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Project Managers:
Supriya Kalidas 4 Chairperson’s report for the year ended 30 June 2009
Editor: Amanda de Lilly, Clarity Editorial
amanda@clarityeditorial.co.za
6 Chief executive officer’s performance management report
Designer: Karien van der Westhuizen
karien@theearthisround.co.za
members
• Buffalo City Municipality
• City of Cape Town
• Ekurhuleni Metropolitan Municipality
• eThekwini Metropolitan municipality
• City of Johannesburg
• Mangaung Local Municipality
• Msunduzi Local Municipality
• Nelson Mandela Bay metropolitan municipality
• City of Tshwane
partners
• Department of Cooperative Governance and Traditional
Affairs (formerly DPLG)
• South African Local Government Association (SALGA)
secretariat
• Sithole Mbanga, CEO
• Supriya Kalidas, Executive Manager: Finance and
Corporate Support Services
• Sharon Lewis: Executive Manager: Programmes
• Astrid Wood, Programmes Manager
• Sadhna Bhana, Programmes Coordinator
• Letlhogonolo Dibe and Clement Mpurwana, Finance
and Corporate Support Services.
The SACN’s expenditure grew by an unprecedented 59 per cent in 2008/09. This was matched by a 49 per
cent growth in the number of programme outputs (publications, learning events and video records of learning
events). This report considers the extent to which the SACN has delivered programme outputs against targets
in the 2008/09 business plan. It reflects on the quality of outputs and outcomes, and records the learning and
policy impacts of the SACN programme in 2008/09.
2008/09
2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Planned
No. of learning events 6 17 21 26 29 37 40
No. of video records of
1 9 3 3 3
events
No. of publications 2 4 7 5 5 15 17
Total number of outputs 8 21 29 40 37 55 60
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The distribution of outputs by theme during 2008/09 reflects an emphasis on CDS outputs because of the cross-cutting
nature of this theme. The outputs for the Sustainable, Inclusive and Well-governed cities themes are fairly well-balanced,
but there were few outputs in the Productive Cities theme in this year. This is because many of the Productive Cities projects
have evolved into cross-cutting projects that are best categorised in the CDS theme.
Well-
CDS Productive Inclusive Sustainable Other
governed
No. of learning events 13 1 7 6 8 2
No. of video records of events 1 0 1 1 0 0
No. of publications 3 0 3 3 5 1
Total number of outputs 17 1 11 10 13 3
Table 5: Results of quality surveys completed for SACN learning events during 2008/09
Four new learning approaches were tested by the SACN • The Sustainable Cities reference group on waste-to-
in 2008/09: energy used teleconferencing for all of its meetings.
• The leadership study tour on renewable energy allowed This proved to be very cost- and time-efficient.
a small group (15 people) of municipal leaders and sen-
ior decision makers to travel to the UK, Germany and
Denmark to see renewable energy solutions first-hand. Performance outcomes
• The Well-governed Cities seminar on municipal infra-
structure investment planning provided an intensive These can be measured in terms of the number and pro-
learning experience in a workshop environment, with file of people reached, networking outcomes, expenditure
facilitators guiding a group of 20 municipal officials results, and the cost-effectiveness of the particular out-
through the application of a computer-based municipal put.
infrastructure investment planning tool.
• The CDS knowledge-sharing workshop in Mangaung Number of people reached
and the Well-governed knowledge-sharing workshop SACN’s knowledge generation and knowledge dissemi-
on credit enhancement in Msunduzi brought together nation strategies reach people in person, through pub-
municipal experts and senior officials in these two lications and the website. In total, 97 879 people were
municipalities. This allowed for a strategic and applied reached in 2008/09. This is 4 per cent higher than the
exchange of ideas, with a view to supporting the cities figure for 2007/08. Overall, the total reach achieved by
with specific and targeted learning interventions. the SACN has grown significantly every year.
