VISION 2017 MISSION A transformed Construction Industry that delivers value and contributes to economic growth of South Africa.

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2 VISION 2017 A transformed Construction Industry that delivers value and contributes to economic growth of South Africa. MISSION 2017 To drive enhanced delivery management, capacity improvement and contractor development in the construction industry through strategic interventions and partnerships.

3 Help Desk Support: GP 30 April December 2012 Data Capturer: GP New 1 December 2012 Data Capturer: EC 30 November 2012 Not filled Data Capturer: WC 30 March July 2012 CEO s Office Chief Executive Officer 31 October April 2012 Executive Assistant to the CEO 31 August October 2012 Board Secretariat New 19 November 2012 Employee Relations Table 13: Misconduct and Disciplinary Actions Nature of Disciplinary Action Quantity Verbal Warning 0 Written Warning 2 Final Written Warning 0 Dismissal 2 National Education, Health and Allied Workers Union Membership The National Education, Health and Allied Workers Union (NEHAWU) was granted permission to organise within the cidb during Financial Year 2011/12. The recognition agreement to govern collective agreement between the cidb and the Union was entered into on 15 May An addendum to this agreement was entered into on 4 December The collective agreement has created a platform for consultation and joint decision-making between management and employees, so as to address the communication gap which had existed for years. There is an urgent need to nurture a culture of trust in the organisation through communication and mutual understanding. The collective agreement and constant interaction between management and employee representatives is aimed at: Collectively addressing the issues that impacts on employees; Creating an avenue for management to inform and consult with employees on aspects that impact on employees and business operations; Creating a workplace that is performance-driven; and Serving as a platform and avenue for the resolution of employee concerns at the lowest level

4 AnnUAL RePORt 2012/2013 1

5 List of Abbreviations construction industry development board AC AG BAC BEC BER BPCRS CCC CD CDP CE CETA cidb CIFOZ CIOB CII CPUT CMS CRS CRS DBSA DPW EC ECDC EAP EDMS EPIN EPWP ESDA FET FHU FIDIC FS GB GBCSA GCC GCD GDP GP GRAP HR IDC IDIP IDMS IDMT IDT IDZ Audit Committee Auditor-General Bid Adjudication Committee Bid Evaluation Committee Bureau for Economic Research Best Practice Contractor Recognition Scheme Construction Contact Centres Contractor Development Contractor Development Programme Civil Engineering Construction Education and Training Authority Construction Industry Development Board Construction Industry Federation of Zimbabwe Chartered Institute of Building Construction Industry Indicators Cape Peninsula University of Technology Construction Management System Construction Registers Service Contractor Registers Services Development Bank of Southern Africa Department of Public Works Eastern Cape Eastern Cape Development Programme Employee Assistance Programme Electronic Document Management System European Policy Institutes Network Expanded Public Works Programme Employment Skills Development Agency Further Education and Training Fort Hare University Fédération Internationale Des Ingénieurs-Conseils (International Federation of Consulting Engineers) Free State General Building Green Building Council of South Africa General Conditions of Contract Growth and Contractor Development Gross Domestic Product Gauteng Province Generally Recognised Accounting Practice Human Resources Industrial Development Corporation Infrastructure Delivery Improvement Programme Infrastructure Delivery Management Infrastructure Delivery Management Toolkit Independent Development Trust Industrial Development Zone 2

6 ILO ISO JBCC JV KPMG LP MoU MP M&E NC NCDP NCV NDPW NEC NEF NIMS NSF NW OHS OHSAS OHSC PAA PAP PCDF PDP s PDM PFMA PE PEP PICC PPP RC RoC RoPSP RoP RPL SABS SADC SAWIC SBSA SCM SDA SEDA SIPS SLA WC International Labour Organisation International Organisation for Standardisation Joint Building Contracts Committee Joint Venture (company name) Limpopo Memorandum of Understanding Mpumalanga Monitoring and Evaluation Northern Cape National Contractor Development Programme National Certificate Vocational National Department Public Works New Engineering Contract National Empowerment Fund National Infrastructure Maintenance Strategy National Stakeholder Forum North West Occupational Health and Safety Occupational Health and Safety Advisory Services Occupational Health and Safety Committee Public Administration Act Procurement Advisory Panel Provincial Contractor Development Forum Performance Development Plan Procurement and Delivery Management Public Finance Management Act Potential Emerging Project Execution Plan Presidential Infrastructure Coordination Commission Public Private Partnership Risk Committee Register of Contractors Register of Professional Service Providers Register of Projects Recognition of Prior Learning South African Bureau of Standards Southern African Development Community South African Women in Construction Standard Bank of South Africa Supply Chain Management Skills Development Act Small Enterprise Development Agency Strategic Integrated Project(s) Standard Level Agreement Western Cape annual report 2012/2013 3

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8 annual report 2012/2013 5

9 Minister s Foreword Financial Year 2012/13 has been another challenging year for the construction industry, characterised by difficult economic conditions, ongoing slow pace of transformation of the industry, and the surfacing of collusion. As highlighted in this Annual Report, the Construction Industry Development Board (cidb) continues to play a strong role in responding to these challenges, as well as in supporting the construction industry to respond to government s development agenda. The constant challenge however is for the cidb to intensify its efforts to enhance its contribution to the development of the construction industry and the growth of the South African economy. Minister of Public Works Hon.Thembelani Thulas Nxesi Although there are certainly signs of a recovery taking place in the industry, the difficult economic conditions continue to impact negatively on employment, job creation, contractor development and skills formation. It is imperative therefore that the roll-out of government s infrastructure plan is not left wanting in this regard, to minimise under spending, delays and inefficiencies and to maximise infrastructure spend as an economic and social enabler. A strong and vibrant industry focusing on transformation of the industry and job creation, is therefore central to the roll-out of government s infrastructure plan as highlighted in the 2012 State of the Nation Address of the President of South Africa. It is against this objective that I tasked the cidb to co-ordinate the Construction Industry Transformation Summit that was held in November construction industry development board The Construction Industry Transformation Summit was singularly important to recommit industry to the objectives of transformation and call on action to improve the pace and depth of transformation in the construction industry which, is lagging and is not representative of what government, society or the industry desires. The cidb s role and focus on monitoring the state of the industry, ongoing interventions in collaboration with National Treasury to enhance the procurement, delivery of public sector infrastructure, as well as their support to contractor development and growth of the emerging sector are also important, and are beginning to show positive impact. I commend the cidb for the continued effort to enforce compliance to its prescripts, development and implementation of its integrity management systems, and I encourage the 6

10 Board to exert same effort towards promoting best ethical practices in the construction sector. Fraud, collusion and corruption undermine transformation, contractor development and the country s social and economic objectives. A clear message must be sent that these practices will not be tolerated. In conclusion, I wish to acknowledge and once again commend the management and staff of the cidb for their continued support to the construction sector. I want to acknowledge and thank the Board for their ongoing strategic leadership and support in meeting cidb s mandate. As the Board nears completion of its term I want to express particular gratitude for their sterling work, and for their dedication and commitment to advancing the construction industry s development and transformation. I am particularly pleased that the cidb has again achieved an unqualified audit report. Hon. Thembelani Thulas Nxesi Minister of Public Works 31 st July 2013 annual report 2012/2013 7

11 Statement by the Board Chairperson Financial Year 2012/13 marks 12 years of the cidb operations. We move into the next decade of construction regulation, mindful of the critical role that the cidb must play to continuously level the playing fields for transformation, and for the industry to expand its role as a catalyst for economic and social development. Many challenges lie ahead. As the Board, we are pleased and privileged to support and lead the cidb into the new decade and the next phase of construction industry development. With the Register of Contractors and the Register of Projects firmly in place, the cidb is gearing up to move into the Best Practice Contractor Recognition and Best Practice Project Assessment and Recognition Schemes, as the second phase of the construction industry Registers. A number of Best Practice Standards under development were published for comment in the Government Gazette during the period under review. These will support contractor development and contribute to performance improvement. Chairperson: cidb Board Bafana Ndendwa Focus of the Registers during Financial Year 2012/13 was centred around consolidation of our operations to improve systems efficiency and the standard and level of service provided to clients and contractors. I thank the staff and executive of the cidb for the unwavering commitment that has ensured a successful transition to the new IT software system in the face of challenges during the SIYAKHA Project. construction industry development board The Register of Contractors reflects the nature, size and geographic distribution of contractors. The Register serves not only as a barometer of contractor development, but also as an indicator of the state of the economy and its impact on the construction industry. During the period under review the number of Grade 1 contractors continued to grow fuelled by prevailing unfavourable economic conditions. Going forward, the cidb will be reviewing registration of Grade 1s in consultation with the industry, through the Registers Task Team which was established in Financial Year 2012/13. Significant progress was also achieved towards bringing to finality amendments to the Construction Industry Development Regulations of When approved, the amendments will 8

12 improve chances for contractors to maintain and improve their grades on the Register of Contractors. The amendments aim to improve the Register of Contractors as a risk management tool taking into account the state of development of the emerging sector, and to better align registration requirements with the business and operating environment in the construction industry. I am pleased that the Minister of Public Works launched the National Contractor Development Programme (NCDP) during the period under review, elevating the status of capacity development on the national construction agenda. The NCDP was also endorsed by MinMEC, setting the stage for monitoring and evaluation of contractor development. The National Stakeholder Forum has also established the Contractor Development Task Team, to look into areas of improvement in consultation with industry stakeholders. During Financial Year 2012/13, the cidb ramped up the monitoring and enforcement of compliance to construction procurement prescripts. Following the compliance audit blitz, the cidb has instituted investigations and action against individual clients on compliance. Much more still needs to be done to increase the level of enforcement going forward. We have intensified engagement with stakeholders substantially improving relations with industry and key stakeholders. The cidb convened the Construction Industry Transformation Summit on behalf of the Minister in November The Summit reviewed the state of transformation in construction as well as the effectiveness of current legislation and initiatives, including the Construction Charter. The outcome of the Summit will inform actions going forward. Under the current Board the cidb has committed to convene the National Stakeholder Forum at least twice a year. The Forum convened in July 2012 and November Consultation was extended further to the provinces through the Provincial Stakeholder Liaison Meetings which took place in all the provinces. Robust engagement continues with stakeholders through various forums to strengthen consultation and cidb leadership on various construction industry challenges and initiatives. I wish to thank the Minister of Public Works, Hon. Thembelani Thulas Nxesi, for his unwavering support and leadership. I also wish to thank my colleagues on the Board, the cidb executive and the staff for their hard work and dedication. Bafana Ndendwa Chairperson: cidb Board 31 st July 2013 annual report 2012/2013 9

13 Chief Executive Officer s Report Financial Year 2012/13 ends with significant progress achieved towards strengthening and advancing delivery on the key strategic focus areas of the cidb. Among key milestones is completion of the rewrite and migration of the Construction Registers Service (CRS) to the new software system to improve service to contractors and clients. We are now poised to achieve greater efficiencies in the registration process and to offer better communication and response times to contractors, as well as to clients registering tenders and projects on the CRS system. The new system also provides for better integrity of the two Registers; the Registers of Contractors and of Projects respectively. Through the dedication of our staff to eradicate the initial backlog associated with the transitional period, the bulk of the applications has been resolved and the system is well on the way to stabilising. construction industry development board Acting CEO Hlengiwe Khumalo The Register of Contractors continues to grow in size, with much of the growth fuelled by economic conditions and the flooding of Grade 1 registrations. These adverse economic conditions also continued to affect cidb registered contractors threatening sustainability and posing a risk to contractor s ability to qualify for, and maintain, gradings on the cidb register. The cidb focused on supporting the process for approval of the proposed amendments to the Regulations governing the Register of Contractors. The amendments aim for better alignment of the register s requirements to the state of development of the emerging sector and the socio-economic conditions. Approval of the proposed amendments is expected early in the next financial year. Strengthening compliance to the cidb prescripts remained a top priority with disciplinary hearings instituted following the cidb audit blitz to determine the levels of compliance by individual clients. Clients were also assisted to improve their capacity to comply, with the cidb conducting capacitation workshops across the country. 10

14 I thank MinMEC for their continued support, which saw their official endorsement of the National Contractor Development Programme (NCDP) during the period under review. This partnership paves the way for implementation of NCDP aligned contractor development programmes and for better monitoring and evaluation of efforts. Major strides were also achieved towards establishment of cidb Standards for contractor development. The cidb continues to rely on the support and partnership of the many stakeholders within the construction industry. Stakeholder participation in the many engagement processes during the financial year facilitated critical consultation and dialogue on various industry development initiatives. In Financial Year 2012/13, the cidb held two meetings of the National Stakeholder Forum, nine Provincial Stakeholder Liaison Meetings across the country, the National Transformation Summit, which was convened by the Minister of Public Works, Thembelani Thulas Nxesi and many other forums. I thank the management and staff of the cidb for their commitment, the Board of the cidb for their continued leadership. In particular I thank Minister Nxesi for his invaluable support and leadership. Hlengiwe Khumalo Acting CEO 31 st July 2013 annual report 2012/

15 cidb Board Members construction industry development board 12

16 cidb leadership annual report 2012/

17 Progress Against Annual Performance Plan construction industry development board 14

18 Register of Contractors The Construction Registers Service comprises the Register of Contractors and the Register of Projects which have been established in terms of the CIDB Act No. 38 of The Register of Contractors grades and categorises contractors according to financial and works capability. It is mandatory for public sector clients to apply the register when considering construction works tenders. The Register of Contractors facilitates public sector procurement and promotes contractor development. Registrations Processing Contractor registrations are processed at the cidb provincial offices and at the registrations unit at the cidb head office in Pretoria. The entry level Grade 1 applications are processed at the provincial offices. The process takes approximately 48 hours. The cidb is required to process Grade 2 to 9 applications within 21 working days. In order to provide improved services to contractors the cidb upgraded the registration software systems. The new software system enables improved customer service, better integration of services across the registration processing points and greater integrity in registration processes. There were problems experienced with the new system which were exacerbated by network infrastructure constraints. This hampered the turnaround time for processing of applications. This slowdown occurred in the period of August 2012 to March The software systems have largely stabilised and production outputs are back to the levels experienced before implementation of the new system. The cidb is planning an upgrade of the IT network infrastructure in May 2013 which will also enable faster registration outputs across all registration processing points. The focus for Financial Year 2012/13 and beyond will be on improving customer services through better integration of registration services across all cidb registration service points and harnessing the technology platform implemented in Financial Year 2012/13. The register noted the highest registrations output in October 2012 than any other month in the past two Financial Years. With this being an inspiring achievement, the goal ahead is to continuously improve on this new record on a month-to-month basis. This is significant in light of challenges experienced with the implementation of the new registration software system as it indicates that the system is stabilising. The clearance of backlogs in applications is being prioritised. Feedback on Customer Service Customer feedback is facilitated through an electronic touch pad system at each cidb provincial office. The system enables stakeholders to comment anonymously on their service experience giving provincial offices an opportunity for service analysis and remedial action. It also assists the organisation to address areas where customer service falls consistently below expectation. Feedback from contractors has been positive, although there are areas for improvement. annual report 2012/

19 Amendments to Regulations Improvements to the Registers regulatory environment began in Financial Year 2012/13. The revised Regulations are designed to better align the Register of Contractors with developments in the construction industry, and in particular the state of development of the emerging sector. Various improvements to the Register have been effected since it was first implemented in June These were informed by industry stakeholder inputs through the cidb National Stakeholder Forums and provincial workshops. The current amendments include: Removal of the requirement for contractors to have registered professionals in their employ; Reduction in the annual turnover requirements; Reduction in the track record requirements; Provision for review of the tender value limits; Removal of the Method B registration option where enterprises are registered with high financial capacity but no track record; and Improvement to the grading calculation for joint ventures. Interested parties had until 5 December 2012 to submit written comments on the proposed regulation amendments. It is envisaged that the Minister of Public Works will publish the final regulation amendments by the end of June construction industry development board 16

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21 COntRACtOR DeveLOPMent The cidb Contractor Development Strategy The cidb Contractor Development Strategy was finalised in November 2012 for implementation in Financial Year 2013/14. The various elements of this strategy are depicted in the diagram below: Key elements that are being implemented to take the contractor development strategy forward include, amongst others, the: NCDP Framework; COnstRUCtIOn InDUstRY DeveLOPMent BOARD cidb Best Practice Project Assessment Scheme; cidb Best Practice Contractor Recognition Scheme; Capacitation of clients in support of contractor development; Supporting training for contractors; Practice notes and guides; Monitoring of contractor development programmes. 18

22 The NCDP Framework MinMEC adopted the National Contractor Development Programme (NCDP) Framework in September The framework, together with contractor development guidelines, formed the basis of cidb engagement with clients on implementation of contractor development. A series of workshops were held to promote a common approach to contractor development. The feedback and lessons learnt from these engagements are crucial for the planned review of the NCDP Framework in Financial Year 2013/14. To improve understanding of contractor development the cidb engages all provinces through Provincial Construction Development Forums (PCDFs). In Financial Year 2012/13, participation in PCDFs expanded to reach provincial public sector clients, contractor associations and professions. The cidb Best Practice Project Assessment Scheme The CIDB Act requires that the Board must establish a Best Practice Project Assessment Scheme based on the best practices identified by the Board. All construction contracts above a prescribed tender value will then be subject to an assessment of compliance with best-practice standards and guidelines published by the Board. Several key best practices are currently being finalised by the cidb working together with industry stakeholders, for possible roll-out as part of the Best Practice Project Assessment Scheme. These include the: Standard for Indirect Targeting for Enterprise Development Standard for Developing Skills through Infrastructure Contracts The Standard for Indirect Targeting for Enterprise Development was published by the Board in Government Gazette No of 25 February The Standard is the culmination of several years of development and consultation with industry stakeholders. The Standard provides for a minimum five precent of the total project value on selected public sector contracts to be undertaken by joint-venture partners or to be sub-contracted to developing contractors that are also to be beneficiaries of enterprise development support from the main contractor. It is the cidb s intent that the Standard will be mandatory on Grade 7 to 9 public sector General Building (GB) and Civil Engineering (CE) contracts by early When implemented, it is estimated that the Standard could result in approximately R4.6 billion of contracts to developing enterprises per year and 700 contractors receiving developmental support per year. cidb Best Practice Contractor Recognition Scheme The CIDB Act No. 38 of 2000 requires the Board to establish a Best Practice Contractor Recognition Scheme which: a) Enables organs of state to manage risk on complex contracting strategies; and annual report 2012/2013 b) Promotes contractor development in relation to best-practice standards and guidelines developed by the Board. Work is progressing well with the development of the cidb Best Practice Contractor Recognition Scheme. 19

23 Grade Enablers: Business, H&S, Quality, Env, etc. Results 9 SANS / ISO / OSHAS Systems cidb Accredited Management Systems 2 cidb Competence Recognition Performance Reports The Standard for Contractor Performance Reports The cidb Standard for Contractor Performance Reports was published for public comment in Government Gazette No of 25 February The Standard forms part of the cidb Best Practice Contractor Recognition Scheme. It provides for a consistent method of the assessment of the performance of a contractor with respect to the following project parameters: Time management; Cost management; Quality management; Health and safety management; Management of site conditions; and Management of sub-contractors (including payment). The Contractor Performance Reports will also include a record of any breaches of contract (including those resulting in the termination and/or cancellation of a contract) as well as non-compliance with mandatory cidb Best Practices. construction industry development board It is anticipated that the Standard will be published as a final best-practice standard shortly. Standard for Competence Recognition A stakeholder Focus Group has endorsed acceptable minimum competence standards for running a contracting enterprise and for supervising building and construction works. The competence standards have been developed for contractors within the cidb classes of construction works of General Building (GB), Civil Engineering (CE), and selected artisanal categories within the Special Works (SW). Within these classes of works the standards apply in the following categories: 20

24 cidb Grades 7 to 9 being a contractor who has access to a SACPCMP registered Construction Manager, or recognised equivalent; cidb Grades 2 to 6 being a contractor who has adequate knowledge and experience to carryout work within pre-determined sub-categories; cidb Grades 1 to 5 being a contractor who has adequate knowledge and experience to carry out work within pre-determined trade categories. The competence standards are included in the NCDP Guidelines for Implementing Contractor Development Programmes. Construction Management Systems To promote and recognise performance improvement by contractors in, typically, Grades 5 to 7, the cidb has developed a customised standard for Construction Management Systems (CMSs) based on recognisable construction industry minimum standards. The Standard covers: Health and safety management; Quality management; Environmental management (covering air, water, land and waste). The Standard for Construction Management Systems allows for expansion and conversion to meet ISO or OHSAS requirements in the future, and has been submitted to the South African Bureau of Standards (SABS) for development into a SANS Standard. It has passed the committee draft stage, and will be issued for public comment shortly. Client Capacitation The cidb capacitated clients on implementation of NCDP through training. Major provincial infrastructure clients such as the provincial Departments of Health, Public Works, Education, Roads and Transport respectively underwent the training. In each province the cidb held quarterly Provincial Contractor Development Forums aimed at providing support to clients. Support was also provided through client capacitation workshops, provincial Client Procurement Officers (CPO) meetings and through bilateral engagements with clients. Public sector clients share knowledge and information on procurement best-practices, compliance to cidb prescripts and contractor development issues at CPO meetings. The meetings also help to strengthen cidb relations with clients. In total 13 CPO forums were held in all the nine provinces. These covered a wide range of issues including: PPPFA implications for construction procurement; Fronting; annual report 2012/2013 Potentially Emerging Status; Supplier development opportunities; 21

