlands were dissatisfied with the configuration of the ward, as they feel it is taking away some amenities enjoyed over years.

City of Johannesburg (CoJ)

The MDB clarified the process followed and provided an analysis of submissions and objections received.

Gauteng 67 Community protest against the inclusion of the Mamelodi Hostel into Ward 67. Residents threatened violence and marched to the MDB offices.

City of Tshwane Metropolitan Municipality (CTMM).

The MDB responded to a memorandum submitted by the community.

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Kwazulu-Natal 70 Complaint about the configuration of Ward 70 in eThekwini Municipality (EM).

EM The MDB clarified the process followed and provided an analysis of submissions and objections received.

KwaZulu-Natal 5 Complaint about the configuration of Ward 5 in eThekwini Municipality (EM).

EM The MDB clarified the process followed and provided an analysis of submissions and objections received.

KwaZulu-Natal 2, 3 The applicant alleged that the variation of Ward 2 and Ward 3 was not legal. He was under the impression that ward consultation was still underway and threatened to take legal action against the MDB if Ward 2 and Ward 3 were not reversed to the draft.

Mandeni Local Municipality (KZN291).


Kwazulu-Natal 10, 18 Voting station 43414231, which was under Ward 10, was transferred to Ward 18 People did not want to be in the new ward and were reluctant to vote.

Mtubatuba Local Municipality (KZN275).


KwaZulu-Natal All Complaint about the configuration of wards in Ulundi Local Municipality (KZN266).

KZN266 The MDB clarified the process followed and provided an analysis of submissions and objections received.

KwaZulu-Natal All Community members unhappy about the lack of consultation invited the MDB to address them on the ward delimitation process.

Umshwathi Local Municipality (KZN221).

The MDB was unable to honour the meeting, but clarified the process followed and provided an analysis of submissions and objections received.

Limpopo Voting station

Complaint about the creation of a new voting station at Tshikanoshi Secondary School in Ephraim Mogale Local Municipality (LIM471).

LIM471 The matter was referred to the IEC as custodian of voting stations.

Limpopo 8, 10, 11 Complaint about the configuration of Ward 8,Ward 10 and Ward 11 in Elias Motsoaledi Local Municipality (LIM472).

LIM472 The MDB clarified the process followed and provided an analysis of submissions and objections received.

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Limpopo 21, 30 Complaint about the configuration of Ward 21 and Ward 30 for Ramaroka in Greater Letaba Local Municipality (LIM332).


Limpopo 5, 18 Complaint about the configuration of Ward 5 and Ward 18 in Makhado Local Municipality (LIM344).


Mpumalanga Voting station

Applicant required clarity on voting stations and wards.

City of Mbombela Local Municipality (MP326).

The MDB clarified voting stations and ward configuration.

North West 3, 5 Ward 3 and Ward 5: The community of Amalia in Mamusa Local Municipality (NW393) is dissatisfied with the ward delimitation, as it may impact on the benefit it receives from the mine in the area.

NW393 The MDB clarified the process followed and provided an analysis of submissions and objections received.

North West All Complaint about the configuration of wards in Moretele Local Municipality (NW371).

NW371 The MDB clarified the process followed and provided an analysis of the submissions and objections received.

North West 3, 4, 9,13, 14,16, 22,23, 24,27, 31,32, 33

Community request for a meeting to discuss wards that are not to its satisfaction in Moses Kotane Local Municipality (NW375).

NW375 The MDB was unable to honour the meeting, but clarified the process followed and provided an analysis of the submissions and objections received.

Western Cape 95 Information indicated that the community of Kuyasa, Khayelitsha was planning to disrupt voter registration. According to the new boundaries, some residents who now fall under Ward 95 were not happy.

City of Cape Town The MDB honoured a meeting, at which it clarified the process followed and provided an analysis of the submissions and objections received.

Western Cape 97 The community sealed gates on both registration days. Clearly it was not an IEC matter, but a demarcation matter.

City of Cape Town The MDB honoured a meeting, at which it clarified the process followed and provided an analysis of the submissions and objections received.

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2. CONFERENCE ON DEMARCATION AND SPATIAL TRANSFORMATION: 23 AND 24 JUNE 2016

2.1 Background and rationaleOver a number of years, the MDB has not been able to com-municate effectively and efficiently with stakeholders nationally on its challenges and on opportunities to improve its work and deliver on its mandate. In June 2016, the MDB hosted a con-ference on demarcation and spatial transformation.

The conference, which brought together national and interna-tional stakeholders in the local government sector, discussed resolving hurdles pertaining to demarcation, while contribut-ing to the current spatial transformation discourse in South Africa. Attendees included representatives from Parliament, government, institutions that support democracy, donor agencies, research institutions, political parties, international organisations, schools and the general public.

The conference focused on six themes, namely:• Municipal demarcation: Challenges and opportunities for

spatial transformation’; • Financial and functional viability, and sustainability of

municipalities: Beyond the demarcation instrument; • Towards a comprehensive municipal capacity

assessment; • Public and stakeholder participation and social

integration in demarcations; • Metropolitan system of governance: Issues and

challenges, and• Ward delimitation: Impact on municipal service delivery.

2.2 Conference objectivesThe objectives of the conference were to:• Take stock of the lessons learnt and challenges

encountered by the MDB during past demarcation processes;

• Gain a deeper understanding of challenges and experiences faced by communities, municipalities and other stakeholders during past demarcation processes;

• Develop a framework for better management of the demarcation process;

• Develop proposals for legislative reforms;• Sketch future demarcation scenarios by using lessons

from other countries and international experiences, and• Develop proposals for future MDB research agenda.

2.3 Conference outcomesThe intended outcomes of the conference were to:• Share lessons learnt and challenges pertaining to the

work of the MDB.• Make recommendations on possible legislative

amendments of the Municipal Demarcation Act (MDA) and the Municipal Services Act (MSA).

• Make recommendations on the alignment of the work of the MDB and that of other institutions affected by the outcomes of demarcation.

• Make recommendations on the design, capacity and mandate of the MDB.

• Facilitate the alignment of demarcation processes and decisions with other programmes in local government to build viable and sustainable municipalities.

• Make recommendations on how the MDB can contribute to enhancing and strengthening stability and viability of the local government system.

2.4 Target audienceThe following groups attended:• Cooperative Governance and Traditional Affairs (CoGTA);• Municipalities (mayors, speakers and municipal

managers);• Parliament Portfolio and Select Committee on

Cooperative Governance and Traditional Affairs;• Political parties in Parliament;• Provincial legislatures;• MECs and provincial departments for cooperative

governance and traditional affairs;• Institutions supporting democracy, including Statistics

South Africa (StatsSA), South African Local Government Association (SALGA), IEC, South African Cities Network, Development Bank of South Africa, Financial and Fiscal Commission (FFC), City Support Programme and Gender Commission;

• National and provincial houses of traditional leaders;• Academia and research institutions;• International participants;• Media, and• Members of the public.

2.5 Conference themes and recommendations2.5.1 Municipal demarcation: Challenges and oppor-

tunities for spatial transformationPanellists discussed the following issues:• A normative framework within which demarcations

should be located: Integrated Urban Development

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Framework (IUDF), National Development Plan (NDP), Integrated Development Plan (IDP) etc.

• Impact of demarcations on local government stability.• The challenges of demarcating municipalities across

provincial boundaries.• International best practices and experiences of

demarcating boundaries in ethnically and tribally diverse areas, as well as the wisdom and challenges of a 10-year boundary determination in Kenya.

• The impact of amalgamations and the disestablishment of municipalities on municipal councils and service delivery.

• Stakeholder perspectives on aspects of demarcation that require review.

• The role of demarcations in the history of South Africa in view of sensitivities surrounding the history of social disintegration and separate development, as well as the role that spatial transformation should play in promoting social cohesion and integration.

• The original conceptualisation of the demarcation instrument in the formative years of the present local government system, and insight on whether the MDA is still in line with the original vision - for instance, a focus on the demarcation criteria in view of the evolution of local government over the last 16 years and the necessary reforms.

The following conclusions and recommendations were made at this session:• An internal review mechanism should be explored

to provide aggrieved members of the public with an opportunity to seek recourse before final decisions.

• The consideration of demarcation objectives and criteria must be guided by detailed regulations, and these must be aligned to longer-term planning for local government (NDP and IUDF vision for spatial transformation).

• Demarcation is not a panacea for local government problems and challenges, and other factors and mechanisms must be considered.

• The frequency of the demarcation process should be reviewed to allow new municipal entities to take root first and be subjected to rigorous evaluations. This would also allow the MDB sufficient time to consider proposals and consult extensively.

• The scope for initiating or making proposals for redeterminations should be narrowed to exclude the demarcation of municipal boundaries on the MDB’s ‘own initiative’. Proposals or requests for redetermination

should be limited to local authority, provincial and national executive members and other applicants with vested interests.

• Demarcation should perhaps be linked with the 10-year national census to ensure that demarcations are aligned to longer-term planning for developmental local government processes based on credible statistical indicators and building blocks.

• Economic catchment areas (nodal points) need to be taken into consideration in municipal boundary redetermination.

• Measures should be introduced to regulate the public consultation process during the full cycle of redetermination, ie consideration, decision-making and planning for implementation of redetermination decisions.

• The Constitution should be reviewed to empower the MDB to have a role in demarcating provincial boundaries by recommending a joint investigation with CoGTA.

• Further research should be conducted to explore misalignment of traditional authority boundaries with municipal boundaries.

2.5.2 Financial and functional viability and sustaina-bility of municipalities: Beyond the demarcation instrument

Panellists discussed the following issues:• Is amalgamation a sustainable approach to securing

viable local municipalities (LMs)?• The impact of demarcations on the national fiscus

and long-term sustainability of communities and municipalities.

• The appropriateness of the demarcation instrument as a solution to municipal financial viability.

• Understanding financial viability and dysfunctionality in terms of the Back-to-Basics programme.

• Municipal financial viability in the context of the apartheid legacy.

• Reflection on costs and long-term gains of municipal amalgamations and how these compare to mergers in business.

The following conclusions and recommendations were made at this session:• The MDB should consider a study to develop a common

definition of financial viability, including indicators based on norms and standards (using the White Paper on Local Government as a basis).

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• Financial costs of implementing demarcations should be determined prior to finalisation, in the wake of the Tshwane/Metsweding merger, which had huge financial implications on the metropolitan municipality.

• Stakeholders should be made aware that demarcations cannot be used to solve local government problems, which must be solved through other government interventions.

• A study should be conducted to evaluate the success and actual costs of mergers.

• Proper MDB investigations are needed, including financial modelling and viability studies of proposed mergers.

2.5.3 Towards a comprehensive municipal capacity assessment

Panellists discussed following issues:• The need to determine the usefulness and adequacy of

current municipal capacity assessments.• The identification of possible gaps in the current

municipal capacity assessment instrument and how this could be changed to enhance future processes.

• The viability of the two-tier system of local government in relation to municipal powers and functions.

• The extent to which information technology (IT) is used as an enabler for municipal capacity assessments and public participation in local government.

The following conclusions and recommendations were made at this session:• The authorisation framework for powers and functions

should be reviewed and functions such as housing and public transport possibly assigned to metropolitan municipalities.

• CoGTA should review the concept of ‘wall-to-wall’ municipalities and the two-tier system of local government, revisiting the role of districts outlined in the White Paper on Local Government (eg district functions such as coordination, planning, facilitation of district-wide development, provision infrastructures and services, building capacity and supporting weaker LMs).

• CoGTA should review legislation to provide for devolution of functions, which would assist in addressing developmental challenges facing secondary cities.

• Government should introduce appropriate procedures and regulations in the MSA to guide functional adjustments and capacity assessments.

• Regarding municipal capacity assessment, the MSA

should be amended to clarify the role of MECs after the assessments by the MDB.

• The MDB should reconsider its decision to develop a comprehensive capacity assessment model without an enabling and developmental framework to advance government’s management of the two-tier system.

• CoGTA should introduce measures to enforce the current legislative framework, and strengthen management and governance of function division and execution.

• CoGTA should introduce regulations for collaboration among the MDB, FFC, NPC, StatsSA, IEC and the Auditor-General of South Africa (AGSA) for geostatistical building blocks and sharing of information.

2.5.4 Public and stakeholder participation and social integration in demarcation

Panellists discussed the following issues:• Public consultation as a fundamental pillar of democracy

and its significance for demarcation.• Balancing the role of key stakeholders in demarcation

with special reference to vested interests of municipalities and councillors in the outcome of the process.

• The significance of involving communities in demarcation and enhancing participatory democracy at local level.

• Public and stakeholder participation in municipal planning processes and how that can be adapted for the demarcation process.

• Key contestation areas of demarcating traditional authority areas and mitigating against existing boundary anomalies.

• Possible changes in addressing issues of traditional areas in demarcation.

• The role of traditional leaders in enhancing the public participation process.

The following conclusions and recommendations were made at this session:The MDB should review the public consultation process, as stipulated in the MDA, and develop a public participation framework in line with existing frameworks and guidelines, including Promotion of Administrative Justice Act, the MSA, National Assembly, SALGA and CoGTA.

The MDB framework must: - Include participation of youth and traditional

leadership in demarcation processes and pro-grammes;

- Streamline the MDB’s public consultation and

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ensure direct involvement by MECs, provincial houses of traditional leaders, magistrates and municipalities, and

- Make provision for the publication of decisions and reasons for decisions, to provide communi-ties with proper feedback.

• The MDB should accelerate efforts to improve community knowledge on demarcation matters, as public education and awareness campaigns are crucial to meaningful engagement.

• Intergovernmental and other structures should be leveraged to enhance public participation, including using ward committees and other public participation committees to inform communities of any municipal boundary or ward changes.

• Proponents of redetermination proposals – with provincial, district and local authorities - should be responsible for public participation and stakeholder consultation, and for soliciting public opinion and support before the proposal is submitted to the Board.

• Public participation activities and programmes should go beyond compliance and drive meaningful engagement with people.

• Technological and social media mechanisms should be explored to involve the public and stakeholders, and improve communication.

• Efforts should be accelerated to enhance public participation activities and programmes through a regionalisation plan.

• Meetings must be appropriately timed, venues accessible and suitable, and meeting notices adequately circulated to ensure involvement of all stakeholders affected by a demarcation matter. All inputs and submissions from communities should be considered and feedback provided.

• Research should be instituted on the culture of public participation in municipalities.

2.5.5 Metropolitan system of governance: Issues and challenges

Panellists discussed the following issues: • Getting cities to work in South Africa.• Inclusive city growth: Why governance and collaborative

leadership matter.• The role of metropolitan municipalities in the national

economy beyond the demarcation of a municipal boundary, ie metros as engines for economic growth.

• Tshwane/Metsweding merger case study: What could have been done differently to ensure a smooth transition?

• Analysis of the criteria for the categorisation of metros and/or their application, and reflection on the basis for creating future metropolitan municipalities.

The following conclusions and recommendations were made at this session:• The recategorisation of metropolitan municipalities is an

expensive and potentially disruptive solution to urban and developmental challenges, and should be used with ‘caution’ as it impacts on demarcation and can have dire structural implications for the two-tier system in local government, eg Buffalo City’s exclusion from Amatole District Municipality.

• Thriving cities (and municipalities) are less about boundaries than about ‘softer’ issues such as partnership, collaboration, integration, social inclusion and cohesion.

• An MDB study should be conducted to evaluate the impact of previous decisions on redeterminations, eg Tshwane/Metsweding, Buffalo City and Mangaung, to assess how far these municipalities have progressed as metropolitan municipalities compared to other historical metros.

• A review of Section 2 of the MSA to be proposed to clarify what constitutes a metropolitan, or Category A, municipality.

• Functional assignments are crucial to economic growth, particularly the assignment of housing and public transport functions in cities and metropolitan municipalities.

