ANNUAL REPORT 2011/12

Transcription

1 ANNUAL REPORT 2011/12

2 ANNUAL REPORT 2011/12

3 Table of Contents List of Abbreviations 2 Minister's Foreword 5 Chairperson's Statement 8 CEO's Report /11 Performance Summary 18 The Construction Registers Services 33 Facilitating Growth and Contractor Development 41 Monitoring Industry Performance 52 Public Sector Procurement and Development Management 60 Corporate Services 71 Accounting Authority's Report 78 Report of the Audit Committee Statement of Responsibility and Going Concern 75 Report of the Auditor-General 88 Annual Financial Statements 77 1

4 List of Abbreviations 2 AG BAC BEC BER Auditor-General Bid Adjudication Committee Bid Evaluation Committee Bureau for Economic Research BPCRS Best Practice Contractor Recognition Scheme CCC CD CDP CE CETA cidb CIFOZ CIOB CII CPUT CMS CRS CRS DBSA DPW ECDC EDMS EPIN EPWP ESDA FET FHU FIDIC GB 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 Development 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) General Building GBCSA Green Building Council of South Africa GCC GCD General Conditions of Contract Growth and Contractor Development

5 GDP Gross Domestic Product HR Human Resources IDC Industrial Development Corporation IDIP Infrastructure Delivery Improvement Programme IDT Independent Development Trust IDZ Industrial Development Zone ILO International Labour Organisation ISO International Organisation for Standardisation JBCC Joint Building Contracts Committee JV Joint Venture MoU Memorandum of Understanding M&E Monitoring and Evaluation NCDP National Contractor Development Programme NCV National Certificate Vocational NEC New Engineering Contract NEF National Empowerment Fund NSF National Stakeholder Forum OHS Occupational Health and Safety OHSAS Occupational Health and Safety Advisory Services OHSC Occupational Health and Safety Committee PCDF Provincial Contractor Development Forum PDP's Performance Development Plan PDM Procurement and Delivery Management PPP Public Private Partnership RoC Register of Contractors RoPSP Register of Professional Service Providers RPL Recognition of Prior Learning SABS South African Bureau of Standards SADC Southern African Development Community SAWIC South African Women in Construction SBSA Standard Bank of South Africa SCM Supply Chain Management SEDA Small Enterprise Development Agency 3

6 MINISTER S FOREWORD

7 Minister s Foreword Hon. Thembelani Nxesi (MP) Minister of Public Works After a period of substantial growth, driven in part by the 2010 FIFA World Cup, the construction industry has experienced a decline characterised by job losses and decreasing profit margins. Much of the decline in the construction industry can be linked to an overall depressed global economy. This decline in infrastructure spend is impacting negatively on the pace and depth of transformation within the industry, on job creation, on contractor development and on skills formation, and could even impact negatively on health and safety, and construction quality. As recognised in government's strategic priorities, infrastructure underpins the economic growth of the country, such decline in infrastructure spend will impact negatively on the economic growth of our country. 5 This Annual Report highlights how despite enormous challenges facing the construction sector nationally and internationally the Construction Industry Development Board (cidb) continues to play a strong role in supporting the construction industry in responding to South Africa's development agenda on the one hand, while remaining globally competitive on the other. Key to this has been the ongoing monitoring of the state of the industry by the cidb, interventions by the cidb with National Treasury to enhance the procurement and delivery of public sector infrastructure, and ongoing interventions to support contractor development, growth of the emerging sector, and transformation of the industry. Underlying all of these is a particular focus on women and youth.

8 Through these activities, cidb continues to lay a solid foundation for the role and contribution of the construction industry to government's recently adopted Infrastructure Plan. The Infrastructure Plan is intended to develop social and economic infrastructure to drive an ambitious and achievable vision of creating a significant numbers of new jobs, to strengthen the delivery of basic services to the people of South Africa and support the integration of African economies. The construction industry will clearly play a pivotal role in the implementation of this Infrastructure Plan. But, while the cidb is strongly aligned to, and continues to influence the delivery of government's Infrastructure Plan, my Ministry and the cidb continue to monitor and respond to the changing environment. Through this, the cidb will continue to reposition itself to play a pivotal role in government's Infrastructure Plan into the future. 6 I wish to acknowledge and commend the management and staff of the cidb for their continued support to the construction sector. A special word of welcome to Ms. Ursula Ntsubane, the newly appointed CEO of the cidb. You have taken over the helm of this organisation at a very important point in time, and the industry looks to your leadership in these challenging times. A benchmark can be set under your leadership in ensuring that emerging contractors play a leading role in rolling out the Infrastructure Plan of government across all the identified strategic integrated projects highlighted in the 2012 State of the Nation Address of the President of South Africa. I also want to acknowledge and thank the Board for their ongoing strategic leadership and support in taking the cidb forward and in meeting its mandate, and I look forward to working with the Board in this important task which includes achieving another clean Audit. The year ahead will be a challenging one. But through concerted effort and collaborative work I do not doubt that the cidb, as a public entity of the Department of Public Works, will continue to ensure that the construction industry and emerging contractors in particular, play a part in the economic growth of our country. Hon. Thembelani Nxesi (MP) Minister of Public Works

9 CHAIRPERSON'S STATEMENT

10 Chairperson s Statement 8 The fourth Board of the cidb assumed office in March 2011 at a pivotal time in the industry considering increased Government infrastructure plans and projects. It is also at a time when industry faces many economic and transformation challenges. The change in the global economic environment which has resulted in amongst others, increased unemployment, - especially in the construction industry - requires vigorous intervention by all sectors of the economy for continued economic growth. Chairperson s of CIDB Board Mr. Bafana Ndendwa Government has declared the construction industry a national priority and the cidb has accordingly committed time and effort to providing a framework for industry transformation. Supported by industry role players, the cidb has reviewed and published the National Contractor Development Programme Framework. The Framework highlights amongst others, the critical role of all industry stakeholders towards increased impact. In our eyes, transformation cannot happen without contractor development. Special Stakeholder Liaison Meetings with the Board, cidb executive and industry stakeholders intensified our efforts to improve stakeholder relations. These allowed the necessary interaction with stakeholders to give way to common understanding of industry challenges and cidb progress. The outcome of the meetings will inform the National Stakeholder Forum and other efforts towards improving the construction environment.

11 Construction on the North West cidb office, the last of the nine cidb Provincial Offices, was completed during the year under review. The cidb now has a foot print in all nine provinces, bringing the organisation closer to our objective of providing stakeholders easy access to cidb services. Continuous improvement of the Register of Contractors (RoC) and Register of Projects (RoP) is crucial to maintain the credibility of the two registers. The current rewrite of the registers software is a big step towards improving the RoC and the RoP. The Board has also worked hard with the support of other industry stakeholders towards improving the registration criteria. The proposed amendments to the Regulations have been tabled to Public Works before gazetting for public comment. Fraud and Corruption continues to be one of the cidb and Government's main concerns. We are happy for the strategic relationships forged between the cidb and the office of The Auditor-General, the Competition Commission and the Special Investigation Unit to curb fraud and corruption, which are big threats to the country's economy. The progress and maturity of the cidb, ten years in its existence is commendable! I would like to take this opportunity to thank and congratulate the cidb management and staff for the unqualified audit achieved for the year under review as well as their teamwork and commitment to driving the many successful projects amidst challenges and the ever changing landscape. 9 We welcome on board, the new cidb CEO Ms Ursula Ntsubane and wish her the best in leading the cidb and the industry to greater success and thank Mr. Peter Mongwenyana for his sterling performance as Acting CEO towards the end of the Financial Year. The year's success would not have been possible without his contribution and commitment. I wish to thank the Minister of Public Works, Honourable TW Nxesi for his leadership, support and contribution to the construction industry. Mr. Bafana Ndendwa Chairperson

12 CEO S REPORT

13 Chief Executive Officer s Report Ursula Ntsubane Chief Executive Officer Ten years after its inception, the cidb has reached many milestones in leading the South African construction industry towards improved performance to meet construction demand, and to deliver best value to clients and society with a strong transformation agenda. These include the development and endorsement of the Construction Industry Code of Conduct, the Standard for Uniformity, establishment of the Register of Contractors and the Register of Projects. 11 The organisation has expanded its reach through its nine Provincial Offices, with the North West Office being last to be completed during the year under review. The Construction Contact Centres or cidb Provincial Offices are established in partnership with the National and Provincial departments of Public Works. The cidb facilitates training and development through various measures, including interventions to address the procurement and delivery of infrastructure as well as promoting strategic training opportunities towards contractor development. The following is a summary of progress and milestones achieved during the Year 2011/12: The National Contractor Development Programme (NCDP) Framework was reviewed and published in September 2011 with the support of a consultative process with MEC's, HoD's and senior management of Public Works.

14 12 The Employment Skills Development Agency (ESDA) was successfully piloted in 2011/12, and discussions to migrate the ownership of the ESDA to industry in partnership with the cidb are currently underway. Its business plan is currently being developed, along with a number of other initiatives Positive progress on the Best Practice Contractor Recognition Scheme and Best Practice Project Assessment Scheme has been realised with the practice Standards and/or requirements developed and endorsed by industry for key components of the Best Practice Contractor Recognition Scheme. The consultative process to improve the registration criteria is approaching its final stages. The proposed changes have been submitted to the Public Works ahead of publishing for public comment. The changes seek to create better alignment of the Register with the construction industry and the economic environment in the country. The re-write of the registration software systems as well as the development of the Electronic Document Management System (EDMS) continued during the year under review and is planned to be implemented in August The Business Process Management (BPM) team has been established. It aims to improve the Registers Services and has already minimised the backlog from which the organisation and contractors benefit. The cidb continues to investigate Fraud and Corruption within the organization and the industry at large. Outcomes of the cases are published in the Government Gazette and on the cidb website.

15 Furthermore; the Construction Sector Transparency Initiative (CoST) was introduced during the year under review. CoST is an international multi-stakeholder initiative designed to increase transparency and accountability in the construction sector. In its endeavour to improve communication and interaction with industry stakeholders, the cidb successfully hosted the Provincial Stakeholder Liaison Meetings to give provinces an opportunity to raise industry and cidb related concerns for the Board to address. The cidb continues to support different social initiatives. Amongst them are the Women in Construction Excellence Awards. The awards recognise 51% women owned contractors for outstanding achievements in delivering value to clients and in growing and developing their businesses. They also recognise achievements of women in harnessing development support for construction enterprise growth. Special Acknowledgements: I thank the cidb Board under the leadership of Mr. Bafana Ndendwa for supporting and guiding the cidb and ensuring high standards in the execution of duties and responsibilities towards the many successes achieved in the Financial Year 2011/ All this would not be possible without the leadership and steady support of the Minister of Public Works, Honourable Nxesi, Senior Management and the staff in the Department. Ursula Ntsubane Chief Executive Officer

16 cid b Board Members 14 Chairperson: Bafana Ndendwa Deputy Chairperson: Lindelwa Myataza Dr Patricia Makhesha Zanele Ntombena Hareesh Patel Gilberto Martins Marten Govender

17 15 Aligasen Naidu Shareen Bogosing Nico Maas Nyeleti Makhubele Lwandile Kona

18 cid b Leadership 16 From left to right: Programme Managers: Growth and Contractor Development - Gerald Naidoo, Construction Industry Performance - Dr Rodney Milford, Procurement and Delivery Management - Inba Thumbiran, Construction Registers Service - Ebrahim Moola, CFO - Peter Mongwenyama, Seated: CEO - Ursula Ntsubane.

19 2011/12 Performance Summary

20 18 PROGRESS AGAINST ANNUAL PERFORMANCE PLAN PROGRAMME 1: GROWTH AND CONTRACTOR DEVELOPMENT Programme purpose: Promotion of enterprise development, investment and spending as the basis for a stable, developing industry and the participation of the emerging sector. Reason for deviation Target 2011/12 Performance Achievement Strategic Objective Output Performance Indicator Achieved NCDP Framework updated and approved by NCDP Steering Comm and endorsed by the cid b Revised and Boardendorsed NCDP by May Revised and Board-endorsed Framework twice or once a year for National Contractor Development Programme (NCDP). National Contractor Development Programme (NCDP) Framework document (annually revised and Board-endorsed). Enterprise Development Board. Achieved NCDP framework and NCDP Guidelines for implementing CDP's were updated and ed to the participating Public sector clients and stakeholder. NCDP Framework uploaded on cidb website and ed to all participating public sector clients and voluntary contractor associations in all provinces by 31 July A revised and Boardendorsed NCDP Framework uploaded on cid b website NCDP framework posted on the cid b website and e- and ed twice or once year to all participating public sector clients and contractor voluntary associations in all provinces. mailed to all participating public sector clients and contractor voluntary associations. Achieved Client Capacitation Workshops held in all provinces. 9 provincial and 1 national road shows and/or workshops to train public sector clients and contractors on the NCDP framework in each of the 9 provinces, by 31 Dec provincial and 1 national annual road shows and/or workshops to train Public Sector Clients and contractors on the NCDP framework and 1 for national departments and SOEs. 9 provincial and 1 national annual road shows and/or workshops to train Public Sector Clients and contractors on the NCDP and 1 for national departments and SOEs. National Contactor Development Workshop held on 26th and the 27th October 2011 with public sector clients.

21 Strategic Objective Output Performance Indicator Target 2011/12 Performance Achievement Piloted and published Implementation Guidelines document. Awareness and promotion of Guidelines through Provincial CD Forums and an identified national meeting. Tips and Advice brochure published, distributed and Achieved Guidelines Capacitation with the minimum 18 identified officials completed at all the Provincial CD Forum meetings. 1 X Guidelines document (piloting and publishing) for implementing the recommendations from the Status Quo Report on CD in SA. 1 x presentation / document used to create awareness and promotion of the Guidelines to provincial Clients through the Provincial CD Forums and an identified national meeting. uploaded on the cid b website per quarter. Tips and Advice brochure published, distributed and loaded on the cid b website per quarter. Maintenance and improved quality of the Registration service provided to contractors. Guidelines piloted by end of January 2012 with identified 18 officials. Grade 1: Reports on the maintenance of compliance with over the counter registration and 48hr activation on the website measured from monthly reporting. Presentation on awareness and promotion of the Guidelines through Provincial CD Forums and a national meeting by January Achieved Tips and Advice brochures completed per quarter. 1 X Tips and Advice brochure published, distributed and loaded on the cid b website per quarter from the 1st quarter. Achieved Annual average of 96,6% on compliance with over the counter 48hr registration turnaround time was achieved. 95% compliance with over the counter registration and 48hr activation from April Reason for deviation 19

22 Strategic Objective Output Performance Indicator Grade 2-9: Generate monthly Reports to monitor Quality/accuracy of data captured at the cid b Provincial Offices Target 2011/12 Performance Achievement (CCC's). Grade 2-9: Generate monthly Reports to monitor Compliant documents receipt and forwarding to registers. Generate bi-annually report on trained staff, reflecting at least 2 areas of training for each cid b Provincial Offices staff, based on gaps/areas identified through assessments and noncompliance. Quarterly reports to NCDP, National Task Team and Provincial HoD's from Provincial Contractor Reason for deviation 20 Achieved Annual average of 93.8% on compliance was achieved on the accuracy of data captured. 90% compliance produced monthly from the 1st month. Achieved Annual average of 92.3% registration compliant documents produced. 90% compliance produced monthly from the 1st month. Achieved Training of staff in all provinces completed. Training in at least 2 areas of training for each cid b Provincial Offices staff by end of March Achieved Quarterly NCDP Steering Committee meetings were held. NCDP National Task Team quarterly meetings held from the 1st quarter and reports produced quarterly. Provide business/contract management support to emerging contractors.