25 Black Economic Empowerment and the transformation agenda; Procurement officials skills development plan; and Best-practices in construction procurement. Training for Contractors An amount of R was allocated to each province for contractor training. Contractors were trained on financial management, organisational health and safety, contracts management and on construction management. Training was rendered in terms of agreements with stakeholders in the form of Memoranda of Understanding, Memoranda of Agreement or to those within a contractor development programme. A total of 512 contractors benefited from cidb funded training. The Northern Cape Department of Economic Development contributed one million three hundred thousand rand (R1, ) toward training of contractors. The training took place in five Northern Cape districts; namely Frances Baard, Siyanda, John Toale Gaetsewe, Pixley Ka Seme and Namakwa. The table below reflects targeted training per province. Table 1: Number of contractors trained per province Number of Emerging Contractors Trained Per Programme Province Occupational Health and Safety Construction Management Contract Management Pricing and Tenders Financial Management NEC Free State Northern Cape Eastern Cape North West Western Cape Limpopo construction industry development board Mpumalanga Gauteng KwaZulu-Natal Total number of contractors trained

26 Catalytic Projects Catalytic projects are an initiative of the cidb to encourage stakeholder participation and contribution to collaborative projects aimed at supporting contractor development. Each project is initiated on cidb funding, which may, in turn, be matched by partnering stakeholders. Needs addressed by catalytic projects are identified by stakeholders in each province through the PCDFs. During the period under review the cidb allocated an amount of one hundred thousand rand (R ) per province for catalytic projects. Table 2: Catalytic projects implemented in support of contractor development Project Project Description Research on Women CDP Study into the impact of CDPs on development of women contractors. Formulation of targets by client Resource planning support to clients on implementation of contractor development programmes and alignment of programmes to the Medium Term Expenditure Framework. Study into the application of PE Status To conduct a study aimed at identifying constraints and challenges leading to poor usage of Potentially Emerging (PE). Monitoring the impact of CDPs Monitoring of beneficiaries and their progress following participation in CDPs. Demystifying Set-Asides The cidb developed Practice Note 29: Allocating Sustainable Work Opportunities to Contractor Development Programmes to clarify set-asides and ring fencing, particularly in the context of National Treasury Practice Note 2 of The cidb Practice Note 29 clarifies the legality of set-asides for contractors enrolled in a contractor development programme. Workshops were held in all nine provinces to promote the Practice Note. A tips brochure for clients was also issued to further capacitate and support implementation of contractor development by clients. Monitoring Contractor Development Programmes PCDFs provide opportunities to monitor and evaluate contractor development programmes. Analysis of the statistical information emerging from the PCDFs guides and informs development of targeted interventions by clients to address gaps and focus on areas of improvement. It also helps to gauge progress on implementation of contractor development programmes nationally, to establish trends, as well as to measure the effectiveness of efforts to develop and support the emerging contractors. annual report 2012/

27 Provincial Heads of Departments (HoDs), MECs, and the National Contractor Development Programme Steering Committee are supplied with statistics and reports on contractor development programmes on a quarterly basis. A single system used by stakeholders; At least contractors were participating in 17 Contractor Development Programmes at the close of Financial Year 2012/13. Of these, 875 contractors were in KwaZulu-Natal Development Programmes. An overview of the number of contractors per grade is shown in the adjacent figure (excluding KwaZulu- Natal and Mpumalanga). Future efforts will need to focus on ensuring client alignment to the cidb guidelines for implementing CDPs in order to maximise the efficiency of these programmes and to measure impact. The quality of reporting provided by clients has not been optimal and considerations are being given to developing an electronic monitoring and evaluation system linked to the cidb Construction Registers Service. This will have the following expected benefits: Clients will need to register only once to receive all the value add services provided by the system; Employers will be able to access the system in the same way that they access Register of Projects (RoP) and i-tender modules. This will reduce the learning curve; and cidb will be able to monitor and report on CDP s in real time. Strengthening cidb Institutional Arrangements Institutional arrangements to drive and co-ordinate efforts on contractor development were consolidated through: Quarterly meetings of the NCDP Steering Committee consisting of the Department of Public Works and the cidb; The National Contractor Development Forum. The Forum was established on 26 November 2012 and consists of key National Infrastructure Departments and other critical national stakeholders. It meets quarterly to address matters related to contractor development at a national level; construction industry development board The National Stakeholder Forum (NSF) Contractor Development Task Team. The Task Team was established in July 2012 to take forward the deliberations of the NSF, the Transformation Summit of November 2012 and the Provincial Stakeholder Liaison Meetings of February and March 2013; and Engagement with the technical MinMEC of COGTA on the NCDP framework and Guidelines. This has laid the groundwork for capacitation of municipalities through the SALGA working group in Financial Year 2013/14. 24

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29 Public Sector Procurement The CIDB Act No. 38 of 2000 mandates the cidb to promote procurement reform and to within the framework of the policy of Government, promote the standardisation of the procurement process with regards to the construction industry. The Construction Industry Development Regulations of 2004, as amended, the Standard for Uniformity in Construction Procurement and the cidb Code of Conduct for parties involved in construction procurement give effect to the objectives of the CIDB Act. In terms of the Regulations and the Standard for Uniformity, public sector clients must advertise all construction tenders on the cidb i-tender and register award of contracts on the cidb Register of Projects. Register of Projects The Register of Projects gathers information on the nature, value and distribution of projects. When clients register projects, the track records of contractors are updated and the information is available to other clients through the cidb website. Public sector clients are required to register projects above R while private sector clients and large state owned entities are required to register projects above R10 million. The Register has the potential to improve transparency in the award of projects and serves to assist contractors when upgrading with the cidb. It also forms the basis for the implementation of the best- practice project assessment scheme designed to drive performance improvement. The cidb has also developed the free i-tender service an online service used by clients to advertise tenders on the cidb website. The i-tender service automatically alerts registered contractors of tender opportunities by and SMS. Tenders are also displayed on the cidb website. Compliance with legislative requirements to Register of Projects is made easy for clients who convert the same tender information after award and add additional post award information. Greater effort was invested in supporting clients on using the i-tender and the Register of Projects, as well as on producing statistics and reports of client compliance in Financial Year 2012/13. This focus is planned to continue in the Financial Year 2013/14. Compliance Monitoring The cidb quarterly Compliance Monitor was introduced in 2012 to provide indicators of the level of compliance with the i-tender/register of Projects by client bodies. These indicators can be used by clients to verify compliance with the cidb regulations, and by the cidb to support enforcement actions and sanctions. Cases will be reported to the Auditor-General of South Africa. construction industry development board The Compliance Monitor is being rolled-out incrementally and currently focuses on: Selected national and provincial infrastructure departments; Public entities; and Metropolitan Councils. The Compliance Monitor will be extended to local authorities in due course. 26

30 Non-compliance by Government Departments Regulations 18(1) and 24 mandate employers to advertise tenders on the i-tender system and to register projects on the Register of Projects at award stage. The cidb implemented a compliance audit blitz to evaluate the levels of compliance on a sample of public sector employers. The sample of employers investigated in the various provinces appears in Table 3 below: Table 3: Sampled employers investigated Statistics Per Province GP MP NW KZN LP NC FS EC WC Total Number of Sampled Employers Investigated The breakdown in terms of percentages is as follows: cidb audit blitz - samples elected ANNUAL REPORT 2012/2013 The compliance audit blitz has been finalised, and out of 73 sampled employers, 56 were compliant. Disciplinary hearings were instituted in terms of Part V of the Regulations against those employers who were non-compliant. 27

31 Table 4 below shows statistics of disciplinary hearings that were concluded: Table 4: Disciplinary hearings concluded: Period April 2012 to March 2013 Statistics of Guilty Findings Per Province( All found guilty) GP MP NW KZN LP NC FS EC WC Total Number of Hearings Instituted and Finalised cidb Audit hearings (Conducted And Finalised) COnstRUCtIOn InDUstRY DeveLOPMent BOARD In addition to cases of non-compliance by employers, the cidb has had success in the management of reported cases on any alleged breach of the Code of Conduct, including cases reported against contractors. Any reports received through cidb fraud hotline, telephone, s are investigated. 28

32 Table 5: Categories of transgressions investigated: Period Statistics per Province Total April 2012 to March 2013 Number of GP MP NW KZN LP NC FS EC WC Queries 1 Tax Certificate Track Record Financials Code of Conduct Award to nonregistered contractor Award to incorrect grade i-tender non compliance Standard for Uniformity Professionals Abuse of cidb logo 1 1 TOTAL The total number of the categories of transgressions investigated will differ from the total number of investigations received, because the investigation can be conducted in more than one category of transgression. The investigations conducted and concluded on complaints received against contractors can be summarised as follows: Table 6: Period April 2012 to March 2013 Statistics Per Province GP MP NW KZN LP NC FS EC WC Total Number of Hearings Instituted and Finalised annual report 2012/

33 Contractor Complaints Investigated and Concluded There are however additional 12 cases received during this period under review but the investigations have not be finalised. In another case, the allegation was unfounded and thus the investigation was withdrawn. Many have led to disciplinary hearing being instituted against transgressors in terms of Chapter V of the Regulations. The successful outcome of disciplinary hearings and the sanctions that are issued by the cidb are published in the Government Gazette and the cidb website. The disciplinary hearings instituted in terms of Chapter V of the Regulations against contractors and employers are as follows: Period April 2012 to March 2013 Statistics per Province GP MP NW KZN LP NC FS EC WC Totals COnstRUCtIOn InDUstRY DeveLOPMent BOARD Of the finalised cases, the number of respondents guilty Of the finalised cases, the number of respondents acquitted Of the finalised cases, the number of cases withdrawn TOTALS

34 The breakdown in terms of percentages is as follows: Hearings Instituted and Concluded Transgressions can generally be categorised as follows: employers non-compliance to the cidb standard for Uniformity; Incorrect identification of the grade of contractors required for the level and complexity of construction works to be performed. This is mainly as the result of a poorly written scope of work to be performed and/or incorrect estimates; Contractors misrepresentation of information to the cidb; and Breach of the cidb Code of Conduct. Client Capacitation and Training The cidb capacitation programme trains clients on the CIDB Act, the Regulations, the Standard for Uniformity in Construction Procurement and on requirements for compliance with these prescripts. this service is provided on request and at no cost to public sector clients. Clients were trained on different procurement issues in the nine provinces, ranging from: AnnUAL RePORt 2012/2013 The cidb Regulations; The cidb i-tender and the Register of Projects; the cidb standard for Uniformity in Construction procurement; 31

35 Procurement procedures; The cidb registration; Procurement strategies in support of contractor development; Practice Notes; Applying the cidb Registers in construction procurement; Compliant procurement documentation; The CIDB Act 38 of 2000; and Framework agreements. Table 8 below shows a list of clients trained on cidb prescripts during Financial Year 2012/13. Table 8: List of clients trained in Financial Year 2012/13 Provincial Departments Municipalities National & Other Agencies North West Sports, Arts & Culture Cooperative Governance & Traditional Affairs Public Works, Roads & Transport Health Education Provincial Treasury Ngaka Modiri District Municipality Mafikeng Local Municipality Ditsobotla Local Municipality Ratlou Local Municipality Tswaing Local Municipality Ramotshere Moiloa Local Municipality Bojanala District municipality Dr S Ruth Mompati District Municipality Dr K Kaunda District municipality Mpumalanga construction industry development board Umjindi Local Municipality Gauteng Eskom: Kriel Power Station Independent Development Trust (IDT) Construction Procurement Officials Forum 32

36 Department of Water Affairs Department of Roads & Transport Department of Infrastructure Development Westonaria Local municipality Mogale City Sedibeng District Municipality Johannesburg Market Johannesburg City Power Passenger Rail Agency of South Africa (PRASA) Eskom Airports Company of South Africa (ACSA) Transport Freight Rail Agricultural Research Council City Power Rand Water South African Revenue Services (SARS) Northern Cape Department of Transport, Roads & Public Works Provincial Treasury Sol Plaatje Local Municipality Ga-Segonyana Local Municipality Siyanda District Municipality Mier Local Municipality John Taole District Municipality Joe Morolong Local Municipality Tsantsabane Local Municipality Gamara Local Municipality Western Cape Department of Public Works & Transport Drakenstein Local Municipality The Waterkloof Local Municipality Koeberg Power Station Airports Company of South Africa (ACSA) Eskom South African Revenue Services (SARS) Supply Chain Forum Cape Town Community Housing Company (Pty) Ltd South African National Defence Force annual report 2012/

37 Department of Roads and Public Works Eastern Cape King Sabatha Dalindyebo Municipality Buffalo City Municipality Nkonkobe Local Municipality OR Tambo District Municipality Amathole District Municipality ARS Construction Procurement Officials Forum Department of Public Works (Provincial and Regional) Limpopo Polokwane Local Municipality Lepelle-Nkumi Local Municipality Greater Tzaneen Municipality Capricorn District Municipality Aganang Local Municipality Blouberg Local Municipality Molemole Municipality IDT Auditor-General of South Africa Construction procurement Officials Forum Department of Police, Roads & Transport Free State Matjhabeng Local Municipality Tokologo Local Municipality Nala Municipality Tswelopele Municipality KwaZulu-Natal Umgeni Water Transnet Richards Bay Industrial Development Zone construction industry development board 34

38 Transparency and Integrity in Construction Projects Public sector infrastructure projects are a major contributor to economic growth and to poverty reduction. However fraud and corruption in procurement, mismanagement and inefficiency can undermine the expected economic and social benefits of infrastructure delivery. Fraud and corruption in the public sector procurement has become a growing concern and needs to be addressed. The cidb has taken a firm position to fight fraud and corruption in the construction industry and has held engagements with key government departments, such as the Department of Public Works and National Treasury, as well as CoST International. A draft CoST model for South Africa was developed with the support of CoST International Secretariat. The Chairperson of the cidb Board delivered the keynote address, on behalf of the Minister of Public Works, at the African launch of the CoST International Programme on 25 October In his address, the Chairperson said he has no doubt that we have much to learn from the international best practice. It is therefore important that we continue to engage with the CoST initiative. In this respect we will continue to build on the knowledge gained to develop a South African CoST Model. The objective of CoST is to improve the value-for-money spent on public infrastructure by increasing transparency in the delivery of construction projects. The Construction Transformation Summit hosted by the Minister of Public Works on 23 November 2012 mandated the cidb to establish a task team to address transparency and integrity in construction projects. This task team will be established in Financial Year 2013/14. annual report 2012/

39 36 construction industry development board

40 Strengthening Infrastructure Delivery Capacity Infrastructure Delivery Improvement Programme (IDIP) The Infrastructure Delivery Improvement Programme (IDIP) is a partnership programme championed by the National Treasury, the cidb, the National Department of Public Works, and the Development Bank of Southern Africa (DBSA). The programme is primarily aimed at improving infrastructure delivery in the education, health and public works sectors at both national and provincial level. The current IDIP Phase III continues to boast a much stronger partnership which enjoys amongst others, the support of the Minister s Committee on the Budget. The Department of Basic Education (DBE) and the Department of Health (DoH) still play a strong leadership role in ensuring that IDIP systems and approaches are implemented in their sectors. IDIP phase III B will commence in Financial Year 2013/14. The review of IDIP is also scheduled to take place during the second quarter of Financial Year 2013/14. IDIP is focused on the following key areas of leverage which aim to lead to significant and enduring improvements in infrastructure delivery: Infrastructure Delivery Management Toolkit (IDMT) implementation; Provision of dedicated support to provinces on infrastructure planning and construction procurement; The development and implementation of an Infrastructure Delivery Management System (IDMS) to replace systems that are not effective and that are in some instance dysfunctional; and The implementation of the IDMS capacitation strategy which ensures the sustainability of IDMS through the appropriate structuring, staffing, and training of infrastructure units in both national and provincial departments of health, basic education and public works. During Financial Year 2012/13 IDIP achieved the following: Significant improvement in the application of the IDMT; Development of course material based on the IDMT by the University of Pretoria; Development of the Infrastructure Delivery Management Programme (IDMP); The adoption of the IDMS capacitation framework by the Limpopo, KwaZulu-Natal and Gauteng Provincial Cabinet. The MECs and HoDs for Health and Education have signed-off on the new structures, the post provisioning and job descriptions for the infrastructure units; and The recognition of the Standard for an Infrastructure Delivery Management System in the draft National Treasury regulations. The Infrastructure Delivery Management Toolkit (IDMT) annual report 2012/2013 The assessment report on the levels of application of the IDMT by the Provincial Departments of Basic Education, Health and Public Works shows that there has been a significant improvement in the levels of application of the core delivery processes of the IDMT. Unlike previous financial years, the report focused on portfolio management, project management and operations and maintenance. 37

41 Institutionalisation of the IDMT remains one of the key focus areas for IDIP to ensure that the Infrastructure Delivery Management System, which is the backbone of the IDMT, is fully embedded in the management of public sector infrastructure delivery. This is supported by IDIP s initiative to capacitate the infrastructure units with appropriately skilled personnel. The IDMT is subjected to continuous improvements as implementation progresses and it is envisaged that the next major upgrade will be undertaken in Financial Year 2014/15. Infrastructure Delivery Management Programme (IDMP) In order to build public sector capacity to deliver and manage infrastructure, IDIP has developed the Infrastructure Delivery Management Programme (IDMP) in partnership with the University of Pretoria. The purpose of this programme is to further institutionalise the IDMT core delivery processes within the public sector thereby building infrastructure delivery capacity. The IDMP also seeks to promote much needed uniformity in the way that public sector infrastructure is delivered and managed. The IDMP consists of both a Foundation Course and an Executive Course. Delegates from National and Provincial Treasuries, the national Departments of Higher Education and Basic Education, the national and provincial Departments of Health, Public Works and Sports, Arts and Culture, the DBSA and the cidb attended the Foundation Course which is a one-year certificate course at NQF Level 6. The target audience of the course is typically middle management who are the implementers. The Foundation Course is made up of five block weeks of five days each. Three block weeks were completed successfully in Financial Year 2012/13 and the remaining two blocks and the graduation ceremony will be conducted in Financial Year 2013/14. The Executive Course targets executive level management and was successfully conducted as per table below. It is conducted in two block weeks of three days and participants receive a certificate of attendance on completion of the two blocks. The objective of this course is to familiarise participants with the Infrastructure Delivery Management System (IDMS), its processes and procedures, as it applies to both inter- and intra-departmental decision-making processes at the executive level. The scope of the course is the IDMS Management Companion and its application at a top management level. Table 9: The 2012 schedule of the IDMP Executive Course Block Date Module No. of Delegates FOUNDATION COURSE construction industry development board 1 July 2012 Infrastructure Delivery Management System Orientation 2 August 2012 Portfolio Management (includes Infrastructure Planning and Programme Management) 3 November 2012 Project Management

42 Block Date Module No. of Delegates EXECUTIVE COURSE 1 July 2012 Infrastructure Delivery Management System Orientation in relation to inter/ intra departmental decision-making and Portfolio Management 2 October 2012 Construction Procurement Strategy, Performance Management, Procurement Legislation Infrastructure Gateway System (IGS) The cidb Standard for IGS has been completed. The Standard is also embedded in the draft Standard for delivery and maintenance of infrastructure which was published by National Treasury for public comment and closed in Financial Year 2012/13. Delays in Payments During the first quarter of Financial Year 2012/13, a focus group comprising of industry stakeholders reviewed the draft regulations developed to address the challenges of delayed payments in the construction industry. The focus group s inputs were incorporated into the draft regulations for submission to the Department of Public Works. Specific Government bodies such as the National Treasury, SALGA and COGTA are being consulted to broaden and expand cidb consultation in this process. The construction industry faces a major challenge of failure by client departments to pay contractors and consultants on time. This is a key blockage in the infrastructure delivery chain that undermines economic growth, infrastructure delivery as well as the developmental and transformational objectives of the country. The cidb will continue to work closely with industry stakeholders to develop meaningful and holistic interventions to address this scourge. annual report 2012/

43 40 construction industry development board

44 Skills Development The Standard for Developing Skills through Infrastructure Contracts The cidb Standard for Developing Skills through Infrastructure Contracts was published in the Government Gazette No for public comment in July The Standard had been developed through extensive industry consultations, and provided for workplace training of interns and up-skilling of company employees in programmes that result in nationally accredited outcomes, such as, learnerships and accredited skills programmes. The draft Standard provide for 0,5% of the tender value of General Building contracts and 0,25% of the tender value of Civil Engineering (CE) public sector contracts to be allocated to workplace training on public sector contracts in tender Grades 7 to 9. It is estimated that this will translate to around R280 million spend on workplace training per year; and learning opportunities per year respectively. Comment received on the draft Standard was very favourable, and the Department of Higher Education and Training (DHET) requested that they be extended to the candidacy phase for professional registration, and was also extended to services contracts. The final consultation has recently been concluded, and it is anticipated that the Standard will be published in the Government Gazette shortly. It is the cidb and DHET s objective that the Standard will be mandatory on selected government contracts, including SIPS projects. annual report 2012/