• The MDB should recognise the crucial role of an effective metropolitan system of governance that advocates and promotes the following: - a shared vision and common agenda by private,

public and civic stakeholders; - partnering and collaborative leadership; - relationships and cross-border collaboration (soft

power); - city growth coalitions to execute collective action

among the three spheres of government, the pri-vate sector and civil society groups, and

- different treatment of cities (metropolitan munici-palities) by government.

• CoGTA should develop regulations for differentiated approach to categorising municipal areas (eg secondary and intermediate cities).

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The MDB approach should change to: - limit the number of metros and not dilute focus

with wider metros; - avoid redrawing boundaries unnecessarily; - note that boundary determination is not the pri-

mary challenge for secondary cities or metropol-itans;

- ensure that metros are always created for the right reasons, and

- note that boundary redistribution is a national consideration and not an MDB responsibility.

2.5.6 Ward delimitation: Impact on municipal service delivery

Panellists discussed the following issues:• An assessment of the ward delimitation framework,

focusing on the purpose for delimiting municipal wards, the criteria for ward delimitation and the proposed reform to improve the system.

• The impact of the municipal ward delimitation process on local government elections and the work of the IEC.

• The significance of statistical data on demarcations and service delivery, as well as the central role StatsSA can play in improving demarcation legislation and processes.

• The impacts of ward delimitation on functionality, planning and service delivery in a municipality, as wards are used as planning units.

• Comparison of the South African ward system with practices elsewhere in the world.

The following conclusions and recommendations were made at this session:• The timing and sequencing of demarcation and ward

delimitation processes are crucial and must be mindful of election schedules and other municipal processes.

• Legislation must define timeframes for different role-players in the ward delimitation process.

• Criteria for ward delimitation must be reviewed, especially the use of registered voters and the norm variation for ward delimitation, instead of population and the socio-cultural aspects of communities.

• A study should be undertaken to resolve confusion about demarcation of wards for spatial transformation or socio-economic, political or election purposes, and to further clarify the role of wards.

• The MDB should conduct a social and cultural impact assessment prior to or as part of the ward delimitation process.

3. DEVELOPMENT OF A REGIONAL OPERATING MODEL (REGIONALISATION)

The MDB’s core functions necessitate that the institution work with all members of the public, ward committees, municipal-ities and provincial departments etc. The MDB, in its current format, is highly dependent on officials in municipalities and provincial departments to assist with the implementation of some operations. These dependencies have very often left the MDB vulnerable and looking very inefficient in mandate delivery. The MDB is striving to enhance the delivery of its mandate by widening its understanding of the regional dy-namics and, therefore, intends to regionalise core functions.

As one of its key focus areas, the MDB aims to ensure that there is regular engagement with members of the public, ca-pacity building and education. It will also encourage public and community inputs on municipal boundary determina-tions, redeterminations, ward delimitations and municipal capacity assessments, and ensure effective management of stakeholder expectations.

The MDB has, at times, been criticised by communities for its poor public and stakeholder engagement. As the discontent stems from the MDB’s failure to avail itself to communities, the Board launched a regional operating model project.

In terms of the MDB model, ‘regionalisation’ is defined as the physical presence of MDB staff, based at a regional of-fice and supporting satellite offices. Staff members of the re-gional office will provide services to stakeholders of one or more provinces that constitute the region. The clustering of provinces into regions takes into consideration geographic location, size, population and associated workload. Support-ing satellite offices are located in provinces where there is no regional office.

To achieve this, more emphasis has been placed on the need to adopt a regional operating model, which will:• Enhance local participatory democracy by allowing the

public access to MDB offices for information.• Strengthen public participation and enhance public

education.• Increase the Board’s understanding of provincial,

regional and local dynamics.

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• Facilitate a systematic shift from reliance on municipalities to forging and driving engagements, as the former can compromises the process (eg municipalities and councillors may be conflicted as interested and affected parties).

• Drive a region-based research agenda that is consistent with unique regional characters and profile.

• Engage timeously with key and strategic stakeholders.• Improve turnaround of regional correspondence and

interaction.

The following functions are to be performed at the regional offices with support from their satellite offices, as part of the MDB’s core operations:

Regional functions in core operations

Core Operations

Function Description

Municipal boundary redetermination

Handling of proposals for redetermination

This function will entail preliminary investigations and compiling of reports for consideration by the Board.

Conduct public meetings This will include preparing public meeting schedules, organising suitable meeting venues, identifying and inviting relevant stakeholders and members of the public, preparing information materials for meetings, convening meetings and compiling public meeting reports.

Distribution of notices and awareness materials of redetermination proposals

Regional offices will develop information materials for target audiences in the region and ensure that appropriate media are used to distribute the information on time.

Collect and verify specific information for redetermination investigations

Regional staff members will be responsible for collecting and verifying case-specific information for redetermination cases in their area.

Understanding of local issues will provide requisite context for these investigations.

Handling of submissions and objections

Due to lack of facilities such as fax machines and email access, much of the population has to rely on post office or hand delivery for submissions, which may be a disadvantage as the submissions are time-bound.

Regional staff will be responsible for collecting submissions from the public and capturing them by the due dates.

Regional staff will analyse submissions and objections received and compile reports for consideration by the Board.

Communicate decisions Regional staff will communicate and clarify Board decisions to the local audience.

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Core Operations

Function Description

Municipal ward delimitations

Consult communities on first drafts of wards

Involving communities at an early stage in the drafting of wards will enhance public understanding of the process, reduce mistrust and build support.

Conduct public consultation meetings

Regions will be responsible for preparations of the public consultation meetings schedule, as they have a good understanding of local events and calendar commitments of stakeholders.

Activities for conducting meetings will include procuring meeting venues, preparing information materials, facilitating proceedings and compiling meeting reports.

Handling of submissions and objections

Due to a lack of facilities such as fax machines and email access, much of the population has to rely on post office or hand-delivery for their submissions, which may be a disadvantage as submissions are time-bound.

Regional staff will be responsible for collecting submissions from the public and capturing them by the due dates.

Regional staff will analyse submissions and objections received and compile reports for consideration by the Board.

Site visits and verification of municipal ward boundaries

The public’s primary concern was the MDB’s perceived lack of knowledge of local conditions, such as the topographical constraints of the area, which results in the creation of dysfunctional wards.

The MDB’s local presence will assist with site visits to verify claims made about delimited wards that are contrary to the criteria.

Capacity assessment Information gathering MDB personnel in the region will be well positioned to collect information timeously at source and capture it appropriately for incorporation into the system.

Monitoring and evaluation The local presence of MDB personnel will assist with continuous gathering of data for monitoring and evaluation.

The regional offices will perform, among others, the following functions:• Public education and outreach• Consultation with stakeholders• Local research information gathering• Geographic Information System (GIS)and general

helpdesk services• Assistance with local demarcation enquiries, and • Core MDB functions related to:

- Municipal boundary redetermination - Ward boundary redelimitations - Capacity assessments.

The implementation plan proposes a phased approach to regionalisation, with the goal of establishing a full complement of the MDB local office in each province. The plan’s initial phase groups provinces into three regions, requiring the establishment of two new regional offices - Eastern Cape and KwaZulu-Natal - and a regional office based at the MDB Centurion office, Gauteng. These offices will be supported by satellite offices in the remainder of the provinces making up the regions.

For the initial phase of regionalisation, 29 MDB staff members will be required, reporting to the Chief Operating Officer. They include an additional 12 full-time staff. A total of 15 will be based at regional offices to fulfil the minimum requirement to establish a regional footprint in each province.

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For the initial phase, three regions will be constituted as follows:

Region Province Regional Office Satellite Office Staff Contingent

A

Eastern Cape Bhisho 3

Northern Cape Kimberley 1

Western Cape Cape Town 1

B

Limpopo Polokwane 1

Gauteng Centurion 3

Mpumalanga Mbombela 1

North West Mmabatho 1

CKwaZulu-Natal Bloemfontein 1

Free State Pietermaritzburg 3

The broad categories of boundary misalignments identified during the assessments are as follows:

CATEGORY OF BOUNDARY MISALIGNMENT CASES DESCRIPTION

Split communities/settlements Municipal boundary splitting communities in villages or settle-ments, not affecting traditional council areas.

Cadastre misalignment Municipal boundary not aligning to cadastre, such as farm boundaries (minor shifts), not affecting traditional council areas.

Split farms Municipal boundary splitting parent farms into separate portions (ie one portion in one municipality, another portion in another municipality), not affecting traditional council areas.

Split traditional communities/areas Municipal boundary splitting traditional council or traditional community areas into separate parts belonging to different municipalities.

For the two future phases, the number of regional offices will be increased initially to six and ultimately to nine, with one local office per province. The number of staff required will be determined during the initial phase.

The MDB prepared a business plan based on the model for submission to National Treasury (NT) to secure funding. As funding was not secured, implementation of the model is in abeyance. In the meantime, the MDB will explore other mechanisms to enhance public participation and consultation with its limited financial resources.

4. TECHNICAL ASSESSMENTS

4.1 IntroductionAccording to the MDA, the MDB must determine the boundaries of municipalities in the Republic of South Africa.

Although it was not mandatory, the MDA usually determined municipalities immediately after every local government elections (every five years). The MDB has decided that no major redetermination of municipal boundaries will take place before the 2019 national elections, except technical boundary alignments.

As a result, the project to assess the municipal boundary alignments to cadastral and other administrative boundaries was initiated for the 2016/17 Annual Performance Plan (APP). The boundaries of the existing 213 municipalities (ie local and metropolitan municipalities) were assessed to identify boundary misalignment cases. The boundary misalignments were captured and categorised by whether they affect the communities/settlements, cadastre, farms and traditional communities.

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4.2 Results of technical assessmentsBy the end of the financial year, municipal boundary assessments had been completed in all nine provinces.

The results of the assessments were categorised according to which boundaries of the abovementioned datasets were not aligned to the municipal boundary. The distribution of boundary misalignments among the nine provinces is shown below.

The distribution of boundary misalignments described above is shown in Figure 1 above. Eastern Cape has the highest percentage of total boundary misalignments, at 33%, followed by KwaZulu-Natal (22%), Limpopo (11%), Northern Cape (8%), North West (7%), Western Cape (7%), Gauteng (5%), Free State (4%) and lastly Mpumalanga (3%).

PROVINCETOTAL BOUNDARY

MISALIGNMENT CASES

SPLIT COMMUNITIES/ SETTLEMENTS

CADASTRE MISALIGNMENT

SPLIT FARMS

SPLIT TRADITIONAL

COMMUNITIES

Free State 43 2 37 4 -

Mpumalanga 30 18 6 1 5

North West 75 7 38 5 25

Northern Cape 85 3 61 12 9

Western Cape 82 3 40 39 -

Gauteng 52 35 16 1 -

Limpopo 125 14 26 20 64

KwaZulu-Natal 232 26 41 33 132

Eastern Cape 351 4 162 13 172

Total 1 075 112 (10%) 427 (40%) 128 (12%) 407 (38%)

Eastern Cape 33%

Free State 4%

Mpumalanga 3%

North West 7%

Northern Cape 8%

Western Cape 7%

Gauteng 5%

Limpopo 11%

KwaZulu-Natal 22%

33%

4% 3%

7%

8%

7%

5%

11%22%

Figure 1

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4.3 Importance of boundary misalignment cases to demarcation

In the forthcoming demarcation process, the MDB will redetermine municipal boundaries to correct only the boundary misalignments detailed above, and not to implement major municipal redeterminations.

The following points must be taken into consideration.• The technical assessment of municipal boundaries,

which focused on identifying boundary misalignments cases, has been completed, and in the next stage, the profiles of the boundary misalignments will be developed for incorporation into the demarcation process.

• Subsequently, a profile of each of boundary misalignment must be developed after consultation with different data custodians and stakeholders, namely the Chief Surveyor General (CSG), the IEC and StatsSA. The profiles would inform decision-makers on which cases advance to the next level of demarcation.

5. 2017 TO 2021 REDETERMINATION PLAN

For the past 17 years, the MDB has been in the forefront of spatial transformation in South Africa through the determination and redetermination of municipal boundaries. This process evolved from addressing spatial injustices of the past to rationalising municipalities into functional units to meet their constitutional obligations, including infrastructure and service delivery.

While the MDB has seen many years of success, there have been challenges. As in any thriving democracy, decisions of the Board are challenged from time to time in the courts of law and there have been community protests (sometimes violent) against decisions of the Board.

The successes since 2000 have been achieved, in part, through the strong partnerships established with institutions such as the IEC, StatsSA, the FFC, CoGTA, the CSG, SALGA, provincial departments responsible for local government and municipalities.

Many valuable lessons have been learnt, which have placed the MDB in a better position to review the demarcation process and propose changes to the legislative framework that govern its work.

The Board considered the following:a) The Demarcation Process Review Task Team report,

a comprehensive review of the current legislation and the practice and process of municipal demarcation;

b) Lessons learnt from previous demarcation processes and from engagements with stakeholders (including the public), and

c) The outcomes of the MDB conference on demarcation and spatial transformation held in June 2016.

The outcome of the abovementioned processes pointed to the following matters that require attention:

a) Limitations and challenges with the legislation governing demarcations.

b) MDB’s five-year cyclic review of municipal boundaries is too short and compromises the planning and service delivery role, and consequently municipal sustainability.

CEO of South African Cities Network, Mr Sithole Mbanga facilitated one of the panel discussions at the MDB conference – 23 and 24 June 2016

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c) Lack of a clear plan on configuration of the local government landscape - continued debates on the future of the two-tier system of local government, secondary cities and categorisation of metropolitan areas.

d) Communities proposing changes to provincial boundaries often making the MDB’s work difficult as they do not accept that this does not constitute the Board’s mandate.

e) Inadequate funding of the MDB, which does not allow for establishment of regional presence and might constrain effective public participation.

f) Instances of misaligned municipal boundaries to cadastral farms, including challenges with spatial configuration of informal settlements.

g) Spatial discrepancies concerning traditional authority areas exacerbated by lack of proclamations, resulting in misalignment of municipal boundaries.

h) Inadequate funding for transitional arrangements to ensure that the newly established municipalities are functional from the date of effect.

The MDB considered all circumstances and, on 8 December 2016, resolved that no major municipal boundary redeterminations would be conducted before the next ward delimitation process after the next local government elections. In the run-up to the 2019 elections, only technical misalignment of municipal boundaries will handled, which will involve minor adjustments to align municipal boundaries to cadastral boundaries, natural or man-made features (eg farm boundaries, rivers and roads), or split settlements. The 2017 to 2021 demarcation process addresses boundary misalignments rather than major boundary redeterminations.

The demarcation process culminating in the 2021 local government elections is illustrated in the diagram below. It includes technical boundary alignments conducted between 2017 and 2019, ward delimitation in local and metropolitan municipalities between 2019 and 2020, and IEC processes for the local government elections towards 2020.

Broad Demarcation Process

Broad process and timeframes within the current legal framework: 2017 - 2021

Technical alignment of

municipal boundaries

Delimit wards for local

government elections

Prepare for local

government elections

2017 • 2018 2018 • 2019 • 2020 2020 • 2021

Consultation and legal process

Consultation and legal process

IEC process

April 2017 - July 2018 April 2018 - June 2020

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Table1: The municipal boundary redetermination programme focusing on technical boundary alignment, detailing activities and broad timeframes

PROCESSES DATE TASK RESPONSIBILITY

Consultation– pre-legal process April – July 2017 Consultation with Ministers and Members of the Executive Council (MinMEC)

MDB board members

Consultation with provinces MDB board members

Consultation with other primary stakeholders (CSG, the IEC, StatsSA)

MDB officials

July – October 2017

Technical consultation with municipalities

MDB officials

November 2017 – January 2018

Consultation with affected communities

MDB officials

Legal process: Intention to consider proposals and Board decisions: sections 26 and 27 of the MDA

February 2018 Publish intention to consider proposals and process submissions

MDB board members and officials

Legal process: Conduct investigations – sections 29 and 18 of the MDA

March – May 2018

Consideration of public inputs, public meetings where necessary and determination or redetermination of municipal boundaries


Legal process: Publication for objection - Section 21 of the MDA

June - July 2018 Publication of redetermination and consideration of objections


Legal process: Confirm, vary or withdraw redetermination – Section 21(5) of the MDA

July 2018 Confirm, vary or withdraw redetermination and final gazetting


Legal process: Section 23 of the MDA August 2018 IEC and MECs’ gazette Section 23 notices

IEC and MDB

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S E C T I O N C P E R F O R M A N C E I N F O R M A T I O N


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PERFORMANCE INFORMATION1. STATEMENT OF RESPONSIBILITY

FOR PERFORMANCE INFORMATION

Statement of responsibility of Performance Information for the year ended 31 March 2017

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

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

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

The MDB’s performance information for the year ended 31 March 2017 has been examined by the external auditors and their report is presented on page 67.