100 000
90 000
80 000
70 000
60 000
50 000
40 000
30 000
20 000
10 000
The 37 learning events hosted by SACN in 2008/09 Cities seminar on wind energy in January 2009 had 284
account for 354 hours of learning, and can be extrapo- participants, making it one of the biggest events ever
lated to 17 792 person hours of learning. By comparison, hosted by SACN.
all of SACN’s learning events in 2007/08 accounted for 198
hours of learning and 9 544 person hours. This dramatic Profile of people reached
growth in 2008/09 was due to the increased number of Most of the 1 777 participants at SACN learning events in
events; an increase in the average length of events; and an 2008/09 were from the nine member cities (31 per cent).
increase in the average number of people that attended Independent researchers and analysts accounted for 29 per
each event. cent, largely due to the large number of private-sector partic-
Only one learning event in 2008/09 had to be post- ipants at the wind energy seminar in January 2009. National
poned due to insufficient attendance, compared to four government and public entities made up 14 per cent of par-
in 2007/08. The secretariat has found that most learning ticipants. Participants from non-member cities made up 11
events achieve attendance figures that exceed the targets per cent of the learning event audience in 2008/09, a small
set during event planning. For example, the Sustainable but steadily rising sector.
Outcome
Audited Audited Audited Audited Audited Audited Audited
R Thousand 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Expenses
Operational costs (including salaries) 1 713 3 079 3 584 3 500 3 372 3 673 4 909
Percentage 63 50 58 42 40 34 29
Programme costs 1 023 3 131 2 617 4 910 4 985 7 154 12 288
Percentage 37 50 42 58 60 66 71
Total expenses 2 736 6 210 6 201 8 410 8 357 10 827 17 197
If one views the budget separately in terms of programme increase this ratio to 80 per cent over the medium term
expenditure (as a proxy for spending on knowledge out- to achieve the international best practice benchmark for
puts) and operational spend, then it is clear that the sec- similar programmes.
retariat is on a positive trend towards greater efficiency. During 2008/09, reference group meetings have cost an
The percentage of expenditure on programmes (and thus average of R230 per person per event, and seminars have
outputs) rose from 42 per cent in 2004/05 to 66 per cent cost around R1 340 per person per event. The renewable
in 2007/08. This trend was maintained in 2008/09, with energy study tour was not included in these averages, as
the ratio rising to 71 per cent. The secretariat will aim to this learning approach cost over R80 000 per person.
This is a significant reduction on the costs of learning events in 2007/08. The cost savings are due to the increased number of
attendees at learning events, as well as cost-saving strategies employed by the SACN secretariat. By comparison, a two-day
commercial conference currently costs approximately R12 000 per person, and an executive course or master class offered
by an academic institution is approximately R3 500 per day.
Learning and policy impacts input into the design of the second phase of the EPWP.
The EPWP received significant additional allocations in
The SACN’s analyses of national policy issues at learning the February 2009 Budget. The planning for this pro-
events and in its publications often have a direct impact gramme is informed by the analysis commissioned by
on the formation and implementation of these policies. SACN for the EPWP reference group.
• SACN has been invited to participate in meetings of
During 2008/09, the SACN was able to influence national the City Budget Forum, a new intergovernmental forum
policy in the following ways: convened by the National Treasury to coordinate inputs
• The Municipal Demarcation Board recommended that into the budget process.
the three non-metro member cities of SACN should • The renewable energy feed-in tariff was announced by
be reclassified as metropolitan municipalities with the the National Energy Regulator of South Africa (NERSA)
associated devolution of functions that this implies. in March 2009. This was a positive response to the
Much of the quantitative analysis used to support this call for a feed-in tariff made at the SACN’s Renewable
recommendation was drawn from SACN’s 2006 State of Energy City Summit in May 2008. In July 2009, NERSA
the Cities Report. made a presentation that indicated the inclusion of
• The Parliamentary Portfolio Committee on transport biogas generation in the renewable energy feed-in tariff
invited inputs from SACN into discussions about the in future. The SACN understands that this development
National Land Transport Bill. The bill deals with intergov- was hastened by the launch of SACN’s toolkit and feasi-
ernmental arrangements for public transport functions, bility model for waste-to-energy through biogas.