45 Monitoring Industry Performance The cidb has developed a suite of products to help monitor and evaluate the performance of the industry and to support contractor development including: Sector specific status reports; The cidb Construction Industry Indicators (CIIs); The cidb Quarterly Monitor; and The cidb SME Business Conditions Survey. The monitoring products build on the information within the cidb Register of Contractors and the cidb Register of Projects. Collectively, these products provide a base for a detailed understanding of the industry by the cidb. Statistics from the Register of Contractors The cidb Register of contractors reflects the nature, size and distribution of contractors. It also provides indicators for transformation and empowerment in the construction industry. During Financial Year 2012/13, the Register of Contractors experienced the following trends: Grade 1 The absolute number of Grade 1 contractors per province is shown in the figure below. It is seen that the number of registered Grade 1 General Building (GB) and Civil Engineering (CE) contractors in KwaZulu-Natal and the Eastern Cape appears to be disproportionally high when compared to the GDP or construction spend per province. Supply: Grade 1 (Absolute) GB CE construction industry development board 42

46 Grade 2 to 9 Details of the distribution of the total number of registrations in Grades 2 to 9 in General Building (GB) and Civil Engineering (CE) for South Africa and the total number of registrations over the past three years is shown in the following figures: Supply: Registrations per Grade (% Grades 2 to 9) Grade 9 7 & 8 5 & 6 2 to 4 Number GB Distrubution 1% 6% 22% 72% Total CE 100% 9 7 & 8 5 & 6 2 to % 7% 29% 64% Total % It is seen that the number of registrations in Grades 2 to 4 account for around 65% to 70% of the total registrations in Grades 2 to 9; whereas the number of registrations in Grades 7 to 9 account for around 7% of the total number of registrations. Of significance is that the trend in a reduction in the number of registrations in Grades 2 to 4 in both GB and in CE has reversed. However, the growth in the number of registrations in Grades 5 to 9 is seen to be small. annual report 2012/

47 Supply: Grade 1 (Absolute) GB CE to 4 5 & to 4 5 & & & 8 9 Upgrading of Contractors Details of the upgrading of contractors in General Building (GB) and in Civil Engineering (CE) within the past four quarters are shown in the table below. The average rate of contractor upgrades per year is seen to vary between around 5% for Grades 5 and 8 to around 10% for Grades 2 to 4 while contractors rate of upgrading for Grade 1 is significantly lower, namely around 3%. Of interest, except for the rate of upgrades in Grades 7 and 8, in General Building (GB), the overall rate of upgrades in General Building (GB) and Civil Engineering (CE) appears to be decreasing over the past three years (possibly reflecting the difficult economic conditions). construction industry development board 44

48 Upgrades From/To 2 to 4 5 & 6 7 & 8 9 Total Registrations % GB 7 & 8 5 & 6 2 to % 8% 9% 2% Total % 7 & 8 5 & 6 2 to CE Total % 5% 9% 11% 3% annual report 2012/

49 Upgrades per Year to GB CE Construction Enterprises Ownership and Equity Black Ownership Details of black ownership of cidb registered contractors (defined as ownership control of 50% or more) for South Africa is shown in the following figures. It can be seen that around 90% of cidb registered Grade 2 to 4 General Building (GB) and Civil Engineering (CE) contractors are black-owned. Furthermore, around 80% of all Grade 5 and 6 General Building (GB) and Civil Engineering (CE) contractors are blackowned, while around 60% of all Grade 7 and 8 General Building (GB) contractors are black-owned. Black ownership of Civil Engineering (CE) contractors in Grades 7 and 8 is however much lower at approximately 50%. construction industry development board 46

50 Supply: Black Ownership Grade 9 7 & 8 5 & 6 2 to 4 Number GB Black (%) 18% 68% 84% 94% Total CE 91% 9 7 & 8 5 & 6 2 to % 58% 78% 93% Total % The history profile of black ownership for South Africa is also shown in the below figures. Of concern is that, overall, black ownership representation has not significantly increased over the past three years. Supply: Black Ownership to GB CE annual report 2012/

51 Women Ownership The following figures show details of women ownership of cidb registered contractors (defined as ownership control of 50% or more) for South Africa. Supply: Woman Ownership Grade 9 7 & 8 5 & 6 2 to 4 Number GB Black (%) 0% 30% 44% 55% Total 767 CE 47% 9 7 & 8 5 & 6 2 to % 26% 39% 56% Total % On average, around 40% of all Grade 2 to 4 contractors are women owned whereas their ownership from Grades 5 and above is typically less than 30% in Civil Engineering (CE) and around 30% to 40% in General Building (GB). Supply: Woman Ownership to GB CE construction industry development board 48

52 The cidb Quarterly Monitor The cidb Quarterly Monitor provides an overview of the state of contractor development in South Africa as input to developing targeted intervention strategies in support of the National Contractor Development Programme (NCDP). The cidb Quarterly Monitor focuses on public sector supply and demand at a provincial level, and currently deals only with the General Building (GB) and Civil Engineering (CE) cidb Class of Works. A specific focus of the cidb Quarterly Monitor has been on obtaining a detailed analysis of contractor upgrades, downgrades, and new registrations. The cidb Quarterly Monitor also monitors empowerment trends, and should be used as a key input into the targeting strategies for contractor development programmes (CDPs) and particularly those that are aligned with the National Contractor Development Programme (NCDP). The latest cidb Quarterly Monitor shows that around 3% to 5% of the Grade 7 and 8 contractors are currently upgrading to a higher grade per year but this is significantly lower than that being observed a year ago. Similar trends are also observed with other contractor Grades, with the exception of Civil Engineering Grades 5 and 6. This decrease in the rate of development of contractors is directly attributable to the negative construction economy at present difficult construction economic conditions result in a slower rate of the development of contractors. The difficult economic conditions has also reflected in the growth in the number of contractor registrations with the cidb, and until around one year ago, the year-on-year growth in the number of registrations was decreasing in line with the difficult economic conditions. However, a somewhat surprising trend is that the cidb is currently observing an increase in the number of contractor registrations over the last few quarters at between 3% and 5% per year in general building and between 5% and 12% in civil engineering. This suggests confidence in the future of the construction economy, but it is questionable whether growth rates in the number of contractor registrations that exceeds the growth rate of the economy can be sustained. The growth in number of registrations is also likely to result in an increase in the competition in the industry. annual report 2012/

53 The SME Business Conditions Survey The cidb SME Business Conditions Survey measures business conditions amongst cidb registered contractors at a provincial level and in various contractor grades. The SME Business Conditions Survey is undertaken by the Bureau for Economic Research (BER) for the cidb. The Survey measures, amongst others, the business confidence, construction activity, tendering competition, employment and labour constraints amongst cidb registered contractors, predominantly in cidb Grades 3 to 8. The results of the Business Conditions Surveys show that business confidence in the General Building (GB) and Civil Engineering (CE) sectors has increased at a modest rate over the past three years, but still remains low. Of interest is the survey results for the constraints to business growth. These show the major constraints to growth for General Building to be: Access to work opportunities (75%); Access to skills (54%); and Access to credit (32%). Similar results were obtained for Civil Engineering. The cidb Construction Industry Indicators The cidb Construction Industry Indicators (CIIs) have been captured annually since 2003, and measure the performance of the industry focusing on clients, the client s agent/consultant and contractors. The CIIs are currently being captured by the cidb in partnership with the Department of Quantity Surveying and Construction Management of the University of the Free State. The current CIIs reflect indicators measured for projects completed in the 2011 calendar year, drawn from client for 498 construction projects, and for contractors and sub-contractors on projects across all nine provinces. 50 construction industry development board The CIIs show that clients were neutral or dissatisfied with the performance of contractors on 16% of the projects, and around 15% of the projects surveyed had levels of defects which are regarded as inappropriate. This client dissatisfaction can in fact be partially attributable to the client procurement systems in which the capabilities of the contractor have not been matched to the requirements of the contract. This is illustrated by the results which suggest that functionality was not taken into account in the adjudication of tenders on around 65% of public sector projects. Furthermore, on around 16% of the projects, the recommendations of the tender committee were overruled in the award of public sector projects. Contractors were neutral or dissatisfied with the quality of tender documents and specifications obtained from clients on around 22% of the projects surveyed. Of ongoing concern is that the 65% of payments to contractors were made within 30 days or longer after invoicing.

54 Sub-contracting in the South African Construction Industry Sub-contracting, including specialist, generalist, trade and labour-only sub-contractors, is an integral component of the construction industry, and its importance has been increasing in the industry over the last two decades in South Africa and elsewhere around the world. As part of the cidb s role to stimulate reform and improvement in the construction sector and to promote best-practice, the cidb undertook a study on the state of the sub-contracting sector with a primary objective to better understand skills development within the sub-contracting sector and to identify opportunities for improving skills development within this sector. The study focused on specialist, generalist and trade sub-contracting practices, and excluded labour-only sub-contracting practices. The study recognised that main contractors have a major influence on a sub-contractor s access to work opportunities. Key factors identified in the study that influence a main contractor s choice of subcontractors include the sub-contractor s: Financial capability; Track record; Construction management systems; Compliance with legislative requirements; and BEE status. Subject to a sub-contractor meeting these basic requirements, the study found that the key criterion for sub-contractor selection is then the sub-contractor s bid amount (or price). Relationships between contractors and sub-contractors are then predominantly long-term, and are dependent on the ongoing performance of the sub-contractor, including the quality of work of the sub-contractor. Most sub-contractors claimed not to have experienced significant problems with main contractors, and to have good working relationships with the main contractors. However, dissatisfaction with main contractors does arise because of late payments, under-payment, and where main contractors put pressure on sub-contractors to reduce their price (and hence margins). Specifically, the main contractors and sub-contractors in this study all identified payment practices as the main source of conflict between the parties, with the pay-when-paid principle being singled out as chief amongst these. Poor working relationships appear to be most prevalent in the low-income housing sub-sector due to the low profit margins which result in sub-contractors bearing the brunt of tough working conditions. Management practices are the backbone of any successful business, and this study has identified that: Overall, management practices of specialist sub-contractors were considered by main contractors to be good, but for generalist and trade sub-contractors were considered to be fair to poor; annual report 2012/2013 Financial management skills and business management systems of general sub-contractors were poor, with business management skills and management and supervision being fair; Many sub-contractors, especially smaller and trade sub-contractors have poor health and safety management practices; and 51

55 Many sub-contractors are reluctant to train their employees. The study notes that sub-contractor/main contractor relationships have a high potential for skills transfer and for learning, and the degree and quality of skills transfer mainly depends on: the willingness and aptitude of the sub-contractor; the willingness of the main contractor to pass on skills; and pressure or incentives from the client. However, successful development only happens if both main and sub-contractors are intent on long-term strategic relationships, as most sub-contractors are reluctant to share confidential information with other companies, especially financial information. The study concluded with various recommendations to strengthen the performance and sustainability of sub-contractors. construction industry development board 52

56 annual report 2012/

57 Stakeholder Engagements The National Stakeholder Forum The CIDB Act No. 38 of 2000 mandates the cidb to establish the National Stakeholder Forum to advise the Minister and the cidb Board on matters affecting construction industry development. The Act requires the Board to constitute the National Stakeholder Forum every two years and to convene the meeting of the Forum at least once a year. The Forum as currently constituted comprises of 120 members and has met twice during the period under review, on 4 July, 2012 and on 22 November The meeting on 4 July 2012 was attended by the Minister Public Works, Minister Thembelani Thulas Nxesi. At this meeting the Forum highlighted the following issues as affecting the development of the construction industry: Business integrity, including collusion, fraud and corruption; Procurement efficiency in the public sector; Public sector institutional capacity to deliver; Efficiency of current delivery mechanisms; Monitoring and evaluation of infrastructure delivery; Infrastructure maintenance; Skills development; Delayed payment; Packaging of projects to achieve transformation; BBBEE Scorecard; and Amendments to regulations governing the Register of Contractors. Three task teams were established to deliberate further and engage the cidb on proposed action around the following issues: construction industry development board Contractor Development and Registers Regulations; Skills for Infrastructure; and Balancing Delivery, Development and Empowerment. The purpose of the second meeting of the National Stakeholder Forum on 22 November 2012 was to review progress on the work of the three task teams. The work of the task teams continues. 54

58 Provincial Stakeholder Liaison Meetings The CIDB Act 38 of 2000 mandates the cidb to facilitate communication between construction industry stakeholders, in all spheres of Government and statutory bodies. The cidb Provincial Stakeholder Liaison meetings are integral to the cidb stakeholder communication to facilitate industry dialogue. They bring together Government, public sector clients, industry associations, academics, development practitioners, professionals, lending institutions and other stakeholders to engage on matters affecting the construction industry. Inputs from the Provincial Stakeholder Liaison Meetings inform the agenda of the National Stakeholder Forum, which is established in terms of the CIDB Act, to advise the Minister on matters that affect the construction industry s development. The Provincial Stakeholder Liaison meetings provide the cidb with a vehicle to broaden consultation on industry development initiatives and to communicate progress and outcomes of these initiatives. With the scope of the Provincial Contractor Development Forums (PCDFs) expanded to include broader industry development issues, members of the PCDFs now form the core of the Provincial Stakeholder Liaison meetings. The 2013 Provincial Stakeholder Liaison meetings were led by the cidb Chairperson, Mr Bafana Ndendwa and the Deputy Chairperson, Ms Lindelwa Myataza. Provincial Stakeholder Liaison meetings were held on the following dates: Table 10: Dates of Provincial Stakeholder Liaison meetings 2013 Date Province 13 February 2013 Western Cape 25 March 2013 Free State 19 February 2013 Eastern Cape 22 February 2013 KwaZulu-Natal 1 March 2013 North West 5 March 2013 Mpumalanga 12 March 2013 Northern Cape 19 March 2013 Gauteng 14 March 2013 Limpopo The Construction Industry Transformation Summit The cidb hosted the Construction Industry Transformation Summit in Johannesburg, Gauteng on 23 November The Summit was initiated by the Minister of Public Works, Minister Thembelani, Thulas Nxesi. In his opening address the Minister noted: annual report 2012/2013 I have said to the Summit organisers, that whilst issues of empowerment remain at the heart of this event, we need to see empowerment within a much broader context of transformation. It is conceivable that we can succeed in increasing the number of emerging contractors at grades 7, 8 and 9 and we increase the overall proportion and numbers of black professionals but if nothing else changes for the mass of our people, what have we really achieved? 55

59 Various presentations were made at the Summit to guide deliberations, including: State of Play: Driving Transformation; Government covering: The use of Government procurement to drive transformation; and Government institutions and programmes that have been established or tasked to drive transformation in the construction industry. Transformation and the Contracting Sector covering: The current state of transformation within the contracting sector; The state of contracting skills; and Key external factors that could impact on the transformation of contractors. Transformation and the BEP Sector covering: The market structure of the Built Environment Professions (BEPs) and its implications for transformation; Public sector procurement as a key policy instrument to drive transformation; Growing the skills base of BEPs to drive transformation and its major impediments; and BEPs industry transformation performance. The Summit concluded that: a) Transformation is not a threat, but an opportunity and must be embraced by all participants; b) The pace and depth of transformation in the construction industry is lagging, and is not representative of what government, society or the industry desires. c) Transformation is broad, but that at the heart of transformation is ownership. 56 construction industry development board d) Transformation is influenced by the construction economy and construction spend. Government delivery capacity is critical for Government spend to achieve its full potential e) The Construction Charter is an important instrument in furthering transformation, and its effectiveness needs to be examined. g) The supply and availability of skills underpins the ability of the construction industry to transform. The inequalities in education need to be addressed urgently, and the Departments of Basic Education and Higher Education and Training are key Government departments in this regard.

60 Transforming the industry cannot proceed at the levels we desire without restoring the skills supply line at all levels and across all sectors of the construction industry. In this regard, restoring the supply line for artisan training in the construction industry is very important, including the quality of such artisans, and the quality and relevance of such training. h) Fraud and corruption is impacting negatively on transformation, and there is no doubt that corruption is having a negative impact on transformation of contractors that are best able to perform and deliver. Furthermore, there are strong indications that collusion is likely to restrict new entrants by restricting competition to existing entrants. i) With regard to the contracting sector, there is a need to focus on, amongst others, transformation at contractor Grades 7 to 9. Transformation has to extend to the large contractors. The current deliberations within government and industry with regard to the need for balancing delivery and empowerment were endorsed. The roll-out of government s infrastructure programme must support transformation. The Summit concluded that no single solution will suffice in addressing transformation in the construction industry, and addressing transformation is not the responsibility of one entity or organisation. Addressing transformation requires a cross-sector response, involving all stakeholders in the public and private sector. Notwithstanding this, the role of the PICC in enhancing transformation will be critical. The Summit also concluded that an appropriate way forward is to build on the existing cidb National Stakeholder Forum (NSF) teams which are addressing many of these issues. A Transformation Forum was established to take the process forward. Provincial Infrastructure Co-ordinating Committees The cidb participates in the Provincial Infrastructure Coordinating Committees to ensure that issues such as construction procurement prescripts and other cidb programmes are elevated. The forum seeks to coordinate government s effort to roll-out infrastructure plans and to avoid a fragmented approach to infrastructure planning and development. Memoranda of Understanding and Agreements Memoranda of Understanding (MoU) and Memoranda of Agreements (MoA) have played a major role in cidb s strategy to strengthen relations with key stakeholders. A number of these agreements have reached the end of their validity period and need to be reviewed. MoUs and MoAs currently under review include those with Nedbank, Standard Bank and ABSA. Through these agreements the cidb has hosted successful financial management workshops for contractors to address the issue of access to finance which remains a challenge in construction and also to share information. annual report 2012/

61 Training and Development Programmes The cidb was instrumental in facilitating the Department of Trade and Industry s (DTI) Black Business Supplier Development Programme. It also facilitated training for contractors and contractor associations on topics including financial management, contracts management, Occupational Health and Safety and business management. Engagement on Proposed Amendments to the Registers Regulations Following publication of the proposed regulation amendments by the Minister on 5 October, 2012 the cidb embarked on a communication campaign. The objective of the campaign was to create awareness of the proposed amendments, to contextualise the amendments and to encourage stakeholders to submit comments before the closing date of 5 December, The campaign was launched with a briefing session held for national industry associations and other key stakeholders on 18 October 2012 in Tshwane, Gauteng. This was followed by further engagements at the provincial level as follows: Table 11: Provincial engagements on cidb draft regulation amendments Target audience Date Gauteng Infrastructure departments, contractors 28 September 2012 Khuthaza contractors 6 November 2012 Premier s contractors session Devon 16 November 2012 Standard Bank contractors session 21 November 2012 CDP Forum clients 30 November 2012 Eastern Cape Service Provider Contractors 25 October 2012 SAWIC 13 October 2012 Coega Development Corporation officials, SCM and Small Enterprise Development Unit 16 October 2012 Session with contractors in Port Elizabeth 16 October 2012 construction industry development board Mthatha, associations and contractors 23 October 2012 Contractors in Queenstown 24 October 2012 EC Contractors Forum general contractors at Amathole District 25 October 2012 PCDF 22 November 2012 Client departments 26 November 2012 Alfred Nzo District 28 November 2012 Joe Gqabi District 29 November 2012 Coega s road show with contractors 3 December

62 Limpopo Provincial Contractor Associations 31 October 2012 Free State SAWIC members 23 October 2012 MBA members (1 st group) Welkom 6 November 2012 MBA members (2 nd group) Bloemfontein 7 November 2012 NAFCOC members Welkom 8 November 2012 FABCOS members Bloemfontein 8 November 2012 Small Builders Workshop Sasolburg 16 November 2012 Contractors Workshop Qwa-Qwa 22 November 2012 Coega s road show with contractors 3 December 2012 Western Cape Provincial SCM Managers 15 October 2012 Associations and Contractors 29 October 2012 North West SAWIC, NEBCAT, Local Treasury, TAs; NAFCON, DPWR&T, Department Health, DPW Regional Office, Department Social Development 25 and 31 October 2012 KwaZulu-Natal MBA EXCO 5 November 2012 MBA members and KZN Black Association EXCO Members 28 November 2012 Northern Cape Siyanda District municipality Upington Region Gamagara Municipality Kathu/Kuruman Provincial Treasury Kimberley Department of Education Department of Public Works and Roads Department of Health Frances Baard District Municipality CDP Forum Meeting Namakwa District SEDA workshop with Contractors (at the Entrepreneurial week) 13 October November November November 2012 annual report 2012/