The performance information of the institution set out on page 32 to page 40 was approved by the accounting officer.

Mr Muthotho SigidiChief Executive OfficerMunicipal Demarcation BoardDate: 31 May 2017

2. AUDITOR’S REPORT: PREDETERMINED OBJECTIVES

The Auditor-General of South Africa (AGSA) currently performs the necessary audit procedures on the performance information to provide reasonable assurance in the form of an audit conclusion. The audit conclusion on the performance against predetermined objective is included in the report to management, with material findings being reported under the Predetermined Objectives heading in the Report on other legal and regulatory requirements section of the auditor’s report.

Refer to page 67 of the Report of the Auditor’s Report, published as Part F: Financial Information.

3. OVERVIEW OF PERFORMANCE

3.1 Service Delivery environmentThe MDB has been essential in accelerating spatial integration as a number of municipalities were amalgamated following the re-determination process the MDB concluded in 2013 and 2015 respectively. The conclusion and handover of wards to the IEC ensured successful local government elections.

In the build up to the elections, the MDB attended to various queries from communities who were unclear about their new ward boundaries, thereby threatening to disrupt elections. These communities were supportively engaged and their challenges addressed.

3.2 Organisational environmentThe Board delivers its mandate through four divisions. These divisions drive the performance of the Board as follows:

Operations and Research Division Programme 1

Research Unit Programme 2

Finance Division Programme 3

Corporate Services Division Programme 4

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The MDB substantially achieved its predetermined objectives for the year under review. Some of the key achievements include the technical assessment of all municipal boundaries, the successful consultative conference on demarcation and spatial transformation, the development of a new capacity assessment model, development of a regionalisation model and a framework on public participation for boundary re-determination process.

These achievements will path the way for the work to be done by the MDB over the next year, which includes the boundary re-determinations process and the assessment of municipal capacity for 81 municipalities in 2017/18.

Although there were several successes, capacity constraints contributed to targets not reached during the period under review. Vacant positions within the Corporate Services Division were only filled from the middle of the year onwards, with the appointment of an Executive Manager, Company Secretary and Manager: Human Resources. The Chief Executive Officer resigned and was replaced just before year-end. However several key managerial positions are still vacant and processes are in place to fill these within the first half of the new financial year.

The staff compliment of the Board is 44 employees, including five contract employees and one intern. Major weaknesses in the organisational structure have been highlighted by the Board on several occasions and through its Annual Reports over the past few years.

National Treasury and CoGTA was engaged to increase the MTEF allocation, in support the regionalisation model was finalised. However the allocation was not increased and the Board is committed to further engage with National Treasury, Parliamentary Portfolio Committee and MinMEC to sensitise them of our dire financial situation and the implication it has on fulfilling our legislative mandate.

The regionalisation model aims at cascading the work of the institution and operating at a regional level in order to enhance local participatory democracy by allowing the public to have access to the MDB.

3.3 Key policy developments and legislative changesThere were no key policy developments or legislative changes for the period under review.

3.4 Strategic Outcome Oriented Goals• Facilitate spatial and economic transformation through

determination and re-determination of municipal boundaries.

• Enhance participatory democracy through municipal ward delimitation.

• Assess the capacity of metropolitan, district and local municipalities.

• Strengthen research and knowledge management.• Improved public participation through enhanced

citizen engagement and communication.• Ensuring good governance and sound financial

management, supported by an effective and efficient organisation, with relevant organisational processes, systems and practices in place.

4. PERFORMANCE INFORMATION

BY PROGRAMME

4.1 Programme 1: OperationsDetermine and re-determine municipal boundaries to enhance spatial and economic integration in line with the demarcation criteria. Provide pre-and post-demarcation coordination and support to ensure efficient and sustainable implementation of the Board determinations.

This programme consists of three sub-programmes, which are:• Determinations and re-determination of municipal

boundaries• Delimitation of municipal wards• Geographic Information Systems (GIS) and database

management

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Key performance indicators, planned targets and actual achievements

Strategic Objective

Determination and redetermination of municipal boundaries

Performance Indicator

Actual achievements

2015/16

Planned target 2016/17

Actual achievement

2016/17

Deviation from planned

target to Actual achievement for

2016/17

Comment on deviations

Municipal boundaries determined and/or redetermined.

100% of requests for boundary re-determinations considered and finalised.

Municipal outer boundary determination and redetermination policy and procedure approved.

Municipal outer boundary determination and re-determination policy and standard operating procedure approved.

No deviation None required

Number of municipalities for which technical assessment of municipal boundaries are completed.

N/A Technical assessment of municipal boundaries for 213 municipalities completed.

Technical assessment of municipal boundaries for 213 municipalities completed.


Develop a framework on the application of the demarcation criteria.

N/A Draft framework document on the application of the demarcation criteria developed.

A framework on the application of the demarcation criteria not developed.

Due to delays a framework on the application of the demarcation criteria could not be finalised by the end of the period.

Plans are in place to ensure that a framework on the application of demarcation criteria be finalised by end June 2017.

Delegates in attendance during the MDB conference – 23 and 24 June 2016

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Strategic Objective Delimit wards to facilitate local government elections


Actual achievements

2015/16


Actual achievement

2016/17

Deviation from planned target to

Actual achievement for 2016/17


The evaluation report on the efficiency and effectiveness of the 2014 to 2016 ward delimitation process is finalised by end of 3rd quarter.

100% of wards for the 2016 local government elections finalised.

An evaluation on the efficiency and effectiveness of the 2014 to 2016 ward delimitation process and produce a report by end of 3rd quarter.

The evaluation report on the efficiency and effectiveness of the 2014 to 2016 ward delimitation process was finalised by end of 3rd quarter.


Improved public access to geospatial information resources in line with the information and knowledge hub objective.

N/A Development and piloting of interactive online geospatial information centre.

Interactive online geospatial information centre was developed and piloted.


Strategy to overcome areas of under performanceAs part of the 2017/2018 personal development plans, all managers in the Operations and Research Division will have to undergo training in respect of project management and leadership. This will be rolled out to all staff from this year onwards. The division has instituted a weekly and monthly performance reporting system, this will allow managers to regularly monitor progress and identify hindrances and lapses of performance well in advance to be able to employ remedial measures. Contrary to common practice in the MDB this time around all projects are allocated project managers and that forms part of their performance agreements. It is hoped that this will improve accountability and responsibility.

Changes to planned targetsNo planned targets were changed.

4.2 Programme 2: Research and Knowledge Management

Initiate research and form partnerships with existing institutions to develop and exchange spatial research data that will inform decision making on boundary matters. Coordinate and process data to produce information that will add value to the planning processes of municipalities. To manage and assess the capacity of municipalities to perform their functions. To conduct policy research to enable the MDB to render advisory services in respect of demarcation matters.

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Strategic Objective Capacity assessment of metropolitan, district and local municipalities

Performance IndicatorActual achievements

2015/16

Planned target

2016/17

Actual achievement

2016/17

Deviation from planned target

to Actual achievement for 2016/17


Develop and design a revised municipal capacity assessment model.

The development of a new capacity assessment model as delayed due to Section 22 (2) proposals from which lessons learnt emanated. The capacity assessment model could only be developed upon completion of the Section 22 (2) process.

Develop and design a new and relevant capacity assessment model.

Revised municipal capacity assessment model developed.


Strategic Objective Research and knowledge management to improve advisory services


Actual achievements

2015/16


Actual achievement 2016/17



2016/17


Conference on demarcation and spatial transformation agenda hosted.

N/A Host a conference on demarcation and spatial transformation agenda by end of 1st quarter.

Conference on demarcation and spatial transformation hosted on 23 and 24 June 2016.


A virtual information portal on demarcation established.

N/A Online information repository on demarcation established by end of 2nd quarter.

Online information repository on demarcation established by end of 2nd quarter.


Number of municipalities evaluated to determine if they still meet demarcation objectives.

N/A Evaluation studies on 180 local municipalities to determine if they still meet demarcation objectives.

Evaluation studies on 180 local municipalities to determine if they still meet demarcation objectives were not conducted.

Due to delays in conceptualising the project the evaluation studies on 180 local municipalities were not concluded by the end of the period.

The evaluation studies on 180 local municipalities will be concluded in 2017/18.

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Strategic Objective Research and knowledge management to improve advisory services


Actual achievements

2015/16


Actual achievement 2016/17



2016/17


Study on metropolitan system of governance conducted.

N/A Revised methodology on categorization of metropolitan municipalities, norms and standards developed.

Revised methodology on categorization of metropolitan municipalities, norms and standards were developed.


Complete inputs into the amendments of applicable legislation and regulations affecting the work of the MDB.

The proposed amendments to legislation were tabled to the board on 14 December 2015. The board will consider and consolidate input received from the conference.

Inputs into the amendments of applicable legislation and regulations affecting the work of the MDB by end of 3rd quarter.

Inputs into the amendments of applicable legislation and regulations affecting the work of the MDB was completed by end of 3rd quarter.


Strategy to overcome areas of under performanceAs part of the 2017/2018 personal development plans, all managers in the Operations and Research Division will have to undergo training in respect of project management and leadership. This will be rolled out to all staff from this year onwards. The division has instituted a weekly and monthly performance reporting system, this will allow managers to regularly monitor progress and identify hindrances and lapses of performance well in advance to be able to employ remedial measures. Contrary to common practice in the MDB this time around all projects are allocated project managers and that forms part of their performance agreements. It is hoped that this will improve accountability and responsibility.

The research unit is now capacitated with two researchers and the process to appoint the manager of the unit is underway. This will provide the needed stability in the division as often work in research is shared between the managers.


4.3 Programme 3: Finance and Management Accounting

Provide efficient management of financial resources to accomplish strategic goals, as well as ensure efficient, financial planning, accounting and compliance.

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Strategic Objective

Ensure good financial planning and management


Actual achievements

2015/16


Actual achievement

2016/17



2016/17


Internal audit rating

Internal audit rating: Some improvement needed obtained.

Internal audit rating 2 (audit objectives met with housekeeping matters).

An average rating of “Satisfactory with room for improvement” has been obtained.


Opinion of the Auditor General on Annual Financial Statements.

Clean audit (unqualified audit without emphasis of matter).

Clean audit (Unqualified audit with no emphasis of matter).

Unqualified audit with emphasis of matter.


Compliance with SCM prescripts

One known instance of non-compliance with National Treasury cost containment measures.

No irregular expenditure to be incurred.

Irregular expenditure was incurred.

Non compliance with SCM prescripts as irregular, fruitless and wasteful expenditure was incurred.

The irregular, fruitless and wasteful expenditure was due to poor contract management. However, the board at its meeting of 29 March 2017 condoned the irregular expenditure.

Strategic Objective

Provide and maintain a stable and secure ICT environment


Actual achievements

2015/16


Actual achievement

2016/17



2016/17


Annual % network and application systems availability (System generated reports).

N/A 92% of 8,760 hours of network and application systems availability achieved over the period.

92% of 2,190 hours of network and application systems availability for 2016/17 not achieved.

Due to new servers only being installed in January 2017, the measurement tool to monitor uptime were only effective from February 2017.

Quarterly reports on the availability of network and application systems will be produced from quarter 1 of 2017/18.

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Strategic Objective Ensure good Corporate Governance and efficient board support


Actual achievements

2015/16


Actual achievement

2016/17



2016/17


Monitoring and evaluation of legislative compliance by the organisation and board.

Four compliance reports produced.

Monitoring and evaluation of compliance with relevant legislations.

Quarterly monitoring and evaluation of compliance with relevant legislation conducted.


Monitoring and evaluation of efficacy of the board.

N/A Provide support to ensure efficient operation of the board.

Support provided to ensure efficient operation of the board.


Strategic Objective Build and maintain institutional capacity


Actual achievements

2015/16


Actual achievement

2016/17



2016/17


Percentage of positions filled as per approved organisational structure.

N/A 92% occupancy rate of funded position over the period.

84,4% occupancy rate of funded positions over the period.

Occupancy rate of funded positions over the period is 7.6% lower than the planned rate.

Recruitment processes could not be concluded in time, and will be expedited during quarter 1 of 2017/18.

Strategy to overcome areas of under performanceProgramme 3 had not control over the performance indicators especially on the achievement of clean audit and compliance with SCM prescripts, the management of this performance indicators are managed and controlled in different Programmes to ensure that all kinds of irregularities are minimised. Programme 3 can only ensure that investigations are conducted to determine liability and thereafter a condonation will be requested from the National Treasury. However, the performance indicators that could not be managed by the programme have been reviewed for the new financial year.

Changes to planned targetsNo planned targets were changed. 4.4 Programme 4: Corporate ServicesThis programme provides administrative and corporate services to the institution through four sub-programmes, which are:Legal Services and Board Secretariat;Administration and Human Resources; Stakeholder Management and Communication; andInformation Systems and Technology Management.

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Strategic Objective Build and maintain institutional capacity


Actual achievements

2015/16


Actual achievement

2016/17



2016/17


Performance management system developed and implemented.

N/A Performance management system reviewed and implemented.

The Performance management system was not reviewed.

The Performance management system was not reviewed.

The performance management system in place was implemented and 100% of qualifying employees adhered to the system.

Percentage of employees attending training as per the training and development strategy.

N/A 50% of employees attending as per the training and development strategy.

98% of employees attended various training sessions. However a training and development strategy was not developed.

A training and development strategy was not developed.

A workplace skills plan based on personal development plans to be developed for 2017/18.

Remuneration strategy developed and implemented.

N/A Develop a remuneration strategy and framework.

Remuneration strategy and framework not developed.

Remuneration strategy and framework not developed.

Regionalisation operating model developed.

N/A Regionalisation operating model developed by end 2nd quarter.

Regionalisation operating model developed by end of 2nd quarter.


Strategic Objective Enhance public participation and stakeholder engagement


Actual achievements

2015/16


Actual achievement

2016/17



2016/17


Number of public awareness and Stakeholder engagement activities.

N/A Four stakeholder engagements and communication platforms per annum.

Four stakeholder engagements and communication platforms.


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Strategic Objective Enhance public participation and stakeholder engagement


Actual achievements

2015/16


Actual achievement

2016/17



2016/17


Number of media and communication initiatives implemented.

N/A Seven media and communication initiatives implemented.

Seven media and communication initiative were implemented.


Programme on public participation in municipal boundary redetermination and ward delimitation developed.

N/A Framework for public participation in municipal boundary redetermination and ward delimitation developed.

Framework for public participation in municipal boundary redetermination and ward delimitation were developed.


Number of strategic partnerships established with local and/or international organisations.

N/A Two strategic partnerships established with local and/or international organisations.

Two strategic partnerships with local organisations established.


Strategy to overcome areas of under performancePercentage of positions filled as per approved organisational structure.a) In terms of the annual target, 92% occupancy rate

of funded position was to be achieved by Quarter Four, however, 84,4% occupancy rate was achieved with a variance of 7.6%.

b) To overcome the area of underperformance all vacant positions have been triggered and interviews have been conducted. The recruitment process is at an advanced stage and it is anticipated that by the end of Quarter One of 2017/18 financial year, the target would be achieved.