and will have a significant impact on the autonomy of • At the sustainable public transport seminar in August
cities in dealing with public transport infrastructure and 2008, Enrique Penalosa, former mayor of Bogota,
operations. On the basis of supplementary work flow- Colombia, shared his experience of managing resistance
ing from the State of Municipal Finances Report 2007, and protests against the introduction of the Bogota BRT
SACN made an evidence-based input that strength- system - a system that is now hailed as best practice
ened the case for clear devolution of public transport in international transit. The lessons he shared with local
functions and funding. This input was well received by public transport champions have been applied in the
the PPC, resulting in support for this approach in the implementation of the Rea Vaya transit system as a pilot
legislation. project in Johannesburg.
• In the February 2008 Budget, the then Minister of Finance • The SACN was invited to participate in a series of con-
announced a five-year extension in the urban develop- sultations about the new human settlements strategy.
ment zone tax incentive. This was a direct response to a These included the National Treasury’s stakeholder
submission by SACN to the National Treasury, on behalf consultations on the human settlements budget; the
of member cities. In order to implement this extension, Department of Human Settlement’s internal strategic
SACN was asked to facilitate comments on the Taxation planning session towards a new human settlement
Laws Amendment Act by member cities. Three submis- development programme; and the Presidency’s infor-
sions were forwarded to the National Treasury, and the mal consultations on measuring performance in human
amendment act was passed in September 2008. settlement development. It remains to be seen whether
• The evaluation report on EPWP outcomes in the cities, these inputs will result in policy or institutional change,
commissioned by SACN, was submitted to the National and the SACN intends to follow developments and
Department of Public Works. The report served as an report on them.
Year Number of contracts Value of contracts (ZAR) Average value of contracts (ZAR)
2002/03 1 66 728 66 728
Overall, these contracts were for the purpose of generating or disseminating knowledge. Most of the expenditure was on
knowledge production through research, and printing of publications (87 per cent of the total contract value). Twelve per
cent of the contracts were for facilitation support.
Most companies that are contracted to provide services to the SACN are small (employing less than 50 people). An amount
of R11.7 million of SACN’s spend since 2002 has therefore contributed to the profitability of the SMME sector in South
Africa.
Academic and science institutions have won 22 per cent of all contracts, including the University of Cape Town (UCT), the
Human Sciences Research Council (HSRC), and the Council for Scientific and Industrial Research (CSIR). The remaining 78
per cent of contract spend is through private companies and individuals (R15.7 million since 2002/03).
N J O Lester Y E Patel
(Alternate)
M Maseko K D Kekana
Z C Faku C E Walters
E Achmat I Nielson
(Alternate)
Msunduzi Municipality
Z I Hlatshwayo B S Ngubane
(Alternate)
Approval
The annual financial statements set out on pages 18 to 34 have been approved by the Board of Directors and are signed
on its behalf by:
_______________________________
_______________________________ Mr S M Mbanga
Councillor M Maseko Chief Executive Officer
Acting Chairperson
________________________________
Mrs S Kalidas
______________________________
Councillor M Maseko
Acting Chairperson
_______________________________
Mr S M Mbanga
Chief Executive Officer
The directors present the attached annual financial state- Share capital and dividends
ments and submit their report for the year ended 30 June The company has no share capital and its memorandum
2009. and articles of association prohibit the payment of divi-
dends to members.