63 Newspaper Notices Notice of the proposed amendments to the Construction Registers Regulations was advertised widely in newspapers to reach as much of South Africa as possible. Notices were placed in the following newspapers: The Argus Burger City Press Cape Times Citizen Daily Dispatch Diamond Field Daily News Engineering News EP Herald Express: Free State, Northern Cape, Polokwane Isolezwe The Mail Mercury Mpumalanga News Pretoria News Rustenburg Herald Sunday Tribune Sowetan The Star Zululand Observer construction industry development board 60

64 annual report 2012/

65 Corporate Services Chief Financial Officer s Overview Corporate Services is geared towards ensuring the improved and efficient use of resources, compliance with statutory and external requirements and the achievement of sound administrative and financial management. Corporate Services strives to make certain that policies and procedures are in place so as to ultimately direct the management of financial resources and general operations, while assisting the entity to meet its strategic business objectives. cidb acknowledges that a skilled labour pool is critical to the realisation of the strategic organisational objectives. Accordingly there was great emphasis placed on the internal development of skills at all levels through the facilitation of workshops tailored to suit the operational needs of the organisation and its various divisions. As part of the organisation s funding arrangement, the cidb is required to submit accurate and timely financial reports to the Department of Public Works, which effectively reflect the prudent utilisation of available financial resources. Review of Policies Realising that some of the shortcomings in the cidb were as a direct lack of and/or existence of weak policies, a policy register was developed to record all policies in terms of their status, namely policies to be approved, developed and reviewed. This exercise helped in prioritising on the policies that were highly critical, most of which were amongst human resource administration. Furthermore, the cidb delegations of authority was finalised and approved by the Board. The whole administration of policies included the development of a framework for the administration. Training Workshops Attended Given the need to continuously work towards enhancing our business operations, the organisation regularly identifies training interventions which are both relevant and appropriate to our day-to-day activities. Employees are identified to attend such training to ensure up-skilling and improved production efficiencies, while reducing the skills gap. Timely Submission of Financial Reports construction industry development board The funding arrangement with the Department of Public Works requires that quarterly financial reports be submitted. Such reporting ensures absolute accountability on the part of cidb and facilitates rapid decision making by the department. It also provides for an effective monitoring system designed to ensure budget execution remains within approved limits. 62

66 Information Technology Governance The following reviews were undertaken within the period under review: An annual risk assessment of Information Technology (IT) was performed and areas of improvement were identified as focus area; The implementation of the Contractor Registration System (Siyakha) was finalised and all audit queries were addressed in terms of system development cycle requirements; Back-up management review was performed and the review highlighted areas of improvement which were considered by management; and King III governance gap analysis was performed and this identified some shortcomings in the IT governance principles which need attention by management. All the areas that need attention in terms of IT governance will be given priority in Financial Year 2013/14. annual report 2012/

67 Human Resources Management Table 12: Occupational levels Occupational Levels Male Female Foreign Nationals A C I W A C I W Male Female Total Top management Senior management Professionally qualified and experienced specialists and midmanagement Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents Semi-skilled and discretionary decision making Unskilled and defined decision making TOTAL PERMANENT construction industry development board Total fixed term contract Employees with disabilities Temporary employees Grand Total Percentage A - African C - Coloured I - Indian W - White 64

68 Table 13: Summary staff breakdown No. of Staff Representative % Males 71 41% Females % People with disability 0 0% Total staff % Employment Equity Statistics The employment equity levels at the cidb show a huge concentration of African females in the lower ranks than in the higher ranks. Furthermore, the higher ranks show not only a lower concentration of female employees but also lower levels of African candidates in general. There is an urgent need to address the employment of female employees in higher ranks. There are no disabled employees employed at the cidb and this situation needs to be addressed. Table 14: Staff complement Staff Complement Period ended 31 March 2013 Permanent staff 173 Full time contract staff 8 Temporary staff 18 Total 199 annual report 2012/

69 Table 15: Staff movement Position Date Vacated Date Filled Construction Registers Service Manager: Strategic Planning and Support 31 January 2013 Not filled Business Process Analyst 31 May October 2012 Process Quality Assurance New 13 August 2012 Process Quality Assurance New 13 August 2012 Registrations Co-ordinator New 2 April 2012 Supervisor: Admin 30 April August 2012 Senior Admin Officer 31 July 2012 Not filled Assessor New 1 May 2012 Assessor 18 Nov May 2012 Assessor 17 June April 2012 Resolution Officer 30 April August 2012 Corporate Services construction industry development board Chief Financial Officer 30 September October 2012 Manager: Information Technology 31 March 2013 Not filled Manager: Human Resource 31 July October 2012 Manager: Supply Chain New 1 November 2012 Manager: Facilities New 1 July 2012 Chief Accountant 28 February 2013 Not filled SCM Officer 31 October November 2012 SCM Practitioner 31 March 2013 Not filled Revenue Officer 2 November 2012 Not filled Refunds Officer 16 June October 2012 Programme Assistant 22 February 2013 Not filled Front Office Admin 31 August September 2012 Front Office Support 31 August 2012 Not filled Construction Industry Performance Programme Assistant 30 June 2012 Not filled GCD: Project Manager: Eastern Cape GCD: Project Manager: Limpopo Growth and Contractor Development New 3 September 2012 New 3 September 2012 Data Capturer: Gauteng 28 October December

70 Help Desk Support: NW 31 May September 2012 Help Desk Support: GP 31 July 2012 Not filled Help Desk Support: GP 30 April December 2012 Data Capturer: GP New 1 December 2012 Data Capturer: EC 30 November 2012 Not filled Data Capturer: WC 30 March July 2012 CEO s Office Chief Executive Officer 31 October April 2012 Executive Assistant to the CEO 31 August October 2012 Board Secretariat New 19 November 2012 Employee Relations Table 16: Misconduct and disciplinary actions Nature of Disciplinary Action Quantity Verbal Warning 0 Written Warning 2 Final Written Warning 0 Dismissal 2 National Education, Health and Allied Workers Union Membership The National Education, Health and Allied Workers Union (NEHAWU) was granted permission to organise within the cidb during Financial Year 2011/12. The recognition agreement to govern collective agreement between the cidb and the Union was entered into on 15 May An addendum to this agreement was entered into on 4 December The collective agreement has created a platform for consultation and joint decision-making between management and employees, so as to address the communication gap which had existed for years. There is an urgent need to nurture a culture of trust in the organisation through communication and mutual understanding. The collective agreement and constant interaction between management and employee representatives is aimed at: collectively addressing the issues that impact employees; creating an avenue for management to inform and consult with employees on aspects that impact on employees and business operations; creating a workplace that is performance-driven; and annual report 2012/2013 serving as a platform and avenue for the resolution of employee concerns at the lowest level possible, or escalation to appropriate management levels. 67

71 Table 17: NEHAWU membership statistics Number of union membership qualifying staff 167 Number of unionised employees 134 Union representation percentage 80% Recognition agreement signed Yes Wellness at cidb The primary goal of Employee Assistance Programme (EAP) is to inform, empower and provide employees with the means to take ownership of their well-being, by supporting them with the necessary interventions and self-management tools to better achieve a healthy work-life balance. The broad EAP has been a neglected area at cidb. This aspect is currently receiving priority attention so as to achieve a healthy work-life balance thus improving employee performance. Performance Management and Remuneration Strategy The performance management system of the cidb aims to align individual performance with the cidb s vision, mission and purpose. Employee Key Performance Areas (KPAs) are drawn from strategic objectives of the organisation and business units. Performance feedback is given to staff regularly and through performance assessments that are conducted twice a year. During the period under review, all staff members concluded performance agreements and participated in performance reviews. However, the said reviews were not used to pay bonuses due to a CCMA settlement agreement which was issued on 17 October The agreement called for the payment of an 8% guaranteed bonus to all staff in the bargaining unit for the period December 2012 and The current interim performance management and remuneration strategy and policies are under review. Human Resource (HR) Policies, Processes and Systems The HR policies that govern the staff conditions of service were developed and approved during the period under review. The business of the cidb has evolved affecting not only the support functions in terms of resources, growth and relevance, but also the core deliverables of cidb. HR has had to relook its positioning and the value that it adds. These must be embedded in its policies, processes and systems so that they are geared at enhancing its support to the ultimate cidb imperatives. 68 construction industry development board Training and Development The cidb has spent an amount in excess of R780, on employee training during the period under review. Training and development of employees has been identified as an area of priority for Financial Year 2013/14 onwards. Information Technology The Information Technology (IT) Unit is committed to continuous improvement and providing a service that fully supports and enhances the delivery of the various business units within the cidb. A strong focus

72 on business alignment and improvement of processes is the driving factor of the Unit and will continue to ensure the delivery of successful services and solutions. The IT Unit continued to deliver and support information systems infrastructure, custom built applications and off the shelf products for nine provinces from a single location in Gauteng. The forward looking approach ensures that all solutions are scalable, easy to maintain and flexible to adapt to the changing environment both internally and externally. The rolling out of the new registration system, Siyakha was implemented in August The implementation of this CRM software system received significant focus in the period under review. Three elements that were of critical importance in terms of the Siyakha project were: registrations processing, data integrity and system administration. A number of teething problems were experienced during the first few months of implementation but the system had stabilised by the end of the financial year. In December 2012, a new contract was signed with Telkom for the provision of network support. Amongst other things, this new contract was to ensure that a larger bandwidth was going to be provided, thus allowing for a more efficient service delivery especially in the contractor registrations services. A project to upgrade all cidb servers and equipment was started in January 2013 so as to enhance the IT infrastructure support and delivery. Supply Chain Management (SCM) The organisation strengthened the supply chain management structure by employing a Senior Manager (in November 2012) to head the Unit as well as a Senior Practitioner (employed in March 2012). This was as a result of shortcomings raised in the 2011/12 audit which resulted in irregular expenditure in excess of R11 million. This was largely caused by poor management of the SCM function, particularly the management and/or administration of contracts as the operations were decentralised. In Financial Year 2012/13, a new SCM Policy was approved by the Board. This included the delegations and a procedure manual that govern the SCM operations. New bid committee members, mainly comprised of management, were formally appointed and taken through a structured training workshop on bid committees. All employees in the SCM unit were also taken through vigorous SCM training workshops including the SCM code of conduct. This was followed by workshops for all cidb employees taking them through the SCM policy and the delegations thereto. This essentially provided the organisation with a pool of better skilled and knowledgeable employees in SCM matters, thus greatly assisting our organisation to not only improve on service delivery but also by ensuring that compliance is advocated. The unit ensures that the cidb procures goods and services in a manner that is consistent with fairness, equitability, transparency and cost effectiveness by adhering to the relevant legislations. The cidb discharges its procurement duties through the following main structures: the SCM function; the Price Quotation Committee; annual report 2012/2013 the BID Specification Committee; the BID Evaluation Committee; and the BID Adjudication Committee. 69

73 All these structures are kept independent from each other in line with maintaining adequate segregation of duties and in order to uphold the key principles of good governance. Price Quotation Committee A newly appointed Price Quotation Committee (PQC) was effective from January The committee, although not prescribed in terms of the SCM Framework, was established as a risk management tool to consider quotations between R and R prior to being submitted to the Chief Financial Officer for approval. Bid Specification Committee A newly appointed Bid Specification Committee (BSC) was effective from January The Committee is responsible for the compilation of specifications for all open bids and is chaired by the Senior SCM Practitioner. The committee has a cross functional representation with diversely qualified officials who have adequate supply chain experience. Bid Evaluation Committee A newly appointed Bid Evaluation Committee (BEC) was effective from January The Committee is responsible for evaluating and verifying all open bids for compliance and correctness prior to being adjudicated. The BEC presents a detailed report with recommendations to the BAC for consideration and/or approval as per the SCM delegations. Bid Adjudication Committee A newly appointed Bid Adjudication Committee (BAC) was effective from January The committee is a permanent structure that is representative of all Programme Managers and chaired by the Chief Financial Officer. As such, the committee has a cross functional representation with diversely qualified officials who have adequately been trained in the effective management of all bid committees. The committee is guided by the terms of reference aligned to the SCM Policies and a Code of Conduct. All BAC members are required to disclose their interest prior to any adjudication meeting. Irregular Expenditure The SCM unit maintains a register of any irregular expenditure and actions taken in line with National Treasury Practice Note 4 of 2008/09. All relevant disclosure requirements have been complied with as reported in the cidb s Annual Financial Statements. construction industry development board 70

74 Annual Financial Statements Annual Financial Statements annual report 2012/

75 GENERAL INFORMATION Country Of Incorporation and Domicile South Africa Registered Office Block N & R sabs Campus, 2 Dr. Lategan Road, Groenkloof Pretoria 0027 Postal Address P.O Box 2107 Brooklyn Square Pretoria 0075 Bankers standard Bank Of South Africa Limited investec Limited construction industry development board Auditors Auditor General South Africa 72

76 AnnUAL RePORt 2012/

77 statement OF RESPONSIBILITY Annual Financial Statements for the year ended 31 March 2013 The accounting authority is required by the Public Finance Management Act No. 1 of 1999, to maintain adequate accounting records and is responsible for the content and integrity of the Annual Financial Statements and related financial information included in this annual report. It is the responsibility of the accounting authority to ensure that the Annual Financial Statements fairly present the state of affairs of the entity as at the end of the financial year and the results of its operations and cash flows for the period then ended. The Auditor-General South Africa is engaged to express an independent opinion on the Annual Financial Statements and given unrestricted access to all financial records and related data. The Annual Financial Statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The Annual Financial Statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The accounting authority acknowledges that it is ultimately responsible for the system of internal financial control established by the entity and place considerable importance on maintaining a strong control environment. To enable the accounting authority to meet these responsibilities, the accounting authority sets standards for internal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the entity and all employees are required to maintain the highest ethical standards in ensuring the entity s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the entity is on identifying, assessing, managing and monitoring all known forms of risk across the entity. While operating risk cannot be fully eliminated, the entity endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The accounting authority is of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the Annual Financial Statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or deficit. construction industry development board The accounting authority has reviewed the entity s cash flow forecast for the year ended at 31 March 2014 and, in the light of this review and the current financial position, the accounting authority is satisfied that the entity has access to adequate resources to continue in operational existence for the foreseeable future. The entity is largely dependent on the Department of Public Works (DPW) for continued funding of operations. The Annual Financial Statements are prepared on the basis that the entity is a going concern and that the Department of Public Works has neither the intention nor the need to liquidate or curtail materially the scale of the entity 74

78 statement OF RESPONSIBILITY continued Although the accounting authority is primarily responsible for the financial affairs of the entity, they are supported by the entity s external auditors. The Annual Financial Statements for the year ended 31 March 2013, set out on page 88 to 133 which have been prepared on the going concern basis, were approved by the accounting authority in terms of Section 51(1)(f) of the Public Finance Management Act No. 1 of 1999, as amended and are signed on its behalf by: Hlengiwe Khumalo Acting Chief Executive Officer 30 July 2013 Bafana Ndendwa Chairperson: cidb Board 30 July 2013 annual report 2012/

79 Corporate Governance Report Annual Financial Statements for the year ended 31 March 2013 These include management processes aimed at minimising any conflict of interest and the implementation of a code of conduct, together with safety, health and environmental issues faced by the cidb. The Board of the Construction Industry Development Board (cidb) is responsible for the establishment of a risk management approach, development of fraud policies, effectiveness of internal audit and audit committee as well as other governance structures. These include management processes aimed at minimising any conflict of interest and the implementation of a Code of Conduct, together with safety, health and environmental issues faced by the cidb. Conversely, Management is responsible and accountable to the Board for the design, implementation and monitoring of the above-mentioned processes and for integrating them into the day-to-day activities of the cidb. In line with this approach, appropriate governance structures have been established to deal with such issues, as indicated in greater detail below. Remuneration Committee The Remuneration Committee (RemCom) comprises of a minimum of three members, including the Chairperson, as nominated from the members of the Board. RemCom s primary functions include reviewing and recommending to the Board the following: Issues relating to human resources management and planning, including recruitment and selection, training, performance management and succession planning, while also reporting to the Board in terms of the implementation of such strategies; Reviewing and approving proposals for the general adjustment of standard conditions of service, including matters relating to leave, bonuses, incentives, the provident fund, medical aid and other conditions of service applicable to the organisation; Reviewing salary scales and determining overall compensation, including annual increments and bonuses, while taking into account applicable performance targets; Reviewing and approving changes in the organisational structure; construction industry development board Ensuring that the organisation has in place programmes and policies for the attraction and retention of Executives of high calibre to successfully give leadership to the organisation in their respective areas of responsibility; Performance management of RemCom; and Reviewing and evaluating the adequacy of these Terms of Reference on, at least, an annual basis. 76

80 Corporate Governance Report continued Audit Committee The Audit Committee (AC) comprise of external members and at least two members from the Board, including the Chairperson who is externally appointed by the members of the Board. The primary functions of the AC includes reviewing and recommending to the Board the following: Annual Financial Statements The AC shall: Examine and review the Annual Financial Statements and Interim Financial Reports with management and the external auditors before filing with regulators, and consider whether such documentation is complete and consistent with information known to members of the AC and reflects appropriate accounting principles; Review, with management and the external auditors, the results of the audit, inclusive of any difficulties encountered; and Review, with management and the external auditors, all matters which are required to be communicated to stakeholders under generally accepted auditing standards. Internal Audit The AC shall monitor, guide and supervise the functioning of the internal audit, ensuring that the roles and functions of external and internal audit are sufficiently clarified and co-ordinated so as to provide an objective overview of the operational effectiveness of the organisation s systems of internal control and reporting. These include: Annually reviewing and approving the Internal Audit Charter to ensure adherence to bestpractice; Approving the three-year Internal Audit Strategy and Annual Performance Plans and the reviewing of performance against the said plans; Reviewing the adequacy of corrective action taken in response to significant internal audit findings; Reviewing Internal Audit Plans to ensure that areas of high risk are identified and mitigation strategies developed; Meeting separately with the Chief Audit Executive to discuss the matters which the AC believes should be discussed privately; annual report 2012/2013 Reviewing the significant matters reported by way of the internal audit function; Assessing the adequacy of the performance of the internal audit function; 77

81 Corporate Governance Report continued Reviewing co-operation and co-ordination between the internal and external audit functions; Reviewing any significant disagreements or differences of opinion between Management and the internal audit function; Evaluating the independence and effectiveness of internal auditors; and Reviewing the effectiveness of the internal audit function, including compliance with the Institute of Internal Auditor s International Standards for the Professional Practice of Internal Auditing. External Audit The AC shall be responsible for: Reviewing the external auditor s proposed audit scope and approach, including the co-ordination of the audit effort with internal audit; Reviewing and confirming the independence of the external auditors by obtaining statements from the auditors regarding relationships between the auditors and the organisation, including non-audit services and discussing the relationships with the auditors; Reviewing the external auditor s observations, as presented in management reports and the adequacy of management s responses; and Meeting separately on a regular basis with the external auditors to discuss any matters which the AC or auditors believe should be discussed privately. Risk Committee The Risk Committee (RC) comprise of a minimum of three members, including the Chairperson, as nominated from the members of the Board. The primary functions of the RC include reviewing and recommending to the Board the following: Internal Controls The Risk Committee shall: construction industry development board Consider the effectiveness of the organisation s internal control systems, including information technology security and control; Understand the scope of the internal and external auditor s review of internal control over financial reporting and obtain reports on significant findings and recommendations, together with management s responses; Review control procedures followed by the management; Review controls designed to ensure that assets are safeguarded; Review the fraud prevention plan implemented to prevent and detect fraud; 78

82 Corporate Governance Report continued Review risk management and related policies; and Review compliance with the prescribed accounting framework. Compliance The Risk Committee shall be responsible for: Reviewing the effectiveness of the system for monitoring compliance with laws and regulations and the results of Management s investigations and follow-up of any instances of non-compliance; Reviewing the processes for communicating the Code of Conduct to the cidb s personnel and for monitoring compliance therewith; and Obtaining regular updates from Management and the organisation s legal counsel regarding compliance matters. Reporting Responsibility for both Audit Committee and Risk Committee The Audit Committee and Risk Committee shall be responsible for: Reporting regularly to the Board with regards to the AC and RC s activities, issues and related recommendations; and Providing an open channel of communication between internal audit, the external audit and Executive Management. Other Responsibilities for both the Audit Committee and Risk Committee The AC and RC shall be responsible for: Performing other activities related to their charters, as requested by the Board; Instituting and overseeing special investigations, as required; Reviewing and assessing the adequacy of the AC and RC Charters annually; Confirming annually that all responsibilities outlined in the charters have been executed; and Evaluating, on a regular basis, the performance of the committees and their individual members. annual report 2012/