Percentage of employees attending training as per the training and development strategya) The training and development policy has been

reviewed and served at the Human Capital Committee for recommendation to the board

for approval. A WSP based employee’s needs assessments and personal development plans has been developed and is currently being consulted for submission by 31 May 2017. The training and development strategy will be developed by the end of Quarter Two of the 2017/18 financial year.

Remuneration strategy developed and implementeda) A draft remuneration strategy has been developed

and will be consulted and finalised by end of Quarter Two of the 2017/18 financial year. It forms part of the CEO’s performance agreement. The remuneration policy has been reviewed and served at the Human Capital Committee for recommendation to the board for approval.


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5. SUMMARY OF FINANCIAL INFORMATION

5.1 Revenue Collection

2016/17 2015/16

Sources of revenueEstimate

Actual collected

(Over)/Under collection

EstimateActual

collected(Over)/Under

collection

R’000 R’000 R’000 R’000 R’000 R’000

Grants and subsidies 58 220 58 220 0 45 793 45 793 0

Sale of goods 14 17 (3) 12 6 (6)

Interest received 500 717 (217) 610 463 (147)

Other Income 1 052 1 061 (9) 26 26

Total 59 786 60 015 (229) 46 415 46 288 (127)

5.2 Programme Expenditure

2016/17 2015/16

ProgrammeBudget

Actual expenditure

(Over)/Under expenditure

BudgetActual

expenditure(Over)/Under expenditure

R’000 R’000 R’000 R’000 R’000 R’000

Programme 1: Operations 10 679 10 005 674 24 181 24 876 (695)

Programme 2: Research & Knowledge management

8 025 3 010 5 015 1 373 411 962

Programme 3: Finance and Management accounting

9 043 8 917 126 6 441 6 575 (134)

Programme 4: Corporate Services 29 709 28 106 1 603 31 270 32 847 (1 577)

Total 57 456 50 038 7 418 63 265 64 709 (1 444)

Delegates from the Department of Cooperative Governance and Traditional Affairs attending the MDB conference – 23 and 24 June 2016

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S E C T I O N D G O V E R N A N C E


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GOVERNANCES E C T I O N D G O V E R N A N C E

1. INTRODUCTION

The MDB is an independent authority, established in terms of Section 155 of the Constitution of the Republic of South Africa, whose members are appointed for five years. Members of the Board, including the Chairperson and Deputy Chairperson, are appointed by the President.

The functions and general powers of the MDB are outlined in detail in the MDA of 1998. In terms of Section 155 of the Constitution, the MDA of 1998 and the MSA of 1998, the MDB is an independent authority responsible for:

- The determination and redetermination of mu-nicipal boundaries

- The delimitation of wards for local elections - The declaration of district management areas,

and the withdrawal of such declarations - The assessment of the capacity of district and

local municipalities to perform their functions - The rendering of an advisory service on matters

provided for in the applicable legislation.

In addition, Cabinet mandated the MDB to assist government departments to align their service delivery boundaries to municipal boundaries.

The MDB accepts that good corporate governance is essential to supporting the interests of its stakeholders. The Board, therefore, always conducts its business with integrity, and is committed to applying and enforcing appropriate corporate governance principles, policies and practices, in accordance with the guidelines of the King IV Report on Corporate Governance.

2. PORTFOLIO COMMITTEE

In terms of Section 39 of the MDA of 1998 the MDB is accountable to Parliament, and must annually submit to both Houses of Parliament a written report on its activities. This report must be submitted within six months of the end of the financial year and must include audited financial statements.

The MDB was invited and briefed the Portfolio Committee on Cooperative Governance and Traditional Affairs twice and the Select Committee Cooperative Governance and Traditional Affairs once during the year under review.

3. THE BOARD

Members of the Board are appointed after a selection process laid out in Section 8 of the MDA. There is no limit to the number of terms a member of the Board may serve, except that reappointment is subject to the conditions and procedures of Section 8 of the MDA. The board must be impartial and perform its function without fear, favour or prejudice.

Unlike boards of other institutions, the MDB board is tasked with dual responsibilities, namely the oversight role and the executive role in boundary demarcations. The board’s Boundaries, Powers and Functions Committee, mainly, and the Policy and Research Committee, to a lesser extent, deal with executive responsibilities. Constitution of committees and meetings held are detailed on pages 44 to 50.

Board CharterThe board is the focal point of the MDB’s corporate governance system and remains ultimately accountable and responsible for its performance and affairs. The board is, therefore, committed to upholding good corporate governance in all of its business dealings with shareholders, regulatory authorities and other stakeholders.

To this end, it has adopted the Board Charter to regulate how business is conducted in accordance with the principles of good corporate governance. The Board Charter sets out the specific responsibilities of board members collectively, and their individual roles. The board recognises that substance must prevail over form and, in applying the principles in the charter, it will be guided by the King lV Report and established standards of best governance practice.

The Board Charter is aligned with the King IV Report and addresses the role of the board, meetings, committees of the board, terms of reference of the committees of the board and code of ethics.

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Composition of the BoardThe board assumed office on 20 February 2014 and will remain in office until 19 February 2019. To improve corporate

governance, the board, at its meeting on 08 December 2016, resolved to reconstitute its committees. The new Committees came into operation on 01 January 2017.

The membership of its nine members, as follows:

Name Designation

Date

Other committees

Number of board meetings attended

AppointedResigned/

term ended

Jane J Thupana Board Chairperson

20 February 2014

- Executive Committee

Newly constituted committees:Governance, Social and Ethics Committee.

11

Ashraf M Adam Deputy Board Chairperson

20 February 2014

- Executive Committee

Newly constituted committees:Governance, Social and Ethics Committee.

11

Isobel E Konyn Board Member

20 February 2014

- Executive Committee;Remuneration and Human Capital Committee;Policy and Research Committee.

Newly constituted committees:Audit and Risk Committee;Knowledge Management and ICT Committee.

11

Lebina D Tsotetsi Board Member

20 February 2014

- Audit and Risk Committee; Boundaries, Powers and Functions Committee.

Newly constituted committees:Human Capital Committee;Public Participation Committee.

12

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Name Designation

Date

Other committees


AppointedResigned/

term ended

Nompumelelo ZH Mpofu

Board Member

20 February 2014

- Executive Committee;Remuneration and Human Capital Committee;Boundaries, Powers and Functions Committee; Policy and Research Committee.

Newly constituted committees:Governance, Social and Ethics Committee;Knowledge Management and ICT Committee;Public Participation Committee.

10

Simphiwe Dzengwa

Board Member

20 February 2014

- Executive Committee;Audit and Risk Committee; Remuneration and Human Capital Committee;Boundaries, Powers and Functions Committee.

Newly constituted committees:Governance, Social and Ethics Committee;Audit and Risk Committee;Boundaries, Powers and Functions Committee.

11

Shivon D Wiggins Board Member

20 February 2014

- Remuneration and Human Capital Committee;Boundaries, Powers and Functions Committee;Policy and Research Committee.

Newly constituted committees:Governance, Social and Ethics Committee;Human Capital Committee;Boundaries, Powers and Functions Committee.

11

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Name Designation

Date

Other committees


AppointedResigned/

term ended

Maruping M Wildebees

Board Member

20 February 2014

- Audit and Risk Committee; Remuneration and Human Capital Committee.

Newly constituted committees:Boundaries, Powers and Functions Committee;Knowledge Management and ICT Committee.

12

Mmatsie S Mooki Board Member

20 February 2014

- Audit and Risk Committee; Boundaries, Powers and Functions Committee;Policy and Research Committee.

Newly constituted committees:Governance, Social and Ethics Committee;Audit and Risk Committee;Public Participation Committee.

11

Committees

CommitteeNo of

meetings held

No of members

Name of members

Board 12 9 Jane J Thupana;

Ashraf M Adam;

Isobel E Konyn;

Lebina D Tsotetsi;

Nompumelelo ZH Mpofu;

Simphiwe Dzengwa;

Shivon D Wiggins;

Maruping M Wildebees;

Mmatsie S Mooki

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CommitteeNo of

meetings held

No of members

Name of members

Executive Committee 5 5 Jane M Thupana;

Ashraf M Adam;

Isobel E Konyn;


Simphiwe Dzengwa

Audit and Risk Committee 6 5 Dawood Coovadia (Independent);

Lebina D Tsotetsi;

Simphiwe Dzengwa;


Mmatsie S Mooki.

Remuneration and Human Capital Committee

8 5 Nompumelelo ZH Mpofu;

Isobel E Konyn;

Simphiwe Dzengwa;

Shivon D Wiggins;


Boundaries, Powers and Functions Committee


Lebina D Tsotetsi;

Simphiwe Dzengwa;

Shivon D Wiggins;

Mmatsie S Mooki.

Policy and Research Committee 2 4 Isobel E Konyn;


Shivon D Wiggins;

Mmatsie S Mooki.

Joint Boundaries, Powers and Functions Committee and Policy and Research Committee*


Isobel E Konyn;

Lebina D Tsotetsi;

Simphiwe Dzengwa;

Shivon D Wiggins;


Mmatsie S Mooki.

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The new committee structure as follows:

Committee No of meetings held No of members Name of members

Governance, Social and Ethics Committee

1 6 Jane J Thupana;

Ashraf M Adam;


Simphiwe Dzengwa;

Shivon D Wiggins;

Mmatsie S Mooki.

Human Capital Committee 1 2 Shivon D Wiggins;

Lebina D Tsotetsi.

Audit and Risk Committee 1 4 Dawood Coovadia (Independent);

Isobel E Konyn;

Simphiwe Dzengwa;

Mmatsie S Mooki.


1 3 Simphiwe Dzengwa;

Shivon D Wiggins;

Maruping M Wildebees.

Knowledge Management and ICT Committee


Isobel E Konyn;

Maruping M Wildebees.

Public Participation Committee 1 3 Mmatsie S Mooki;

Lebina D Tsotetsi;

Nompumelelo ZH Mpofu.

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Attendance of meetings

NameBoard

Executive Committee

Audit and Risk

Committee

Remuneration and Human

Capital Committee


Policy and Research

Committee

Joint Boundaries, Powers and Functions Committee

and Policy and Research

Committee

M A M A M A M A M A M A M A

Jane J Thupana 12 11 5 3 - - - - - - - - - -

Ashraf M Adam 12 11 5 4 - - - - - - 2 1 2 2

Isobel E Konyn 12 11 5 3 - - 9 9 - - 2 2 2 1

Lebina D Tsotetsi 12 12 - - 6 6 - - 2 2 2 - 2 1

Nompumelelo ZH Mpofu

12 10 5 5 - - 9 9 - - 2 - 2 2

Simphiwe Dzengwa 12 11 5 3 6 6 9 9 2 2 2 2 2 2

Shivon D Wiggins 12 11 - - 6 6 9 9 - - 2 2 2 1

Maruping M Wildebees 12 12 - - 6 6 9 9 2 - 2 - 2 2

Mmatsie S Mooki 12 11 - - 6 5 - - 2 - 2 2 2 2

Legend:

M = Meetings convened

A = Attendance

Newly constituted committees

Name

Governance, Social and

Ethics

Human Capital

Committee

Audit and Risk

Committee


Knowledge Management

and ICT

Public ParticipationCommittee

M A M A M A M A M A M A

Jane J Thupana 1 1 - - - - - - - - - -

Ashraf M Adam 1 1 1 1 - - - - - - - -

Isobel E Konyn - - - - 1 1 1 1 1 1 - -

Lebina D Tsotetsi - - 1 1 - - - - - - 1 1

Nompumelelo ZH Mpofu 1 1 - - - - - - 1 1 1 1

Simphiwe Dzengwa 1 1 - - 1 1 1 1 - - - -

Shivon D Wiggins 1 1 1 1 - - 1 1 - - - -

Maruping M Wildebees - - - - - - 1 1 1 1 - -

Mmatsie S Mooki 1 1 - - 1 1 - - - - 1 1

Legend:

M = Meetings convened

A = Attendance

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Remuneration of Board membersBoard members are remunerated for attendance of Board meetings, Board sub-committee meetings, and workshops and other assignments.

Name Remuneration Other allowancesOther

reimbursementsTotal

Jane J Thupana 1 468 650 - - 1 468 650

Ashraf M Adam 335 172 6 000 - 341 172

Isobel E Konyn 289 472 6 000 - 295 472

Lebina D Tsotetsi 266 565 6 000 - 272 565

Nompumelelo ZH Mpofu 240 969 6 000 - 246 969

Simphiwe Dzengwa 392 914 6 000 - 398 914

Shivon D Wiggins 345 465 6 000 - 351 465

Maruping M Wildebees 269 017 6 000 - 275 017

Mmatsie S Mooki 282 964 6 000 - 288 964

4. RISK MANAGEMENT

In line with best practice, the MDB has instituted a robust enterprise risk management (ERM) process, founded on a framework that is organisationally embedded, supported and assured, and continuously reviewed. ERM is the application of risk management throughout the MDB rather than only in selected business areas or disciplines. Accordingly, risk management at the MDB is decentralised, with every division being responsible for risk management.

The MDB’s Risk Management Framework, which lays out guiding principles for the management of risk, comprises the totality of all the structures, policies, strategies and procedures within that deal with risk management at strategic or operational level.

A formal risk assessment exercise is undertaken annually to identify risks that may prevent the MDB from achieving its goals and objectives. The exercise enables the MDB to formulate appropriate risk strategies and action plans to mitigate and address risks. Quarterly risk assessments are also performed as part of the quarterly performance monitoring process.

5. INTERNAL CONTROL

Internal control systems were introduced to provide management and the Board with comfort regarding the financial position of the MDB, safeguarding of assets (including information) and compliance with related laws and regulations. Internal auditors monitor the functioning of the internal control systems and make recommendations to management and to the Audit and Risk Committee of the Board.

The AGSA considered the internal control systems as part of its audit and identified some deficiencies. All internal control systems do, however, have inherent shortcomings, including the possibility of human error and the evasion or flouting of control measures. Collusion by individuals is a challenge to any internal control system. Even the best internal control system may provide only partial assurance.

The MDB’s internal control systems were designed to provide reasonable, and not absolute, assurance of the integrity and reliability of the financial statements, to safeguard, verify and maintain accountability of its assets and to detect fraud, potential liability, loss and material misstatement, while complying with applicable laws and regulations.

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The internal audit function is an independent appraisal mechanism that evaluates the MDB’s procedures and systems (including internal control, disclosure procedures and information systems), ensuring that these are functioning effectively. The MDB has an outsourced internal audit function. During the year under review, the internal audit function carried out its audits in terms of an approved internal audit plan.

7. COMPLIANCE WITH LAWS AND REGULATIONS

The following legislations are applicable:Local Government: Municipal Demarcation Act 27 of 1998Local Government: Municipal Structures Act 117 of 1998Local Government: Municipal Systems Act 32 of 2000Generally Recognised Accepted PracticeIncome Tax Act 58 of 1962Value-Added Tax Act 89 of 1991Public Finance Management Act 1 of1999, as amendedTreasury Regulations, March 2005, issued in terms of the PFMAPreferential Procurement Policy Framework Act 5 of 2000All practice notes on Supply Chain Management ActEmployment Equity Act 55 of 1998

Basic Conditions of Employment Act 75 of 1997Labour Relations Act 88 of 1998Promotion of Administrative Justice Act 1 of 2000Promotion of Access to Information Act 2 of 2000

8. FRAUD AND CORRUPTION

The MDB is committed to combatting all forms of fraud and corruption and to remaining proactive in the fight against fraud and other white-collar crime. During the year, the Fraud Prevention Policy and the Fraud Prevention Plan were reviewed.

The Fraud Prevention Policy provides for a system of internal controls to prevent and detect fraud and corruption. The system of internal controls includes , creating awareness, policies and procedures, segregation of duties, internal audit, ongoing risk assessment and mechanisms for reporting and monitoring allegations.