General review of finances: Directors report
The SACN spent R17.2 million in 2008/09, an increase Equipment
of 59 per cent on 2007/08, and R2 million more than the During the year under review, the company acquired
budgeted expenditure for the year. The additional funding equipment to the value of R49 243 (2008: R78 423).
was raised through a grant from the former Department
of Provincial and Local Government for the research work Statements of responsibility
towards the National Urban Development Framework. The directors are responsible for the maintenance of
This expenditure yielded programme outputs that adequate accounting records. The auditors are responsi-
included 15 new publications, and 37 learning events ble for reporting on the fair presentation of the financial
that were attended by almost 1 800 people. Programme statements. The financial statements have been prepared
expenditure made up 71 per cent of total spend; salaries in accordance with Generally Accepted Accounting Prac-
made up the second largest spending component at 22 per tice, and the requirements of the Companies Act of South
cent; and other operating costs amounted to 7 per cent. Africa, 1973.
Within programme expenditure most of the spending The directors are also responsible for the company’s
was on the City Development Strategies theme at R4.7 mil- systems of internal control. These are designed to pro-
lion (38 per cent of programme spend); R2.7 million (22 vide reasonable, but not absolute assurance as to the
per cent) was spent on the Well-governed Cities theme), reliability of the financial statements, to adequately safe-
and R2.5 million (20 per cent) was spent on the Sustainable guard, verify and maintain accountability of assets, and to
Cities theme. prevent and detect misstatement and loss. Nothing has
The three largest projects undertaken during 2008/09 been brought to the attention of the directors to indicate
were the Sustainable Municipal Finance project, covering that any material breakdown in the functioning of these
nine municipalities within the Southern African Develop- controls, procedures and systems has occurred during the
ment Community (SADC) region; the renewable energy year under review.
leadership study tour to three European countries; and
the urban space economy research undertaken in support Results for the year
of the National Urban Development Framework. The results of operations for the year are fully disclosed in
the attached financial statements.
The detailed financial statements for the year are submit-
ted for your consideration. Post balance sheet events
No material fact or circumstance has occurred between
the balance sheet date and the date of this report.
Resignations
N C Peter
Chairperson & Buffalo City Municipality
(resigned 20 March 2009)
Dr M Kruger Department of Cooperative Governance and
(resigned 20 February 2009) Traditional Affairs (formerly DPLG)
G Sharpley
Buffalo City Municipality
(resigned 30 March 2009)
Secretary Auditors
Secretarial services are performed by S Kalidas. Xabiso Chartered Accountants Inc.
1st Floor, Building 22B
Physical address and registered offices Cnr Woodlands and Kelvin Drive
Joburg Metro Building The Woodlands Office Park
158 Loveday Street Woodmead
Braamfontein Telephone: +27(11) 802 4155
Johannesburg Facsimile: +27(11) 802 5857
2009 2008
Notes R R
Cash received from funders and subscribers 16 550 278 11 297 515
Cash paid to programmes, suppliers and employees (16 732 578) (9 957 828)
Cash (utilised by) generated from operations 15 (182 300) 1 339 687
Cash flows (utilised by) generated from financing activities (8 583) 8 583
Decrease in long-term liabilities (8 583) 8 583
Net increase in cash and cash equivalents 292 100 1 536 224
Cash and cash equivalents at beginning of year 4 766 126 3 229 902
1.1 Accounting convention The depreciation charge for each period is recognised
The Association is registered under the Companies Act, in profit or loss, unless it is included in the carrying amount
1973, as an association not for gain and as such no part of another asset.
of its income or property shall be transferred to members, The gain or loss arising from the derecognising of an
directly or indirectly. All reserves of the Association are item of property, plant and equipment is included in the
consequently non-distributable. equipment fund when the item is derecognised.
3. EQUIPMENT
30 June 2008
Net book value 30 June 2007 35 032 53 542 5 260 93 834
At cost 164 758 105 548 6 715 277 021
Accumulated depreciation (129 726) (52 006) (1 455) (183 187)
Additions during the year 78 423 78 423
Depreciation for the year (36 364) (22 534) (1 343) (60 241)
Disposal of assets (13 805) - - (13 805)
At cost (63 336) - - (63 336)
Accumulated depreciation 49 531 - - 49 531
15 390 22 560
5. ACCRUED INCOME
SANERI - 50 000
USAID/ISLGS - 65 000
Cash at banks earn interest at floating rates based on daily bank deposit rates. Short-term deposits are made for vary-
ing periods of between one day and three months, depending on the immediate cash requirements of the entity, and
earn interest at the respective short-term deposit rates. The fair value of cash and short-term deposits is R5 058 226
(2008: R4 766 126).