83 Joint Report of the Audit and Risk Committees Annual Financial Statements for the year ended 31 March 2013 Proper risk management will ensure that best practice is implemented and that the core function of the entity remains the focal point, thus contributing enormously to service delivery. The cidb s joint report of the Audit Committee (AC) and Risk Committee (RC) for the year-ended 31 March 2013 is presented below: Audit Committee and Risk Committee Responsibilities The function of these two committees is primarily, to assist the Board in discharging its duties as they relate to the safeguarding of assets, the effective management of liabilities and working capital, the operation of adequate systems and the process of internal control, together with the preparation of financial reports and the Annual Financial Statements. The Committees report that they have complied with their responsibilities arising from Section 50(1) of the Public Finance Management Act and Treasury Regulations. The AC and RC also report that they have adopted appropriate formal Terms of Reference, as per their respective charters, and have regulated their affairs in compliance with these charters in the discharge of their responsibilities as contained therein. Audit Committee and Risk Committee Members and Attendance The external (AG) as well as internal (KPMG) auditors, the Chief Executive Officer, as well as the Chief Financial Officer have a standing invitation to the AC meetings and have attended most of the meetings during the year. The AC and RC for Financial Year 2012/13 comprised of the members detailed in tables below and met for a minimum of two times, as per their approved Terms of Reference. Audit Committee Members Name of Member Number of Meetings Attended construction industry development board Shelley Thomas CA(SA) Chairperson Independent member Nala Mhlongo CA(SA) Independent member Victor Nondabula Independent member Lindelwa Myataza 6 Marten Govender 7 Lwandile Kona

84 Joint Report of the Audit and Risk Committees continued Risk Committee Members: Name of Member Number of Meetings Attended Shereen Malebye Chairperson 5 Victor Nondabula Independent member Lindelwa Myataza 4 Zanele Ntombela 5 Hareesh Patel 6 7 Risk Management As part of ongoing efforts to further improve governance, the RC reviewed the Risk Management Strategy which was developed by the internal auditors. The committee made recommendations regarding the implementation of the strategy. The RC is of the opinion that once the risk management process has been rolled-out, it will significantly improve the strategic management and corporate governance of the entity. We believe that strategy, risk performance and sustainable service delivery are inseparable. Proper risk management will ensure that the best-practice is implemented and that the core function of the entity remains the focal point, thus contributing enormously to service delivery. The AC and RC will constantly monitor the roll-out of risk management in order to ensure that the process reaches maturity within a reasonable time. Internal Audit The Board has outsourced the internal audit function to a private firm of chartered accountants and the area covered operated within an annual and three-year plan approved by the AC. The audit coverage included mainly cyclical audits and focused on areas considered to be important. The results of these audits were presented to management for response and findings resolution, as well as to the AC & RC for final review. The AC has reviewed the adequacy of the coverage and, subject to certain deviations, is satisfied therewith. The Report on Performance Information Whilst the Board has additional responsibility as required by Section 55(2) (a) of the Public Finance Management Act to ensure that the annual report and audited Annual Financial Statements fairly present its performance against predetermined objectives, it is the AC s opinion that performance information is appropriately reported. annual report 2012/2013 The Effectiveness of Internal Controls The system of controls is designed to provide cost-effective assurance that assets are safeguarded and the liabilities and working capital are effectively managed. In line with the Public Finance Management Act and King III Report on Corporate Governance requirements, internal audit provides for the AC and 81

85 Joint Report of the Audit and Risk Committees continued Management process, as well as the identification of corrective actions and suggested enhancements to controls and processes. During the period under review, from time to time, the Board sanctioned for combined meetings of both AC and RC to deliberate on specific matters of concern for example: the Centres of Excellence and Siyakha. Governance Processes and Accountability The AC and RC report that they have adopted appropriate formal Terms of Reference as their charters, have regulated their affairs in compliance with these Charters and have discharged all their responsibilities as contained therein. The AC and RC reviewed quarterly reports and are satisfied that controls are in place to monitor spending patterns. The quarterly reports were submitted to the Board and the Department of Public Works, in terms of the Transfer Funding arrangement. Evaluation of Annual Financial Statements The AC has: Reviewed and discussed the audited Annual Financial Statements to be included in the annual report with the Auditor-General South Africa and the Board; Reviewed the Auditor-General s management letter and management s response thereto; Reviewed the accounting policies and practices; and Reviewed significant adjustments resulting from the audit. Appreciation Our sincere appreciation and thanks are extended to all those who attended our meetings for their contribution and to the acting Chief Executive Officer and management as a whole for their support and useful interactions during the year under review. The AC concurs with and accepts the Auditor-General s conclusions on the Annual Financial Statements to be accepted and read together with the report of the Auditor-General South Africa. construction industry development board Ms Shelley Thomas CA (SA) Signed on behalf of the Audit Committee 30 July 2013 Ms Shereen Malebye Signed on behalf of the Risk Committee 30 July

86 REPORT OF THE AUDITOR-GENERAL OF SOUTH AFRICA Annual Financial Statements for the year ended 31 March 2013 Introduction I have audited the Annual Financial Statements of the Construction Industry Development Board set out on pages 88 to 133, which comprise the Statement of Financial Position as at 31 March 2013, 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, and the notes, comprising a summary of significant accounting policies and other explanatory information. Accounting Authority s responsibility for the Annual Financial Statements The accounting authority is responsible for the preparation and fair presentation of these Annual Financial Statements in accordance with South African Standards of Generally Recognised Accounting Practice (SA Standards of GRAP) and the requirements of the Public Finance Management Act No. 1 of 1999) (PFMA), and for such internal control as the accounting authority determines is necessary to enable the preparation of Annual Financial Statements that are free from material misstatement, whether due to fraud or error. Auditor-General s responsibility My responsibility is to express an opinion on these Annual Financial Statements based on my audit. I conducted my audit in accordance with the Public Audit Act No.25 of South Africa, 2004, (the General Notice issued in terms thereof and International Standards on Auditing. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Annual Financial Statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Annual Financial Statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the Annual Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the Annual Financial Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the Annual Financial Statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the Annual Financial Statements present fairly, in all material respects, the financial position of the Construction Industry Development Board as at 31 March 2013, 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 No. 1 of 1999 of South Africa, (PFMA). annual report 2012/

87 REPORT OF THE AUDITOR-GENERAL OF SOUTH AFRICA continued REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the PAA and the General Notice issued in terms thereof, I report the following findings relevant to performance against predetermined objectives, compliance with laws and regulations and internal control, but not for the purpose of expressing an opinion. Pre-determined Objectives I performed procedures to obtain evidence about the usefulness and reliability of the information in the Annual Performance Report as set out on pages 136 to 159 of the Annual Report. The reported performance against predetermined objectives was evaluated against the overall criteria of usefulness and reliability. The usefulness of information in the annual performance report relates to whether it is presented in accordance with the National Treasury s annual reporting principles and whether the reported performance is consistent with the planned objectives. The usefulness of information further relates to whether indicators and targets are measurable (i.e. well defined, verifiable, specific, measurable and time bound) and relevant as required by the National Treasury Framework for managing programme performance information. The reliability of the information in respect of the selected objectives is assessed to determine whether it adequately reflects the facts (i.e. whether it is valid, accurate and complete). There were no material findings on the annual performance report concerning the usefulness and reliability of the information. Additional Matters Although no material findings concerning the usefulness and reliability of the performance information were identified in the Annual Performance Report, I draw attention to the following matter below. Achievement of Planned Targets Of the total number of 38 targets planned for the year, 18 of targets were not achieved during the year under review. This represents 47% of total planned targets that were not achieved during the year under review. For further details on the extent and reasons for deviations between planned targets and actual performance refer to 2012/2013 Performance Summary on page 136 to 159 of the Annual Performance Report construction industry development board Compliance with Laws and Regulations I performed procedures to obtain evidence that the entity has complied with applicable laws and regulations regarding financial matters, financial management and other related matters. My findings on material non-compliance with specific matters in key applicable laws and regulations as set out in the General Notice issued in terms of the PAA are as follows: 84

88 REPORT OF THE AUDITOR-GENERAL OF SOUTH AFRICA continued Annual Financial Statements The Annual Financial Statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by Section 55(1)(b) of the PFMA. Material misstatements of property, plant and equipment and disclosure items identified by the auditors were subsequently corrected resulting in the Annual Financial Statements receiving an unqualified audit opinion. Internal control I considered internal control relevant to my audit of the Annual Financial Statements, Annual Performance Report and compliance with laws and regulations. The matters reported below under the fundamentals of internal control are limited to the significant deficiencies that resulted in the findings on compliance with laws and regulations included in this report. Leadership The accounting authority did not exercise effective oversight in ensuring that the Annual Financial Statements submitted for audit purposes were complete and accurate. Financial and Performance Management Management did not adequately review the Annual Financial Statements for completeness and accuracy prior to its submission for audit purposes. Pretoria 31 July 2013 annual report 2012/

89 Accounting Authority s Report Annual Financial Statements for the year ended 31 March 2013 The Construction Industry Development Board (cidb) is a statutory body listed as a Schedule 3A public entity established in terms of the CIDB Act No.38 of 2000 to provide strategic leadership to stakeholders to stimulate sustainable growth, reform and improvement of the construction sector and the industry s enhanced role in the country s economy as well as regulate the industry. The cidb is under the Executive Authority of the Department of Public Works (DPW). General Overview of the State of Affairs For the Financial Year 2012/13, the cidb received a grant of R (2011/12: R ) from DPW. A further amount of R (2011/12: R ) was received in the form of registers revenue; as well as other income of R (2011/12: R ). Thus, the total income for the cidb was R (2011/12: R ). The net deficit for the financial year was R (2011/12: R surplus). After taking into account the opening accumulated surplus of R , this has resulted in the reduction of accumulated surplus to R at the end of the financial year. One member of the Board, Dr P Makhesha, resigned from the Board during the period under review. The Committees of the Board continued to play their oversight roles and are constituted as follows: Audit Committee Risk Committee Remuneration Committee The terms of reference of the Board Committees remained the same throughout the year under review and are detailed in the Corporate Governance Report. The cidb s performance plan was, to a large extent, implemented satisfactorily. Further details are contained under the section dealing with performance information. Service Rendered by the cidb Business Address construction industry development board Registered Office: Block N, R & Z, SABS Campus Postal Address: P.O Box 2107 No. 2 Dr Lategan Road Brooklyn Square Groenkloof, 0027 Pretoria, 0075 Bankers: Standard Bank of SA Limited Investec Bank Limited External Auditors: Auditor-General South Africa 86 Internal Auditors: KPMG Services Proprietary Limited

90 Accounting Authority s Report continued New or Proposed Activities There were no new activities embarked upon during the period under review. Furthermore, there are no proposed activities for the upcoming Financial Year. Events after Reporting Date Subsequent to the financial year end, the Chief Executive Officer (an ex-officio member of the Board) resigned from the cidb as at 31 May Performance Information The cidb must develop an Annual Performance Plan (APP); the APP must provide clear indication of goals and objectives for the planning period. Such a plan was developed for Financial Year 2012/13. Progress reports were tabled at each Board and Committee meeting of the cidb. Furthermore, the cidb reported to DPW on a quarterly basis regarding progress towards the achievement of the stated outputs and objectives, in line with the funding arrangement between the two parties. A detailed report on the activities of the cidb is included under the section: 2012/13 Performance Summay of the Annual Report. Approval The Annual Financial Statements for the year-ended 31 March 2013, set out on pages 72 to 159 were approved by the Accounting Authority in terms of section 51(1)(f) of the Public Finance Management Act No. 1 of 1999, as amended and are signed on its behalf by: Hlengiwe Khumalo Acting Chief Executive Officer Bafana Ndendwa Chairperson annual report 2012/

91 STATEMENT OF FINANCIAL PERFORMANCE Annual Financial Statements for the year ended 31 March 2013 Revenue Exchange transactions Note Assessment fees 12 24,213,359 22,031,550 Other income , ,880 Finance income 17 4,141,704 4,600,284 Non-exchange transactions Government grants 12 67,614,000 65,959,000 Contractor fines 210, ,250 Annual fees 18,145,000 24,911,746 Total revenue 115,164, ,460,710 Expenditure Staff cost 15 ( 73, 0 45, 333 ) (61,064,668) Depreciation and amortisation ( 3, 335, 350 ) (2,943,262) Finance costs 18 ( 2, 272 ) (35,179) Debt impairment 16 ( 228, 76 4 ) (152,503) Operating expenses 14 ( 45, 137, 8 45 ) (47,896,927) Total expenditure ( 121, 749, 56 4 ) (112,092,539) Operating (deficit)/surplus ( 6, 585, 259 ) 6,368,171 Loss on disposal of assets and liabilities (434,102) (299,776) construction industry development board (Deficit)/surplus for the year (7,019,361) 6,068,395 88

92 Statement of Financial Position Annual Financial Statements for the year ended 31 March 2013 ASSETS Current Assets Note Receivables from exchange transactions 6 1,919,437 1,505,516 Cash and cash equivalents 7 77,527,077 80,163,463 Non-Current Assets 79,446,514 81,668,979 Property, plant and equipment 4 13,904,042 13,809,992 Intangible assets 5 8,755,194 8,709,083 22,659,236 22,519,075 Total Assets 102,105, ,188,054 Finance lease obligation 8-90,134 Payables from exchange transactions 11 15,212,181 17,836,598 Provisions 9 3,934,529 - Income received in advance 10 31,292,879 27,575,800 50,439,589 45,502,532 Total Liabilities 50,439,589 45,502,532 Net Assets 51,666,161 58,685,522 NET ASSETS Accumulated surplus 51,666,161 58,685,522 annual report 2012/

93 CASH FLOWS STATEMENT Annual Financial Statements for the year ended 31 March Note CASH FLOWS FROM OPERATING ACTIVITIES Receipts Registers income 42,154,586 47,893,676 Grants received 67,614,000 65,959,000 Finance income 4,141,704 4,600,284 Other receipts 840, , ,750, ,649,315 Payments Compensation to employees (68,738,438) (61,064,668) Payments to suppliers and others (44,646,315) (46,878,717) (113,384,753) (107,943,385) Net cash flows from operating activities 21 1,365,629 10,705,930 CASH FLOWS FROM OPERATING ACTIVITIES Purchase of property, plant and equipment 4 (2,729,667) (3,818,185) Purchase of other intangible assets 5 (1,179,942) (7,179,100) Net cash flows from investing activities (3,909,609) (10,997,285) construction industry development board CASH FLOWS FROM FINANCING ACTIVITIES Finance lease payments (92,406) (356,946) Decrease in cash and cash equivalents (2,636,386) (648,301) Cash and cash equivalents at the beginning of the year 80,163,463 80,811,764 Cash and cash equivalents at the end of the year 7 77,527,077 80,163,463 90

94 STATEMENT OF CHANGES IN NET ASSETS Annual Financial Statements for the year ended 31 March 2013 Accumulated surplus Total net assets Balance at 01 April ,617,127 52,617,127 Changes in net assets Surplus for the year 6,068,395 6,068,395 Total changes 6,068,395 6,068,395 Balance at 01 April ,685,522 58,685,522 Deficit for the year (7,019,361) (7,019,361) Total changes (7,019,361) (7,019,361) Balance at 31 March ,666,161 51,666,161 annual report 2012/

95 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS Annual Financial Statements for the year ended 31 March 2013 Budget-on-Cash Basis Approved budget Adjustments Final Budget Actual amounts on comparable basis Difference between final budget and actual Notes Statement of Financial Performance Revenue Revenue from exchange transactions Assessment fees 24,213,359-24,213,359 24,213,359 - Other income 840, , , Finance income 2,890,000-2,890,000 4,141,704 1,251, Total revenue from exchange transactions 27,943,451-27,943,451 29,195,155 1,251,704 Revenue from non-exchange transactions - Taxation revenue Government grants and subsidies 66,882, ,000 67,614,000 67,614, Transfer revenue Contractor fines , , Annual fees 19,498,549-19,498,549 18,145,000 (1,353,549) 12 construction industry development board Total revenue from non-exchange transactions 86,380, ,000 87,112,549 85,969,150 (1,143,399) Total revenue 114,324, , ,056, ,164, ,305 92

96 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS continued Budget-on-Cash Basis Approved budget Adjustments Final Budget Actual amounts on comparable basis Difference between final budget and actual Notes Expenditure Personnel (71,184,914) (71,184,914) (73,045,333) (1,860,419) 15 Depreciation and amortisation - (3,335,350) (3,335,350) (3,335,350) Finance costs - - (2,272) (2,272) 18 Debt impairment - - (228,764) (228,764) 16 Operating expenses (43,871,086) - (45,137,845) (45,137,845) (1,266,759) 14 Total expenditure (115,056,000) - (115,056,000) (121,749,564) (6,693,564) Operating deficit (6,585,259) (6,585,259) Loss on disposal of assets and liabilities Deficit before taxation Actual Amount on Comparable Basis as Presented in the Budget and Actual Comparative Statement (434,102) (434,102) (7,019,361) (7,019,361) (7,019,361) (7,019,361) Reconcilation Basis difference Depreciation and amortisation 3,335, Finance costs 2,272 Debt impairment 228,764 Loss on sale of assets 434,102 annual report 2012/2013 Actual amount in the Statement of Financial Performance (3,018,873) 93

97 ACCOUNTING POLICIES Annual Financial Statements for the year ended 31 March Presentation of Financial Statements The Annual Financial Statements have been prepared in accordance with the Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. These Annual Financial Statements have been prepared on an accrual basis of accounting and are in accordance with historical cost convention unless specified otherwise. They are presented in South African Rand. A summary of the significant accounting policies, which have been consistently applied, is disclosed below. 1.1 SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATING UNCERTAINT In preparing the Annual Financial Statements, management is required to make estimates and assumptions that affect the amounts represented in the Annual Financial Statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the Annual Financial Statements. Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in note 9 - Provisions. Allowance for doubtful debts On debtors an impairment loss is recognised in surplus and deficit when there is objective evidence that it is impaired. The impairment is measured as the difference between the debtors carrying amount and the present value of estimated future cash flows discounted at the effective interest rate, computed at initial recognition. 1.2 PROPERTY, PLANT AND EQUIPMENT construction industry development board Property, plant and equipment are tangible non-current assets (including infrastructure assets) that are held for use in the supply of services, 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. 94

98 ACCOUNTING POLICIES continued 1.2 PROPERTY, PLANT AND EQUIPMENT (continued) 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. Where an asset is acquired at no cost, or for a nominal cost, its cost is its fair value as at date of acquisition. Where an item of property, plant and equipment is acquired in exchange for a non-monetary asset or monetary assets, or a combination of monetary and non-monetary assets, the asset acquired is initially measured at fair value (the cost). If the acquired item s fair value was not determinable, it s deemed cost is the carrying amount of the asset(s) given up. 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. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories. 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. 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. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. The useful lives of items of property, plant and equipment have been assessed as follows: Item Average useful life annual report 2012/2013 Furniture and fittings Office equipment Computer equipment 10 to 14 years 8 to 14 years 3 to 14 years 95

99 ACCOUNTING POLICIES continued 1.2 PROPERTY, PLANT AND EQUIPMENT (continued) The residual value, and the useful life and depreciation method of each asset are reviewed at the end of each reporting date. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. Reviewing the useful life of an asset on an annual basis does not require the entity to amend the previous estimate unless expectations differ from the previous estimate. Each part of an item of property, plant and equipment with a cost that is significant 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 entity are de-recognised 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 de-recognition of an item of property, plant and equipment is included in surplus or deficit when the item is de-recognised. The gain or loss arising from the de-recognition 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. 1.3 INTANGIBLE ASSETS An asset is identified as an intangible asset when it: 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, assets or liability; or Arises from contractual rights or other legal rights, regardless whether those rights are transferable or separate from the entity or from other rights and obligations. An intangible asset is recognised when: construction industry development board 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. Intangible assets are initially recognised at cost. An intangible asset acquired through a non-exchange transaction, the cost shall be its fair value as at the date of acquisition. Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised when: 96

100 ACCOUNTING POLICIES continued 1.3 INTANGIBLE ASSETS (continued) It is technically feasible to complete the asset so that it will be available for use or sale. There is an intention to complete and use or sell it. There is an ability to use or sell it. It will generate probable future economic benefits or service potential. There are available technical, financial and other resources to complete the development and to use or sell the asset. The expenditure attributable to the asset during its development can be measured reliably. Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows or service potential. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life. The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date. Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life. 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, other Intangible assets are de-recognised: On disposal; or 1 to 15 years annual report 2012/2013 When no future economic benefits or service potential are expected from its use or disposal. 97

101 ACCOUNTING POLICIES continued 1.4 FINANCIAL INSTRUMENTS A financial instrument is any contract that gives rise to a financial asset of one cidb 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. Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Derecognition is the removal of a previously recognised financial asset or financial liability from cidb s Statement of Financial Position. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability (or group offinancial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, cidb shall estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate (see the Standard of GRAP on revenue from exchange transactions), transaction costs, and all other premiums or discounts. There is a presumption that the cash flows and the expected life of a group of similar financial instruments can be estimated reliably. However, in those rare cases when it is not possible to reliably estimate the cash flows or the expected life of a financial instrument (or group of financial instruments), the cidb shall use the contractual cash flows over the full contractual term of the financial instrument (or group of financial instruments). 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. construction industry development board 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 98