The MDB, through the Audit and Risk Committee, monitors and reviews business risk relating to fraud and corruption. Moreover, the MDB makes use of the Public Service Commission’s National Anti-Corruption Hotline as a reporting channel.

NameInternal or external

If Internal, position in the public entity

AppointedResigned/

Term ended

Number of meetings attended

Dawood Coovadia External Independent 01 September 2014 7

Lebina D Tsotetsi External Board member 20 February 2014 31 December 2016 6

Simphiwe Dzengwa External Board member 20 February 2014 7

Maruping M Wildebees External Board member 20 February 2014 31 December 2016 6

Mmatsie S Mooki External Board member 20 February 2014 6

Isobel E Konyn* External Board member 01 January 2017 1*IE Konyn became a member of the Audit and Risk Committee when the board reconstituted its committees from 01 January 2017.

6. INTERNAL AUDIT AND AUDIT AND RISK COMMITTEE

The Chairperson of the Audit and Risk Committee is Dawood Coovadia, an external/independent member and a practising accountant and auditor. The table below discloses relevant information on the Audit and Risk Committee members:

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9. MINIMISING CONFLICT OF INTEREST

The MDB has developed procedures to prevent and minimise conflict of interest. Board members and employees are required to disclose annually their financial interests and those of close family members. Such disclosures ensure that there is no conflict of interest when decisions are made by any of the Board’s governance structure.

Furthermore, meeting procedures provide for recusal of a member or an employee if there is a perceived or actual conflict of interest. In addition, board members also complete the declaration of interest register in all Board and committee meetings.

10. BOARD CHARTER

The board has in place an approved Board Charter that addresses, among others, the role of the board, terms of reference of board committees, governance of board meetings and communications.

Included in the Board Charter is a code of ethics for board members that is based on principles of honesty and integrity. It guides board members on aspects such as the protection of organisational assets and information, and conflicts of interest.

11. BOARD EVALUATION

A self-assessment of the board and its committees was conducted for 2016/17, focusing on overall board strategic

perception, decision-making, collective leadership, analytical understanding, communication, integration and quality of board support.

While the average score was way above average (industry norm), a central area was highlighted that required urgent intervention ie deficient secretariat. Plans are in place to capacitate the unit to improve Board efficiency.

12. CODE OF CONDUCT

The MDB has in place an approved code of corporate practice conduct based on the principles of honesty and integrity. It guides board members, management and employees on ethical conduct individually and in their dealings with others, including the legislature, the public, fellow employees and other organs of state.

13. COMPANY SECRETARY

The Company Secretary is appointed by the board and is tasked with supporting the board to maximise its efficiency and to ensure that it conducts its business according to good corporate governance and practice.

The Company Secretary is located within the Office of the Chairperson and is responsible for the operations of the board, including secretarial and administrative support. In compliance with good corporate governance, the Company Secretary also facilitates self-assessment of the board and its committees, as well as financial disclosures by the board. The responsibilities are strategic and incorporate all matters pertaining to corporate governance and compliance with King IV Report.

Staff at the MDB came together to lend a hand on Mandela Day 2016 and also took the opportunity to educate Grade 12 learners of Olivenhoutbosch School about the work of the Board

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We are pleased to present our report for the financial year ended 31 March 2017.

The Audit and Risk Committee is an independent sub-committee of the Board. Further duties are delegated to the Audit and Risk Committee by the board and these activities and duties were effectively discharged during the year. This report includes both these sets of duties and responsibilities.

1. AUDIT AND RISK COMMITTEE CHARTER

The Audit and Risk Committee has adopted a formal Audit and Risk Committee Charter that has been approved by the board. The committee has conducted its affairs in compliance with its charter and has discharged its responsibilities contained therein. The Audit and Risk Committee Charter is available on request.

2. AUDIT AND RISK COMMITTEE MEMBERS, MEETING ATTENDANCE AND ASSESSMENT

The committee met seven times during the 2016/17 financial year, in line with the approved Audit and Risk Committee Charter, and consists of the members listed below:

Member Term of officeNumber of meetings attended

Dawood Coovadia

Appointed 01 September 2014.

7

Lebina D Tsotetsi

Appointed 20 February 2014,

Concluded 31 December 2016.

6

Simphiwe Dzengwa

Appointed 20 February 2014.

7


Appointed 20 February 2014,

Concluded 31 December 2016.

6

Member Term of officeNumber of meetings attended

Mmatsie S Mooki

Appointed 20 February 2014.

6

Isobel E Konyn*

Appointed 01 January 2017.

1

*IE Konyn became a member of the Audit and Risk Committee when the Board reconstituted its committees from 01 January 2017.

The effectiveness of the Audit and Risk Committee and its individual members are assessed annually.

3. ROLE AND RESPONSIBILITIES

3.1. Statutory dutiesThe committee reports that it has operated and performed its oversight responsibilities in compliance with Section 51(1)(a) of the PFMA and Treasury Regulations 27.1.8. The Audit and Risk Committee is an advisory committee of the organisation, operating independently and objectively.

Evaluation of Annual Financial Statements The Audit and Risk Committee has:• reviewed and discussed with the Auditor-General and

the Accounting Authority the audited annual financial statements to be included in the Annual Report;

• reviewed the Auditor-General’s audit report, the management letter and management responses thereto, and

• reviewed accounting policies and practices.

The committee concurs and accepts the conclusions of the Auditor-General on the Annual Financial Statements and is of the opinion that the audited financial statements be accepted. The committee agrees that the adoption of the going-concern premise is appropriate in preparing the Annual Financial Statements.

The Audit and Risk Committee has satisfied itself that the external auditor, AGSA, was independent of the organisation, which includes consideration to the extent of other work undertaken by the AGSA and compliance with criteria relating to independence or conflicts of interest as prescribed by the Independent Regulatory Board for Auditors.

AUDIT AND RISK COMMITTEE REPORT

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The committee, in consultation with the Accounting Officer, agreed to the engagement letter, terms and strategic audit plan and recommended the budgeted audit fees for the 2016/17 financial year to the Accounting Officer. The committee confirms that there were no non-audit services provided by the external auditor for the period under review.

Effectiveness of internal controlsThe Audit and Risk Committee has overseen a process by which internal audit performed a written assessment of the effectiveness of the institution’s system of internal control and risk management. This written assessment by internal audit formed the basis for the Audit and Risk Committee’s recommendation in this regard to the Board.

In line with the PFMA and Treasury Regulations, internal audit provides the committee and management with the assurance that internal controls are appropriate and effective but require some improvement. This is achieved by means of the risk management process, as well as the identification of corrective actions and suggested enhancements to controls and processes.

A formal risk assessment was undertaken by the institution during the financial year. Internal audit used this data to prepare the three-year rolling strategic plan and the annual audit plan. Management is committed to addressing the issues raised by the internal and external auditors, and this is reviewed by the committee during its meetings.

Accordingly, the committee can report that the system of internal control over financial reporting for the period under review was efficient and effective, but required some improvement.

WhistleblowingThe Audit and Risk Committee receives and deals with any concerns or complaints, whether from within or outside the organisation. During the year, there were no matters that came to the attention of the committee.

3.2. Duties assigned by the boardIn addition to the statutory duties of the Audit and Risk Committee, as reported above, the board has determined further functions for the Audit and Risk Committee to perform, as set out in the Audit and Risk Committee Charter. These functions include the following:

Corporate governanceThe Audit and Risk Committee is of the opinion that the institution complies with sound principles of corporate governance.

Governance of riskThe Audit and Risk Committee fulfils an oversight role regarding risk management process within the institution. The committee monitored the significant risks faced by institution and is satisfied that these risks were managed effectively. The organisation implements a risk management strategy, which includes a fraud prevention plan.

In year management and quarterly reports in terms of the PFMA The Audit and Risk Committee is satisfied that, during the year, the content and quality of quarterly reports prepared and issued by management were proper and in compliance with the PFMA and NT frameworks.

Internal auditThe Audit and Risk Committee is responsible for ensuring that the organisation’s internal audit function is independent and has the necessary resources, standing and authority within the institution to enable it to discharge its duties. Furthermore, the committee oversees cooperation between the internal and external auditors, and serves as a link between the Board and these functions.

The committee considered and approved the internal audit charter and is satisfied that the internal audit plan was executed accordingly.

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The internal audit function reports centrally, with responsibility for reviewing and providing assurance on the adequacy of the internal control environment across all of the organisation’s operations. The internal auditors are responsible for regularly reporting to the Chairperson of the Audit and Risk Committee the findings of the internal audit work against the agreed internal audit plan. The internal auditors have direct access to the Audit and Risk Committee, primarily through its Chairperson.

The committee is satisfied that the internal audit function is operating effectively and that it has addressed the risks pertinent to the institution in its audits. The committee

believes that the internal audit has contributed to the improvement of internal controls within the institution.

On behalf of the Audit and Risk Committee:

Mr Dawood Coovadia

Chairperson: Audit And Risk CommitteeDate: 31 July 2017

L to R: Speaker of Midvaal Municipality, Mr Freddie Peters, Deputy Speaker of the National Assembly, Hon Lechesa Tsenoli, MDB board member, Mr Maruping Wildebees and MDB COO, Mr Aluwani Ramagadza at the MDB conference – 23 and 24 June 2016

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S E C T I O N E H U M A N R E S O U R C E M A N A G E M E N T


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HUMAN RESOURCE MANAGEMENTS E C T I O N E H U M A N R E S O U R C E M A N A G E M E N T

1. INTRODUCTION

The organisational structure is not sufficiently capacitated to deliver on the mandate of the MDB. The structure has limitations in terms of establishing a full-scale research capacity to conduct research work and municipal capacity assessments, and establishing a regional footprint to enhance stakeholder engagement, public participation, education and awareness in demarcation processes that are key in the delivery of the MDB’s mandate. The current organisational structure has no middle management between senior management and other staff levels, which hampers progression of employees within the organisation. The structure hinders employee growth, which makes the motivation and retention of employees very difficult.

During the period under review, the MDB had a staff complement of 44 filled posts, with five positions vacant. Staff turnover was much lower in this financial year compared to the previous year. The organisation had been faced with various capacity challenges, having had numerous managerial positions vacant. The CEO took office during the period under review. The Human Resources Unit was also capacitated, which minimised use of external services

providers. The recruitment process for all key positions has been concluded, which will reduce the vacancy rate and capacitate the MDB to achieve its mandate.

Human resources priorities for the year under review and the impact of these priorities:• Review organisational structure and identify additional

funds to address structural misalignment. • Optimal use of existing personnel through shared

resources interventions. • Develop a remuneration strategy to support the human

capital aspect in the delivery of the organisation’s objectives.

• Create a sound employee relations and open communication channels by disseminating information to all employees in a structured and timely manner.

• Create a conducive environment for employee engagements to achieve the organisation’s strategic objectives.

• Review human resources policies and implement the human resources plan.

• Promote employee wellness. • Implement training interventions in line with personal

development plans and the WSP.

2. HUMAN RESOURCES OVERSIGHT STATISTICS

Personnel cost by programme

ProgrammeTotal

expenditurePersonnel

expenditure

Personnel expenditure

as a % of total expenditure

No of employees

Average personnel cost per employee

R’000 R’000 R’000

Operations 10 028 072 8 016 954 80% 16 501 060

Research and Knowledge Management 2 950 684 391 143 13% 2 195 572

Finance and Management Accounting 8 928 744 4 994 908 56% 11 454 083

Corporate Services 28 054 339 8 998 380 32% 15 599 892

TOTAL 49 961 839 22 401 385 45% 44 509 122

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Personnel cost by salary band

LevelPersonnel

expenditure

% of personnel expenditure to total personnel

costNo of employees

Average personnel cost per employee

R’000 R’000 R’000

Top management 5 975791 27% 5 1 195 158

Senior management 3 701 078 17% 4 925 270

Professionally qualified 8 173 561 36% 17 480 798

Skilled 3 703 507 17% 12 308 626

Subtotal permanent employees 21 553 938 96% 38 567 209

Fixed-term contract employees 770 711 3% 5 154 142

Internship programme 76 735 0% 1 76 735

Subtotal contract employees 847 447 4% 6 141 241

GRAND TOTAL 22 401 385 100% 44 509 122

Performance rewards

LevelPerformance

rewardPersonnel

expenditure% of performance reward to

total personnel cost

R’000 R’000 R’000

Top management - 5 975 791 -

Senior management - 3 701 078 -

Professionally qualified 123 702 8 173 561 2%

Skilled 72 460 3 703 507 2%

Subtotal permanent employees 196 161 21 553 938 1%

Fixed-term contract employees - 770 711 -

Internship programme - 76 735 -

Subtotal contract employees - 847 447 -

GRAND TOTAL 196 161 22 401 385 1%

Performance management was conducted for filled management positions - one top manager and two senior managers qualified. Fixed-term contract employees and employees on an internship do not qualify for performance rewards as per the Performance Management Policy.

Training costs

DivisionPersonnel

expenditureTraining

expenditure

Training expenditure as a % of

personnel cost

No of employees

trained

Average training cost

per employee

R’000 R’000 R’000

Operations 8 016 954 56 165 0.7% 4 14 041

Research and Knowledge Management 391 143 - - - -

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DivisionPersonnel

expenditureTraining

expenditure

Training expenditure as a % of

personnel cost

No of employees

trained

Average training cost

per employee

R’000 R’000 R’000

Finance and Management Accounting 4 994 908 25 052 0.5% 4 6 263

Corporate Services 8 998 380 - - - -

TOTAL 22 401 385 81 217 1.20% 8 20 304

Employment and vacancies

Programme2015/16

no of employees

2015/16 approved posts

2016/17

no of employees

2016/17 vacancies

% of vacancies

Operations 12 14 13 - 7%

Research and Knowledge Management - 3 2 1 33%

Finance and Management Accounting 8 10 10 0 0%

Corporate Services 12 16 13 4 19%

TOTAL 32 43 38 5 12%

Level2015/16

no of employees

2015/16 approved posts

2016/17no of

employees

2016/17 vacancies

% of vacancies

Top management 4 5 5 - -

Senior management 4 7 4 3 43%

Professionally qualified 12 17 17 - -

Skilled 11 14 12 2 14%

Subtotal permanent employees 31 43 38 5 12%

Fixed-term contract employees 6

5

Internship programme 5 1

Subtotal contract employees 11 6

GRAND TOTAL 42 43 44 5

The positions for senior management have been vacant for approximately nine months and were re-advertised as no suitably qualified internal or external candidates could be found. Interviews are set to take place during the first quarter of 2017/18. Competitive remuneration packages and performance rewards have been structured to attract and retain staff.

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Employment changes

LevelEmployment

at beginning of period

Appointments TerminationsConversion of

contractsEmployment at

end of the period

Top management 4 2 1 - 5

Senior management 4 2 2 - 4

Professionally qualified 9 2 - 6 17

Skilled 8 1 - 3 12

Subtotal permanent employees 25 7 3 9 38

Fixed-term contract employees 12 2* 1 8 5

Internship programme 5 - 1 3* 1

Subtotal contract employees 17 - 2 - 6

GRAND TOTAL 42 7 5 44

*Three incumbents taking part in the Internship Programme were offered fixed-term contracts at the end of the Internship. Following a recruitment and selection process, one was offered and accepted a permanent position. Two remain on fixed-term contracts.

Six employees whose positions were approved and funded in the organisational structure were converted from fixed term to permanent positions. Following a recruitment and selection process, two employees with fixed-term contracts were offered and accepted permanent positions. One employee on a fixed-term contract resigned during the period.

Reasons for staff leaving

Reason Number% of total number of staff

leaving

Death - -

Resignation 5 11%

Dismissal - -

Retirement - -

Ill health - -

Expiry of contract - -

Other: Movement within the organisation - -

TOTAL 5 11%

Staff members usually leave due to external opportunities and recruitment procedures are put in place to fill vacancies to ensure full capacity.