23 Strategic Objective Output Performance Indicator Target 2011/12 Performance Achievement CD Forum held per province. Quarterly Reports and CDP statistics provided to HOD's and DPW NCDP Steering Committee. Achieved Provincial contractor training in all 9 provinces completed including 7 catalytic projects. Development Forums and national departments on support required and support provided. Facilitated catalytic session per province on at least 2 of following knowledge areas:- Contracts Management OHS Business Management Financial Training. Reason for deviation Facilitate 1 session per province on at least 2 of the knowledge areas by September Appropriate support services facilitated for construction businesses.

24 22 PROGRAMME 2: CONSTRUCTION INDUSTRY PERFORMANCE Programme purpose: To determine, establish and promote appropriate measures aimed at 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 cid b strategy, policy makers and stakeholders. Reason for deviation Target 2011/12 Performance Achievement Strategic Objective Output Performance Indicator Achieved: Construction Industry Indicators (CIIs) published, communicated and applied. 1 x CIIs published by end January Publication on: Construction cid b Reports monitoring industry performance. Status Reports & Surveys Industry Indicators (CIIs) Summary Results. Achieved Quarterly Monitor published, communicated and applied. Quarterly Monitor Published Quarterly from 1st quarter (i.e. x 4 in the year). Publication on: Quarterly cid b Monitor. Achieved SME survey published, communicated and applied. SME survey published quarterly from 1st quarter (i.e. x 4 in the year). Publication on: SME cid b Business Conditions Survey. Achieved Construction Quality Report published communicated and applied by June status report published by June x Developed, and published status reports on: Construction Quality (initiated in 2010/11). status reports. cid b Achieved Draft final status report on Sub-contracting finalised by March status report draft developed by March x Developed, and published status reports on Sub-contracting (draft). Achieved Quarterly provincial outreach communication sessions held in 4 provinces by March provincial outreach communication sessions off by March 2012 Quarterly provincial outreach communication sessions on 1 or more of CIIs, Quarterly Monitor, SME and Quality Report. Provincial outreach communication sessions.

25 Strategic Objective Output Performance Indicator Target 2011/12 Performance Achievement Industry Performance Improvement Not Achieved: Frameworks for the implementation of cid b Best Practice Contractor Recognition Scheme. Frameworks submitted for Board approval(after development, piloting and assessment) on: Construction management systems (CMS) Contractor performance reports Competence assessment (priority based on state of readiness of each of the frameworks). Frameworks for cid b Best Practice Project Assessment Scheme. 2 frameworks submitted to Board by March Partially Achieved Frameworks submitted for Board approval(after development, piloting and assessment) on: Building Skills Policy Enterprise Development Policy H&S Management Plans (or similar) Reason for deviation Framework documents for CMS and Competence Recognition complete and published - but not submitted to Board as stakeholder consultation is still in progress. Final stakeholder consultation on CMS, Competence Recognition and Contractor Performance Reports (Grade 2 to 4) scheduled for May & June 2013 Targeting submission to Board in August frameworks submitted to Board by March Framework consists of Standard and Criteria for Legislating. Standard for Building Skills Policy and Standard for Enterprise Development completed, and submitted to Board on 23 Nov 2011 for approval; however the Board requested further 23

26 Strategic Objective Output Performance Indicator Waste Management Plans (or similar) Security of Payment (or similar) Target 2011/12 Performance Achievement Partially Achieved Practice Guides. 1 guide printed by March Developed and/or updated relevant Practice Guides: H&S Practice Guides Quality Practice Guides. Achieved The assessment report for ESDA presented to Advisory Panel on 15 and 16 September Infrastructure Delivery Skills. cid b industry ESDA Pilot. Assessment report for cid b / industry ESDA pilot. Post Graduate (PG) Conference series/ Doctoral workshop. R&D & Academic Excellence workshops/ series. cid b Post Graduate Conference series / Doctoral Workshop. Reason for deviation Assessment done and the report presented to advisory panel by March Achieved cidb Post Graduate Conference held in October PG Conference series / Doctoral Workshop held by March consultation. Standards to be submitted to Board on 29 May Legislative Criteria published, but not brought to Board. Practice Guide still in draft format due to delays by Service Provider. The final draft is scheduled for December 2012 and planned to be published in March

27 PROGRAMME 3: PROCUREMENT AND DELIVERY MANAGEMENT Programme purpose: To promote uniform application of policy throughout all spheres of government and promote uniform and ethical standards, construction procurement reform, and improved procurement and delivery management - including a Code of Conduct. Reason for deviation Target 2011/12 Performance Achievement Strategic Objective Output Performance Indicator Achieved Evaluation of the impact of the cid b Evaluation of the impact of the cid b Toolkit, issue report and revise the Toolkit by March 2012 Improved cid b Provincial Annual Impact Evaluation Toolkit. Report and revision of cid b Toolkit. Infrastructure Delivery improvement Toolkit achieved by March 2012 Gauteng training was scheduled for March 2012, however was postponed to April 2012 on the Province's request. Partially Achieved 8 Provincial Toolkit Training Programme completed with the exception of Gauteng. Provincial Training Programmes to be completed by March Completed Provincial Toolkit Training Programmes. Achieved The procurement strategy was developed for Department of Basic Education (DBE) in July Development of the strategy by 31 July Developed and published sector procurement strategies. Achieved Evaluation of the impact of the pilot programme achieved by March Evaluation of the impact of the pilot programme and production of the report by March x Impact Evaluation Report on the pilot of alternative models for infrastructure delivery in the Provincial Toolkit. 25

28 Strategic Objective Output Performance Indicator 1 x Impact Evaluation Report on the pilot programme of the cid b Gateway Process in the Target 2011/12 Performance Achievement Provincial Toolkit. Developed draft Framework and Action Plan for the Municipal Toolkit. Achieved Evaluation of the impact of the pilot programme on the application of the IGS achieved by March Improvement and maintenance of Regulations to support procurement reform. Evaluate the impact of the pilot programme and issue the report by March Revised and improved cid b Regulations. Revised and improved cid b Not Achieved Regulations to be completed in 2 years. Developed and issued Practice Notes and/or Brochures as communication material to inform and train clients on cid b Regulations. Draft Framework and Action Plan for the Municipal Toolkit to be completed by 31 July Reason for deviation No instruction received from National Treasury to develop the framework and action plan. The project of compiling a draft framework has been deferred to 2014/15 financial year. Amendments to Part 2 of the Regulations were completed and awaiting Minister's approval. Partially Achieved Development, improvement and maintenance of cid b Regulations by March Partially Achieved One Practice Note or brochure issued per quarter from the 1st quarter. (x 4). Practice Note 22c, 27 and 28 completed with the exception of 25 and 26 which have been drafted but can only be published on approval of the Regulation amendments. 26 Practice Notes and/or Brochures

29 Target 2011/12 Performance Achievement Strategic Objective Output Performance Indicator Achieved Public Sector Clients training sessions conducted in all provinces. 2 Provinces trained per quarter from the 1st quarter. Workshop to train and capacitate Public Sector Clients. Quarterly report on the implementation and training on the cid b Strategic Training Programme via the cid b Provincial Offices. Quarterly reports on the geographic information system to monitor and report on the progress of the Strategic Training Programme. Compliance and Regulations enforcement Revised strategy to monitor, evaluate and report on compliance to cid b Regulations; implementation of revised strategy. Developed and published compliance reports on the cid b website on a quarterly basis. Achieved. Training report available and published. Monitor and issue quarterly reports on geographic information system from the 1st quarter. Achieved Revised strategy to monitor, evaluate and report on compliance Review the strategy to monitor, evaluate and report on compliance to cid b Regulations by May cid b Quarterly compliance reports published on the Revised strategy to monitor, evaluate and report on cid b website from the 1st quarter. compliance to Regulations cid b to the Regulations achieved by March Partially achieved Reason for deviation This report relates to the Audit Blitz project. The compliance report may only be published once the sanction is issued. No sanctions were issued for the reporting period. 27

30 Strategic Objective Output Performance Indicator Published case law reports on transgressions to cid b Target 2011/12 Performance Achievement Regulations. Quarterly reports on forensic investigations Quarterly reports on Forensic investigation of cases of fraud and corruption reported to the cid b. Anti-Corruption Strategy Researched, developed and implemented Anti-corruption Strategy for the construction industry to be implemented in Reason for deviation Interim reports have been issued to the Risk Committee. Quarterly case law reports on transgressions to cid b 28 Achieved Case law reports published quarterly. Regulations published on the cid b website from the 1st quarter. Investigations and quarterly reporting on cases of fraud and corruption from 1st quarter of 2011/12. Achieved Quarterly report completed. Achieved Anti-corruption strategy developed in September 2011 Research and development of the Anti-corruption Strategy by September 2011.

31 PROGRAMME 4: CONSTRUCTION REGISTERS SERVICE (CRS) Programme purpose: To 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 cid b Act. Reason for deviation Target 2011/12 Performance Achievement Strategic Objective Output Performance Indicator Achieved The 21 working day turnaround time was achieved for Grade 2-9 Registration. Registration of Grade 2-9 contractors completed within maximum of 21 working days based on all compliant applications. Monthly reports confirming contractor registration turnaround times of 21 working days for all compliant Grade 2-9 applications (Gr. 1's are processed by the cid b Provincial Offices). Contractor registrations that meet the legislated turnaround time of maximum 21 working days for all compliant applications. Maintenance of an efficient registration service (process, quality and integrity) and an efficient query resolution process. Achieved Queries administered within the stipulated turnaround time of 48 hours. Queries captured, investigated and proposed resolutions communicated to originators of queries within a turnaround time of 48 hours. Monthly reports on query resolutions and confirming queries resolved within a 48 hour turnaround time. 48 hour turnaround time for query resolutions. Achieved 2 Fraud Awareness Workshops hosted in September 2011 and March Fraud Awareness Workshops: 1 held by 30 Sep by 31 March x Fraud Awareness Workshops conducted. Workshops to create Fraud Awareness to ci d b staff members. awareness among cid b staff members. Client compliance report was produced for the last quarter of the year due to increased focus and resource allocation for the management of the Register of Projects RoP) Partially Achieved The quarterly compliance report was produced. Client compliance report produced quarterly. Produce quarterly to monitor efficient registration of projects on the RoP. 29

32 Target 2011/12 Performance Achievement Strategic Objective Output Performance Indicator Development and maintenance of new Registration Software systems. New Registration software systems that support flexible business processes, work flow integration and improved performance monitoring across Head Office and cid b Provincial Offices. Partially Achieved New Registration Software system developed by 31 December 2011 however the implementation date has been postponed to 1 August Annual reports on new development (Dec 2011) and review (Dec 2012 and Dec 2013) of improved registration software systems that support integrated registration process at head office, cid b Provincial Offices and Finance Unit Report on Maintenance arrangements (March 2012) and Quarterly Maintenance Reports from April Reason for deviation The implementation of the new software system has been further postponed to 1 August Particular points of emphasis for the revised implementation date includes adequacy of the parallel run between the old and the new systems, ensuring high quality data migration and comprehensive testing of the new system. The software testing structure was improved in order to balance the time demands of production management and staff. The software implementation date has been further postponed to 1 August The maintenance arrangements, essentially comprising a Service Level Agreement will be concluded by 31 July 2012 in alignment with the revised software implementation. New Registration Software system developed by 31 December Not achieved 30 Maintenance arrangements established by 31 March 2012

33 Target 2011/12 Performance Achievement Not Achieved Strategic Objective Output Performance Indicator Improved Document Management. Electronic Document Management System (EDMS) operational at Registers, Finance and the EDMS implemented by 31 December The Quick Guide revised by 31 Mar 2012 cid b Provincial Offices'. Report on the implemented Electronic Document Management System (EDMS) operational at Registers, Finance and cid b Provincial Offices' (31 Dec 2011); Annual Review Reports (31 Dec 2012 and 31 Dec 2013). Improved communication material for dissemination at cidb Provincial Offices' and workshops conducted by other ci d b Programmes. Achieved The Quick Guide was revised on 15 March The comprehensive Registrations Guideline Brochure was reviewed in March 2012 and no amendments were made. Published Registration Material in print and online. Published registration communication material available in-print and online RoC: Revised Quick Guide to Contractor Registration Brochure Updated comprehensive Registrations Guideline Brochure -Tender RoP: Produced Guideline Document on i-tender/rop for clients Reason for deviation The Registration Guideline Brochure revised by 31 March 2012 Achieved The Quick Guide has been produced, printed and distributed. Develop i-tender / RoP Guideline by 31 July 2011 The EDMS is a component of the broader software rewrite project. The EDMS implementation is targeted for 1 August 2012 in alignment with the implementation of the new registrations software system. i 31

34 CONSTRUCTION REGISTERS SERVICE

35 The Construction Registers Service comprises of the Register of Contractors and the Register of Projects which have been established in terms of the cidb Act (Act 38 of 2000). 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. 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 R200,000 while private sector clients and large state owned entities are required to register projects above R10 million. The cidb has also developed the free i-tender service which enables 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. 33 In the year under review the number of registers resources have been increased in order to strengthen quality controls and client support. The dedicated in-house Business Process Management (BPM) team drives process monitoring and improvement. The approach has yielded the necessary benefits with the registrations service stabilising and potential backlogs efficiently dealt with. The role of the BPM team has been extended to the cidb Provincial office (Construction Contact Centres) with a focus on process audits, process documentation and data quality monitoring. Internal resources for the management of the Register of Projects have been increased with the focus on client support and improved data quality.