102 ACCOUNTING POLICIES continued 1.4 FINANCIAL INSTRUMENTS (continued) 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. 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. Loans payable are financial liabilities, other than short-term payables on normal credit terms. Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. A financial asset is past due when a counterparty has failed to make a payment when contractually due. A residual interest is any contract that manifests an interest in the assets of an entity after deducting all of its liabilities. A residual interest includes contributions from owners, which may be shown as: Equity instruments or similar forms of unitised capital; A formal designation of a transfer of resources (or a class of such transfers) by the parties to the transaction as forming part of an entity s net assets, either before the contribution occurs or at the time of the contribution; or A formal agreement, in relation to the contribution, establishing or increasing an existing financial interest in the net assets of an entity. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument. annual report 2012/

103 ACCOUNTING POLICIES continued 1.4 FINANCIAL INSTRUMENTS (continued) Financial instruments at amortised cost are non-derivative financial assets or non-derivative financial liabilities that have fixed or determinable payments, excluding those instruments that: The entity designates at fair value at initial recognition; or Are held-for-trading. Financial instruments at cost are investments in residual interests that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured. Financial instruments at fair value comprise financial assets or financial liabilities that are: Derivatives; Combined instruments that are designated at fair value; instruments held-for-trading. A financial instrument is held for trading if: Classification It is acquired or incurred principally for the purpose of selling or repurchasing it in the nearterm; or On initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short term profit-taking; Non-derivative financial assets or financial liabilities with fixed or determinable payments that are designated at fair value at initial recognition; and Financial instruments that do not meet the definition of financial instruments at amortised cost or financial instruments at cost. construction industry development board The entity has the following types of financial assets (classes and category) as reflected on the face of the Statement of Financial Position or in the notes thereto: Class Trade and other receivables Cash and cash equivalents Category Financial asset measured at fair value Financial asset measured at fair value 100

104 ACCOUNTING POLICIES continued 1.4 FINANCIAL INSTRUMENTS (continued) The entity has the following types of financial liabilities (classes and category) as reflected on the face of the statement of financial position or in the notes thereto: Class Income received in advance Payables from exchange transactions Category Financial liability measured at fair value Financial liability measured at fair value Initial recognition The cidb recognises a financial asset or a financial liability in its statement of financial position when the cidb becomes a party to the contractual provisions of the instrument. The cidb recognises financial assets using trade date accounting. Initial measurement of financial assets and financial liabilities The cidb measures a financial asset and financial liability initially at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. The cidb measures a financial asset and financial liability initially at its fair value. Subsequent measurement of financial assets and financial liabilities The cidb measures all financial assets and financial liabilities after initial recognition using the following categories: Financial instruments at fair value; Financial instruments at amortised cost; and Financial instruments at cost. All financial assets measured at amortised cost, or cost, are subject to an impairment review. Presentation Interest relating to a financial instrument or a component that is a financial liability is recognised as revenue or expense in surplus or deficit. annual report 2012/2013 Losses and gains relating to a financial instrument or a component that is a financial liability is recognised as revenue or expense in surplus or deficit. 101

105 ACCOUNTING POLICIES continued 1.4 FINANCIAL INSTRUMENTS (continued) A financial asset and a financial liability are only offset and the net amount presented in the statement of financial position when the entity currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. 1.5 LEASES A 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. When a lease includes both land and buildings elements, the entity assesses the classification of each element separately. Finance leases - lessee Finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease. Minimum lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance of the liability. Any contingent rents are expensed in the period in which they are incurred. Operating leases - lessee construction industry development board 102 Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset or liability. 1.6 ACCRUALS Accruals are liabilities where the goods and services have been invoiced or formally agreed with the supplier; and where the goods and services have been received but have not been invoiced or formally agreed with the supplier, including amounts due to employees. Although the amount or timing may need to be estimated, there is much less uncertainty involved.

106 ACCOUNTING POLICIES continued 1.7 COMMITMENTS Committments are contractual agreements with the suppliers of goods and services, where delivery has not yet taken place. Committements are disclosed in the notes to the Annual Financial Statements at nominal value of the contractual agreement. 1.8 EMPLOYEE BENEFITS Employee benefits are all forms of consideration given by cidb in exchange for service rendered by employees. Termination benefits are employee benefits payable as a result of either: cidb 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. Vested employee benefits are employee benefits that are not conditional on future employment. A constructive obligation is an obligation that derives from an cidb actions where by an established pattern of past practice, published policies or a sufficiently specific current statement, the cidb has indicated to other parties that it will accept certain responsibilities and as a result, the cidb has created a valid expectation on the part of those other parties that it will discharge those responsibilities. Short-term employee benefits Short-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 12 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 Non-monetary benefits (for example, medical care, and free or subsidised goods or services such as housing, cars and cellphones) for current employees. annual report 2012/2013 When an employee has rendered service to the entity during a reporting period, the entity recognise the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service: 103

107 ACCOUNTING POLICIES continued 1.8 EMPLOYEE BENEFITS (continued) As a liability (accrued expense), after deducting any amount already paid. If the amount already paid exceeds the undiscounted amount of the benefits, the cidb 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 increase their entitlement or, in the case of non-accumulating absences, when the absence occurs. The cidb measure the expected cost of accumulating compensated absences as the additional amount that the entity expects to pay as a result of the unused entitlement that has accumulated at the reporting date. The cidb recognise the expected cost of bonus, incentive and performance related payments when the cidb 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. 1.9 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. construction industry development board 104 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. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset. The amount recognised for the reimbursement does not exceed the amount of the provision. 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.

108 ACCOUNTING POLICIES continued 1.9 PROVISIONS AND CONTINGENCIES (continued) 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. Provisions are not recognised for future operating deficits. If an entity has a contract that is onerous, the present obligation (net of recoveries) under the contract is recognised and measured as a provision. Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note 24. A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. The entity recognises a provision for financial guarantees and loan commitments when it is probable that an outflow of resources embodying economic benefits and service potential will be required to settle the obligation and a reliable estimate of the obligation can be made. Determining whether an outflow of resources is probable in relation to financial guarantees requires judgement. Indications that an outflow of resources may be probable are: Financial difficulty of the debtor; Defaults or delinquencies in interest and capital repayments by the debtor; Breaches of the terms of the debt instrument that result in it being payable earlier than the agreed term and the ability of the debtor to settle its obligation on the amended terms; and A decline in prevailing economic circumstances (e.g. high interest rates, inflation and unemployment) that impact on the ability of entities to repay their obligations. Where a fee is received by the entity for issuing a financial guarantee and/or where a fee is charged on loan commitments, it is considered in determining the best estimate of the amount required to settle the obligation at reporting date. Where a fee is charged and the entity considers that an outflow of economic resources is probable, an entity recognises the obligation at the higher of: The amount determined using in the Standard of GRAP on Provisions, Contingent Liabilities and Contingent Assets; and The amount of the fee initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the Standard of GRAP on revenue from exchange transactions. annual report 2012/

109 ACCOUNTING POLICIES continued 1.10 REVENUE FROM EXCHANGE TRANSACTIONS Revenue is the gross inflow of economic benefits or service potential during the reporting period when those inflows result in an increase in net assets, other than increases relating to contributions from owners. An exchange transaction is one in which the cidb receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services or use of assets) to the other party in exchange. 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. Measurement Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates. Registers income When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the reporting date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: 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; The stage of completion of the transaction at the reporting date can be measured reliably; and The costs incurred for the transaction and the costs to complete the transaction can be measured reliably. construction industry development board When services are performed by an indeterminate number of acts over a specified time frame, revenue is recognised on a straight line basis over the specified time frame unless there is evidence that some other method better represents the stage of completion. When a specific act is much more significant than any other acts, the recognition of revenue is postponed until the significant act is executed. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable. Service revenue is recognised by reference to the stage of completion of the transaction at the reporting date. Stage of completion is determined by: Finance income Revenue arising from the use by others of entity assets yielding interest is recognised when: 106

110 ACCOUNTING POLICIES continued 1.11 REVENUE FROM NON-EXCHANGE TRANSACTIONS 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. Revenue comprises gross inflows of economic benefits or service potential received and receivable by the cidb, which represents an increase in net assets, other than increases relating to contributions from owners. Exchange transactions are transactions in which one entity receives assets or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of cash, goods, services, or use of assets) to another entity in exchange. Non-exchange transactions are transactions that are not exchange transactions. In a non-exchange transaction, the cidb either receives value from another entity without directly giving approximately equal value in exchange, or gives value to another entity without directly receiving approximately equal value in exchange. Revenue from the non-exchange transaction takes the form of grants from the Department of Public Works and is received on an annual basis and raised as revenue on receipt Recognition An 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 entity satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-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. Measurement Revenue 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. annual report 2012/

111 ACCOUNTING POLICIES continued 1.12 FINANCE INCOME Investment income is recognised on a time-proportion basis using the effective interest method FINANCE COSTS Finance costs are recognised as an expense in the period in which they are incurred COMPARATIVE FIGURES Where necessary, comparative figures have been reclassified to conform to changes in presentation in the current year FRUITLESS AND WASTEFUL EXPENDITURE Fruitless 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 year 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 IRREGULAR EXPENDITURE Irregular 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: construction industry development board (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. National Treasury Practice Note No. 4 of 2008/2009 which was issued in terms of Sections 76(1) to 76(4) of the PFMA requires the following (effective from 1 April 2008): 108

112 ACCOUNTING POLICIES continued 1.16 IRREGULAR EXPENDITURE (continued) Irregular expenditure that was incurred and identified during the current financial and which was condoned before year end and/or before finalisation of the Annual Financial Statements must also be recorded appropriately in the irregular expenditure register. Irregular expenditure that was incurred and identified during the current financial year and for which condonement is being awaited at year end must be recorded in the irregular expenditure register. Where irregular expenditure was incurred in the previous financial year and is only condoned in the subsequent financial year, the register and the disclosure note to the Annual Financial Statements must be 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 must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be 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 Annual Financial Statements. The irregular expenditure register must also be updated accordingly. If the irregular expenditure has not been condoned and no person is liable in law, the expenditure related thereto must remain against the relevant programme/expenditure item, be disclosed as such in the note to the Annual Financial Statements and updated accordingly in the irregular expenditure register RELATED PARTY cidb operates in an economic sector currently dominated by entities directly or indirectly owned by the South African Government. As a consequence of the constitutional independence of the three spheres of government in South Africa, only entities with the national sphere of government are considered to be related parties. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive of otherwise) of that entity. cidb regards all individuals at senior management per definition of the financial reporting standards as key management. Close members of the family of key management are considered to be those family members who may be expected to influence, or be influenced by, management in their dealings with the cidb Only transactions with related parties not at arms s length or not in the ordinary course of business are disclosed. annual report 2012/

113 ACCOUNTING POLICIES continued 1.18 BUDGET INFORMATION Entity are typically subject to budgetary limits in the form of appropriations or budget authorisations (or equivalent), which is given effect through authorising legislation, appropriation or similar. General purpose financial reporting by cidb shall provide information on whether resources were obtained and used in accordance with the legally adopted budget. The approved budget is prepared on a cash basis and presented by economic classification linked to performance outcome objectives. The approved budget covers the fiscal period from 01/04/2012 to 31/03/2013. The budget for the economic entity includes all the entities approved budgets under its control. The Annual Financial Statements and the budget are not on the same basis of accounting therefore a reconciliation between the statement of financial performance and the budget have been included in the Annual Financial Statements. Refer to note GOING CONCERN ASSUMPTION These Annual Financial Statements have been prepared on the assumption that the entity will continue to operate as a going concern for at least the next 12 months EVENTS AFTER THE REPORTING PERIOD Events after the reporting date are those events that occur between the end of the reporting period and the date the Annual Financial Statements are authorised for issue. The cidb accounts for those events after the reporting period that provide evidence of the condition that existed at the end of the reporting period by adjusting the Annual Financial Statements, all other material events that are indicative of the condition that arouse after the reporting period are disclosed in the notes to the Annual Financial Statements. construction industry development board 110

114 Notes to the Annual Financial Statements Annual Financial Statements for the year ended 31 March CHANGES IN ACCOUNTING POLICY The Annual Financial Statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice on a basis consistent with the prior year except for the adoption of GRAP 23: Revenue from Non-exchange transactions which became effective on 1 April GRAP 23 During the year, the cidb changed its accounting policy with respect to the treatment of annual fees and contractor fines which were previously disclosed as revenue from exchange transactions in the prior year. In order to conform with the treatment of GRAP 23, cidb has re-classified the annual fees and contractor fines as revenue from non-exchange transactions as the revenue that is collected from these fees does not approximate to an equal value in terms of service offered by the cidb in exchange for the fees paid by contractors. The aggregate effect of the changes in accounting policy on the Annual Financial Statements for the year ended 31 March 2013 is as follows: Statement of Financial Performance Revenue from exchange transactions Previously stated 42,568,508 47,736,545 Adjustment (18,355,149) (25,704,995) Restated amount 24,213,359 22,031,550 Revenue from non exchange transactions Revenue from non exchange transactions 67,614,000 65,959,000 Previously stated 18,355,149 25,704,995 Restated amount 85,969,149 91,663,995 annual report 2012/

115 Notes to the Annual Financial Statements continued 3. NEW STANDARDS AND INTERPRETATIONS STANDARDS AND INTERPRETATIONS ISSUED, BUT NOT YET EFFECTIVE The entity has not applied the following standards and interpretations, which have been published and are mandatory for the entity s accounting periods beginning on or after 01 April 2013 or later periods: Standard/Interpretation: Effective date: Years beginning on or after GRAP 105: Transfers of functions between entities under common control GRAP 106: Transfers of functions between entities not under common control 01 April April 2014 GRAP 107: Mergers 01 April 2014 GRAP 20: Related parties 01 April 2014 IGRAP 11: Consolidation Special purpose entities 01 April 2014 IGRAP 12: Jointly controlled entities Non-monetary contributions by ventures GRAP 6 (as revised 2010): Consolidated and separate Annual Financial Statements 01 April April 2014 GRAP 7 (as revised 2010): Investments in associates 01 April 2014 GRAP 8 (as revised 2010): Interests injoint ventures 01 April 2014 GRAP 1 (as revised 2012): Presentation of Annual Financial Statements GRAP 3 (as revised 2012): Accounting policies, change in accounting estimates and errors 01 April April 2013 GRAP 7 (as revised 2012): Investments in associates 01 April 2013 construction industry development board GRAP 9 (as revised 2012): Revenue from exchange transactions 01 April 2013 GRAP 12 (as revised 2012): Inventories 01 April 2013 GRAP 13 (as revised 2012): Leases 01 April 2013 GRAP 16 (as revised 2012): Investment property 01 April 2013 GRAP 17 (as revised 2012): Property, plant and equipment 01 April

116 Notes to the Annual Financial Statements continued 3. NEW STANDARDS AND INTERPRETATIONS (continued) Standard/Interpretation: GRAP 27 (as revised 2012): Agriculture (Replaces GRAP 101) GRAP 31 (as revised 2012): Intangible assets (Replaces GRAP 102) Effective date: Years beginning on or after 01 April April 2013 IGRAP16: Intangible assets website costs 01 April 2013 IGRAP1 (as revised 2012): Applying the probability test on initial recognition of revenue 01 April 2013 GRAP 16 (as revised 2012): Investment property 01 April 2013 GRAP 17 (as revised 2012): Property, plant and equipment GRAP 27 (as revised 2012): Agriculture (Replaces GRAP 101) GRAP 31 (as revised 2012): Intangible assets (Replaces GRAP 102) 01 April April April 2013 IGRAP16: Intangible assets website costs 01 April 2013 IGRAP1 (as revised 2012): Applying the probability test on initial recognition of revenue 01 April 2013 annual report 2012/

117 Notes to the Annual Financial Statements continued 4. PROPERTY, PLANT AND EQUIPMENT Cost / Valuation Accumulated depreciation Carrying value Cost / Valuation Accumulated depreciation Carrying value Furniture and fixtures 7,195,077 (2,657,932) 4,537,145 7,307,620 (2,339,156) 4,968,464 Office equipment 5,902,996 (2,889,815) 3,013,181 7,233,572 (3,843,679) 3,389,893 Computer equipment 11,325,236 (4,971,520) 6,353,716 9,645,196 (4,193,561) 5,451,635 24,423,309 (10,519,267) 13,904,042 24,186,388 (10,376,396) 13,809,992 Reconciliation of property, plant and equipment Opening balance Additions Disposals Depreciation Carrying Value Furniture and fixtures 4,968, ,948 (91,791) (533,476) 4,537,145 Office equipment 3,389, ,572 (117,981) (652,303) 3,013,181 Computer equipment 5,451,635 2,142,147 (106,686) (1,133,380) 6,353,716 13,809,992 2,729,667 (316,458) (2,319,159) 13,904,042 Reconciliation of property, plant and equipment Opening balance Additions Disposals Depreciation Carrying Value Furniture and fixtures 3,243,476 2,181,613 - (456,625) 4,968,464 Office equipment 3,903, ,796 (12,033) (839,808) 3,389,893 Computer equipment 5,469,884 1,298,776 (287,743) (1,029,282) 5,451,635 construction industry development board 12,617,298 3,818,185 (299,776) (2,325,715) 13,809,992 Assets subject to finance lease (net carrying value) Office equipment - 39,

118 Notes to the Annual Financial Statements continued 5. INTANGIBLE ASSETS Cost / Valuation Accumulated Amortisation Carrying value Cost / Valuation Accumulated Amortisation Carrying value Computer software 10,337,363 (1,582,169) 8,755,194 10,899,052 (2,189,969) 8,709,083 Reconciliation of intangible assets Opening balance Additions Disposals Amortisation Carrying value Computer software 8,709,083 1,179,942 (117,643) (1,016,188) 8,755,194 Reconciliation of intangible assets Opening balance Additions Disposals Amortisation Carrying value Computer software 2,147,531 7,179,100 - (617,548) 8,709, RECEIVABLES FROM EXCHANGE TRANSACTIONS Trade recievables 1,421, ,343 Pre payments 498, ,173 1,919,437 1,505,51 Trade and other receivables impaired As of 31 March 2013, trade and other receivables of R (2012: R ) were impaired and provided for. The amount of the provision was R as of 31 March 2013 (2012: R62 025). annual report 2012/

119 Notes to the Annual Financial Statements continued CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of: Cash on hand 31,646 28,992 Bank balances 300,021 2,800,682 Other cash and cash equivalents 77,195,410 77,333,789 77,527,077 80,163, FINANCE LEASE OBLIGATION Minimum lease payments due within one year - 92,409-92,409 Less: future finance charges - (2,275) Present value of minimum lease payments - 90, PROVISIONS construction industry development board cidb and Nehawu reached a wage settlement agreement on the 17 October 2012 following the conciliation process by the CCMA. In terms of the agreement, 8% guaranteed bonus of total cost to company per employee is payable on 31 December In line with GRAP 19, a provision of R has been recognised for staff guaranteed bonuses. The costs were measured based on the number of employees employed as at 31 March 2013.The amount of the provision was discounted using nominal discount rate of 6.375%. 10. INCOME RECEIVED IN ADVANCE Contractors not assessed (work in progress) 31,292,879 27,575,

120 Notes to the Annual Financial Statements continued PAYABLES FROM EXCHANGE TRANSACTIONS Trade payables 2,153,681 4,916,775 Unallocated deposits 5,822,296 5,453,594 Accrued leave pay 1,807,500 1,585,033 Trade accruals 3,257,204 2,915,280 Other payroll accruals 559, ,486 Payroll liabilities 1,612,452 2,639,430 15,212,181 17,836, REVENUE Registers revenue 24,213,359 22,031,550 Other income 840, ,880 Finance income 4,141,704 4,600,284 Government grants 67,614,000 65,959,000 Contractor fines 210, ,250 Annual fees 18,145,000 24,911, ,164, ,460,710 The amount included in revenue arising from exchanges of goods or services are as follows: Assessment fees 24,213,359 22,031,550 Other income 840, ,880 Finance income 4,141,704 4,600,284 annual report 2012/ ,195,155 26,796,

121 Notes to the Annual Financial Statements continued REVENUE (continued) The amount included in revenue arising from non-exchange transactions is as follows: Transfer revenue Government grants 67,614,000 65,959,000 Contractor fines 210, ,250 Annual fees 18,145,000 24,911,746 85,969,150 91,663, OTHER INCOME Proceeds from insurance claims 46,998 69,650 Sponsorship received - 90,000 Sundry income 793,094 5, , ,880 construction industry development board 118