Labour Relations: Misconduct and disciplinary action

Nature of disciplinary action Number

Verbal warning -

Written warning 2

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Nature of disciplinary action Number

Final written warning -

Precautionary suspensions -

Dismissal -

Equity target and employment equity status

Level

MALE

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top management 2 - - - 1 - - -

Senior management 3 - - - 1 - - -

Professional qualified 8 - - - 1 - 2 -

Skilled 4 - - - - - -

TOTAL 17 - - - 3 - 2 -

Level

FEMALE

African Coloured Indian White

Current Target Current Target Current Target Current Target

Top management 2 - - - - - - -

Senior management - - 1 - - - 1

Professional qualified 5 - - - - - 1 -

Skilled 11 - 1 - 1 - 1 -

TOTAL 18 - 1 1 1 - 2 1

The Board has no female representation at senior management level. Coloureds and whites are under-represented at top and senior management. In filling vacancies, a concerted effort must be made to address the inequality.

Level

Staff with disabilities

Male Female

Current Target Current Target

Top management - - - -

Senior management - - - -

Professional qualified - - - 1

Skilled - 1 - -

TOTAL - 1 - 1

There currently no employees with disability on the MDB organisational structure. As positions become vacant, the MDB will identify opportunities for people with disabilities.

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S E C T I O N F F I N A N C I A L I N F O R M A T I O N


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FINANCIAL INFORMATIONS E C T I O N F F I N A N C I A L I N F O R M A T I O N

1. STATEMENT OF RESPONSIBILITY

Statement of Responsibility for the Annual Financial Statements for the year ended 31 March 2017

The Accounting Authority is responsible for the preparation of the MDB’s Annual Financial Statements and for the judgments made in this information.

The Accounting Authority is responsible for establishing and implementing a system of internal control designed

to provide reasonable assurance as to the integrity and reliability of the Annual Financial Statements.

In my opinion, the financial statements fairly reflect the operations of the constitutional entity for the financial year ended 31 March 2017.

The external auditors are engaged to express an independent opinion of the Annual Financial Statements of the MDB.

The Annual Financial Statements of the MDB set out in Part G have been approved.

2. REPORT OF THE CHIEF EXECUTIVE OFFICER

General reviewThe MDB has worked consistently towards determining municipal boundaries and delimitation of wards for local government. However, in recent years, its financial health has deteriorated due to high demands for a regional presence and stronger public participation.

Key strategic goalsIn line with the strategy for 2015/16 to 2019/20, the board focused on the following key strategic goals during the 2016/17 financial year: 1. Good governance and sound financial management

capability2. Quality demarcation processes and outcomes3. Assessment of the capacity of municipalities4. Research and knowledge management capability,

and

5. Public participation and outreach initiatives.

General financial reviewTotal revenue for the year under review amounted to R60 015 million, compared to R46 288 million in 2015/16, representing a year-on-year increase of 29.7%, which is due to additional funding obtained from CoGTA. The government grant comprises 99% of the MDB’s total revenue.

Total expenditure for the year under review amounted to R50 023 million, compared to R64 737 million in 2015/16, representing a year-on-year decrease of 7.6%. This resulted in a surplus of R9 925 million. This surplus was due mainly to additional funding acquired from CoGTA for determination and/or redetermination of municipal boundaries of dysfunctional and non-viable municipalities as well as ward delimitations that were implemented in 2015/16 financial year. The aforementioned task was requested by the Minister of Cooperative Governance and Traditional Affairs and was not budgeted for.

Mr Chaka Moloto

Acting Chief Financial Officer

Municipal Demarcation Board

Date: 31 July 2017

Mr Muthotho Sigidi

Chief Executive Officer


Date: 31 July 2017

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Spending trendsThe table below presents year on year change in expenditure and income trends:

2013 2014 2015 2016 2017

R'000 % R'000 % R'000 % R'000 % R’000 %

Income 41 324 6% 43 130 4% 45 172 5% 46 288 2% 60 015 30%

Voted funds 40 397 5% 42 182 4% 44 230 5% 45 793 4% 58 220 27%

Other Income 927 45% 948 2% 942 -1% 495 -49% 1 830 270%

Expenditure 34 351 -4% 44 712 30% 52 424 17% 64 737 19% 50 031 -17%

Board members Remuneration 2 606 29% 2 433 (7%) 2 670 10% 3 182 19% 2 755 (13%)

Salaries 13 084 8% 17 991 38% 20 082 12% 20 877 4% 22 668 9%

Project expenses 3 280 (34%) 3 759 15% 2 620 (30%) 3 526 35% 3 138 (12%)

Lease payment 2 311 - 2 311 - 3 662 58% 3 830 5% 3 842 -

Publications 2 173 9% 2 806 29% 236 (92%) 13 072 5439% 83 -99%

Audit 819 3% 923 13% 1 075 16% 750 (30%) 1 560 108%

Travel cost 2 738 2% 3 538 29% 4 451 26% 2 357 (47%) 1 193 (49%)

Other operating expenses 7 340 (18%) 10 951 49% 17 628 61% 17 167 -3% 14 792 (14%)

Surplus/deficit for the period 6 973 (1 582) (7 252) (18 449) 9 984

Capacity constraints and challengesThe MDB has experienced financial limitations since inception, which impedes it ability to normalise its current establishment towards the ideal structure for regionalisation strategy. Notwithstanding a limited budget allocation, the MDB continues to experience capacity constraints and remains critically dependent on its key staff. Not only is suitable research expertise difficult to retain, but the specialist technical talent required is difficult to recruit. The MDB remains under-capacitated and in need of a significant number of research and GIS experienced personnel. The attraction of talent, and its management and retention remain priorities of the MDB.

New activitiesThe MDB’s future plans are included in the revised 2015-2020 Strategic Plan and 2017/18 APP and are aligned with the government priorities.

Request for rollover of fundsIn terms of Section 53(3) of the PFMA, 1999, the MDB submitted a request to NT that R9 464 million in 2016/17 funds for committed projects that could not be completed be carried over to the 2017/18 financial year. This was approved.The funds are earmarked for the following:1. Provision of adequate public and stakeholder

engagement on the redetermination of municipal boundaries in areas such as Vuwani;

2. Outsourcing of a service to conduct capacity assessment and develop a tool to ensure that adequate human capital is appointed to address failures to comply with legislative requirements, and

3. Thorough research from valid and accurate GIS data such as satellite imagery is sourced from the South African National Space Agency (SANSA) to support demarcation decisions.

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Supply chain management (SCM)

Concluded unsolicited bid proposal for the year under reviewNone

SCM processes and systems in placeThe institution has a Supply Chain Management Unit located in the Finance Division, in accordance with the approved organisational structure.

Procurement activities are supported by three committees - the Bid Specification Committee (constituted as-and-

when required), the Bid Evaluation Committee and the Bid Adjudication Committee. An Annual Procurement Plan, as required by NT, guides the activities of the unit. The procurement policy is reviewed annually to ensure that it is aligned to NT’s SCM prescripts.

Challenges experienced and resolvedThe MDB incurred irregular expenditure of R3 192 000, which is disclosed in note 28 to the Annual Financial Statements. Fruitless and wasteful expenditure of R19 000 was identified during the year and is disclosed in note 27 to the Annual Financial Statements.

Matters raised by the Auditor-General in

2015/16Management action implemented

Status (resolved, partially resolved

or unresolved)

1. Predetermined objectives: Indicators and targets not consistent

The 2016/17 APP was developed and reviewed by management in terms of NT framework. It was also reviewed by CoGTA, AGSA and internal audit. Management is confident that the 2016/17 APP is compliant with NT frameworks.

Resolved

2. Predetermined objectives: Indicators not well defined nor verifiable

The 2016/17 APP was developed and reviewed by management in terms of NT frameworks. It was also reviewed by CoGTA, AGSA and internal audit. Management is confident that the 2016/17 APP is compliant with NT frameworks.

Resolved

3. Predetermined objectives: Targets not specific nor measurable


Resolved

4. Predetermined objectives: Reliability


The reliability of performance information will be reviewed in the next audit cycle.

Resolved

5. Deviation approved after expense incurred

Prior written approval will be obtained on all justifiable deviations. Partially resolved

6. Payments not made within 30 days

Compliance with Treasury regulations 8.1.1 and 8.2.3 will be evaluated in the next audit cycle.

Partially resolved

7. Human Resources Plan not approved

Human Resources Plan has been compiled for 2017/18. Partially resolved

8. Vacant posts Vacancies have been filled - occupancy rate of 84.4% at the end of the period.

Resolved

9. Policies and procedures not reviewed regularly

Policies and procedures have been reviewed. Resolved

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Plans for the future to address financial challengesThe MDB developed a funding strategy detailing its financial constraints, which was submitted to NT and the Portfolio Committee to secure additional funding to enhance the organisation’s financial sustainability.

Events after the reporting dateEvents after reporting date are events, either favourable or unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. No events took place after the date of approval of the MDB Annual Financial Statements.

Economic viabilityThe MDB remains resilient despite a limited budget allocation, and is financially viable to carry out its mandate.

AcknowledgementsGenerosity and oversight support of board members have enabled the MDB to achieve its mandate for the determination of municipal boundaries. Staff members have continued to play an integral role in the success of the MDB. The interest, contribution and support of all staff members, who, despite a demanding work schedule and competing priorities, have consistently acted in the best interest of the Board, is highly appreciated. Stakeholders, too, particularly local government continue to contribute their support generously.

Mr Muthotho Sigidi

Chief Executive Officer


31 July 2017

L-R: Minister of Cooperative Governance and Traditional Affairs, Hon David Van Rooyen, MDB Chairperson, Ms Jane Thupana and MDB board member, Mr Lebina Tsotetsi at the MDB conference – 23 and 24 June 2016

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3. REPORT OF THE EXTERNAL AUDITOR

REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE MUNICIPAL DEMARCATION BOARD

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

1. I have audited the financial statements of the Municipal Demarcation Board set out on pages 73 to 98, which comprise the statement of financial position as at 31 March 2017, and the statement of financial performance, statement of changes in net assets, cash flow statement and the statement of comparison of budget and actual amounts for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies.

2. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Municipal Demarcation Board as at 31 March 2017, and its financial performance and cash flows for the year then ended in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA).

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

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

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

Emphasis of matter

6. I draw attention to the matter below. My opinion is not modified in respect of this matter. Irregular expenditure

7. As disclosed in note 28 to the financial statements, irregular expenditure to the amount of R3 192 000 was incurred, as a proper tender process had not been followed.

Responsibilities of the Accounting Officer

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

9. In preparing the financial statements, the accounting officer is responsible for assessing the Municipal Demarcation Board’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless there are any indications that the constitutional institution will cease operations in the foreseeable future.

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Auditor-general’s responsibilities for the audit of the financial statements

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

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

REPORT ON THE AUDIT OF THE ANNUAL PERFORMANCE REPORT

Introduction and scope

12. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected programmes presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance.

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

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

Programmes Pages in the annual performance report

Programme 1 – Operations 32 – 34

Programme 2 – Research and Knowledge Management 34 – 36

Programme 4 – Corporate Services 38 – 40

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

16. The material finding in respect of the usefulness of the selected programmes is as follows:

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Programme 1 – Operations

Indicator: Number of municipalities for which technical assessment of municipal boundaries are completed

17. The indicator and target were reported as Number of municipalities for which technical assessment of municipal boundaries are completed while the indicator and target were approved as Number of municipalities for which technical alignment of municipal boundaries are completed in the Annual Performance Plan. This is not in line with the requirements of treasury regulation 5.2.4.

18. I did not identify any material findings on the usefulness and reliability of the reported performance information for the following programmes:

• Programme 2 – Research and Knowledge Management• Programme 4 – Corporate Services

Other matters

19. I draw attention to the matters below.

Achievement of planned targets

20. Refer to the annual performance report on pages 33 to 36; 38 to 40 for information on the achievement of planned targets for the year and explanations provided for the underachievement of a number of targets. This information should be considered in the context of the material finding on the usefulness of the reported performance information in paragraph 17 of this report.

Adjustment of material misstatements

21. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements were on the reported performance information of Programme 2: Research and Knowledge Management. As management subsequently corrected only some of the misstatements, I raised a material finding on the usefulness of the reported performance information.

REPORT ON AUDIT OF COMPLIANCE WITH LEGISLATION

Introduction and scope

22. In accordance with the PAA and the general notice issued in terms thereof I have a responsibility to report material findings on the compliance of the constitutional institution with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance.

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

Expenditure Management

24 Effective steps were not taken to prevent irregular expenditure amounting to R3 192 000 as disclosed in note 28 to the annual financial statements, as required by section 38(1)(c)(ii) of the PFMA and Treasury Regulation 9.1.1.

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Procurement and contract management

25. Goods and services of a transaction value above R500 000 were procured without inviting competitive bids, as required by Treasury Regulation 16A6.1. Deviations were approved by the accounting officer even though it was not impractical to invite competitive bids, in contravention of Treasury Regulation 16A6.4.

26. Invitations for competitive bidding were not always advertised for a required minimum period, as required by Treasury Regulation 16A6.3(c).

27. Bid documentation for procurement of commodities designated for local content and production, did not stipulate the minimum threshold for local production and content as required by Preferential Procurement Regulation 9(1).

28. Persons in service of the constitutional institution whose close family members, partners or associates had a private or business interest in contracts awarded by the constitutional institution failed to disclose such interest, as required by Treasury Regulation 16A8.4.

OTHER INFORMATION

29. The Municipal Demarcation Board accounting officer is responsible for the other information. The other information comprises the information included in the annual report. The other information does not include the financial statements, the auditor’s report thereon and those selected programmes presented in the annual performance report that have been specifically reported on in the auditor’s report.

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

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

INTERNAL CONTROL DEFICIENCIES

32. I considered internal control relevant to my audit of the financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance thereon. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on the annual performance report and the findings on compliance with legislation included in this report.• Leadership of the constitutional institution did not exercise adequate oversight responsibility regarding performance

reporting and compliance with laws and regulations as well as related internal controls. • Management did not effectively review and monitor compliance with applicable laws and regulations.

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OTHER REPORT

33. I draw attention to the following engagement that had, or could have, an impact on the matters reported in the constitutional institution’s financial statements, reported performance information, compliance with applicable legislation and other related matters. This report did not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation.

34. An independent consultant investigated an allegation into possible irregularities of the procurement of office accommodation at the request of the constitutional institution, which covers the lease period of 01 May 2014 to 30 April 2019. The investigation was concluded on 21 April 2017 and was tabled on 21 June 2017. The report and any further action that might be necessary are presently under consideration by the Board.