36 The rewrite of the registration software systems took place in the year under review and continues into the year. Implementation is planned for 1 August The new software will enable improved customer service, better integration of services across the registration processing points and greater integrity in registrations processes. Infrastructure development constitutes a large proportion of government expenditure with the cidb Register of Contractors serving as an integral component of public sector procurement. The growth in the Register of Contractors has continued in the year under review with a total of 100,049 Grade 1 registrations and 12,770 Grade 2 to 9 registrations as at 31 March The cidb has initiated a review of Grade 1 registration due to the unsustainable environment at the entry level of the Register. Growth of Contractor Registrations - Grade 1 to 9 34 Register of Contracts (Grade 1 to 9) 140, ,000 No. of Active Registrations 100,000 80,000 60,000 40,000 20,000 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Information from the cidb Quarterly Monitor, April 2012 provides details of the number of registrations in Grades 2 to 9 in General Building (GB) and Civil Engineering (CE) over a three year period. Overall, it is seen that the number of registrations in Grades 2 to 4 account for approximately 60% to 70%, whereas the number of registrations in Grades 7 to 9 account for approximately 8% of the total registrations in Grades 2 to 9. 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. While there is overall modest growth in the number of registrations in Grades 5 to 8 it is significant that the number of Grade 9 registrations has been almost constant over the past three years.

37 Number of Registrations 2009 Q2 to 2012 Q1 Grade 9 7 & 8 5 & 6 2 to 4 Total 9 7 & 8 5 & 6 2 to 4 Total Number GB CE Supply: Registration per Grade (% Grades 2 to 9): % Distribution 1% 6% 24% 70% 100% 1% 7% 30% 63% 100% 9 7 & 8 5 & 6 2 to 4 GB CE GB Supply: Number of Registrations to CE 2 to 4 5 & 6 2 to 4 5 & & &

38 Statistics from the Register of Contractors Information from the Construction Registers Service is used to direct development interventions and inform procurement strategies. This information is accessible to the public on the cidb website: The statistics below are as at the end of the financial year; 31 Mar Table 1: Tender Value Ranges 36 Grade Maximum Value of Contract that a Contractor is Considered Capable of Performing 1 R 200,000 2 R 650,000 3 R 2,000,000 4 R 4,000,000 5 R 6,500,000 6 R 13,000,000 7 R 40,000,000 8 R 130,000,000 9 >R 130,000,000 Indicates the maximum value of a contract that a contractor is considered capable of performing. Grade 1 Statistics The statistics for Grade 1 Contractors have been separated from Grades 2 to 9 in order to better illustrate contracting capacity while also allowing for improved identification of development targets. There are no substantive registration requirements for Grade 1 contractors. The actual available contracting capacity is therefore reflected in the number of registrations in Grades 2 to 9. Table 2: Class of Works per Province - Grade 1 Class of Works Region GB CE ME EP EB SW TOTAL Eastern Cape Free State Gauteng KwaZulu-Natal Limpopo Mpumalanga North West Northern Cape Western Cape Total GB: General Building CE: Civil Engineering ME: Mechanical Engineering EP: Electrical Engineering (Infrastructure) EB: Electrical Engineering (Building) SW: Specialist Works

39 Table 3: Consolidated Ownership Profile (%) Grade 1 Class of Works Grade GB CE ME EP EB SW Total Total GB: General Building CE: Civil Engineering ME: Mechanical Engineering EP: Electrical Engineering (Infrastructure) EB: Electrical Engineering (Building) SW: Specialist Works Grade 2 to 9 Statistics 37 Table 4: Contractor Grading by Class of Works Region Total Black Owned Youth Owned Women Owned Eastern Cape Free State Gauteng KwaZulu-Natal Limpopo Mpumalanga North West Northern Cape Western Cape Table above shows the total number of registrations in the various grades and classes of works nationally. Of significance is the low numbers of registrations in the specialist classes of works such as Mechanical Engineering (ME).

40 Table 5: Black Owned by Grade Grade Total Black Owned % of the Total Total Table above reflects the percentage of Black owned enterprises (where at least 50% of the enterprise is Black owned). It is evident that there is a low level of Black ownership at the higher grades. It is to be noted however that there are many public listed enterprises at Grade 9. Therefore the 9% indicated at Grade 9 is not an accurate reflection of the actual level of Black ownership. Table 6: Women Owned by Grading Women Owned by Grading Grade Total Youth Owned % of the Total Total Table 6 reflects the percentage of women owned enterprises (where at least 50% of an enterprise is women owned). Of significance is the low level of women ownership at the higher grades.

41 Table 7: Grading by Province Grade Region Total Eastern Cape Free State Gauteng Foreign KwaZulu-Natal Limpopo Mpumalanga North West Northern Cape Western Cape Total Table 7 shows the registrations by regional breakdown. While the Gauteng Province displays the highest number of registrations at the higher grades, it should be noted that most of the larger contractors establish their head offices in the Gauteng Province but operate nationally and internationally. 39 Statistics from the i-tender Register of Projects For the year under review there was 4,550 projects registered. Due to an increased focus on compliance by the cidb, the number of projects registered has increased. It is to be noted that clients are also recording information on the Register of Projects for projects registered in the previous years. Projects registered, 1 April 2011 to 31 March 2012 and for the two preceding years

42 Register of Projects 5,000 4,500 No. of Projects Registered 4,000 3,500 3,000 2,500 2,000 1,500 1, Mar-10 Mar-11 Mar-12 Table 9 shows the number of projects registered over the past three financial years. There has been a 70.6 % increase in the number of projects registered for the year. This is attributed to the inceased focus by the cidb on driving compliance of public sector clients. It is to be noted that in effort to comply, public sector clients also registered projects that were awarded in previous years. In the year there were 2,926 tenders advertised on the i-tender service.

43 FACILITATING GROWTH AND CONTRACTOR DEVELOPMENT

44 The cidb increased momentum towards entrenching the National Contractor Development Programme (NCDP), driving implementation with core infrastructure client departments. Clients and contractors regularly debated the balance between delivery objectives, empowerment and development. The role of the cidb in ensuring understanding and building relations through various workshops and forum interactions intensified. The cidb Provincial Offices (Construction Contact Centres) have rolled-out an enhanced cidb registration service as well as a host of support services. This has led to a persistent trend of contractor registration at entry level. The programme therefore increased workforce to manage the expectations of these entry level contractors throughout 2011/ Lack of monitoring and evaluation of contractor development programmes by clients, as well as the slow pace to adopt best practices and incorporate contractor development into their procurement practices was a challenge. Notwithstanding these challenges, there is a relative improvement in the implementation of Contractor Development Programmes as a result of an increased focus on client capacitation and strengthening of the Provincial Contractor Development Forums. The influence of the Provincial Contractor Development Forums was expanded, with participating clients rating the cidb leadership, support and guidance very high. The cidb promoted dialogue, sharing of knowledge and experiences. National Contractor Development Programme During 2011/12 the cidb focused on the following key strategic areas of enterprise development: Review and alignment of the NCDP Framework Compiling good practices and guidelines for contractor development programmes Providing technical support to clients Developing knowledge tools and information material Strengthening the monitoring and evaluation of contractor development programmes National Contractor Development Workshop Review and alignment of NCD Framework The NCDP Framework reviewed in September 2011 was based on feedback from engagements with clients and aimed to align with current challenges, trends and market adaptations in relation to contractor development.

45 Feedback from engagements with Contractor Development Programmes from different provinces further indicates that the implementation of the NCDP Framework was beginning to show relevance and impact. The true test thereof will be in the future monitoring and valuation of the NCDP which heavily relies on clients' support. Improved willingness and commitment from clients to aligning their Contractor Development Programmes to the NCDP Framework has become evident through the increased number of enquiries and requests for technical assistance. Our main challenge and focus is to ensure that the NCDP Framework remains relevant. Compiling Good Practices for Contractor Development Programmes An exercise to assess and document models of contractor development programmes was undertaken in order to support good practices and knowledge sharing. 43 The exercise included programmes implemented by Eskom, the ethekwini Metropolitan Municipality, the Development Corporation in the Eastern Cape and Coega Development Corporation. The aim was to identify good practices for contractor development to which development practitioners, agencies and public sector entities may model or align their programmes. The good practice models also serve to guide cidb Provincial Offices (or Construction Contact Centres - CCC's) in their role of supporting contractor development. The following good practices were deemed worth emulating: Construction workforce development for creating contractor competence to undertake a particular class of construction, by the Eskom Contractor Academy; Business skills development for creating entrepreneurial, legislative, management, leadership competence required by the contractor to operate successfully, by Eskom Contractor Academy; and the KwaZulu-Natal ethekwini Large Contractor Development Model; Contractor enterprise development through procurement of works projects, by the KwaZulu-Natal ethekwini Large Contractor Development Model; and, COEGA Small Enterprise Development Programme. Technical Support and Client Capacitation Client capacitation and technical support were once again a key focus area. Support was provided to clients through the Provincial Contractor Development Fora (PCDF), bilateral engagements with clients as well as through Client Capacitation Workshops.

46 A two day capacitation workshop was convened and attended by cidb Provincial Managers and Business Administrators, and by select Clients with plans or intentions to implement CDPs. Guidelines for implementing Contractor Development were developed and completed in September The guidelines seek to strengthen and expedite client capacitation. These were complemented by the development of a training programme and manual. A train-the-trainer project to capacitate clients on developing their own CDP's was conducted. Capacitation workshops were also conducted with the Gauteng Department of Roads and Transport and the Cape Town Metro in the Western Cape. 44 The cidb Provincial Offices consolidated the work of the Provincial Contractor Development forums. The Forums promote information sharing and strengthen collaboration between parties interested in contractor development within the various provinces. The terms of reference of the provincial Contractor Development Forums (CDFs) were revised to strengthen commitment by forum members to promote implementation of contractor development programmes that are aligned to the NCDP Framework and Guidelines. The Free State Department of Public Works and the Mpumalanga Department of Transport and Public Works were assisted to conceptualise and align their contractor development programme policy framework documents. Development of Knowledge Tools and Information Material The cidb produced information tools to empower contractors on managing a construction business, including tips brochures on: Taxation for a Construction Business Contract pricing Strategy by the Client Technical Guides Sustained Growth of Contractors

47 The tips and advice brochure on "Sustainable Growth of Contractors" is based on the cidb document "The Construction Industry as a Vehicle for Contractor Development and Transformation" publication. Monitoring and Evaluation of Contractor Development Programmes A scoping study was undertaken towards the development of a standard monitoring and evaluation system with Key Performance Indicators (KPI's). The system will be used by clients, as recommended by the NCDP Guidelines. It will also ensure the necessary capacity to support monitoring and evaluation of client's contractor development initiatives. Monitoring is conducted to identify areas of improvement. 45 Different ways of improving reporting on contractor development were also explored. Information from the cidb Register of Contractors and the Register of Projects will become the backbone of the monitoring system, while other data will be solicited from Clients and implementing agencies. The study makes note of the challenge of entrenching the proposed best practices in the monitoring and evaluation of contractor development programmes. Driving the National Contractor Development Programme Quarterly NCDP Steering Committee meetings were convened to coordinate implementation of the NCDP. This was achieved with the support of the National Department of Public Works, as the lead partner to the NCDP. The terms of reference for the NCDP Steering Committee were adopted and cascaded to the Provincial Contractor Development Forums. These include: Co-ordinating the NCDP implementation; Providing strategic guidance and leadership on contractor development; Promoting and providing capacitation on the NCDP; Sharing knowledge and experience on contractor development Adopting and promoting good practice contractor development guidelines and processes; Facilitating input into national fora and workshops for consultation, implementation or review; Facilitating development of guidelines and other strategic frameworks for NCDP alignment; Reviewing alignment of contractor development programmes to the NCDP Framework and monitoring; Monitoring and evaluating implementation of Contractor Development programmes.

48 The NCDP Steering Committee comprised representatives from: National Department of Public Works cidb and other role players who are not permanent Steering Committee members. National Contractor Development Workshop The cidb and the National Department of Public Works hosted a joint Contractor Development Workshop on 26 and 27 October The Workshop brought together individuals from all spheres of the construction industry. The purpose of the workshop was to: 46 Improve and develop a shared understanding of the NCDP across all spheres of government, Promote dialogue between diverse stakeholders, Promote exchange of know-how and promote synergies, Explore ways of improving reporting and co-ordination of NCDP, Ensure that the NCDP achieves national prominence, Create a sound basis for forging partnerships among the key role-players in contractor development. The workshop highlighted the need for reporting on contractor development. A workshop report with resolutions and detailed actions going forward was produced. These include a resolution to explore making implementation of the NCDP mandatory. Communicating the National Contractor Development Programme A series of posters and NCDP brochures defining Contractor Development, the role as well as support offered by the cidb were produced to ensure that the NCDP message appropriately reached clients, contractors and stakeholders. The materials were prominently displayed at the cidb Provincial Offices and distributed at various events. NCDP summary posters displayed at the cidb Provincial Offices.

49 Packaging National Contractor Development Programme Information A summary of all Publications in support of Contractor Development' and the NCDP Contractor Support Toolkit were developed. The summary assists stakeholders to see at a glance, the various cidb contractor development support offerings and publications, whilst the NCDP Contractor Support Toolkit ensures access to comprehensive contractor development support information. cidb Provincial Offices (or Construction Contact Centres - CCC's) The cidb Provincial Offices (Construction Contact Centres - CCC's) continued to provide an enhanced registration service, with increased accessibility to cidb customers and stakeholders. Support was offered to contractors and clients on contractor development and procurement and an expanded outreach to groups of organised businesses and associations. 47 Registration of Contractors Grade 1 Contractor registrations continued to increase during the course of , posing a challenge in terms of staff capacity, but compliance to the 48% turn-around time remained at 96% average. Further registration service improvements depend partly on the new CRS system expected to start operating in the financial year , as well as improvement to staff competencies and capabilities through continuous assessment and training. Contractor Development through Provincial Outreach The cidb Provincial Offices provided the following support on contractor development: Contractor Capacitation Workshops; Client Capacitation Workshops; Alignment of existing policies with NCDP; Updating CDP's database; Client support to promote direct to indirect targeting; Assessment and review of existing Contractor Development Programme; Support to clients through catalytic projects.