122 Notes to the Annual Financial Statements continued OPERATING EXPENSES Audit fees 1,750,485 1,764,180 Bank charges 377, ,193 Other maintenance, repairs and running cost 823, ,961 Consulting and professional fees 12,552,109 14,919,552 Audit committee remuneration 725, ,283 Insurance 545, ,988 Computer expenses and consumables 871,077 1,009,048 Lease rentals - Buildings 3,910,645 3,708,318 Lease rentals - Other 1,040, ,029 Sponsorships 91, ,620 Courier and delivery charges 300, ,562 Printing and stationery 4,831,210 3,785,688 Security 1,468,541 1,157,852 Training and staff development 2,133,714 2,846,100 Subscriptions and membership fees 104,567 98,435 Telephone and fax 3,087,599 2,875,827 Travel and subsistence - local 5,854,560 5,416,069 Electricity 971,977 1,051,728 Advertising 1,088,077 1,603,117 Legal fees 392, ,567 Penalties and fines 4,384 33,096 Venue expenses 1,022,198 1,713,797 annual report 2012/2013 Board remuneration 1,189,574 1,076,917 45,137,845 47,896,

123 Notes to the Annual Financial Statements continued STAFF COSTS Basic 54,159,382 48,273,696 Bonus 7,837,710 3,878,137 UIF 267, ,280 Group Life company contribution 260, ,300 Leave payment 372, ,258 Provident fund contributions 1,885,678 1,198,656 64,782,612 54,249,327 Remuneration of executives Annual remuneration 7,860,674 6,295,514 Performance bonuses 402, ,827 8,262,721 6,815,341 Staff cost 73,045,333 61,064,668 construction industry development board 120

124 Notes to the Annual Financial Statements continued DEBT IMPAIRMENT Bad debts written-off 92, ,490 Provision for bad debts 198,514 62,025 Reversal of bad debts provision (62,025) (216,012) 228, , FINANCE INCOME Interest revenue Bank 4,141,704 4,600, FINANCE COSTS Finance leases 2,272 35, INCOME TAX EXEMPTION The cidb is exempt from Income Tax in terms of Section 10 (1) (ca) (i) of the Income Tax Act. annual report 2012/

125 Notes to the Annual Financial Statements continued AUDIT FEES External audit fees 1,026, ,017 Internal audit fees 724, ,163 1,750,485 1,764, CASH GENERATED FROM OPERATIONS (Deficit) surplus (7,019,360) 6,068,395 Adjustments for: Depreciation and amortisation 3,335,350 2,943,262 Loss on assets written off 434, ,776 Finance costs 2,272 35,179 Debt impairment 228, ,503 Movements in operating lease assets and accruals - 1,192,757 Movements in provisions 3,934,529 - Changes in working capital: Receivables from exchange transactions (413,921) 176,595 Reversal of bad debts provision (228,764) (152,503) Payables from exchange transactions (2,624,421) (1,249,220) construction industry development board Income received in advance 3,717,079 1,239, RESTATEMENTS 1,365,629 10,705,930 To conform with the principle of fair presentation of the Annual Financial Statements as outlined in the statement of GRAP, cidb restated the commitment schedule opening balance amount of R as disclosed on the 31 March 2012 to R The above restatement did not have any impact on the surpluses for the periods. 122

126 Notes to the Annual Financial Statements continued COMMITMENTS Authorised Capital Expenditure Already contracted for but not provided for: Outstanding contractual obligations at year-end 41,992,644 57,156,912 Operating leases as lessee (expense) Minimum lease payments due Within one year 1,042,026 3,859,353 In second to fifth year inclusive - 1,042,026 1,042,026 4,901,379 Operating lease payments represent rentals by the cidb to SABS for its office properties in Pretoria. Leases negotiated for an average of five years. The operating lease expires on 30 June CONTINGENCIES Contingent liabilities Liable to: National Treasury - 58,658,519 A contingent liability related to a CCMA Award in the labour court: The matter has since been settled Liable to: Employees of the cidb that were suspended - 299,063 Liable to: annual report 2012/2013 Amount queried with Public Administration Leadership and Management Academy 18,

127 Notes to the Annual Financial Statements continued RELATED PARTIES National Department of Public Works Provincial Department of Public Works Eastern Cape Department of Roads and Public Works Western Cape Department of Transport and Public Works KwaZulu-Natal Department of Public Works Free State Department of Police, Roads and Transport Mpumalanga Department of Public Works Limpopo Department of Public Works North West Department of Public Works, Roads and Transport Northern Cape Regional Development of Roads and Public Works The cidb has entered into an arrangement with the Provincial department of Public Works whereby the departments will provide office space for the cidb operations for free. The cidb operates out of the offices mentioned above. Related party balances Amounts included in trade receivable regarding related parties Z Ntombela (Board member) 23,109 - Related party transactions construction industry development board The following is a summary of transactions with DPW Department of Public Works 67,614,000 65,959,000 The cidb received the following sponsorships from the fellow public sector entities Department of Public Works - 90,000 Income received from DPW for secondment of staff member Inba Thumbiran 788,

128 Notes to the Annual Financial Statements continued 26. MEMBERS EMOLUMENTS Board Committee 2013 Scheduled Meetings Other Meetings Other Activites Scheduled Meetings Other Meetings Other Activites Travel Allowance Total B. Ndendwa (Chairperson) L. Myataza (Deputy Chairperson) , ,118 14, , , , ,851 10, , ,543 N. Maas ,091 32,473 1,203 10,755 84,522 L. Kona ,523 79,845 2,005 32, ,322 G. Martins# M. Govender ,261 41,693-95, ,788 H. Patel ,289 54, , ,423 A. Naidu ,433 16,839-2,419 33,691 S. Malebye ,280 43,144-26, ,374 Z. Ntombela ,914 76,854 4, , ,682 N. Makhubele# P. Makhesha# , , , ,586 32, ,082 1,879, Total Emoluments 362, , ,881 1,717,687 # G.Martins and N. Makhubele are not entitled to remuneration as they are public servants. P. Makhesha resigned from the cidb board on 30 April Scheduled meetings include: Statutory meetings, all pre-scheduled board/exco and committee meetings for the year annual report 2012/2013 All provincial stakeholder liaison meetings All the national stakeholder forums 125

129 Notes to the Annual Financial Statements continued 26. MEMBERS EMOLUMENTS (continued) Other meetings include: National and regional meetings as well as events, parliamentary meetings, road shows, other stakeholder meetings, any board and sub- committee meetings including but not limited to strategic plan meetings with executive committee etc. Other activities include: Attendance/participation at any other events or meetings as determined from time to time. Executives 2013 Salary Acting Allowance Performance bonus Total U. Ntsubane (CEO) 1,327, ,327,625 P. Mongwenyana (CFO: 01 APR - SEP 2012) 636, ,415 H. Khumalo (CFO: 01 OCT - to date) 538,310 23,219 37, ,211 G. Naidoo (Prog Manager: PCD) 1,043,948 35,268 73,076 1,152,292 R. Milford (Prog Manager: CIP) 1,166,617-81,663 1,248,280 I. Thumbiran (Prog Manager: PDM - seconded to DPW) 1,037,567-72,882 1,110,449 K. Ntiisa (Acting Prog Manager: PDM) 795, ,842 63,260 1,041,557 E. Moola (Prog Manager: CRS) 1,049,772 23,636 73,484 1,146,892 7,595, , ,047 8,262, construction industry development board Total Emoluments 6,295, ,827 6,815,

130 Notes to the Annual Financial Statements continued 26. MEMBERS EMOLUMENTS (continued) Audit Committee 2013 Scheduled Meetings Other Meetings Scheduled Meetings Other Meetings Travel Allowance Total S. Thomas (Chairperson): ,184 76,839 6, ,216 V. Nondabula* ,512 52,776 7, ,926 N. Mhlongo: CA(SA) ,920 17,592 7, , , ,207 21, , Total Emoluments 390,896 70, , ,276 * V. Nondabula is a member of both the Audit Committee and Risk Committee annual report 2012/

131 Notes to the Annual Financial Statements continued 27. CHANGE IN ESTIMATE Property, plant and equipment During the financial period, management revised the estimated useful lives of computer equipment, office equipment and furniture and fittings to 14 years. In prior periods, management had estimated the useful lives of computer equipment and office equipment to be 12 years and that of computer software to be 10 years. The effect of this revision has reduced the depreciation charges for the current and future periods by R RISK MANAGEMENT Financial risk management Liquidity risk Liquidity risk is the risk that cidb would not have sufficient funds available to cover future commitments. The cidb regards this risk to be low; taking into consideration the cidb s current funding structures and availability of cash resources. At 31 March 2013 Carrying amount Total cash flow Contractual cash flow within 1 year Contractual cash flow between 1 and 5 years Other financial liabilities 50,439,591 50,439,591 50,439,591 - At 31 March 2013 Carrying amount Total cash flow Contractual cash flow within 1 year Contractual cash flow between 1 and 5 years construction industry development board Other financial liabilities 45,502,533 45,502,533 45,502,

132 Notes to the Annual Financial Statements continued 28. RISK MANAGEMENT (continued) The following table shows the classification of the cidb s principal instruments together with their carrying value: Financial instrument Carrying Value Carrying Value Cash and cash equivalents 77,527,077 80,163,463 Receivables 1,919,438 1,505,516 Payables 50,439,591 45,502, Loans and Receivables Financial Liabilities at amortised cost Total Interest income 4,141,704-4,141,704 Finance charges - (2,274) (2,274) 4,141,704 (2,274) 4,139, Loans and Receivables Financial Liabilities at amortised cost Total Interest income 4,600,284-4,600,284 Finance charges - (35,179) (35,179) 4,600,284 (35,179) 4,565,105 Interest rate risk The cidb is exposed to interest rate changes in respect of returns on its investment with financial institutions and interest payable on finance leases contracted with external parties. The cidb s exposure to interest risk is managed by investing, on short term basis, in current accounts and the call accounts Change investments (%) Upward Change Downward Change Cash and cash equivalents 1 77,527,077 (775,270) annual report 2012/ Cash and cash equivalents 1 80,163,463 (801,634) 129

133 Notes to the Annual Financial Statements continued 28. RISK MANAGEMENT (continued) Credit risk Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The cibd only deposits cash with major banks with high-quality credit standing and limits exposure to any one counter-party. The cibd trades only with recognised, creditworthy third parties and monitors receivable balances on an o-going basis with the result that the cidb s exposure to bad debts is not significant. With respect to credit risks arising from the other financial assets of the cibd, which comprises cash and cash equivalents, the cibd s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. The cibd s cash and cash equivalents are placed with high credit quality financial institution therefore the credit risk with respect to cash and cash equivalents is limited. Financial assets exposed to credit risk at year end were as follows: Financial instrument Cash and cash equivalent 77,527,577 80,163,463 Other receivables 1,919,438 1,505,516 The following tables provide information regarding the credit quality of assets which may expose the cidb to credit risk: 2013 Neither past due nor impaired Past due but not impaired - less than 2 months Past due but not impairedmore than 2 months Carrying value Cash and cash equivalent 77,527, ,527,077 Other receivables - - 1,919,438 1,919,438 77,527,077-1,919,438 79,446,515 construction industry development board 2012 Neither past due nor impaired Past due but not impaired - less than 2 months Past due but not impairedmore than 2 months Carrying value Cash and cash equivalents 80,163, ,163,463 Other receivables - - 1,505,516 1,505,516 80,163,463-1,505,516 81,668,

134 Notes to the Annual Financial Statements continued 28. RISK MANAGEMENT (continued) The maximum exposure to credit risk for financial assets at the reporting date by credit rating category was as follows: 2013 AAA Unrated Cash and cash equivalents 77,527,077 - Other receivables - 1,919,438 77,527,077 1,919, AAA Unrated Cash and cash equivalents 80,163,463 - Other receivables - 1,505,516 80,163,463 1,505, EVENTS AFTER THE REPORTING DATE The Chief Executive Officer tendered her resignation as at 31 May FRUITLESS AND WASTEFUL EXPENDITURE Cell phone airtime paid for stolen cell phone - 29,457 Interest penalty charged for early funds withdrawals 4,384 33,096 4,384 62, IRREGULAR EXPENDITURE Opening balance 11,302,902 - annual report 2012/2013 Add: Irregular Expenditure - current year 4,942,658 11,781,140 Less: Amounts condoned (8,460,067) (478,238) 7,785,493 11,302,

135 Notes to the Annual Financial Statements continued IRREGULAR EXPENDITURE (continued) Details of current year irregular expenditure not recoverable Transaction procured without following SCM process. Five year lease not initially approved by the National Treasury Expired contracts / Extension of contracts Bids awarded and no supporting documentation could be located No valid contracts Two matters are under investigation, and one other matter was taken through disciplinary process. No disciplinary action required against any staff member. This was subsequently confirmed by National Treasury that, there was no impropriety in the transaction which required action to be taken against anybody. The condonation was later granted by National Treasury. No disciplinary action required against any staff member. These contracts relate to old tenders before the establishment of SCM unit. Extensions were in line with business needs while tenders were being processed. In one matter a new contract was awarded and other three matters the contracts were terminated. The bid processes started for the one matter. No disciplinary action taken since the staff involved has resigned. Two transactions will be formalised through signing of the new SLA, the other transaction will be formalised through the new SCM process. 1,224, ,207 1,113, , ,654 Bids awarded and no consistent application of the evaluation criteria followed No disciplinary action taken since the staff involved has resigned 1,125,667 construction industry development board Services procured without obtaining at least three quotes No disciplinary action taken since the staff involved has resigned. Purchase Order signed outside delegation of authority No disciplinary action taken since the staff involved has resigned. Clear delegation of authority were developed and implemented. 41,142 27,759 4,942,

136 Notes to the Annual Financial Statements continued 32. BUDGET DIFFERENCES Material differences between budget and actual amounts The cidb budget is approved on a cash basis by functional classification. The approved budget covers the period from 1 April to 31 March each year. The Annual Financial Statements and budget documents are prepared for the same period. For the period ended 31 March 2013, there is a basis difference: the budget is prepared on a cash basis and the Annual Financial Statements on the accrual basis. The cidb is not allowed to budget for a deficit; however, it has exceeded its budget allocation as at 31 March 2013 by R This over- spending is as a result of non-cash items of R which were not budgeted for in the allocation for the financial year under review. This over-spending was not budgeted in the current year s allocation due to the fact that it was going to be absorbed in the accumulated surplus of R58 million from previous years as the entity had received approval from the National Treasury to retain the surplus funds. Furthermore, the cidb entered into a CCMA Wage Settlement Agreement in October 2012 which included amongst other things, the payment of guaranteed bonuses by 31 December As a result, these were recognised in the cidb Annual Financial Statements so as to comply with GRAP 19. The over-expenditure relating to guaranteed bonuses has been budgeted for in the 2013/14 allocation and as such, will be offset in the following year. After taking into account the opening accumulated surplus of R , this has resulted in the reduction of accumulated surplus to R at the end of the financial year. annual report 2012/

137 construction industry development board 134

138 2012/13 Performance Summary annual report 2012/

139 construction industry development board Progress Against Annual Performance Plan PROGRAMME 1: GROWTH AND CONTRACTOR DEVELOPMENT Purpose To improve the effectiveness and extend the reach of contractor development support through outreach and effective and efficient support from provincial partnered cidb offices (cidb Provincial Offices) and to stimulate the role of industry and stakeholders for meaningful empowerment and improved contractor sustainability and performance. Objective Statement Provision of leadership and support to the public sector and other stakeholders in the development of previously disadvantaged contractors. Key Policy Priority Support to contractor development and increased participation of the emerging sector. Strategic Outcome-Oriented Goal Provide leadership and support in the development of the emerging sector. No. Strategic Objective Output Performance Indicator Performance Target 2012/13 Performance Progress Reason for Deviation 1.1 Sustainable Growth of Contractors: NCDP Framework implementation Client departments generic NCDP awareness and capacitation workshop 1 x workshop inviting all client department in each of the nine provinces conducted on NCDP Framework and Guidelines awareness and capacitation. 1 x client awareness and capacitation workshop conducted in each of the nine provinces by end of March Achieved: All nine provinces held their workshops. 136

140 No. Strategic Objective Output Performance Indicator Performance Target 2012/13 Provincial Contractor Development Forum (PCDF) held in each of the nine provinces. 4 x PCDF with 2 client departments (aligning to NCDP Targeting guidelines, quarterly targets and CDP Statistic reports provided in terms of NCDP M&E guidelines to HOD s. For submission to HOD meetings and MinMEC meetings). 1 x PCDF held in each of the nine provinces by end of each Quarter. i.e. end of June 2012, Sep, 2012, Dec 2012 and Mar (within one month thereafter) 2 x client departments PCDF attendance Quarterly NCDP Stats reporting. 1.2 Sustainable Growth of Contractors: Monitoring and Evaluation Framework for the performance of NCDP application NCDP Monitoring and Evaluation (M&E) Framework document. 1 x M&E Framework developed and updated 1 x M&E Framework submitted for Board and NCDP Steering Committee. Approval by end of March Performance Progress Achieved: All provinces held PCDFs as follows (nine provinces x four PCDF s = 36 meetings). A minimum of 2 x client departments attended each meeting and CDP statistics were provided on a quarterly Wbasis to NCDP SCM. Achieved: M&E framework approved by the Board, NCDP SCM and MinMEC within the NCDP framework and CDP guidelines on 21 September Reason for Deviation In the 1 st quarter, N-Cape meeting was scheduled for 23 June but due to key stakeholder (DPW) need for participation and them having other commitments had to be re-scheduled for 26 July. In the 2 nd quarter, the Department of Public Works in North West requested for a postponement since contractor development was on the agenda of a planning meeting in September 2012 and date of 25 October 2012 had been scheduled. Mpumalanga scheduled for 23 October annual report 2012/

141 construction industry development board No. Strategic Objective Output Performance Indicator Performance Target 2012/ Sustainable Growth of Contractors: Information and tools Contractor tips and advice brochures. 2 x advice brochures published on cidb website annually. 2 x brochures per year by the end of September 2012 and February Report on information sourced from the cidb provincial offices information hub and website. 2 x statistical reports on information updated and posted on cidb web and accessed from cidb provincial offices information hubs. 2 x statistical report, 1 st report by end September 2012 and 2 nd report by end of March (within 1 month thereafter) Performance Progress Achieved: 1 st brochure titled: Cash flow management by a construction business designed, published and distributed in the 1 st quarter. 2 nd brochure titled: Demystifying setasides and ring-fencing designed, published and distributed in the 2 nd quarter. Achieved: The 1 st statistical report was provided on information hubs, updated and posted on cidb web in the 1 st quarter and the 2 nd Statistical report in the 4 th quarter. Reason for Deviation 138

142 No. Strategic Objective Output Performance Indicator Performance Target 2012/ cidb Provincial office support to Public Sector initiatives on contractor development Procurement focus support workshop. 2 x procurement focus workshops per province (CPO Forum focused on procurement driven contractor development project packaging : 2 sessions per province). 2 x procurement focus workshops per province (3 x client departments in attendance).by end September 2012 and end March (3 x client departments in attendance). Catalytic Contractor Development Project. 1 x annual catalytic partnered project per province. (as per NCDP & internal guidelines e.g. Strategy for client and stakeholder support programme for Provincial Contractor Development Framework on-going management strategy, and partner support). 1 x catalytic partnered project implemented per province by end March Performance Progress Achieved All provinces held their construction procurement workshops. In total 18 meetings were held by end of March Partially Achieved 9 x catalytic projects were procured for implementation by 31 March Final project reports were received from five provinces. 4 x outstanding reports to follow in April/May Reason for Deviation NW project was delayed by the poor quality service from the service provider. WC catalytic project was delayed due to unreasonable time taken at procurement process. There was lack of commitment from Free State and Northern Cape service providers who were non responsive. annual report 2012/

143 construction industry development board No. Strategic Objective Output Performance Indicator Performance Target 2012/ cidb provincial offices support to partners Contractor capacitation sessions. 2 x capacitation sessions facilitated for contractors within CDP s or affiliates of cidb MOU partners (e.g. finance, OHS, CMG, Contracts Management etc.). 2 x capacitation sessions facilitated for contractor per province per year by end March Report on MOUs 1 x report on MOUs (review of contractor development and mutual area deliverables from all signed partnermous). 100% of all MOUs to be reviewed by February Efficient Services offered from cidb Provincial Offices Report on registration service. 4 x reports on compliance with over the counter registration and activation of compliant Grade 1 applications on the cidb website within 48 hours. 95% compliance with over the counter registration and 48 hours activation of compliant Grade 1 applications reported end of each Quarter. i.e. end of June 2012, September 2012, December 2012 and March 2013 (within 1 month thereafter). Performance Progress Partially Achieved: All provinces held their capacitation sessions except for KZN. Achieved: All MOUs were reviewed and are subject to the Board approval to continue or terminate various MOU. The report was tabled to DPW NCDP Steering Committee secretariat to be included in the next meeting agenda. Not achieved 99% of the applications achieved the legislated turnaround times in the 1 st quarter, 55% in the 2 nd quarter, 32% in the 3 rd quarter and 42% in the 4 th quarter. Reason for Deviation There was delay to procure a service provider. The KZN session was scheduled on the 26 April Siyakha project and contractor registration system continued to create registration delays/ challenges and process. The system stabilisation is underway and efficiency is expected to improve during mid/end of