Auditor-General South AfricaPretoria 31 July 2017

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S E C T I O N G A N N U A L F I N A N C I A L S T A T E M E N T S


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ANNUAL FINANCIAL STATEMENTS

INDEX

The reports and statements set out below comprise the financial statements presented to the parliament:Index PageStatement of Financial Position ............................................................................................................................................ 74Statement of Financial Performance .................................................................................................................................... 75Statement of Changes in Net Assets ................................................................................................................................... 76Cash Flow Statement .......................................................................................................................................................... 77Statement of Comparison of Budget and Actual Amounts ................................................................................................... 78Accounting Policies ........................................................................................................................................................79-85Notes to the Financial Statements ..................................................................................................................................86-98

ABBREVIATIONS

AGSA Auditor General South Africa AFS Annual Financial Statements CEO Chief Executive Officer CFO Chief Financial OfficerCoGTA Cooperative Governance and Traditional AffairsGRAP Generally Recognised Accounting PracticeHTL House of Traditional LeadersIEC Independent Electoral CommissionMDB Municipal Demarcation Board (the Board)MEC Member of Executive CouncilPFMA Public Finance Management ActPLC Party Liaison CommitteeSALGA South African Local Government AssociationSCM Supply Chain ManagementSDL Skills Development LevyTR Treasury Regulation

The financial statements set out on pages 74 to 98, which have been prepared on the going concern basis, were approved by the accounting authority on 31 May 2017 and were signed on its behalf by:

Mr Muthotho SigidiChief Executive Officer

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STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2017

Note(s)2017

R '0002016

R '000Assets

Current Assets

Inventories 2 200 191

Receivables from exchange transactions 3 29 58

Cash and cash equivalents 4 9 464 174

9 693 423

Non-Current Assets

Property, plant and equipment 5 4 140 3 664

Intangible assets 6 902 878

Warranties 15 2

5 057 4 544

Total Assets 14 750 4 967

Liabilities

Current Liabilities

Operating lease liability 984 879

Payables from exchange transactions 7 3 841 4 146

4 825 5 025

Total Liabilities 4 825 5 025

Net Assets 9 925 (58)

Accumulated surplus / (deficit) 9 925 (58)

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STATEMENT OF FINANCIAL PERFORMANCE

Note(s)2017R'000

2016R‘000

Revenue

Revenue from exchange transactions

Sale of goods 17 6

Other exchange revenue - 2

Interest received - investment 18 717 463

Total revenue from exchange transactions 734 471

Revenue from non-exchange transactions

Transfer revenue

Government grants 9 58 220 45 793

Other non-exchange revenue 1 061 24

Total revenue from non-exchange transactions 59 281 45 817

Total revenue 10 60 015 46 288

Expenditure

Administrative Costs 16 (14 286) (30 768)

Audit Fees 12 (1 560) (750)

Depreciation and amortisation 13 (1 608) (1 471)

Employee Costs 11 (22 668) (20 877)

Other operating expenses 15 (6 763) (7 322)

Consulting Expenses 14 (3 138) (3 526)

Total expenditure (50 023) (64 714)

Gain / (Loss) on disposal of assets 17 (8) (23)

Surplus / (Deficit) for the period 9 984 (18 449)

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STATEMENT OF CHANGES IN NET ASSETSAccumulated surplus R '000 Total net assets R'000

Balance at 01 April 2015 18 391 18 391

Deficit for the year (18 449) (18 449)

Total changes (18 449) (18 449)

Balance at 01 April 2016 (58) (58)

Surplus for the 12 months 9 983 9 983

Total changes 9 983 9 983

Balance at 31 March 2017 9 925 9 925

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CASH FLOW STATEMENTNote(s)

2017R’000

2016 R '000

Cash flows from operating activities

Receipts

Revenue from exchange transactions 707 505

Revenue from non-exchange transactions 59 281 45 817

59 988 46 322

Payments

Employee benefit costs (22 668) (21 461)

Suppliers (25 869) (41 085)

(48 537) (62 546)

Net cash flows from operating activities 19 11 451 (16 224)

Cash flows from investing activities

Purchase of property, plant and equipment 5 (1 815) (591)

Proceeds from sale of property, plant and equipment 5 35 5

Purchase of intangible assets 6 (368) (113)

Proceeds from sale of intangible assets 6 - 4

Purchase of warranties (13) (2)

Net cash flows from investing activities (2161) (697)

Net increase / (decrease) in cash and cash equivalents 9 290 (16 921)

Cash and cash equivalents at the beginning of the period 174 17 095

Cash and cash equivalents at the end of the period 4 9 464 174

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STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTSBudget on Cash Basis

Approvedbudget

Adjustments Final Budget Actual amounts on comparable

basis

Difference between

final budget and actual

Reference

R '000 R '000 R '000 R '000 R '000

Statement of Financial Performance

Revenue

Revenue from exchange transactionsSale of goods - 14 14 17 3

Interest received - investment 500 - 500 717 217

Total revenue from exchange transactions 500 14 514 734 220

Revenue from non-exchange

transactions

Government grants & subsidies 58 220 58 220 58 220 -

Other non-exchange revenue - 1 052 1 052 1 061 9

Total revenue from non-exchange transactions 58 220 1 052 59 272 59 281 9

Total revenue 58 720 1 066 59 786 60 015 229Expenditure

Administrative costs (14 612) (1 160) (15 772) (14 291) 1481 29.1

Audit fees (1 000) (437) (1 437) (1 560) (123)

Employee costs (28 817) 4 157 (24 660) (22 668) 1 992 29.2

Other operating expenses (8 481) 580 (7 901) (6 763) 1 138 29.3

Project expenses (4 810) (2 895) (7 705) (3 138) 4 567 29.4

Total expenditure (57 720) 245 (57 475) (48 420) 9 055Operating surplus 1 000 1 311 2 311 11 595 9 284

Loss on disposal of assets - (8) (8) (8) -

Surplus / (deficlt) 1 000 1 303 2 303 11 587 9 284Actual Amount on Comparable Basis as Presented in the Budget and Actual Comparative Statement

1 000 1 303 2 303 11 587 9 284

Reconciliation

Basis differenceDepreciation and amortisatioin (1 608)Actual Amount In the Statement of Financial Performance

9 979

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1. PRESENTATION OF FINANCIAL STATEMENTS

The financial statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board including any interpretations, guidelines and directives issued by the Accounting Standard Board.

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

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

1.1 Presentation currencyThese financial statements are presented in South African Rand and are rounded to the nearest thousand (R’000).

1.2 Critical Accounting Estimates and Judgements in Applying Accounting Policies

The Board makes estimates and assumptions that affect the reported amounts of assets and liabilities within the current and subsequent financial years. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

There does, however, not appear to be a significant risk that these assumptions will cause significant adjustments to the carrying amount of assets and liabilities within the subsequent financial years.

Significant judgements include:

Impairment testingThe entity reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets.

Contingent liabilityA contingent liabilities are disclosed when the Board has a possible obligation that arose from past events whose existence will be confirmed only by the occurrence or non-

occurrence of one or more uncertain future events not wholly within the control of the Board.

Useful lives of property, plant and equipment and intangible assetsThe Board re-assesses the useful lives and residual lives of property, plant and equipment and intangible assets on an annual basis. In reassessing the useful lives and residual values of property, plant and equipment management considers the condition and use of the individual assets, to determine the remaining period over which the asset can and will be used.

1.3 Property, plant and equipmentProperty, plant and equipment are tangible non-current assets that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period.

The cost of an item of property, plant and equipment is recognised as an asset when:• it is probable that future economic benefits or service

potential associated with the item will flow to the entity; and

• the cost of the item can be measured reliably.

Property, plant and equipment is initially measured at cost.

The cost of an item of property, plant and equipment is the purchase price and other costs attributable to bring the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Trade discounts and rebates are deducted in arriving at the cost.

When significant components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. tf a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced partis derecognised.

Recognition of costs in the carrying amount of an item of property, plant and equipment ceases when the item is in the location and condition necessary for it to be capable of operating in the manner intended by management.

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

Property, plant and equipment are depreciated on the straight line basis over their expected useful lives to their estimated residual value.

The useful lives of items of property, plant and equipment have been assessed as follows:

Item Depreciation method

Average useful life

Furniture and fixtures Straight line 10-15 years

Motor vehicles Straight line 5-10 years

Office equipment Straight line 5-10 years

IT equipment Straight line 3-9 years

Leasehold improvements Straight line 5 years

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

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

Each part of an item of property, plant and equipment with a cost that is signifrcant in relation to the total cost of the item is depreciated separately

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

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

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

1.4 Intangible assetsAn asset is identifiable if it either• is separable, i.e. is capable of being separated or divided

from an entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable assets or liability, regardless of whether the entity intends to do so. or

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

A binding arrangement describes an arrangement that confers similar rights and obligations on the parties to it as if it were in the form of a contract.

An intangible asset is recognised when:• it is probable that the expected future economic benefits

or service potential that are attributable to the asset will flow to the entity; and

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

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

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

intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date.Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows:

Item Useful life

Computer software 3-9 years

Intangible assets are derecognised:• on disposal; or• when no future economic benefits or service potential

are expected from its use or disposal.

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The gain or toss arising from the derecognition of an intangible assets is included in surplus or deficit when the asset is derecognised (unless the Standard of GRAP on leases requires otherwise on a sale and leaseback).

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

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

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or if the related party entity and another party are subject to common control. Related parties include individuals who have significant influence over the Board, such as members of the Board and key management personnel.

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

The ability of the Board to continue as a going concern is dependent upon further funding from Parliament.

1.7 Budget informationEntity is typically subject to budgetary limits in the form of appropriations or budget authorisation’s (or equivalent), which is given effect through authorising legislation, appropriation or similar.

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

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

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

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

1.8 Financial instrumentsA financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or a residual interest of another entity. The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Derecognition is the removal of a previously recognised financial asset or financial liability from an entity’s statement of financial position.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction.

A financial asset is:• cash;• a residual interest of another entity, or• a contractual right to:• receive cash or another financial asset from another

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

A financial liability is any liability that is a contractual obligation to:• deliver cash or another financial asset to another entity;

or• exchange financial assets or financial liabilities under

conditions that are potentially unfavourable to the entity.

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Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Liquidity risk is the risk encountered by an entity in the event of difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

A financial asset is past due when a counterparty has failed to make a payment when contractually due.

ClassificationThe Board s principal financial instruments are receivables cash and cash equivalents and payables.

Classification depends on the purpose for which the financial instrument were obtained / incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through surplus or deficit, which shall not be classified out of the fair value through surplus or deficit category.

Initial recognition and measurementFinancial instruments are recognised initially when the entity becomes a party to the contractual provisions of the instrument.

The entity classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial instruments are measured initially at fair value.

Subsequent measurement of financial assets and financial liabilitiesThe entity measures all financial assets and financial liabilities after initial recognition using the following categories.• Financial instruments at fair value.• Financial instruments at amortised cost.• Financial instruments at cost.

All financial assets measured at amortised cost, or cost, are subject to an impairment review.

Receivables from exchange transactionsTrade receivables are initially measured at fair value, and are subsequently measured at amortised cost using the effective

interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised In surplus or deficit when there is objective evidence that the asset is impaired.

Payables from exchange transactionsTrade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially recorded at fair value and subsequently measured at amortised cost

For the purpose of the Cash Flow Statement, as well as Statement of Financial Position, cash and cash equivalents comprise cash on hand and other short-term investments.

Impairment and uncollectibility of financial assetsAt each end of the reporting period the entity assesses all financial assets, other than those at fair value through surplus or deficit, to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired.

Impairment losses are recognised in surplus or deficit.

Impairment losses are reversed when an increase in the financial asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the financial asset at the date the impairment is reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.

Reversals of impairment losses are recognised in surplus or deficit except for equity investments classified as available-for- sale.

1.9 LeasesA lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards Incidental to ownership.

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Operating leases - lesseeOperating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease liability.

1.10 InventoriesInventories are measured at the lower of cost and current replacement cost where they are held for• distribution at no charge or for a nominal charge: or• consumption in the production process of goods to be

distributed at no charge or for a nominal charge.

The cost of inventories is assigned using the weighted average cost formula. The same cost formula is used for all inventories having a similar nature and use to the entity.

1.11 Employee benefitsEmployee benefits are all forms of consideration given by an entity in exchange for service rendered by employees.Termination benefits are employee benefits payable as a result of either:• an entity’s decision to terminate an employee’s

employment before the normal retirement date; or• an employee’s decision to accept voluntary redundancy

in exchange for those benefits.

Short-term employee benefitsShort-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within twelve months after the end of the period in which the employees render the related service.Short-term employee benefits include items such as:• wages, salaries and social security contributions;• short-term compensated absences (such as paid annual

leave and paid sick leave) where the compensation for the absences is due to be settled within twelve months after the end of the reporting period in which the employees render the related employee service;

• bonus, incentive and performance related payments payable within twelve months after the end of the reporting period in which the employees render the related service; and

When an employee has rendered service to the entity during a reporting period, the entity recognise the undiscounted amountof short-term employee benefits expected to be paid in exchange for that service:• as a liability (accrued expense), after deducting any

amount already paid. If the amount already paid exceeds

the undiscounted amount of the benefits, the entity recognise that excess as an asset (prepaid expense) to the extent that the prepayment will lead to, for example, a reduction in future payments or a cash refund; and

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

The expected cost of compensated absences is recognised as an expense as the employees render services that increasetheir entitlement or, in the case of non-accumulating absences, when the absence occurs. The entity measure the expected cost of accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unusedentitlement that has accumulated at the reporting date.

The entity recognises the expected cost of bonus, incentive and performance related payments when the entity has a present legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the obligation can be made. A present obligation exists when the entity has no realistic alternative but to make the payments.

Termination benefitsThe entity recognises termination benefits as a liability and an expense when the entity is demonstrably committed to either:• terminate the employment of an employee or group of

employees before the normal retirement date; or• provide termination benefits as a result of an offer made

in order to encourage voluntary redundancy.The entity is demonstrably committed to a termination when the entity has a detailed formal plan for the termination and iswithout realistic possibility of withdrawal. The detailed plan includes [as a minimum]:• the location, function, and approximate number of

employees whose services are to be terminated;• the termination benefits for each job classification or

function; and• the time at which the plan will be implemented.

Implementation begins as soon as possible and the period of time to complete implementation is such that material changes to the plan are not likely.

Where termination benefits fall due more than 12 months after the reporting date, they are discounted using an appropriatediscount rate. The rate used to discount the benefit reflects the time value of money. The currency and term of the financialinstrument selected to reflect the time value of money is consistent with the currency and estimated term of the benefit.

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In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits shall be based onthe number of employees expected to accept the offer

1.12 Provisions and contingencies Provisions are recognised when:

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

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

• a reliable estimate can be made of the obligation.

The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date.

Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation.

The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are reversed if it is no longer probable that an outflow of resources embodying economic benefits or service potential will be required, to settle the obligation.

Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognised as an interest expense.

A provision is used only for expenditures for which the provision was originally recognised.

Contingent assets artd contingent liabilities are not recognised. Contingencies are disclosed in note.

Commitments represent orders that have been approved, but where no delivery has not taken place as at year end. and contractual commitments.

Commitments are not recognised as liabilities or assets in the Statement of Financial Position but are included in the disclosure notes.

1.13 Revenue from exchange transactionsExchange transactions are transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value to another entity in exchange.

MeasurementRevenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates. Sale of goods

Revenue from the sale of goods is recognised when all the following conditions have been satisfied:• the entity has transferred to the purchaser the significant

risks and rewards of ownership of the goods,• the entity retains neither continuing managerial

involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;• it is probable that the economic benefits or service

potential associated with the transaction will flow to the entity: and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

InterestRevenue arising from the use by others of entity assets yielding interest:• it is probable that the economic benefits or service

potential associated with the transaction will flow to the entity, and

• the amount of the revenue can be measured reliably.

interest is recognised, in surplus or deficit, using the effective interest rate method.

1.14 Revenue from non-exchange transactionsNon-exchange transactions are defined as transactions where the Board receives value from another entity without directly giving approximately equal value in exchange.

RecognitionAn inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow.

As the Board satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-

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exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction.

MeasurementRevenue from a non-exchange transaction is measured at the amount of the increase in net assets recognised by the entity.

When, as a result of a non-exchange transaction, the entity recognises an asset, it also recognises revenue equivalent to the amount of the asset measured at its fair value as at the date of acquisition, unless it is also required to recognise a liability. Where a liability is required to be recognised it will be measured as the best estimate of the amount required to settle the obligation at the reporting date, and the amount of the increase in net assets, if any, recognised as revenue. When a liability is subsequently reduced, because the taxable event occurs or a condition is satisfied, the amount of the reduction in the liability is recognised as revenue.

1.15 Comparative figuresWhere necessary, comparative figures have been reclassified to conform to changes in presentation in the current 12 months.

1.16 Fruitless and wasteful expenditureFruitless expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised.

All expenditure relating to fruitless and wasteful expenditure is recognised as an expense in the statement of financial performance in the 12 months that the expenditure was incurred. The expenditure is classified in accordance with the nature of the expense, and where recovered, it is subsequently accounted for as revenue in the statement of financial performance.