50 2011/12 Provincial Catalytic Projects Catalytic provincial projects, some of which were financed by the cidb, were implemented in partnership with provincial clients. The projects aim to stimulate other projects and encourage contractor development. Other stakeholder partnerships are also encouraged to achieve positive development outcomes. The projects were executed as follows: Table 8: Capacitation Workshops and Road Shows 48 Mpumalanga Research on impediments to development and implementation of contractor development programmes. Free State Study on emerging contractor development: Data Analysis and Reporting. Gauteng Diagnostic analysis for Ekurhuleni CDP: Trace Development of Learners. Northern Cape Analysis of feasibility on establishment of an emerging contractor incubator. North West Develop policy for NW Contractor Development. KwaZulu Natal Ethekwini Metro: Contractor academy framework. Eastern Cape Aptcod Programme Impact of EPWP Municipal Contractor Development Capacitation. Further analysis was conducted from which a Concluding Report and Framework were developed. The reports were provided to the Clients for implementation based on the recommendations contained in Framework/Concluding Reports. Platforms were created for contractors for advisory and information sharing in the different provinces. More than 10,000 contractors participated in different workshops. Provincial workshops on supply chain management were convened, targeting infrastructure clients, provincial Treasuries and Municipalities. These covered: Applying the Register of Contractors Register of Projects -Tender i Conditions of Tender Calling for Expression of Interest Targeted Procurement Legal Framework Delivery Management Managing Construction Procurement Processes Construction Procurement

51 Table 9: Summary of the Provincial Contractor Capacitation Programme Provincial Office Training 1 Training 2 Mpumalanga Construction Contract Management Occupational Health and Safety Free State SHE Principal and procedures - Northern Cape Occupational Health and Safety Contract Management Gauteng Financial Statements Forms of Contracts Eastern Cape Financial Management Project Management KwaZulu Natal Business Management Health and Safety Western Cape - Project, Finance and Business Management North West Financial Management Contract Management Limpopo Financial Management & ISO-900 Occupational Health Safety A total of 280 individuals were trained. Provincial cidb Stakeholder Liaison Meetings and Outreach 49 Provincial Stakeholder Liaison Meetings were organised to facilitate discussion between the cidb Board and stakeholders on issues affecting construction industry. National Contractor Development Programme Client Capacitation Provincial Contractor Development Fora have been constituted and functional/operates in all provinces. The Fora comprise of client infrastructure departments entities and including participation of provincial associations and stakeholders. A National CD Workshop was hosted in October 2011 in response to the evident lack of comprehensive understanding of the requirements of contractor development programmes within the various client departments and municipalities. Capacitation on the NCDP Framework and Guidelines was conducted in the latter part of 2011 and early 2012 at provincial level through the Provincial Contractor Development Forum meetings. This was also further entrenched at the Public Works' MinMEC of March 2012 where the NCDP Framework and Guidelines were presented to the Provincial DPW HoD's and MEC's for endorsement. The cidb was requested to produce a support paper: 'Balancing Delivery and Development' to support efforts towards ensuring that contractor development is entrenched through appropriate client procurement strategies. The paper will be developed and tabled at MinMEC in early 2012/13. Strategic Partnerships The cidb Provincial Offices continued to build national and provincial partnerships through formal agreements and MoA's initiated at provincial and head office leve.

52 Customer Satisfaction Customer satisfaction was measured throughout the year through customer satisfaction surveys conducted on electronic survey systems. The electronic survey systems are available in all provincial offices. Areas of customer service improvement and complaints were accordingly addressed so as to enhance our customer service. Staff Training and Capacitation Internal resourcing and staff training based on needs remained a priority towards ensuring efficient customer service and registration. Challenges 50 Repeat client capacitation due to staff turnover at Infrastructure Clients Departments. This has impacted negatively on on cidb resources and planning. It further impacts on compliance to cidb Regulations and frameworks; Infrastructure budgets are not optimally spent by Client Departments and needs prioritised focus with clear primary and secondary objectives as well as targets for development; Municipalities involvement in contractor development issues; cidb to further balance its regulatory role with development of contractors and other stakeholders in the construction industry; cidb to produce and share tools for development of contractors and allocate resources to achieve maximum impact to enforce its current mandate; Client's compliance on procurement and delivery; Lack of understanding and application of the cidb Regulations, especially within the smaller and less capacitated municipalities; Imbalance in supply and demand, especially at the Grade 1 level; Numerous complaints about late payment, contractual disputes between clients and contractors, and main contractors and subcontractors; Insufficient staff capacity to deal with other cidb programme challenges especially with regards to the Procurement and Delivery Management challenges. Growing the Provincial Outreach of cidb in 2012/13 and beyond The cidb footprint is now established throughout the nine provinces. The cidb Provincial Offices aim to strengthen working relations with Provincial Treasuries and Provincial Infrastructure Planning Committees. This will include capacitating Treasury and employees within client departments to improve compliance to cidb Regulations and Frameworks. Improved communication is necessary to achieve maximum support and impact.

53 Monitoring Industry Performance

54 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; cidb Construction Industry Indicators (CIIs); cidb Quarterly Monitor; and cidb SME Business Conditions Survey. Collectively, these products provide the cidb a base for a detailed understanding of the industry. 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. 52 The current CIIs reflect indicators measured for projects completed in the 2010 calendar year. They are drawn from client departments involving 592 construction projects, and contractors and sub-contractors on 1300 projects across all nine provinces. As in previous years, while the overall performance results for the industry are encouraging, and in many cases show an improvement over previous years, the challenge is to raise the performance of the industry as a whole, and in particular the performance of "the bottom 30%": Clients were neutral or dissatisfied with the performance of contractors on 16% of the projects surveyed in 2011; Around 15% of the projects surveyed had levels of defects which are regarded as inappropriate; Contractors were neutral or dissatisfied with the performance of clients on 21% of the projects surveyed; Contractors were neutral or dissatisfied with the quality of tender documents and specifications obtained from clients on around 22% of the projects surveyed; Contractors were neutral or dissatisfied with the management of variation orders on 26% of the projects surveyed; 65% of payments to contractors were made within 30 days or longer after invoicing; Quality (or functionality) was not taken into account in the adjudication of tenders on around 65% of public sector projects; Around 16% of the recommendations of the tender committee were overruled in the award of public sector projects; 0% 20% 40% 60% 80% 100% 9 GB CE 7 & 8 5 & 6 2 to 4

55 Around 8% of projects surveyed in the public sector were undertaken using contract documents other than those recommended in the cidb's Standard for Uniformity; Safety on building and construction sites as well as transportation to the sites remains a concern. 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 Classes 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). Ownership: Around 80% of cidb registered General Building (GB) and Civil Engineering (CE) contractors in Grades 2 to 4 are Black owned (defined as 50% or more ownership control). Furthermore, around 70% to 80% of all Grade 5 & 6 General Building and Civil Engineering contractors are Black owned, while around 50% to 60% of all Grade 7 & 8 General Building contractors are Black owned. 53 Ownership History: The change in Black-ownership over the past 2 to 4 5 & 6 7 & % 80% 60% 40% 20% 0% three years (2009 Quarter 2 to 2012 Quarter 1) for Civil Engineering is shown in the adjacent figure. Of concern is that Black-ownership as a percentage of the total in Grades 2 to 4 and 5 & 6 has in fact decreased over this period. Similarly, Black-ownership as a percentage of the total in Grades 7 & 8 has only increased marginally over this period. The trends for Grade 9 contractors are similar, although it should be noted that many Grade 9 contractors are publically listed companies. Similar results are obtained for General Building. Upgrade History: The number of upgrades (as a percentage of the 2 to 4 5 & 6 7 & % 5% 4% 3% 2% 1% 0% total number of registrations) from Grades 2 to 4, Grades 5 & 6 and Grades 7 & 8 to a higher Grade for Civil Engineering contractors over the past three years is shown in the adjacent figure. It is seen that a decreasing trend (linear) is observed in the number of upgrades per quarter in Grades 5 & 6 and in Grades 7 & 8. Similar trends are obtained for General Building. As is shown below in this Annual Report, this trend is a reflection of the deteriorating business conditions over this period - which is also impacting negatively on transformation.

56 120% 100% 80% 60% 40% 20% 0% Total Metro District Local Municipal Expenditure: cidb Quarterly Monitor has been extended to include details of public spending against budget, and details of municipal spending against budget was included in 2012 Quarter 1. (Details of provincial spending will be included in the 2012 Quarter 2 cidb Quarterly Monitor). From the adjacent figure it can be seen that Municipalities only spent 73% of their budgets at the end of the 2011 municipal financial year - or an underspend of around R11.3 billion Rand. This trend appears to be continuing in the 2012 Municipal financial year, and at the end of 2011 Quarter 4 Municipalities had under spent by around R15 billion rand based on a phased liner budget to 4 5 & 6 7 & 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 Civil Engineering sectors has decreased significantly over the period 2009 Quarter 2 to 2012 Quarter 1. This is reflected in the decrease in the number of upgrades per quarter over the same period shown previously. Similar results are obtained for general Building. The Construction Industry as a Vehicle for Contractor Development and Transformation. The previous assessment of the state of transformation within the construction industry illustrated in this Annual Report highlights the cidb's philosophy of a portfolio of systemic actions to address the growth and development of the industry. As illustrated elsewhere in this Annual Report, these actions include interventions addressing the procurement and delivery of infrastructure, as well as interventions addressing contractor development and skills development. In support of the need to understand a wide range of contractor development options, the cidb undertook an investigation of the growth of cidb registered Grade 4 to 6 contractors as they grow into large contractors. The study focuses primarily on internal growth, or organic growth, within a company.

57 An analysis of the rate of contractor upgrading showed that approximately or 10% of General Building and Civil Engineering contractor registrations in Grades 2 to 8 upgraded by at least one grade per year. The highest rate of upgrades occurred in Grades 2 to 4, and around Grade 1 contractors upgraded by at least one grade per year, or around 2%. However, the analysis also showed that although roughly 10% of contractors upgrade by one or more grades annually, only 2% have improved by three or more grades since cidb registration. This equates to around 67 General Building and Civil Engineering contractors upgrading by three or more grades since Based on actual case studies, this publication drew out key characteristics of such contracting enterprises which could serve as an example for others who aim to follow in their footsteps. Some of the key lessons from the cidb study can be summarised as follows: Construction companies require time to grow - successful enterprises only achieve sustained growth at an average rate of three grades every three years; Although Government policies play a crucial role in promoting the growth of contractors, they do not guarantee success. Enterprises have to use their organisational strengths to be effective and efficient; Successful companies have tended to be formed by leaders who have acquired good individual and collective experience in the construction industry. Strong teams have the requisite experience and education to develop faster; Successful companies focus on developing a strong financial base, delivering quality, building a strong track record and investing in fixed assets; They focus on developing and maintaining a strong workforce and working closely with their supply chain; Geographic spread and product diversification are necessary growth spurs; Delegation is important so that senior management can concentrate on a strong strategic focus. They must manage the managers and have a clear idea of what has to be done, when and by whom. 55 The study concluded that considerable progress towards transformation has been made in the lower grades and Government can be justifiably proud of this achievement. Further progress is also likely to be driven through preferential procurement and BBEEE policies, and through interventions such as the NCDP, the cidb Best Practice Project Assessment Scheme, and others. However, transformation can and should be accelerated through an increase in public and private sector spending. Progress with 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.

58 Several key best practices are currently being finalised by the cidb together with industry stakeholders for possible roll-out as part of the Best Practice Project Assessment Scheme: Enterprise Development: Stakeholder consultation has shown support for the draft requirements that have been developed for indirect targeting to promote enterprise development. These requirements provide for a minimum of 5% 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. The draft requirements will be submitted to the Board shortly for possible gazetting for public comment, and could be followed by submission to the Minister of Public Works for subsequent roll-out. If implemented, it is estimated that the recommendations could result in approximately R4,6b of contracts to developing enterprises per year; and 700 contractors receiving developmental support per year. 56 Construction Skills: Stakeholder consultation has shown support for the draft requirements 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 requirements provide for 0,5% of the tender value of General Building contracts and 0,25% of the tender value of Civil Engineering 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: R280m spend on workplace training per year; and learning opportunities per year. The draft requirements will be submitted to the Board shortly for possible gazetting for public comment, which could be followed by submission to the Minister of Public Works and for subsequent roll-out. Progress with the cidb Best Practice Contractor Recognition Scheme The cidb Act (Act 38 of 2000) requires the Board to establish a Best Practice Contractor Recognition Scheme which: enables organs of state to manage risk on complex contracting strategies; and 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, and best practice Standards and/or requirements have been developed and supported by industry for key components of the Best Practice Contractor Recognition Scheme.

59 Contractor Performance Reports: A Focus Group has developed and endorsed recommendations that Contractor Performance Reports will be required to be completed on practical completion on all public sector contracts. These Performance Reports will provide a track record and an assessment of the performance of the 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 subcontractors (including payment). The Contractor Performance Reports will also include a record of any breaches of contract (including those resulting in the termination and/or cancelation of a contract) as well as non-compliance with mandatory cidb Best Practices. The draft requirements will be submitted to the Board shortly for possible gazetting for public comment, and could be followed by submission to the Minister of Public Works and for subsequent roll-out on projects within tender ranges of Grades 2 to 4. (Contractor Performance Reports for tender ranges on Grade 5 an up are still under development). 57 Competence Recognition: A Focus Group has developed and endorsed recommendations that will provide for an assessment of the competencies of a contracting enterprise. These will be measured against acceptable standards necessary for running a contracting enterprise and for supervising building and construction works targeting Grade 2 to 4 contractors. A draft Standard has been developed that provides for a standard method of assessment and recognition of the competencies of a contracting enterprise. It will apply to enterprises in the General Building (GB), Civil Engineering (CE) classes of construction works, to selected artisanal categories within the Special Works (SW), and in the following categories within a class of construction works: Open (cidb Grades 7 to 9); being a contractor who has access to a SACPCMP registered Construction Manager, or recognised equivalent; Limited (cidb Grades 2 to 6): being a contractor who has adequate knowledge and experience to carry out work within pre-determined sub-categories; Trade Contractors (cidb Grades 1 to 5): being a contractor who has adequate knowledge and experience to carry out work within pre-determined Trade Categories. The draft Standard will be submitted to the Board shortly for possible gazetting for public comment.

60 Construction Management Systems: To promote and recognise performance improvement by contractors in Grades 5 to 7, the cidb has developed a customised standard for Construction Management Systems (CMSs) based on recognisable construction industry minimum standards covering: Health and safety management; Quality management; and Environmental management (covering air, water, land and waste). This cidb standard allows for expansion and conversion to meet ISO or OHSAS requirements in the future. The cidb Standard for Construction Management Systems has been submitted to the South African Bureau of Standards (SABS) for development into a SANS Standard for Construction Management Systems - which is expected to be complete before the end of cidb Industry ESDA 58 In partnership with industry partners, the cidb has established an Employment Skills Development Agency (ESDA) to provide work placement opportunities to FET college learners to gain vital workplace experience. The cidb industry ESDA is currently rolling out a pilot project with 20 learners who have completed their National Certificate Vocational (NCV) Level 4 in Civil Engineering and Building Construction. The ESDA will be integral to the roll-out of the Standard for Construction Skills Development that has been presented previously in this Annual Report. The ESDA was successfully piloted in 2011/12, and discussions are currently taking place to migrate the ownership of the ESDA into industry in partnership with the cidb. cidb Post-Graduate Conference The cidb Postgraduate Conference is an annual event that has grown to become the premier event among construction schools and postgraduate students for sharing research experiences and knowledge. The conference held in October 2011 was organised by the University of Pretoria.