144 No. Strategic Objective Output Performance Indicator Performance Target 2012/13 Administrative and logistical support to host the provincial stakeholder workshops. 1 x annual stakeholder workshop report on administrative and logistical support per province provided to Office of CEO. 1 x annual stakeholder workshop (as scheduled by Communications Unit) report per province by end March Contractor satisfaction report on CCC support services. 1 x quarterly Contractor satisfaction report with actions and remedial measures for complaints. 1 x quarterly Contractor satisfaction report with actions and remedial measures for complaints. i.e. end of June 2012, September 2012, December 2012 and March 2013 (within 1 month thereafter). Performance Progress Achieved: All provinces held their provincial stakeholder liaison workshops before end March Achieved: Quarterly contractor satisfaction reports with the remedial actions were produced in each quarter. Reason for Deviation annual report 2012/

145 construction industry development board PROGRAMME 2: CONSTRUCTION INDUSTRY PER Purpose To determine, establish and promote appropriate measures aimed at improved performance and best practice of public and private sector clients, contractors and other participants in the construction delivery process. Objective Statement Improved performance and best practice for an industry that delivers reliable value to clients, investors and end-users, information on construction industry indicators to inform cidb strategy, policy makers and stakeholders. Key Policy Priority Construction industry performance. Outcome- Oriented Goal Improved performance supporting contractor development and value to clients. No. Strategic Objective Output Performance Indicator Performance Target 2012/13 Performance Progress Reason for Deviation 2.1 Monitor and evaluate the performance of the construction industry Monitoring reports, and sector specific status reports. 1 x publication of cidb Construction Industry Indicators (CIIs) published in PDF format on cidb Web Summary Result. 1 x CIIs published by January Achieved: 1 x CIIs published by on 14 January x cidb Quarterly Monitor published in PDF format on cidb website. 4 x Quarterly Monitors published in 2012/13 (Apr, Jul, Oct, Jan). Achieved: All 4 x Quarterly Monitors were published as targeted. (1 st report on 10 April 2012, 2 nd on 16 July 2012, 3 rd on 26 October 2012 and 4 W on 23 January 2012). 142

146 No. Strategic Objective Output Performance Indicator 4 x Quarterly cidb SME Business Conditions Survey result published in PDF format on cidb website 1 x sector status report published in PDF format on cidb website) on: (1 x construction quality), 1x state of subcontracting and 1 x sector status report on employment Performance Target 2012/13 4 x SME surveys published in PDF format on cidb website in 2012/13 (Apr, Jul, Oct, Jan). 1 x Report on the state of sub-contracting published in PDF format on cidb website by March Performance Progress Achieved: All SME Business Conditions Survey results were published quarterly as targeted. (1 st report on 23 March 2012, 2 nd on 19 June 2012, 3 rd on 28 September 2012 and 4 th on 5 December Achieved 1 x Report on the state of sub-contracting published in pdf format on cidb web 20 February Reason for Deviation annual report 2012/

147 construction industry development board No. Strategic Objective Output Performance Indicator 2 x stakeholder communications Sessions on CIIs, Quarterly Monitor and SME survey. 2.2 Develop and promote construction best practice guides Construction best practice guides. 1 x H&S Practice Guide published in PDF format on cidb website. Performance Target 2012/13 2 x Stakeholder Communication Sessions held by March x H&S Practice Guide published by March Performance Progress Achieved Stakeholder Communication Sessions were held in: Durban on 23 May 2012 Bloemfontein on 10 May 2012 Midrand on 20 July 2012 Cape Town on 3 September 2012 East London on 7 March Partially Achieved Final Draft H&S Practice Guide available. Reason for Deviation Reason for deviation Work behind schedule by approximately 2 weeks. Final draft submitted to Programme Manager for review on 5 April Target date for completion is 30 May

148 No. Strategic Objective Output Performance Indicator 2.3 Develop and implement the best practice registers in support of improving the performance of the industry cidb Best Practice Contractor Recognition Scheme. 1 x cidb Standard for Competence Recognition submitted to cidb Board for approval and gazetting. 1 x cidb Standard for Construction Management Systems submitted to Board for approval and gazetting. Performance Target 2012/13 1 x cidb Standard for Competence Recognition submitted by end of September x cidb Standard for Construction Management Systems submitted by December Performance Progress Partially Achieved Draft Standard completed and supported by Stakeholders (7 September 2013), but consensus was not achieved on submitting to Board to be published as a Standard. Submission to Board delayed. Partially Achieved Draft SABS CMS Standard still to be issued by SABS for public comment. Reason for Deviation Reason for deviation Consensus was not achieved with Stakeholders on submitting to Board to be published as a Standard. Standard is available, but strategy is to revise Standard into a Framework document, which will be submitted to Board in July Meeting scheduled to finalise strategy for 23 April Reason for deviation Consensus was not achieved with Stakeholders on submitting to Board to be published as a Standard. Draft SABS CMS Standard has not yet been issued by SABS for public comment. annual report 2012/

149 construction industry development board No. Strategic Objective Output Performance Indicator 1 x cidb Requirements for Contractor Performance Reports submitted to cidb Board for approval for gazetting. cidb Best Practice Project Assessment Scheme. 1 x cidb Requirements for Construction Skills Development submitted to cidb Board for approval for gazetting. Performance Target 2012/13 1 x cidb Requirements for Contractor Performance Reports for Grades 2 to 4 submitted by September x cidb Requirements for Construction Skills Development submitted by December Performance Progress Partially Achieved (late) 1 x cidb Standard for Contractor Performance Reports for Grades 2 to 9 gazetted for public comment on 25 February Partially Achieved Final draft available. Reason for Deviation The Standard has been gazetted. Legislation to make Standard compulsory can only be introduced after Service Fee has been approved by Board targeting October Draft delayed due to requests by DHET to broaden scope Final consultations held on 18 April 2013 Targeting submission of Standard to July 2013 Board meeting. Legislation to make Standard compulsory can only be introduced after Service fee has been approved by Board targeting October

150 No. Strategic Objective Output Performance Indicator 1 x cidb Requirements for Indirect Targeting for Enterprise Development submitted to cidb Board for approval for gazetting. 1 x annual assessment of roll-out and implementation of cidb Requirements for Green Building Certification submitted to cidb Board for noting. Performance Target 2012/13 1 x cidb Requirements for Indirect Targeting for Enterprise Development submitted to cidb Board for approval for Gazetting by December x annual assessment of roll-out and implementation of cidb Requirements for Green Building Certification submitted by March Performance Progress Partially Achieved (Late) 1 x cidb Standard for Indirect Targeting for Enterprise Development was approved by cidb board and published in Gazette on 25 February Partially Achieved Monitoring completed: 3 x Public buildings certified (SANRAL Corporate Head Office, Manenberg Civic Offices, Sisonke District Office. 3 x Public buildings registered (ESKOM Megawatt Park, National English Literary Museum, Nelson Mandela Metropolitan University Business School. Reason for Deviation Legislation to make Standard compulsory can only be introduced after Service fee has been approved by Board targeting October The annual assessment has not been submitted to the Board as the Requirements have not been regulated. annual report 2012/

151 construction industry development board No. Strategic Objective Output Performance Indicator 2.4 Support the development and promotion of infrastructure delivery skills cidb Infrastructure Delivery Skills Strategy document. 1 x annual assessment report for cidb Employment Skills Development Agency (ESDA) submitted to Advisory Committee for approval. 1 x Business Plan for implementing WorldSkills in SA submitted to cidb Board for approval. 1 x cidb Post- Graduate (PG) Conference / Doctoral Workshop hosted annually. Performance Target 2012/13 1 x Business Plan for transfer of ESDA to industry submitted by December x Business Plan for implementing WorldSkills in SA submitted by August x PG Conference or Doctoral Workshop hosted by December Performance Progress Partially Achieved Draft plan available end of the 4 th quarter and will be submitted for Board approval after approval by industry stakeholders. Partially Achieved Final draft business plan completed. Achieved: Workshop held at Wits on 18 October Reason for Deviation Draft SDA business plan is available and scheduled for discussion with Exco in May 2013.Discussions to be held with DPW end May 2013, which will be followed by industry discussions after which the business plan will be finalised. Approach revised, and WorldSkills Business Plan will be submitted to Board for approval as part of cidb Construction Skills Strategy. Scheduled for discussion with Exco in May 2013 Will submit to Board as part of cidb Construction Skills Strategy. 148

152 No. Strategic Objective Output Performance Indicator 2 x Youth in Construction / National Construction supported annually. 2.5 Project Management of National Infrastructure Maintenance Strategy (NIMS) Project management progress report of NIMS. 1 x quarterly progress report on project management of NIMS submitted to Steering Committee. Performance Target 2012/13 2 x YIC events supported by December x Progress reports on NIMS submitted to DPW Steering Committee in 2012/13 (April, July, October, January). Performance Progress Partially Achieved Cape Town YIC event completed in the 2 nd quarter. Partially Achieved DPW/cidb project committee established. Initial funds transferred by DPW. Delays by DPW in establishing Steering Committee to approve PEP. Reason for Deviation The Durban event was postponed due to poor uptake by industry. The Gauteng event was held from the 17 to 22 February Delays by DPW in establishing Steering Committee to approve Project Executing Plan (PEP). annual report 2012/

153 construction industry development board PROGRAMME 3: PROCUREMENT DELIVERY MANAGEMENT Purpose Develop, promote and monitor uniform application of cidb prescripts throughout all organs of state and industry stakeholders including procurement standards, construction procurement reform, improved infrastructure delivery management practices and the cidb Code of Conduct. Objective Statement Provide leadership to stakeholders and to stimulate sustainable growth, reform and improvement of theconstruction sector for effective delivery and the industry s enhanced role in the country s economy. Key Policy Priority Provide leadership for enhanced public sector construction procurement and infrastructure delivery management capability of public sector clients delivered within the prescribed framework. Expected Outcome Enhanced compliance to construction procurement and infrastructure delivery management. No. Strategic Objective Output Performance Indicator Performance Target 2012/13 Performance Progress Reason for Deviation 3.1 Infrastructure Delivery improvement Assessment of the application and maintenance of the Infrastructure Delivery Management Toolkit (IDMT). 1x assessment report on the application and maintenance of the Infrastructure Delivery Management Toolkit (IDMT) as part of the feedback to the IDIP partners (DBSA, NT, NDPW & CIDB) developed. 1 x assessment report developed for the period 1 April 2012 to 31 March 2013 (available April 2013). Achieved Assessment report was developed for the period 1 April 2012 to 31 March 2013 (available April 2013). Rewrite of the current Toolkit to Microsoft Foundation has been completed by end of February

154 No. Strategic Objective Output Performance Indicator Certified IDMT course material. 1 x IDMT course material. 3.2 Improvement and maintenance of the regulations to enhance procurement reform and delivery management Prescripts for construction infrastructure project delivery. 1 x recommendation and prescript for dispute resolution and prompt payment for Board approval. 1 x development of the standards and gateway reviews for Board approval. Performance Target 2012/13 1 x draft IDMT course material finalised by end of March x recommendation for dispute resolution and prompt payment to the Board by June x developed draft standard for Gateway Reviews by March Performance Progress Achieved Draft IDMT course material was finalized before the end of March Achieved Target was achieved in the first quarter. Partially Achieved The Consultation with IDIP s stakeholder was held with regard the draft standard on 3 and 4 December Reason for Deviation The standard for gateway review is addressed in the standard for Infrastructure Delivery Management System to be published by National Treasury so there is a need to align and provide enough time for officials to engage with the standard. annual report 2012/

155 construction industry development board No. Strategic Objective Output Performance Indicator 1 x established Procurement Advisory Panel for guidance on procurement and delivery legislation. 3.3 Improving Client (Government Departments and SoE) capability and industry capacity Enhanced client capability and industry capacity for procurement and delivery management. 4 x CPO forums hosted per province to build client capability (9 x Chief Procurement Officer (CPO) Forums). Performance Target 2012/13 1 x established Procurement Advisory Panel for guidance on procurement and delivery legislation by end of March x CPO forums hosted per annum by end of March Performance Progress Not Achieved The first meeting of the PAP was not held and report was not produced due to the delay in responses from officials. Achieved 6 x CPO Forums were held: Limpopo 08 February Eastern Cape 14 February 2013, Mpumalanga 15 February 2013, Northwest 21 February Western Cape 20 March 2013 and Mpumalanga 28 March Reason for Deviation Responses from the officials were not satisfactory. To date only 4 officials responded. Way forward: To change the PAP strategy by working with the existing forums such as CPO/PCDF in the provinces and establish a task team comprising officials from all the 9 provinces to implement the existing PAP scope of work as per the TOR. 152

156 No. Strategic Objective Output Performance Indicator 1 x industry focus group meetings held per annum. 2 x Training workshops per quarter, (on procurement outcomes for client Contractor Development Programs CDP s, IDMT and other procurement related topics). 1 x quarterly law report published on the cidb website to share information on court rulings on construction contracts. Practice Notes and / or Brochures. 2 x Issued Practice Notes and / or brochures (adhoc) on conclusion of need-assessment on cidb regulations and practices per year. Performance Target 2012/13 1 x Industry focus group meetings held per annum by end of March x Training workshops per quarter by end of June 2012, Sep, 2012, Dec 2012 and Mar x quarterly law report published by end of June 2012, Sep, 2012, Dec 2012 and Mar x Practice Note and / or brochure issued by end of Sep, 2012, and Mar Performance Progress Achieved Target achieved in second quarter. Partially Achieved Training and capacitation workshops were conducted in the following Provinces: (2 x in Gauteng, 2 x in Limpopo, 2 x in Eastern Cape, 1 x in KwaZulu- Natal, and 1 x in Free State). Achieved A quarterly law report was published on the cidb website on 9 April Partially Achieved Practice Note 29 was concluded and published on the website by 30 July Draft Practice Note 31 developed end of March Reason for Deviation Training and capacitation were prioritised and conducted based on needs and resources basis. annual report 2012/

157 construction industry development board No. Strategic Objective Output Performance Indicator 3.4 Improving construction procurement skills. Construction procurement skills competence standards. 1 x Competence Standard model for construction procurement developed and submitted for Board approval. 3.5 Compliance and Enforcement of cidb Regulations. Implementation of compliance monitoring plan. 1 x implemented compliance monitoring plan. Improved compliance with the cidb regulations. 1 x quarterly report on investigations and prosecutions on cases of non-compliance, fraud and corruption. Anti-corruption strategy. 1 x anti-corruption model developed. Performance Target 2012/13 1 x draft standard developed by end of March x compliance monitoring plan implemented by June x quarterly report on investigations and prosecutions by end of June 2012, Sep, 2012, Dec 2012 and Mar x draft anti-corruption model developed by end of March Performance Progress Not Achieved No consultation with stakeholders on the standards due to the revision of Scope of Work. Achieved Target was achieved in the first quarter. Achieved Quarterly report on investigated and prosecuted cases was issued on 30 March Not Achieved Investigation into the development of draft anti-corruption model not finalised. Reason for Deviation Changed strategy because there was a need to align the work to other government initiatives that are being implemented such as the IDIP Capacitation Framework and the capacity building for the SIPs projects. Other alternative transparency models besides CoST to be explored and the best option inclusive of resources and system requirements to be proposed by 30 June

158 PROGRAMME 4: CONSTRUCTION REGISTRATION SERVICES Purpose Implement, manage and improve national registration services covering the Register of Contractors (RoC), Register of Projects (RoP) and new Registers that may be implemented in terms of the CIDB Act. Objective Statement Registration of contractors in a manner that facilitates public sector procurement by ensuring an efficient registrations service and accurate assessments of applications. Facilitate the registration of public sector projects and distribute quarterly reports on client compliance both internally and externally. The registration of projects forms the basis for the implementation of the best practice project assessment schemes designed to drive improved client performance. Key Policy Priority Construction Registration Services. Expected Outcome Effective and Efficient Registration Processes. Strategic Objective Output Performance Indicator Performance Target 2012/13 Performance Progress Reason for Deviation 4.1 Effective and efficient registrations service. Contractor registrations service. Contractor registration within the prescribed 21 working days turnaround time of all compliant applications for Grade 2-9 contained in the quarterly production report. 90 % compliance with the legislated turnaround time on processing compliant Grade 2-9 applications. Not Achieved: 90% compliance with the legislated turnaround time was achieved in the 1 st quarter, 38% in the 2 nd quarter, 32% in the 3 rd quarter and 67% in the 4 th quarter. The legislated turnaround time could not be achieved due to a number of technical problems encountered with the new registrations software system including slow system speed. The performance of the system is improving with production outputs increasing and users are beginning to understand the system. annual report 2012/

159 construction industry development board Strategic Objective Output Performance Indicator Administration (acknowledge, investigate & route to relevant business unit) of queries. 48-hour turnaround time for the administration of contractors and clients registration queries contained in the quarterly production report. RoC data quality management. 10 working days turnaround time for correction of data errors on Grade 2-9 contained in the quarterly production report. Performance Target 2012/13 95 % compliance with the 48-hour turnaround time for the administration of contractors and clients registration queries. 95% of errors identified to be rectified within a period of 10 working days for Grades 2 to 9. Performance Progress Not Achieved 95 % compliance with the 48 hour turnaround time for the administration of contractors and clients registration queries was achieved in the 1 st quarter. Target not achieved in the 2 nd, 3 rd, and 4 th quarter. Not Achieved 96% of errors identified were corrected within a period of 10 working days in the 1 st quarter, 93% in the 3 rd quarter and 96% in the 4 th quarter. During the 2 nd quarter, the number of days in which errors were corrected could not be reported on. Reason for Deviation A new tool has been implemented to administer queries. The new case management functionality has been incorporated into the system and will be used from the first quarter of the Financial Year 2013/14. Due to the implementation of the new Software system, the system performed inadequately which resulted in registration processing delays. Throughput to the quality control phase of production was negatively affected. 156

160 Strategic Objective Output Performance Indicator One calendar month turnaround time for correction of data errors of Grade 1 contained in the quarterly production report. Fraud and ethics awareness among CRS staff members. 2 x fraud awareness workshops conducted. Registrations software system availability. 95% uptime of the registration systems contained in the Quarterly systems uptime report. Performance Target 2012/13 95% of errors identified to be rectified within a period of one calendar month for Grade 1. 2 x fraud awareness workshop held by end of September 2012 and March % uptime of Registration system availability. Performance Progress Achieved 98% of errors identified were corrected within a period of one calendar month. A total of 147 applications were reversed for correction, of which 144 were corrected within a period of one calendar month. Achieved The 1 st fraud awareness workshop took place on 21 st September 2012 and the 2 nd one was held on 20 th March Not Achieved No report was generated from system between February to March 2013 to monitor system failures, however the report generated between 26 th September to 14 th January 2013 period did not report any system failures. Reason for Deviation No system downtime report was generated and tracked for February 2013 and March 2013 period. The system service provider s infrastructure team have been assigned to ensure that the report is generated for monitoring purposes and that this continues going forward. annual report 2012/

161 construction industry development board Strategic Objective Output Performance Indicator 4.3 Review and improvement of registration guidelines. Registration guidelines. 1 x review report / Revised Quick Guide for Contractor Registration. 1 x review report / Revised Comprehensive Guide for Contractor Registration 1 x review report / Revised Quick Guide for i-tender (RoP). Performance Target 2012/13 1 x review report / Revised Quick Guide for Contractor Registration by 30 November x review report / Revised Comprehensive Registrations Brochure by 28 February x review report / Revised Quick Guide for i-tender (RoC) by 31 August Performance Progress Achieved The revision of the Quick Guide was completed and printed in the 2 nd quarter. Achieved Brochure was reviewed before the end of February Achieved The review has been completed. The content of the current guide is still relevant and will remain in circulation. Reason for Deviation 158

162 PROGRAMME 5: CHIEF EXECUTIVE OFFICER S OFFICE Purpose Provide strategic leadership to construction industry stakeholders to stimulate sustainable growth, reform and improvement of the construction sector. Measurable Objective Overall strategic leadership, risk management and corporate governance in support of the Board. Marketing, stakeholder consultations and communications. Key Policy Priority Overall strategic leadership in support of the stakeholder management driven by the comprehensive communication strategy. Outcome-Oriented Goal Build, strengthen and maintain relationships with stakeholders supported by comprehensive communication strategy. Strategic Objective Output Performance Indicator Performance Target Performance Progress Reason for Deviation Stakeholder Management Relationship with industry stakeholders. 3 x MOA/SLA signed with strategic stakeholders in Africa. 3 x MOA/SLA signed with strategic stakeholders by March Not achieved There is an MOA under discussion with the Kenyan delegation from National Construction Authority. They were hosted by the cidb in late March to early April The non-availability of the CEO resulted in delays in pursuing this target. 2 x National Stakeholder Forum (NSF) meetings held and 9 x Provincial Stakeholder Forums. 2 x National Stakeholder Forum (NSF) meetings held and 9 x provincial stakeholders forums by end of March Achieved The 1 st National Stakeholder Forum meeting was held on 4 July 2012 and the 2 nd one on 23 November The Provincial stakeholder forums were held in all the provinces from13 February 2013 to 25 March annual report 2012/

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164 annual report 2012/