8. PROVISIONS
Leave
Leave pay is provided for when it accrues to employees, with reference to
services rendered up to the balance sheet date.
Deferred compensation
Provision for retention of staff 290 395 -
SACN leases office space over a period of three years starting 1 July 2007. The
company has commitments in respect of operating lease charges for premises
and office equipment as follows:
Payable within one year 99 665 90 605
Payable within 2-5 years - 99 665
Operating cash flows before movements in working capital (282 300) 532 704
100 000 806 983
Decrease in accounts receivable 7 170 8 781
Increase in accounts payable 92 830 798 202
Cash (utilised by) generated from operations (182 300) 1 339 687
16. TAXATION
No provision for taxation has been made as the company has qualified for exemption from income tax in terms of section
10(1)(cN) as read with section 30 of the Income Tax Act.
The deficit for the year is arrived at after taking into account the
following:
Auditors’ remuneration 48 467 30 139
Depreciation 48 372 60 243
Staff costs 3 819 782 2 872 752
Office rental 90 879 90 879
Lease payment made 90 605 82 296
Deferred payment 275 8 583
Profit on disposal of computer equipment (8 028) (15 628)
Grant Deferred
2009 Relationship Subscription Total
received income
Department of Cooperative Governance and
Partner (4 700 000) - - (4 700 000)
Traditional Affairs (formerly DPLG)
Department of Public Works Partner (150 000) - 150 000 -
Ekurhuleni Metropolitan Municipality Member cities (286 000) (378 836) 286 000 (378 836)
City of Tshwane Member cities - (378 836) - (378 836)
eThekwini Metropolitan Municipality Member cities - (505 115) - (505 115)
Manguang Local Municipality Member cities - (219 615) - (219 615)
Nelson Mandela Metropolitan Municipality Member cities - (329 423) - (329 423)
Buffalo City Municipality Member cities - (219 615) - (219 615)
City of Johannesburg Member cities - (505 115) - (505 115)
Msunduzi Municipality Member cities - (219 615) - (219 615)
City of Cape Town Member cities - (505 115) - (505 115)
Department of Provincial and Local
Partner (2 613 798) - 350 000 (2 263 798)
Government -NUDF
Development
Royal Danish Embassy (104.SAF.1.MFS.82.01) (3 748 864) - 123 524 (3 625 340)
partner/donor
Development Bank of South Africa Development
(150 000) - - (150 000)
(DBSA10268) partner/donor
Development
World Bank(DGF file:203108-07) (2 655 831) - 79 094 (2 576 737)
partner/donor
19. GOING CONCERN funds at both fixed and floating interest rates. The risk
is managed by maintaining an appropriate mix between
There are no current conditions or events that may affect fixed and floating rates and placing within market expec-
the going concern of the company. The need for knowl- tations.
edge sharing and management strategies across the cit-
ies exists, and remains a major focus of the company, its 20.3 Credit risk
partners and donors. The company’s credit risk is attributable to accounts receiv-
able, accrued income and liquid funds. The credit risk on
liquid funds is limited because the counter party is a bank
20. FINANCIAL RISKS with credit rating assigned by international credit-rating
agencies. The company has no significant concentration
20.1 Solvency risk of credit risk.
The company is exposed to currency risk to the extent that
grants are received by the company in foreign currency. 20.4 Liquidity risk
The company manages liquidity risk by monitoring fore-
20.2 Interest rate risk cast cash flows and ensuring that adequate cash reserves
The company is exposed to interest rate risk, as it places are maintained.
R R
cotinues over
2009 2008
R R