61 PROCUREMENT AND DELIVERY MANAGEMENT

62 Improvement to cidb Regulatory Framework The cidb has begun an investigation into the revision and improvements to the regulatory environment, which will be finalised in the 2012/2013 financial year. Compliance and Enforcement of cidb Regulatory Framework Non-compliance by Government Departments The cidb has a responsibility to monitor and evaluate the level of compliance to its prescripts, namely; the cidb Act 38 of 2000, the Construction Industry Development (CID) Regulations of 2004, as amended, the Standard for Uniformity in Construction Procurement and the Code of Conduct. 60 The CID Regulations require employers to advertise tenders on the i-tender System and register projects award on the cidb Register of Projects. The cidb has conducted an Audit Blitz to evaluate the level of public sector employers' compliance with these regulations. This was in response to low levels of compliance. Disciplinary hearings will now be instituted against non-compliant employers. These will be concluded in the 2012/13 financial year. A fraud hotline allowing members of the public to report non-compliance to the cidb prescripts by employers was established. Investigations were initiated based on tip-offs via the fraud hotline which have led to disciplinary hearings against employers in terms of Part V of the cidb Regulations. The common issues relating to noncompliance by employers include: Non registration of tenders on the i-tender System; Non-application of the Register of Projects(RoP) to record data relevant to the award, construction and close out of a project; Poor application of the cidb Standard for Uniformity; Layout of the tender specification inconsistent 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 describing the work to be performed and /or incorrect estimates; Poorly developed eligibility criteria and project specific quality criteria; Applying generic criteria for preferencing as opposed to a well-constructed procurement strategy to promote government's social agenda; and Non-adherence to the requirements of the Preferential Procurement Policy Framework Act and the Supply Chain Management Guidelines as prescribed by the National Treasury.

63 General Cases of Fraud, Corruption and Maladministration There were successes in the management of cases of industry corruption and unethical behaviour reported through the cidb fraud hotline. The cidb investigated reports and instituted disciplinary hearings in terms of Part V of the Regulations. Sanctions issued were published in the Government Gazette and on the cidb website. Figure below illustrates the number of investigations conducted in the financial year ending 31 March Financial Statements Track Record Professionals 61 Tax Clearance Certificates Corrupt Payments CIDB Certificate PE Status Non-Compliance Table 10: Categories of Cases investigated Overall number of cases investigated against contractors and employers 43 Tax Clearance Certificate 12 Financial statements 11 Professionals 4 Track record 10 Misrepresentation of information to the cidb and to the Clients 4 Non-compliance by the employers 2

64 Table 11: Outcome of Disciplinary Hearings Overall number of investigations earmarked for hearings 50 Hearings pending as at 31 March Hearings finalised as at 31 March Of the finalised cases, the number of cases withdrawn 3 Of the finalised cases, the number of cases removed/allegation unfounded 4 Of the finalised cases, the number of contractors acquitted 0 Strategic Partnerships Strategic partnerships were established with the Office of the Auditor-General, Competition Commission, Special Investigation Unit, academic institutions and various voluntary associations in the construction industry. This is to strengthen cidb efforts to reduce corruption in the procurement process, and to promote the organisational compliance agenda. 62 Transparency and Integrity within Construction Projects Public sector infrastructure projects are a major contributor to economic growth and to poverty reduction. However poor procurement, monitoring capability, fraud, corruption, mismanagement and inefficiency in construction projects can undermine their expected economic and social benefits. The rapid increase in fraud and corruption in public sector procurement has been identified as a growing concern that needs to be addressed and tackled. It undermines the rule of law and hinders the development of strong and accountable institutions that are essential for economic growth and social justice. The cidb report "Construction Quality in South Africa: A Client Perspective" published in 2010 identifies corruption as one of the major barriers to achieving construction quality in South Africa. The report recommends introduction of a system for transparency and integrity of construction procurement. On 19 May 2011 the cidb hosted a summit to introduce the Construction Sector Transparency Initiative (CoST) in an effort to fight fraud and corruption in the construction industry. CoST is an international multi stakeholder initiative designed to increase transparency and accountability, and to reduce mismanagement, waste, and corruption that are common in the construction sector. It also provides for the disclosure of information, including project cost and quality. The Summit tasked the cidb and international CoST Secretariat to establish a Working Committee to focus on a CoST Programme for South Africa. A second meeting was convened on 30 June 2011 to consider the impact of synergising the development of the CoST SA model with an Infrastructure Gateway System (IGS) currently being piloted by the cidb. Report on the progress of this project will be published in the 2012/13 Financial Year.

65 Client Capacitation and Training In response to the low levels of compliance to cidb prescripts, the cidb provides free training and capacitation to all public sector clients. Table 12: Below is the schedule of client capacitation training conducted for the 2011/12 Financial Year. Province Trained Organisation Gauteng Rand Water, State Owned Enterprise Forum; Blue IQ, South African National Biodiversity Institute(SANBI), Airport Company of South Africa (ACSA); Pikitup, Department of Rural Development, National Department of Public Works (Pretoria and Johannesburg Offices), Johannesburg Water. Mpumalanga Emalahleni Local Municipality, Transnet Freight Rail, Govan Mbeki Local Municipality; Victor Khanye Local Municipality. Limpopo Department of Public Works, Department of Education Polokwane Municipality. Free State National Department of Public Works, Provincial Treasury, Departments of Roads and Public Works; Education; Roads and Transport; Tourism and Social Development, Moqhaka Local Municipality, Economic Development and Tourism and the Independent Development Trust. North West Ngaka Modiri District Municipality, Department of Public Works and the Provincial Treasury. Eastern Cape Amatole District Municipality, Accelerated Schools Infrastructure Delivery Initiative (ASIDI) Department of Roads and Public Works, Department of Public Works, Chris Hani District Municipality and Eastern Cape, Industrial Development Zone(IDZ), Departments of Agriculture, Roads and Public Works and the Chris Hani District Municipality, National Department of Public Works and Nelson Mandela Bay Metropolitan Municipality. Northern Cape Department of Roads and Public Works, Departments of Health, Agriculture, Sol Plaatje Local Municipality, Provincial Stakeholder Forum. Free State Maluti- A- Phofung, Dihlabeng, Kopanong & Moqhaka Local Municipalities, National Department of Public Works. 63 The training focussed on amongst other topics the cidb Procurement Strategies, SFU, the Register of Projects, Code of Conduct and compliance to the cidb Regulations.

66 DELIVERY MANAGEMENT Infrastructure Delivery Improvement Programme The Infrastructure Delivery Improvement Programme (IDIP) is a partnership programme championed by the National Treasury, the National Department of Public Works, the Development Bank of Southern Africa (DBSA) and the cidb. The programme is primarily aimed at improving infrastructure delivery in the education, health and public works sectors at both national and provincial levels. It is expected that IDIP will reach full maturity and sustainable impact after 12 years of existence, in accordance with international norms for capacity building programmes. IDIP II commenced in The current IDIP Phase III boasts a much stronger partnership which enjoys amongst others the support of the Minister's Committee on budget, the Department of Basic Education (DBE) and the Department of Health (DoH) also play a strong leadership role in ensuring that IDIP systems and approaches are implemented in their sectors. The partnership with the National Department of Public Works still remains a challenge due to instability at the leadership level. Table 13: Consolidated sectoral provincial infrastructure budgets and expenditure: year-on-year trends Sector 4th Quarter 2010/11 4th Quarter 2011/12 Percentage growth Adjusted Expenditure Total Adjusted Expenditure Total Budget Expenditure Budget as at 31 Spending Budget as at 31 Spending Growth Growth y/y March as % March as % y/y 2011 Adjusted 2012 Adjusted Budget Budget (R '000) (R '000) (%) (R '000) (R '000) (%) (%) (%) Education 7,771,176 5,802, % 9,047,335 8,498, % 16.4% 46.5% Health 9,080,481 7,372, % 8,981,485 8,104, % (1.1%) 9.9% Total 16,851,657 13,174, % 18,028,820 16,602, % 7.0% 26.0% Source: Infrastructure Reporting Model (IRM) IDIP has continued to positively impact the infrastructure expenditure in both the Education and Health sectors, even where budget allocations have been reduced. The budget growth trends per sector reveal that the departments Education budget has grown by 16.4 % between the fourth quarters of 2010/11 and 2011/12 Financial Years and Health shows a negative growth of 1.1% year on year. In terms of expenditure, Department of Education and Department of Health increased their spending by 46% and 9.9% respectively.

67 IDIP is focused on the following key areas of infrastructure delivery improvement: Implementation of the Infrastructure Delivery Management (IDM) Toolkit; Providing dedicated support to provinces on infrastructure planning and construction procurement; Development and implementation of the Infrastructure Delivery Management System (IDMS) to replace ineffective and in some instances, dysfunctional systems; Implementation of the IDMS capacitation strategy that ensures the sustainability of IDMS through the appropriate structuring, staffing, and training of infrastructure units in both national and provincial departments. IDIP's main achievements for 2011/12 Financial Year are as follows: Training on the IDM Toolkit in the nine provinces; The appointment of the University of Pretoria to develop course material for the IDMT; A pilot programme to enrol officials to the IDMT course; The finalisation of the IDMS capacitation in the Western Cape; The adoption of the IDMS capacitation framework by the Eastern Cape Provincial Cabinet Budget Coordinating Committee. 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; The blue print for the structuring of the physical resources management unit in provincial departments of education was approved by the DPSA and the nine provincial Heads of Department (HoDs); Secured R10 million for the capacitation of each infrastructure unit in the provincial departments of Health and Education Successful cooperation with the Western Cape to develop a draft framework for construction procurement which strengthened IDIP's ability to provide specialised advice and support to the National Treasury and to provinces on the integration of construction procurement into the IDMS. 65 The Infrastructure Delivery Management Toolkit The institutionalisation of Infrastructure Delivery Management Toolkit (IDMT) is one of the key focus areas for the IDIP. It is supported by the initiative to capacitate the Infrastructure Units with appropriately skilled personnel as well as the development of a dedicated course on the IDMT aiming to capacitate officials in the various infrastructure departments. The IDMT is subjected to continuous improvements as implementation progresses.

68 Provincial Training on the Infrastructure Delivery Management Toolkit A total of 437 officials received training on IDM Toolkit. These are officials that are both directly and indirectly involved in infrastructure delivery. Training commenced in August 2011 and was targeted for completion in the new Financial Year. It focused on portfolio management, operations and maintenance, as well as on construction procurement. Table14: Summary of the IDMT Training in the different Provinces. 66 Province North West Northern Cape Eastern Cape Free State Limpopo Client Department of Health Department of Education Social Development, Women and Children Department of Public Works Roads and Transport Provincial Treasury Department of Sports, Arts and Culture Department of Health Department of Education Social Development, Women and Children Department of Public Works Roads and Transport Provincial Treasury Department of Sports, Arts and Culture Department of Agriculture Department of Health Department of Education Department of Public Works Roads and Transport Provincial Treasury Department of Health Department of Education Department of Public Works Roads and Transport Provincial Treasury Social Development, Women and Children Department of Health Department of Education Social Development, Women and Children Department of Public Works Roads and Transport Provincial Treasury Department of Sports, Arts and Culture Department of Agriculture Office of the Premier COGHSTA

69 Province Client Kwazulu Natal Department of Health Department of Education Social Development, Women and Children Department of Public Works Roads and Transport Provincial Treasury Department of Sports, Arts and Culture Department of Agriculture, Environmental Affairs and Rural Development Office of the Premier COGTA Western Cape Department of Health Department of Education Department of Public Works Roads and Transport Provincial Treasury Knysna Municipality COGTA Mpumalanga Department of Health Department of Education Department of Public Works Roads and Transport Provincial Treasury Gauteng Department of Health Department of Education Department of Infrastructure Development Department of Roads and Transport Provincial Treasury ethekwini Municipality Department of Agriculture, Environmental Affairs and Rural Development National Stakeholders Department of Health Department of Education Department of Public Works Roads and Transport National Treasury DBSA A total of 469 across the provinces attended the training during the year under review. 67 Delays in Payments The cidb held a focus group on delays in payments in September The focus group recommended that: The cidb should consider introducing regulation on delayed payment; Further research should be undertaken to improve industry understanding regarding delayed payment, especially dispute adjudication;

70 Consideration should be given to naming and shaming habitual payment defaulters; and possible introduction of construction legislation should be considered, such as the Housing Act of the United Kingdom or similar legislation in Singapore, which includes security of payment but also covers compulsory adjudication for easy enforcement of adjudication decisions. The cidb commenced with a literature review at the beginning of 2011/12 to: Investigate the legal remedies available to the South African building and civil engineering contractors and consultants regarding delayed payment; Determine the effectiveness of the said remedies and the enforcement thereof; and Identify solutions to improve current payment practices in the South African building and construction industry. The literature review has led to the development of draft cidb Regulations on prompt payment for construction works projects. A focus group will be convened in the first quarter of 2012/13 as part of industry consultation on the draft regulations. 68 Infrastructure Gateway System A draft Standard for the Infrastructure Gateway System (IGS) was published on the cidb website for industry inputs by November Provincial departments of Education, Health and Public Works applied the IGS, albeit at varying degrees. Performance Improvement of Public Sector Clients The cidb piloted a Client Procurement Officers (CPO) Forum as a mechanism to forge closer relationships with infrastructure clients. The forum aims to serve as a reference point for public sector procurement on best practices, principles and emerging contractor development issues. It will further provide leadership on evolving procurement practices that comply with the cidb Regulations as well as the broader legislative framework. The CPO Forum is intended to be the catalyst for knowledge sharing and for building networks that can strengthen relations with public sector clients and other stakeholders, to promote compliance to the cidb Procurement Prescripts. The cidb Provincial Offices lead Provincial CPO forums which focus on provincial departments and Municipalities. The cidb also participates in the State Owned Enterprise Procurement Forum (SOEPF).