1.17 Irregular expenditureIrregular expenditure as defined in section 1 of the PFMA is expenditure other than unauthorised expenditure, incurred in contravention of or that is not in accordance with a requirement of any applicable legislation, including -(a) this Act; or(b) the State Tender Board Act, 1968 (Act No. 86 of

1968), or any regulations made in terms of the Act; or

(c) any provincial legislation providing for procurement procedures in that provincial government.

Irregular expenditure that was incurred and identified during the current financial and which was condoned before year end and/or before finalisation of the financial statements is recorded appropriately in the irregular expenditure register. In such an instance, no further action is also required with the exception of updating the note to the financial statements. Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being awaited at year end is recorded in the irregular expenditure register. No further action is required with the exception of updating the note to the financial statements.

Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements is updated with the amount condoned.

Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or the relevant authority is recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account is created if such a person is liable in law. Immediate steps are thereafter taken to recover the amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount as debt impairment and disclose such in the relevant note to the financial statements. The irregular expenditure register Is also updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto remains against the relevant programme/expenditure item, is disclosed as such in the note to the financial statements and updated accordingly in the irregular expenditure register.

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2. Inventories

2017R ‘000

2016R ’000

Consumable stores 200 191

Opening balance 191 372

Additions for the year 279 278

Utilized for the year (270) (459)

200 191

3. Receivables from exchange transactions

2017R ‘000

2016R ’000

Trade debtors - 16

Staff advances 2 28

Interest income accrued 27 14

29 58

4. Cash and cash equivalents

2017R ‘000

2016R ’000

Cash and cash equivalents consist of:

Cash on hand 1 1

Bank balances 890 173

Short-term deposits 8 573 -

9 464 174

There are no restrictions to cash held with banks.

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5. Property, plant and equipment2017 2016

Cost/Valuation

Accumulated depreciation

and accumulated impairment

Carrying value

Cost/Valuation

Accumulated depreciation

and accumulated impairment

Carrying value

Furniture and fixtures 2 067 (1 127) 940 1 967 (956) 1 011

Motor vehicles 656 (328) 328 562 (412) 150

Office equipment 976 (831) 145 990 (777) 213

IT equipment 2 604 (1 054) 1 550 1 734 (1 143) 591

Leasehold improvements 2 504 (1 327) 1 177 2 504 (805) 1 699

Total 8 807 (4 667) 4140 7 757 (4 093) 3 664

Reconciliation of property, plant and equipment • 2017

Opening balance Additions Disposals Depreciation Total

Furniture and fixtures 1 011 142 (9) (204) 940

Motor vehicles 150 245 (37) (30) 328

Office equipment 213 25 (2) (91) 145

IT equipment 591 1 403 (10) (434) 1 550

Leasehold improvements 1 699 - - (522) 1 177

3 664 1 815 (58) (1 281) 4140

Reconciliation of property, plant and equipment • 2016Opening balance Additions Disposals Depreciation Total

Furniture and fixtures 1 172 . 27 - (188) 1 011

Motor vehicles 213 - - (63) 150

Office equipment 383 23 (12) (181) 213

IT equipment 680 290 (15) (364) 591

Leasehold improvements 1 923 251 - (475) 1 699

4 371 591 (27) (1 271) 3 664

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6. Intangible assets2017 2016

Cost/ Valuation

Accumulatedamortisation

andaccumulatedimpairment

Carrying value

Cost/ Valuation

Accumulatedamortisation

andaccumulatedimpairment

Carrying value

Computer software 1837 (935) 902 1 772 (894) 878

Reconciliation of intangible assets • 2017

Opening balance

Additions Disposals Amortisation Total

Computer software 878 368 (18) (326) 902

Reconciliation of Intangible assets • 2016

Opening Additions Disposals Amortisation Total balance

Computer software 969 113 (4) (200) 878

7. Payables from exchange transactions

2017R ‘000

2016R ’000

Trade payables 2 237 2 600

Accrued expenses 1 544 1 471

Other payables 60 75

3 841 4146

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8. Financial instruments disclosure

Categories of financial instruments

2017 Financial assets

At amortised cost Total

Trade and other receivables from exchange transactions 29 29

Cash and cash equivalents 9 464 9 464

9 493 9 493

Financial liabilitiesAt amortised cost Total

Trade and other payables from exchange transactions 3 841 3 841

2016 Financial assets

At amortised cost Total

Trade and other receivables from exchange transactions 58 58

Cash and cash equivalents 174 174

232 232

Financial liabilitiesAt amortised cost Total

Trade and other payables from exchange transactions 4 146 4 146

9. Government grants2017

R ‘0002016

R ’000National Department of Cooperative Governance and Traditional Affairs 58 220 45 793

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10. Revenue

2017R ‘000

2016R ’000

Sale of goods - Maps and other 17 6

Other exchange revenue - Recycle - 2

Interest received - Investment 717 463

Government grants & subsidies 58 220 45 793


60 015 46 288

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

Sale of goods - Maps 17 6

Other exchange revenue - Recycle - 2

Interest received - Investment 717 463

734 471

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

Government grants & subsidies 58 220 45 793


59 281 45 817

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11. Employee benefit costs

2017R ‘000

2016R ’000

Basic 14 753 13 173

Bonus 196 (73)

Full time member’s emoluments 1 406 1 396

Insurance cover 530 449

Leave expenses 73 (22)

Leave payments 152 311

Other non pensionable allowance 5 077 4 510

Other salary related costs 36 53

Overtime payments 86 201

SDL 204 210

Temporary staff allowance - 262

Travel, motorcar, accommodation, subsistence and other allowances 77 335

UIF 70 72

22 668 20 877

12. Audit Fees

Audit Fees 1 560 750

13. Depreciation and amortisation

Computer software 326 200

Furniture and fixtures 203 188

IT equipment 434 364

Leasehold improvements 523 475

Motor vehicles 30 63

Office equipment 91 181

1 607 1 471

14. Project Expenses

Consulting Fees 3 138 3 526

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15. Other Operating Expenses

2017R ‘000

2016R ’000

Consumables 9 10

Courier and delivery charges 51 84

Data acquisitions 686 188

License renewal 840 729

Rental of building 3 842 3 830

Rental of plant, machinery and equipment - 27

Repairs and maintenance 139 84

Travel and accommodation 1 193 2 370

6 760 7 322

16. Administrative expensesAdvertising 263 118

Bank charges 27 26

Conferences and venues 1 174 199

Employee Assistance Programme 3 18

Insurance 233 198

Internal audit fees 294 592

Legal fees 4 608 5 790

Members allowance 2 755 3 182

Other expenses 1 760 1 334

Printing & Photocopying 293 888

Professional fees - 1 953

Publications notices and gazettes 83 13 072

Recruitment costs 280 751

Security services 854 752

Stakeholder relations management 1 092 535

Stationery 224 462

Telephone and fax 259 836

Training - Employees 81 60

Workshops & seminars 3 -

14 286 30 768

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17. Gain/(Loss) on disposal of assets

2017R ‘000

2016R ’000

Proceeds from disposal of assets 34 8

Net book value of assets (16) (31)

18 (23)

18. Investment revenue Interest revenueBank 717 463

19. Cash generated from (used in) operations

Surplus/(Deficit) 9 984 (18 449)

Adjustments for

Depreciation and amortisation 1 608 1 471

Gain/(Loss) on sale of assets 8 23

Movements in operating lease assets and accruals 143 405

Movements in provisions - (551)

Changes In working capital:

Inventories (9) 181

Receivables from exchange transactions 29 51

Payables from exchange transactions (312) 645

11 451 (16 224)

20. CommitmentsThis committed expenditure relates to leased property, capital expenditure and other operational expenditure will be financed by retained surpluses, existing cash resources, funds internally generated, etc.

20.1 Operating leases - the Board as lesseeMinimum lease payments due

within one year 3 802 3 730

in second to fifth year inclusive 4 753 9 614

8 555 13 344

The Board leases its office premises from a commercial property services provider for a period of 5 years, effective from Juiy 2014. Lease payments escalate by 8.90% annually and payable monthly in advance. The lease agreement is renewable for a further period by mutual agreement, Upon termination of the lease any improvements made to the premises by the entity shall belong to the lessor. No contingent rent is payable.

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20.2 Other commitments

2017R ‘000

2016R ’000

Approved and contracted: Other operational expenditure 4 806 3 610

Approved and contracted: Capital expenditure - 141

Total future commitments 4 806 3 751

21. Related parties

Relationships Controlling entity

Other entities in public sphere

Related party balances

National Department of Cooperative Governance and Traditional Affairs Government Printing Works

Related party transactions

Government grant received

National Department of Cooperative Governance and Traditional Affairs (58 220) (45 793)

Operating expenses paid to related parties

Government Printing Works 27 9 249

Other non-exchange revenue

Donations 1 000 -

22. Related partiesExecutive members

2017

Emoluments Other benefits* Total

Ms MJJ Thupana (Chairperson of the Board) 1 469 - 1 469

Mr O Nkoane (CEO) (Appointed December 2015) 832 - 832

Adv T Mekuto (Acting CEO) (Appointed August 2016) - 145 145

Mr N Patel (CFO) (Appointed November 2015) 1 326 - 1 328

Adv T Mekuto (Executive Manager: Corporate Services) (Appointed August 2016)

738 " 738

Mr A Ramagadza (Chief Operating Officer) 1 097 - 1 097

Mr M Sigidi (CEO) 298 - 298

5 762 145 5 907

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2016

Emoluments Other benefits* Total

Ms MJJ Thupana (Chairperson of the Board) 1 396 - 1 396

Mr O Nkoane (CEO) (Appointed December 2015) 570 - 570

Mr A Ramagadza (Acting CEO) (Appointed from August 2015until December 2015)

176 * 176

Mr M Manjezi (Acting CEO) (Appointed September 2014 untilJune 2015)

371 371

Mr N Patel (CFO) (Appointed November 2015) 519 - 519

Ms ML Ratya (Acting CFO) (Appointed for April 2015) 55 - 55

Ms M Mahlangu (Acting CFO) (Appointed from May 2015 untilOctober 2015)

228 “ 228

2 944 371 3 315

Other benefits comprise acting allowance.

Related parties (continued) Non-executive members 2017

Members' fees Other fees(Consultancy fees

to subsidiary)

Total

Mr LD Tsotetsi (Re-appointed 20 February 2014) 267 6 273

Mr AM Adam (Deputy Chairperson) (Re-appointed February 2014) 335 6 341

Prof lE Konyn (Appointed 20 February 2014) 289 6 295

Mr MM Wildebees (Appointed 20 February 2014) 269 6 275

Mr S Dzengwa (Appointed 20 February 2014) 393 6 399

Ms SD Wiggins (Appointed 20 February 2014) 345 6 351

Ms NZH Mpofu (Appointed 20 February 2014) 241 6 247

Ms MM Mooki (Appointed 20 February 2014) 283 6 289

Mr D Coovadia (Chairperson: Audit and Risk Committee) (Appointed October 2014)

285 - 285

2 707 48 2 755

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2016

Members' fees Other fees(Consultancy fees

to subsidiary)

Total

Mr LD Tsotetsi (Re-appointed 20 February 2014) 330 6 336

Mr AM Adam (Deputy Chairperson) (Re-appointed February 2014) 234 6 240

Prof IE Konyn (Appointed 20 February 2014) 459 6 465

Mr MM Wildebees (Appointed 20 February 2014) 343 6 349

Mr S Dzengwa (Appointed 20 February 2014) 489 6 495

Ms SD Wiggins (Appointed 20 February 2014) 386 6 392

Ms NZH Mpofu (Appointed 20 February 2014) 406 6 412

Ms MM Mooki (Appointed 20 February 2014) 218 6 224

Mr D Coovadia (Chairperson: Audit and Risk Committee) (Appointed October 2014)

269 - 269

3 134 48 3182

Remuneration of Board members is determined by the Minister of Cooperative Governance and Traditional Affairs in consultation with the Minister of Finance.

Remuneration of management is determined by the Board.

Remuneration of independent members of the Audit and Risk Committee is determined by the Board in accordance with Treasury Regulations 3.1.6, after taking into account tariffs determined by the South African Institute of Chartered Accountants and the Auditor General, where applicable.

23. Change in estimates Property, plant and equipmentChanges in the estimated useful lives of some items of property, plant and equipment has resulted in the following change in depreciation for the year:

Depreciation: PPEAccording to initial estimated useful life (81) (53)According to re-estimated useful life (77) 26

(158) (27)

24. Risk management Financial risk managementThe entity’s activities expose it to a variety of financial risks market risk (including cash flow interest rate risk and price risk), credit risk and liquidity risk.

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Liquidity riskLiquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Management regularly reviews the Board’s going concern. This includes reviewing the effectiveness of working capital management and budgetary control.

The following table indicates the maturity analysis for financial liabilities showing the remaining earliest contractual maturities. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

Carrying amountDue within

1 yearDue between 1

and 5 years2017

Payables from exchange transactions 3 841 3 841 -

2016

Payables from exchange transactions 4 146 4 146 -

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

26. Events after the reporting dateThe Board is not aware of any matters that arose after the reporting date that requires adjustment to the financial statements or additional disclosure.

27. Fruitless and wasteful expenditureFruitless and wasteful expenditure 19 -

Fruitless and wasteful expenditure relates to settlements made by MDB to one company. MDB was found to be in breach of contract for terminating the maintenance agreement outside the agreed notice period as per original contract. The termination originated in 15 November 2012.

28. Irregular expenditure

2017R ‘000

2016R ’000

Opening balance 66 3 052

Add: Irregular Expenditure - current year 3 192 66

Less: Amounts condoned (48) (3 052)

3 210 66

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Details of irregular expenditure - current yearParagraph (4) (c) of the approved acting allowance policy states that an employee, other than an employee in a management position, may act in a higher post for a maximum uninterrupted period for twelve (12) months. One employee was appointed as the acting manager of Research and Knowledge management unit for a total of sixteen (16) months and twenty-seven (27) days, from 03 August 2015 to 30 December 2016, which exceeds the twelve (12) months maximum period stipulated in the policy.

Disciplinary steps taken/criminal proceedings No further action was taken

44

One contract with the vatue of R 1 076 970 were procured without inviting competitive bids, and the deviations were approved even though It was practical to invite competitive bids.

Invitations for competitive bids for the procurement of one contract with a value of R 1 800 000 was not advertised for the required minimum number of days, expenditure to date on this contracts

R 293 942,33.

Specifications for one 1 award with a total value of R140 675,53 did not stipulate the minimum threshold for local production and content.

The omission of the declaration of relationship between the board member and the bidder has made the award irregular due to the conflict of interest created by the relationship and therefore non-compliance with Practice Note 7 of 2009/10 paragraph 2.1. The irregular expenditure amount to R1 636 100.

The total irregular expenditure is R 3 191 687.86

These issues were raised as part of the year end audit. Further actions to be considered by management

3 148

3 192Details of irregular expenditure not recoverable (not condoned)Approval for deviation was obtained after the expense was incurred. 18

29. Budget differences

Material differences between budget and actual amounts:29.1 The variance is due to cost containment activities and timing differences in expenditure.29.2 This is due to positions budgeted for, but were not filled during the year under review.29.3 The variance is due to cost containment activities and timing differences in expenditure.29.4 The variance is due to timing differences in expenditure.

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NOTES

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NOTES

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NOTES

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Physical Address:Eco Origins - Block C1, 349 Witch-Hazel Street,

Centurion, Pretoria, 0157, South Africa

Postal Address: Private Bag x123,

Centurion, 0046,

South Africa

Telephone: +27 12 342 2481

Facsimile: +27 12 342 2480

Website: www.demarcation.org.za

RP264/2017ISBN: 978-0-621-45752-0

annual report - demarcation.org.za · its function without fear, favour or prejudice. • section 4...

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