71 Topics for discussion in these forums include the following: Tenders, tender specifications and documentation, among others; Vetting or due diligence audits on suppliers; Fronting; Procurement system engineering; Supplier development opportunities; Black Economic Empowerment and the transformation agenda; Procurement Officials skills development plan; Knowledge and information sharing on best practices in the procurement of construction as well as goods and services. The CPO Forums will be instituted in all provinces in the 2012/13 Financial Year to build capacity and improve stakeholder relations with public sector clients. 69

72 Corporate Services

73 Human Resources and Organisational Management Staffing For the period under review, cidb had a total staff complement of 178 permanent employees. Of these, 72 were male and 106 were female employees representing 40% and 60% of the total staff complement respectively. (see breakdown below): Table 15: Staff Breakdown Number of staff Representative % Males 72 40% Females % Youth 94 53% People with disabilities 0 0% TOTAL STAFF Employment Equity Employment equity is one of the critical components underpinning the cidb's business strategy and transformation. The cidb has achieved an above 90% staff representation at all levels. Meaningful representation in this case takes into account legislative provisions, operational and business needs and HR plans.

74 Table 16: Occupational Levels: 72 Occupational Levels Male Female Foreign Nationals Total A C I A C I W Male Female Top management Senior management Professionally qualified and experienced specialists and mid-management Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents Semi-skilled and discretionary decision making Unskilled and defined decision making Employees with disabilities Temporary employees GRAND TOTAL 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 are no disabled employees employed at the cidb and this situation needs to be reversed. To this effect the organization will employ at least two disabled persons during the course of the new financial year.

75 Employee Relations Workplace Dignity The cidb held targeted training for managers and supervisors on management of disciplinary and grievance hearings. This was in response to the need to balance the interests of employers and employees and to entrench the principles embedded in the cidb values, Code of Conduct, Disciplinary Code and Employee Relations Policies. 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 the year and 53% of cidb employees joined the union as paying members. There was no recognition agreement signed to govern collective agreement between the cidb and the Union by 31 March Training and Development Below is the breakdown of employee training and workshops provided during the period under review: 73 Table 17: 2011/12 Employee Training Programme Training Cost Construction Registers Services (CRS) 354, Corporate Services (CS) 164, Construction Industry Performance (CIP) 13, Performance and Delivery Management (PDM) ** Growth & Contractor Development (GCD) 521, CEO's Office 127, GRAND TOTAL 713, Performance Management The performance management system of the cidb aims to align individual performance / contribution with cidb's mission, vision 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.

76 INFORMATION AND TECHNOLOGY The Information and 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 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 delivered and supported 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 uptime of measured, critical services was in excess of 99% for the year. The following governance reviews and improvements took place during the period under review; 74 A risk assessment exercise including on-going monitoring and maintenance; Review of cidb capability requirements. These were fully documented and initiatives for improving the IT service were continuously implemented; King III readiness review. It was established that the cidb is sufficiently providing governance within the guidelines of King III. Additional recommended improvements will be reviewed and implementation where appropriate in the coming Financial Year; External and internal audit of the past three years was completed and the necessary controls were implemented satisfactorily; Various Software Development Lifecycle reviews were undertaken and recommendations implemented; The IT Project Management Framework was finalised and has shown a marked improvement in delivery of solutions on time and within budget. These reviews and initiatives have allowed implementation of further IT improvements and will continue to support delivery of quality service. The cidb completed the planning and procurement for the rewrite of the Electronic Document Management System (EDMS) and the Construction Registers Service applications. Project Siyakha is now underway. Improved system security, monitoring and disaster recovery solutions were implemented. SUPPLY CHAIN MANAGEMENT REPORT The Supply Chain Management (SCM) unit became fully operational during the 2008/09 Financial Year and continues to grow from strength to strength. The control environment continues to improve, however a set-back was experienced through the loss of critical staff in the area. Due to the demands for full compliance with the National Treasury provisions on SCM there is a need for additional capacity in the area as well as an organisation wide awareness on SCM in the new financial period.

77 In its endeavour to comply with the King III Report, Treasury Regulations, Preferential Procurement Policy Framework Act. and Public Finance Management Act. the cidb has developed a comprehensive Supply Chain Management Policy that supports Broad Based Black Economic Empowerment. The policy is reviewed annually to incorporate regular changes pertaining to Broad Based Black Economic Empowerment. 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 Supply Chain Management function; The Bid Specification Committee; The Bid Evaluation Committee; and The Bid Adjudication Committee. All these structures are kept independent from each other in line with maintaining adequate segregation of duties and in order to uphold the key tenants of good governance. 75 Bid Adjudication Committee The Bid Adjudication Committee (BAC) was effective throughout the year. The committee is a permanent structure, with membership rotated on an annual basis. The committee has a cross functional representation with diversely qualified officials who have adequate supply chain and construction related experience. These individuals also hold senior positions in the respective cidb Programmes. 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 evaluation meeting. Bid Evaluation Committee The Bid Evaluation Committee (BEC) evaluates all bids and procurement services above R The committee presents a detailed recommendations report to the BAC. cidb's BEC is kept as a floating structure to allow specialist participation. Irregular Expenditure The Supply Chain Management unit maintains a register of any irregular expenditure and actions taken in line with National Treasury Practice Note 4 of 2008/2009. All relevant disclosure requirements have been complied with as reported in the cidb's Annual Financial Statements.

78 Annual Financial Statements

79 Contents page Accounting Authority's Responsibilities and Approval 3-2 Audit Committee Report 3-2 Report of the Auditor General 3-2 Accounting Authority's Report 3-2 Statement of Financial Position 3 Statement of Financial Performance 4 Statement of Changes in Net Assets 5 Cash Flow Statement 6 Accounting Policies 7-14 Notes to the Annual Financial Statements

80 Accounting Authority's Report For the year ended 31 March 2012 Nature of business The Construction Industry Development Board (cidb) is a Schedule 3A public entity established in terms of the cidb Act, 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. Objectives and targets 78 The objectives and targets of the cidb are summarised in the organisation's strategic and annual performance reports. In terms of the external strategic context the activities of the cidb were focused on Public Sector Procurement Reform and Delivery, facilitating Contractor Development and Infrastructure Delivery Skills as well as improved stakeholder relations. Capacitating of public sector clients was done on request or strategic interventions initiated by cidb. This has assisted many public sector clients to understand the cidb requirements. Public Sector delivery has been enhanced through the Infrastructure Delivery Improvement Programme (IDIP) that is run in partnership with National Treasury, the Department of Public Works and the DBSA. The National Contractor Development Programme (NCDP) was enhanced and rolled out to provincial departments of Public Works and other infrastructure departments, as a new focus and intervention as some of these departments have not demonstrated required compliance. In addition to these objectives, the cidb also focused its resources on internal matters like building the organisation, beefing up resources and systems to ensure a streamlined service to stakeholders. Financial performance The Register of Contractors' previous growth momentum has levelled off in the current year. During the year under review actual total revenue generated amounted to R47.7m. Of this revenue, R23.2m was generated from annual fees of new contractor registrations, upgrades and renewals, the balance of R24.5 m was generated from administration fees and other related income (all classified as "the rest"). Total revenue budget was exceeded by R6.3m. All compliant applications were processed and communication requesting outstanding information was sent out for non-compliant applications. Additional revenue in the form of fines totalling R0.8 m was collected during the year under review. This revenue is part of fines imposed on successful prosecution of contractors who committed fraud and corruption. This revenue has been accounted for separately and it will be used to fund the combating of fraud and corruption. Refunds of annual fees become due to contractors who qualify for grades lower than that applied for, and also for applications that are not processed due to non-compliance by contractors. The cidb managed to process refunds amounting to R2.7m. In order to action any refunds cidb prompts contractors by sending refund request forms for contractors to complete. This is done in order to ensure that refunds are processed to correct and up to date banking accounts.

81 Accounting Authority's Report Continued Cash and cash equivalents balance for the year amount to R80.6m. Events Subsequent to Statement of Financial Position Date No events took place between the year-end date (31 March 2012) and the date on which the financial statements were signed that were sufficiently material to warrant disclosure to interested parties. Audit Committee The Audit Committee consists of external members and two Board members. The external members, namely Ms. Shelley Thomas (Chairperson), Victor Nondabula and Nala Mhlongo supported by two Board members: Messrs Marten Govender and Lwandile Kona. A new rotation system was adopted during the current period whereby the current members of the committee are replaced in a staggered approach over the next 3 years in order to ensure continuity within the committee. The charter has been amended accordingly in this regard. The committee meets at least twice per annum as per its approved terms of reference. Appointed by the Board from 1 July 2007, the Committee met seven times in the current year. The Audit Committee is chaired by an independent chartered accountant who is neither an executive nor a Board member of the cidb. Committee meetings are attended by members of the Auditor-General's office and the internal auditors. 79 Internal Audit Unit The internal audit unit is outsourced to KPMG Chartered Accountants. Their function is mandated by the Audit Committee. The internal audit unit measures and evaluates the effectiveness and application of policies, procedures, systems and processes designed to fulfil the requirements of the risk management policy, and general compliance with governance principles, regulation and the safeguarding of assets. In the year under review internal audit focused on the Growth and Contractor Development, Construction Industry Performance, Finance, I.T. and Human Resources. Remuneration Committee The Remuneration Committee comprises three Board members appointed by the board, namely Dr. Patricia Makhesha (Chairperson), Messrs Ali Nai-du, Nico Maas and Ms. Lindelwa Myataza. This committee is tasked with the evaluation and review of human resource strategy and operations. The committee's terms of reference include considering and making recommendations to the Board on matters relating to general staff policy, remuneration, bonuses, review of service contracts and other benefits. The Remuneration Committee also evaluated and approved staff salaries during the current period. The evaluation of performance bonuses for the period ending 31 March 2012 was conducted by a special team comprising Board and Remuneration Committee members where consideration of bonuses for all staff including Exco and Acting CEO was made.

82 Accounting Authority's Report Continued Remuneration of Board Members 25. MEMBERS' EMOLUMENTS Board Members 80 No. of meetings Fees as members Board Board Other Travel Total meetings meetings meetings Allowance B. Ndendwa 9 52, , , ,422 (Chairperson) L. Myataza 9 41,310 92, , ,324 (Deputy Chairperson) N. Maas 7 26,923 55,569 10,326 92,818 L. Kona 9 39,715 69,505 9, ,561 G. Martins M. Govender 9 39,715 70, , ,423 H. Patel 8 36,660 45,827 86, ,924 A. Naidu 5 21,004 12,221 3,463 36,688 Z. Ntombela 8 40,863 69,507 88, ,994 N. Makhubele S. Bogosing 8 35,133 46,113 15,749 96,995 P. Makhesha 7 28,642 58,050 4,758 91, , , ,792 1,706,598 Total Emoluments March , , , ,781 Audit Committee No. of meetings Fees as members Audit Audit Other Travel Total committee Committee Meetings Allowance meetings Meetings Shelly Thomas ,234 20,891 4, ,426 (Chairperson) Victor Nondabula 9 132,756 49,716 5, ,470 Nala Mhlongo 8 111,906-4, , , ,503 14, ,276

83 Accounting Authority's Report Continued Executives Salary Performance Total bonus R. Khoza 493, ,650 (Chief Executive Officer) P. Mongwenyana 1,134,349 96,420 1,230,769 (Chief Financial Officer) B. Zulu 595,269 76, ,547 (Financial Manager) G. Naidoo 987,897 84,959 1,072,856 (Programme Manager: Growth and Contractor Development) R. Milford 1,102,988 93,754 1,196,742 (Programme Manager: Construction Industry Performance) I. Thumbiran 987,057 83,900 1,070,957 (Programme Manager: Procurement and Delivery Management) E.Moola 994,304 84,516 1,078,82 (Programme Manager: Construction Registers Services) 6,295, ,827 6,815,341 81

84 Accounting Authority's Report Continued Property, Plant and Equipment The cidb adopted the policy as prescribed by GRAP 17 relating to the assessing of useful life and residual value of property, plant and equipment. Residual values and useful life are assessed at the end of each financial year. There has been no change in the policy relating to the use of property, plant and equipment. Materiality Framework The cidb in line with the Public Finance Management Act has updated its materiality framework. The framework has been presented to the Board for their approval. Risk Assessment and Internal Controls 82 The cidb endeavours to minimize risk by ensuring that appropriate systems, policies, personnel and controls are in place throughout the organization. A risk assessment exercise was performed during 2010/2011 financial year to identify areas of risk and to map appropriate controls over the past financial year. The process was facilitated by the Risk and Governance manager and was aimed to determine the material risks to which the cidb was exposed and to evaluate the strategy for managing these risks. The cidb relied on the outsourced internal audit function and external auditors for independent appraisal of the adequacy and effectiveness of the internal controls. The Audit Committee, with extensive input by the internal and external auditors, played a role in assisting management to assess the adequacy and effectiveness of the accounting system, records and internal control. Entity Domicile & Legal form Block N & R, SABS Campus Business Address and Registered Office: No 2 Dr Lategan Road P.O Box 2107 Groenkloof, 0027 Brooklyn Square Pretoria 0075 Website address: Telephone: (012) Fax: Ursula Ntsubane Bafana Ndendwa CEO Board Chairperson Date: 31 July 2012 Date: 31 July 2012

85 Report of the Audit Committee For the year ended 31 March 2012 CONSTRUCTION INDUSTRY DEVELOPMENT BOARD We are pleased to present our report for the financial year ended 31 March Audit Committee Members and Attendance: The audit committee consists of the members listed hereunder and meets at least two times per annum as per its approved terms of reference. Special meetings of the Audit Committee may be convened as required. During the current year four ordinary and six special meetings were held. The special meetings covered the following areas: Review of the 2011/12 internal audit plan and review of completed reports (1 meeting); Review of supply chain management's system of control (3 meetings). Name of Member Number of Meetings Attended Shelley Thomas (Chairperson) 10 Victor Nondabula 9 Nala Mhlongo 8 Marten Govender 7 Lwandile Kona 8 83 Mr Lwandile Kona and Mr Marten Govender's were appointed to the Audit Committee on 1 April 2011 as a result of their re-appointment as Board members. The External Auditors, the Chief Executive Officer, Internal Auditors as well as the Chief Financial Officer have a standing invitation to Audit Committee meetings and have attended most of the meetings during the year under review. The Audit Committee comprises five members, all of whom are from private sector and two of whom are members of the Board. Audit Committee Responsibility The Audit Committee reports that it has complied with its responsibilities arising from Treasury Regulations and (b) and (c) issued in terms of the Public Finance Management Act 1 of 1999, as amended by Act 29 of The Audit committee also reports that it has adopted appropriate formal terms of reference as its audit committee charter, has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein.

86 The report on performance information Whilst the Board has additional responsibility as required by section 55(2)(a) of the PFMA to ensure that the annual report and audited financial statements fairly present its performance against predetermined objectives, it is the Audit Committee's opinion that performance information is appropriately reported. The effectiveness of internal control During the year under review instances of non-compliance were reported by internal and external auditors. A combined audit and risk committee was appointed by the Board. The joint committee advised the Board on supply chain related matters. There will be continued focus on the findings of the internal and external auditors including focusing on the weaknesses within supply chain management. There will also be increased focus on performance information systems and controls and the compliance with laws and regulations. 84 The quality of management and quarterly submitted in terms of the PFMA The Audit Committee has reviewed and commented on the content and quality of quarterly reports prepared and issued by the board during the year under review and provided input if any was required. Internal Audit The Board has outsourced the internal audit function to a private firm of chartered accountants and the areas covered were in terms of a three year rolling plan. The Audit Committee has reviewed the adequacy of the coverage and, subject to certain deviations, is satisfied therewith. Evaluation of Financial Statements The Audit Committee has: reviewed and discussed the audited annual financial statements to be included in the annual report with the Auditor-General and the Accounting Authority; reviewed the Auditor-General's management letter and management's response thereto; reviewed the accounting policies and practices; reviewed the significant adjustments resulting from the audit The Audit Committee concurs and accepts the Auditor-General's conclusions on the annual financial statements and is of the opinion that the audited annual financial statements be accepted and read together with the report of the Auditor-General. Shelley Thomas Chairperson of the Audit Committee

87 Statement of Responsibility and Going Concern For the year ended 31 March 2012 Statement of Responsibility for Annual Financial Statement for a Going Concern At the time of preparation of Annual Financial Statements for the period under review, the Board members believed that the cidb will be a going concern in the foreseeable future. For this reason they continue to adopt a going concern basis in the preparation of these annual financial statements. Responsibility for Annual Financial Statements The members of the Board are responsible for the preparation of the Annual Financial Statements. Approval of cidb Annual Financial Statements The Annual Financial Statements for the year ended 31 March 2012, set out on pages x to x, have been approved by the Board in terms of section 51(1) (f) of the Public Finance Management Act (PFMA), No 1 of 1999 on 31 July Ursula Ntsubane Bafana Ndendwa CEO Board Chairperson Date:31 July 2012 Date: 31 July 2012

88 Auditor General Report For the year ended 31 March 2012 REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE CONSTRUCTION INDUSTRY DEVELOPMENT BOARD REPORT ON THE FINANCIAL STATEMENTS Introduction 1. I have audited the financial statements of the Construction Industry Development Board set out on pages 3 to 29, which comprise the statements of financial position as at 31 March 2012, the statements of financial performance, statement of changes in net assets and cash flow statement for the year then ended, the notes, comprising a summary of significant accounting policies and other explanatory information. 86 Accounting Authority's responsibility for the financial statements 2. The accounting authority is responsible for the preparation and fair presentation of these 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 of South Africa, 1999 (Act No.1 of 1999) (PFMA), and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor-General's responsibility 3. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA), 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 financial statements are free from material misstatement. 4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

89 Auditor General Report Continued Opinion 6. In my opinion the financial statements present fairly, in all material respects, the financial position of the Construction Industry Development Board as at 31 March 2012 and its financial performance and cash flows for the year then ended, in accordance with south African Standards of Generally Recognised Accounting Practise (SA Standards of GRAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No.1 of 1999) (PFMA). Emphasis of matter I draw attention to the matters below. My opinion is not modified in respect of these matters. Restatement of corresponding figures 8. As disclosed in note 22 to the financial statements, the corresponding figures for 31 March 2011 have been restated as a result of an erroneous disclosure of the provision for debt impairment amounting to R discovered during 31 March 2012 in the financial statements of cidb at, and for the year ended, 31 March 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. 87 Predetermined objectives 11. I performed procedures to obtain evidence about the usefulness and reliability of the information in the annual performance report as set out on pages.to of annual report 12. 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 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). 13. The material findings are as follows on the annual performance report concerning the usefulness of the information.

90 Auditor General Report Continued Usefulness of Information Performance indicators are not well defined 14. The National Treasury Framework for managing programme performance information (FMPP) requires that indicators/measures should have clear unambiguous data definitions so that data is collected consistently and is easy to understand and use. A total of 22% of the indicators relevant to the Growth and Contractor Development Programme, Construction Industry Performance Programme and Construction Registers Programme, were not well defined in that collected consistently. This was due to the fact that management was not aware of the requirements of the FMPPI. Additional matter 15. I draw attention to the following matter below. My conclusion is not modified in respect of this matter Achievement of planned targets Of the total number of planned targets, only 34 of the targets were achieved during the year under review. This represents 26% of total planned targets that were not achieved during the year under review. This was mainly due to the fact that indicators and targets were not suitably developed during the strategic planning process Compliance with laws and regulations 17. 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 noncompliance with specific matters in key applicable laws and regulations as out in the General Notice issued in terms of the PAA are as follows: Annual financial statements 18. The 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 disclosure items identified by the auditors were subsequently corrected, resulting in the financial statements receiving an unqualified audit opinion. Budget 19. The public entity accumulated surpluses without the approval of National Treasury, in contravention of section 53(3) of the Public Finance Management Act. Procurement and contract management 20. Goods and service with a transaction value below R were procured without obtaining the required price quotations, as required by Treasury Regulation 16A6.1.

91 21. Sufficient appropriate audit evidence could not be obtained that contracts and quotations were awarded to suppliers whose tax matters have been declared by the South African Revenue Services to be in order as required by Treasury Regulations 16A9.1 (d) and the Preferential Procurement Regulations. 22. Contracts and quotations were awarded to bidders based on points given for criteria that differed from those stipulated in the original invitation for bidding and quotations, in contravention of Treasury Regulations 16A6.3 (b) and the preferential Procurement Regulations. 23. The preference point system was not applied in all procurement of goods and services above R as required by section 2(a) of the Preferential Procurement Policy Framework Act. 24. Contracts and quotations were awarded to bidders based on preference points that were not allocated or calculated in accordance with the requirements of the Preferential Procurement Policy Framework Act and its regulations. Expenditure management 25. The accounting authority did not take effective steps to prevent irregular expenditure and fruitless and wasteful expenditure, as required by section 51(1) (b) (ii) of the Public Finance Management Act The accounting authority did not take effective steps to prevent losses resulting from criminal conduct, as required by section 51(1) (b) (ii) of the Public Finance Management Act. Internal audit 27. The purpose, authority and responsibility of the internal audit function was not formally defined in an audit charter, as required by treasury regulations Internal control 28. I considered internal control relevant to my audit of the 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 the annual performance report and the findings on compliance with laws and regulations included in this report. Leadership 29. The accounting authority did not exercise effective oversight in ensuring that the planning and monitoring of performance information were aligned to National Treasury's Framework for Managing Programme Performance. Furthermore the cidb did not have sufficient monitoring controls to ensure compliance with Supply Chain Management legislation.

92 Financial and performance management 30. The financial statements and other information to be included in the annual report are not adequately reviewed for completeness and accuracy prior to its submission for audit purposes Pretoria 31 July 2012 A U D I T O R - G E N E R A L S O U T H A F R I C A Auditing to build public confidence 90

93 STATEMENT OF FINANCIAL POSITION Annual Financial Statements for the year ended 31 March 2012 Note(s) ASSETS CURRENT ASSETS Operating lease asset 5-1,192,757 Trade and other receivables from exchange transactions 7 1,505,516 1,682,109 Cash and cash equivalents 8 80,163,463 80,811,763 81,668,979 83,686,629 NON-CURRENT ASSETS Property, plant and equipment 3 13,809,992 12,617,298 Intangible assets 4 8,709,083 2,147,531 22,519,075 14,764,829 Total Assets 104,188,054 98,451, LIABILITIES CURRENT LIABILITIES Finance lease obligation 9 90, ,768 Trade and other payables from exchange transactions 11 17,836,599 19,085,819 Income received in advance 10 27,575,800 26,336,616 45,502,533 45,744,203 NON-CURRENT LIABILITIES Finance lease obligation 9-90,133 Total Liabilities 45,502,533 45,834,336 Net Assets 58,685,521 52,617,122 NET ASSETS Accumulated surplus 58,685,521 52,617,122

94 STATEMENT OF FINANCIAL PERFORMANCE Annual Financial Statements for the year ended 31 March Note(s) Revenue Non-exchange transaction Grants Received 12 65,959,000 63,665,000 Exchange transactions Registers revenue 12 47,736,545 45,073,461 Other income , ,083 Finance income 17 4,600,284 4,131,542 Total Revenue 118,460, ,255, Expenditure Staff cost 15 (61,064,668) (52,867,577) Depreciation and amortisation (2,943,262) (2,502,384) Finance costs 18 (35,179) (74,360) Debt impairment 16 (152,503) (92,263) Loss on assets written off (299,776) (107,375) Operating expenses 14 (47,896,927) (47,575,402) Total Expenditure (112,392,315) (103,219,361) Surplus for the year 6,068,394 10,035,725

95 STATEMENT OF CHANGES IN NET ASSETS Annual Financial Statements for the year ended 31 March 2012 Accumulated Total net assets surplus Balance at 01 April ,581,395 42,581,395 Surplus for the year 10,035,725 10,035,725 Balance at 01 April ,617,125 52,617,125 Surplus for the year 6,068,394 6,068,394 Balance at 31 March ,685,519 58,685,519 93

96 CASH FLOW STATEMENT Annual Financial Statements for the year ended 31 March 2012 CASH FLOWS FROM OPERATING ACTIVITIES Note(s) Receipts Registers income 47,893,676 47,818,391 Grants received 65,959,000 63,665,000 Interest income 4,600,284 4,131,542 Other receipts 196, , ,649, ,456, Payments Compensation to employees (61,064,668) (52,867,578) Payments to suppliers and others (46,878,718) (41,993,844) (107,943,386) (94,861,422) Net cash flows from operating activities 21 10,705,929 21,595,085 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment 3 (3,818,185) (1,736,641) Purchase of other intangible assets 4 (7,179,100) (1,002,873) Net cash flows from investing activities (10,997,285) (2,739,514) CASH FLOWS FROM FINANCING ACTIVITIES Finance lease payments (356,944) (282,586) Net increase/(decrease) in cash and cash equivalents (648,300) 18,498,604 Cash and cash equivalents at the beginning of the year 80,811,763 62,313,159 Cash and cash equivalents at the end of the year 8 80,163,463 80,811,763

97 ACCOUNTING POLICIES Annual Financial Statements for the year ended 31 March Presentation of Annual Financial Statements The annual financial statements have been prepared in accordance with the effective 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, are disclosed below. These accounting policies are consistent with the previous period. 1.1 SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATING UNCERTAINTY 95 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 are 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. Significant judgements were made on provision for bad debts and on reassessing the assets' residual values and useful lives. Although these estimates are based on management's best knowledge of current events and actions that cidb may undertake in the future, actual results ultimately may differ from those estimates. The presentation of the results of operations, financial position and cash flows in the financial statements of the cidb are dependent upon and sensitive to the accounting policies, assumptions and estimates that are used as a basis for the preparation of these financial statements. Management has made certain judgments in the process of applying the accounting policies. These, together with the key assumptions concerning the future, and other key resources of the estimation uncertainty at the financial position date. Provisions Provisions were raised and management determined an estimate based on the information available. 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.

98 ACCOUNTING POLICIES Continued 1.2 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are tangible non-current assets that are held for use in the production or supply of goods or services, rental to others, or for administrative purposes, and are expected to be used during more than one period. The cost of an item of property, plant and equipment is recognised as an asset when: it is probable that future economic benefits or service potential associated with the item will flow to the cidb; and the cost of the item can be measured reliably. Property, plant and equipment are initially measured at cost. 96 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. 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. 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 are carried at cost less accumulated depreciation. 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 are carried at cost less accumulated depreciation. The useful lives of items of property, plant and equipment have been assessed as follows: Item Furniture and fittings Office equipment Computer equipment Average useful life 10 years to 14 years 8 years to 12 years 8 years to 12 years

99 ACCOUNTING POLICIES 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. 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 property, plant and equipment are derecognised when the asset is disposed of or when there are no further economic benefits or service potential expected from the use of the asset. The gains or losses arising from derecognition of items of property, plant and equipment are included in surplus or deficit when the items are derecognised. The gains or losses arising from derecognition of items of property, plant and equipment are determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item INTANGIBLE ASSETS An asset is identified as an intangible asset when it: is capable of being separated or divided from an cidb 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 cidb or from other rights and obligations. An intangible asset is recognised when: it is probable that the expected future economic benefits or service potential that are attributable to the asset will flow to the cidb; and the cost or fair value of the asset can be measured reliably. Intangible assets are initially recognised at cost. An intangible asset acquired at no or nominal cost, 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.

100 ACCOUNTING POLICIES Continued An intangible asset arising from development (or from the development phase of an internal project) is recognised when: 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. The amortisation period and the amortisation method for intangible assets are reviewed at each reporting date. 98 Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance are not recognised as intangible assets. Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows: Item Computer software Useful life 1 years to 10 years Intangible assets are derecognised: on disposal; or when no future economic benefits or service potential are expected from its use or disposal. The gain or loss is the difference between the net disposal proceeds, if any, and the carrying amount. It is recognised in surplus or deficit when the asset is derecognised. 1.4 FINANCIAL INSTRUMENTS Trade and other receivables Trade receivables are measured at fair value of the consideration receivable. Appropriate allowances for estimated irrecoverable amounts are recognised in surplus or deficit when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the assets s carrying amount and management s best estimate of what is recoverable, guided by the cidb policy on trade and other debtors.

101 ACCOUNTING POLICIES Continued The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the deficit is recognised in surplus or deficit within operating expenses. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in surplus or deficit. Trade and other receivables are classified as loans and receivables. Trade and other payables Trade payables are measured at fair value of the consideration payable. Cash and cash equivalents Cash includes cash on hand (including petty cash) and cash with banks (including call deposits). Cash equivalents are short-term highly liquid investments, readily convertible into known amounts of cash, which are held with registered banking institutions with maturities of three months or less and are subject to an insignificant risk of change in value. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held on call with banks. The entity categorises cash and cash equivalents as financial assets: loans and receivables 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. 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. Operating leases - lessee 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.

102 ACCOUNTING POLICIES Continued 1.6 ACCRUALS Accruals are liabilities for goods or services that have been supplied to the cidb, but have not been formally confirmed with the supplier. Accruals are mainly distinguished from provisions based on the degree of uncertainty. Although it is sometimes necessary to estimate the amount or timing of accruals, the cidb accounts for accruals where the uncertainty is generally much less than for provisions. 1.7 COMMITMENTS Commitments are contractual agreements with suppliers for goods and services, where delivery has not taken place. Commitments are disclosed on the notes to the financial statements at a nominal value of the contractual agreement MATERIALITY Materiality is an estimated effect that an omission or misstatement of information could have on the economic decisions of users taken on the basis of the financial statements. The materiality thresholds of the cidb are based on the previous year's audited financial statements. 1.9 EMPLOYEE BENEFITS Employee benefits are all forms of consideration given by cidb in exchange for service rendered by employees. A constructive obligation is an obligation that derives from an cidb s 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 twelve months after the end of the reporting period in which the employees render the related employee service;

103 ACCOUNTING POLICIES Continued 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 current employees (for cell phones). When an employee has rendered service to cidb during a reporting period, cidb recognise the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service: as a liability after deducting any amount already paid (accrued expense). 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 if 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 cidb expects to pay as a result of the unused entitlement that has accumulated at the reporting date. 101 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 cidb has no realistic alternative but to make the payments PROVISIONS AND CONTINGENCIES Provisions are recognised when: the cidb has a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation; and a reliable estimate can be made of the obligation. The amount of a provision is the best estimate of the expenditure expected to be required to settle the present obligation at the reporting date. Where the effect of time value of money is material, the amount of a provision is the present value of the expenditures expected to be required to settle the obligation. The discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

104 ACCOUNTING POLICIES Continued Where some or all of the expenditure required to settling 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 cidb 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. A provision is used only for expenditures for which the provision was originally recognised. If cidb 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 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. 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. Revenue from exchange transactions refers to revenue that accrued to the cidb directly in return for services rendered, the fair value of which approximates the consideration received or receivable. Measurement Revenue from exchange transactions is measured at the fair value of the consideration received or receivable and is recognised when it is probable that future economic benefits or service potential will flow to the cidb and these benefits can be measured reliably. Registers income The cidb receive income by way of registration of contractors in accordance with the Construction Industry Development Board Act, Act 38 of Due to the nature of the registration of contractors, the Construction Industry Development Board only recognises this income once a contractor has been assessed with the exception of administration fees. Revenue from administration fees is recognised once an application has been received by cidb and is based on the grade applied for. Finance income Revenue arising from the use by others of cidb assets yielding interest is recognised when:

105 ACCOUNTING POLICIES Continued it is probable that the economic benefits or service potential associated with the transaction will flow to the cidb, and the amount of the revenue can be measured reliably. Interest is recognised, in surplus or deficit, using the effective interest rate method REVENUE FROM NON-EXCHANGE TRANSACTIONS Non-exchange transactions are defined as transactions where cidb receives value from another cidb without directly giving approximately equal value in exchange. 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. Revenue takes the form of grants from the Department of Public Works and is received on an annual basis and raised as revenue on receipt. 103 Measurement Revenue is measured at the fair value of the consideration received or receivable, net of trade discounts and volume rebates. Sponsorships and donations received Sponsorships and donations are recognised as revenue when: it is probable that the economic benefits or service potential associated with the transaction will flow to the cidb; the amount of the revenue can be measured reliably; and to the extent that there has been compliance with any restrictions associated with the grant. If sponsorships and donations are received without conditions attached, revenue is recognised immediately. If conditions are attached, a liability is recognised, which is reduced and revenue recognised as the conditions are satisfied FINANCE INCOME Finance income is recognised on a time-proportion basis using the effective interest method FINANCE COSTS Finance costs are recognise as an expense in the period in which they are incurred

106 ACCOUNTING POLICIES Continued 1.15 COMPARATIVE FIGURES Where necessary, comparative figures are reclassified to conform to the changes needed for fair presentation of the current year s annual financial statements 1.16 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 - (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): Irregular expenditure that was incurred and identified during the current financial and which was condoned before year end and/or before finalisation of the financial statements must also be recorded appropriately in the irregular expenditure register. In such an instance, no further action is also required with the exception of updating the note to the financial statements. Irregular expenditure that was incurred and identified during the current financial year and for which condonation is being awaited at year end must be recorded in the irregular expenditure register. No further action is required with the exception of updating the note to the financial statements. Where irregular expenditure was incurred in the previous financial year and is only condoned in the following financial year, the register and the disclosure note to the financial statements must be updated with the amount condoned.

107 ACCOUNTING POLICIES Continued 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 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 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 within the national sphere of government are considered to be related parties. 105 Key management is defined as being individuals with the authority and responsibility for planning, directing and controlling the activities of cidb, including those charged with the governance of the entity in accordance with legislation, in instance where they are required to perform such functions. cidb regards all individuals at senior management per the definition of the financial reporting standard. Close members of the family of key management personnel are considered to be those family members who may be expected to influence, or be influenced by, management in their dealings with cidb. Only transactions with related parties not at arm's length or not in the ordinary course of business are disclosed BUDGET INFORMATION cidb 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 annual financial statements and the budget are on the same basis of accounting therefore a comparison with the budgeted amounts for the reporting period have been included in the annual financial statements.

108 ACCOUNTING POLICIES Continued 1.20 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 period are those events that occur between the end of the reporting period and the date when the 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 financial statements. All other material events that are indicative of the condition that arose after the reporting period are disclosed in the notes to the financial statements. 106

109 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Annual Financial Statements for the year ended 31 March NEW STANDARDS AND INTERPRETATIONS 2.1 STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE OR RELEVANT The following standards and interpretations have been published and are mandatory for the cidb s accounting periods beginning on or after 01 April 2012 or later periods but are not relevant to its operations: GRAP 18: Segment Reporting The effective date of the standard is for years beginning on or after 01 April The cidb does not envisage the adoption of the standard until such time as it becomes applicable to the cidb's operations. It is unlikely that the standard will have a material impact on the cidb's annual financial statements. 107 GRAP 23: Revenue from Non-exchange Transactions The effective date of the standard is for years beginning on or after 01 April The cidb does not envisage the adoption of the standard until such time as it becomes applicable to the cidb's operations. The impact of this standard is currently being assessed. GRAP 24: Presentation of Budget Information in the Financial Statements The effective date of the standard is for years beginning on or after 01 April The cidb does not envisage the adoption of the standard until such time as it becomes applicable to the cidb's operations. The impact of this standard is currently being assessed. GRAP 21: Impairment of non-cash-generating assets The effective date of the standard is for years beginning on or after 01 April The cidb does not envisage the adoption of the standard until such time as it becomes applicable to the cidb's operations. The impact of this standard is currently being assessed.

110 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Continued GRAP 26: Impairment of cash-generating assets The effective date of the standard is for years beginning on or after 01 April The cidb does not envisage the adoption of the standard until such time as it becomes applicable to the cidb's operations. The adoption of this standard is not expected to impact on the results of the cidb, but may result in more disclosure than is currently provided in the annual financial statements. GRAP 25: Employee benefits The effective date of the standard is for years beginning on or after 01 April The cidb does not envisage the adoption of the standard until such time as it becomes applicable to the cidb's operations. 108 The impact of this standard is currently being assessed. GRAP 104: Financial Instruments 2. NEW STANDARDS AND INTERPRETATIONS (continued) The effective date of the standard is for years beginning on or after 01 April The cidb does not envisage the adoption of the standard until such time as it becomes applicable to the cidb's operations. The impact of this amendment is currently being assessed. 3. PROPERTY, PLANT AND EQUIPMENT Cost Accumulated Carrying Cost Accumulated Carrying depreciation value depreciation value Furniture and fittings 7,307,620 (2,339,156) 4,968,464 5,126,007 (1,882,531) 3,243,476 Office equipment 7,233,572 (3,843,679) 3,389,893 6,929,562 (3,025,624) 3,903,938 Computer equipment 9,645,196 (4,193,561) 5,451,635 8,970,884 (3,501,000) 5,469,884 Total 24,186,388 (10,376,396) 13,809,992 21,026,453 (8,409,155) 12,617,298

111 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Continued Reconciliation of property, plant and equipment Opening Additions Write-offs Depreciation Total balance Furniture and fittings 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 12,617,298 3,818,185 (299,776) (2,325,715) 13,809,992 Reconciliation of property, plant and equipment Opening Additions Write-offs Depreciation Total balance Furniture and fittings 3,410, ,888 (4,773) (402,799) 3,243,476 Office equipment 4,348, ,650 (37,418) (819,908) 3,903,938 Computer equipment 5,325,069 1,083,103 (65,158) (873,130) 5,469,884 13,083,843 1,736,641 (107,349) (2,095,837) 12,617, Assets subject to finance lease (Net carrying amount) Office equipment 39, ,811 A register containing the information required by Public Finance Management Act is available for inspection at the registered office of the cidb. 4. INTANGIBLE ASSETS Cost Accumulated Carrying Cost Accumulated Carrying amortisation value amortisation value Computer software, other 10,899,052 (2,189,969) 8,709,083 3,719,952 (1,572,421) 2,147,531

112 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Continued INTANGIBLE ASSETS (continued) Reconciliation of intangible assets Opening Additions Amortisation Total balance Computer software 2,147,531 7,179,100 (617,548) 8,709,083 Reconciliation of intangible assets Opening Additions Amortisation Total balance Computer software 1,551,207 1,002,873 (406,549) 2,147, OPERATING LEASE ASSET Current assets - 1,192,757-1,192,757 Operating lease asset were in respect of a lease agreement entered into with SABS, for the occupation of office buildings, whereby cidb undertook to renovate the office buildings and in return future lease rentals were to be offset against the total cost of renovations over 3,5 years. The lease period is 5 years. 6. EMPLOYEE BENEFIT OBLIGATIONS All employees are employed on a contract basis on a cost to Board package and are not entitled to any other benefits: Salaries 43,668,418 42,716,081 Leave entitlement 407, ,790 Performance bonus 3,878,138 2,812,428 47,953,814 45,748, TRADE AND OTHER RECEIVABLES FROM EXCHANGE TRANSACTIONS Trade debtors 564, ,281 Prepayments 941, ,828 1,505,516 1,682,109 Trade and other receivables impaired As of 31 March 2012, trade and other receivables of R 306,490 (2011: R 332,741) were impaired and provided for. The amount of the provision was R 62,025 as of 31 March 2012 (2011: R 216,012).

113 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Continued The amount of the provision that was reversed was R216,012 as of 31 March 2012 (2011: R 456,491) 8. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of: Cash on hand 28,992 14,343 Bank balances 2,800,682 1,641,770 Investments 77,333,789 79,155,650 80,163,463 80,811, FINANCE LEASE OBLIGATION Minimum lease payments due - within one year 92, ,947 - in second to fifth year inclusive - 92,408 92, ,355 less: future finance charges (2,275) (37,453) Present value of minimum lease payments 90, , Non-current liabilities - 90,133 Current liabilities 90, ,768 90, , INCOME RECEIVED IN ADVANCE Contractors not assessed (work in progress) 27,575,800 26,336, TRADE AND OTHER PAYABLES FROM EXCHANGE TRANSACTIONS Trade payables 4,916,776 7,907,411 Unallocated deposits 5,453,594 5,515,966 Accrued leave pay 1,585,033 1,330,800 Accrued bonus - 91,474 Trade Accruals 2,915,280 1,928,889 Other payroll accruals 326, ,109 Payroll liabilities 2,639,430 2,179,170 17,836,599 19,085,819

114 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Continued REVENUE Grants received 65,959,000 63,665,000 Registers revenue 47,736,545 45,073, ,695, ,738,461 The amount included in revenue arising from exchanges of services are as follows: Registers revenue 47,736,545 45,073, Registers revenue consists of the following amounts: Annual fees 23,185,558 21,424,664 Assessment fees 23,757,737 23,072,142 Contractor fines 793, ,655 47,736,545 45,073,461 The amount included in revenue arising from non-exchange transactions is as follows: Grants received 65,959,000 63,665, OTHER INCOME Proceeds on insurance claims 69,650 40,228 Sponsorships received 90, ,500 Sundry income 5,230 3, , , OPERATING EXPENSES Administrative expenses Board remuneration 1,076, ,542 Audit committee remuneration 476, ,053 Legal fees 397, ,472 Entertainment - 2,500 Printing and stationery 3,785,688 3,270,250 Bank charges 364, ,048 Training and staff development 2,846,100 2,387,161 Venue expenses 1,713,797 2,072,382

115 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Continued Marketing costs Advertising 1,603,117 2,898,102 Audit fees Audit fees 1,764,180 1,469,479 Operating expenses Other maintenance, repairs and running costs 704, ,234 Consulting and professional fees 14,919,552 15,520,121 Insurance 683, ,437 Computer expenses and consumables 1,009,048 1,116,183 Lease rentals - Buildings 3,708,318 3,377,961 Lease rentals - Other 981, ,024 Sponsorships 665,620 1,905,702 Courier and delivery charges 563, ,280 Security 1,157, ,077 Membership fees 98,435 32,827 Communication cost 2,875,827 3,476,918 Travel and subsistence 5,416,069 4,301,039 Electricity 1,051, ,610 Penalties and fines 33,096-47,896,927 47,575, STAFF COSTS Basic 48,273,696 42,661,716 Bonus 3,878,137 2,812,428 UIF 247, ,581 Group Life company contribution 244, ,125 Leave payment 407, ,790 Provident fund contributions 1,198, ,801 54,249,327 46,516,441 Remuneration of executives Annual Remuneration 6,295,514 5,866,230 Performance Bonuses 519, ,907 6,815,341 6,351,137 61,064,668 52,867,577

116 NOTES TO THE ANNUAL FINANCIAL STATEMENTS Continued DEBT IMPAIRMENT Bad debts written off 306, ,741 Provision for bad debts 62, ,012 Reversal of bad debts provision (216,012) (456,490) 152,503 92, FINANCE INCOME Interest revenue Bank 4,600,284 4,131, FINANCE COSTS 114 Finance leases 35,179 74, INCOME TAX EXEMPTION The cidb is exempt from Income Tax in terms of section 10 (1) (ca) (i) of the Income Tax Act. 20. AUDIT FEES External audit fees 976, ,147 Internal audit fees 788, ,332 1,764,180 1,469, CASH GENERATED FROM OPERATIONS Surplus 6,068,394 10,035,725 Adjustments for: Depreciation and amortisation 2,943,262 2,502,384 Loss on assets written off 299, ,375 Finance costs 35,179 74,360 Debt impairment 152,503 92,263 Movements in operating lease assets and accruals 1,192,757 3,308,774 Changes in working capital: Trade and other receivables from exchange transactions 176,595 (563,289) Reversal of bad debts provision (152,503) (92,263) Trade and other payables from exchange transactions (1,249,220) 3,823,970 Income received in advance 1,239,186 2,305,786 10,705,929 21,595,085