CHAIRPERSON REPORT Introduction Transport Policy Perspectives Creation of competitive economies

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1 CONTENT CHAIRPERSON REPORT 2 CHIEF EXECUTIVE OFFICER REPORT 4 CORPORATE PROFILE 6 BOARD MEMBERS 7 EXECUTIVE MANAGEMENT 8 SENIOR MANAGEMENT 9 PERFORMANCE OVERVIEw 10 ANNUAL PERFORMANCE REPORT 15 CORPORATE SOCIAL INVESTMENT PROGRAMME 20 CORPORATE GOVERNANCE 21 FINANCIAL REPORT 23 GENERAL INFORMATION 24 AUDIT COMMITTEE REPORT 26 FINANCIAL STATEMENTS 37

2 CHAIRPERSON REPORT Introduction The public transport continues to be an integral part of government s service delivery imperative as the mode of transport to the majority of people in the country. The biggest challenge for public transport globally is providing a safe, reliable and affordable service at all times. Public transport contributes to the socio-economic development in most developing societies such as South Africa. In rural provinces, public transport is mostly the choice for commuting to different destinations daily. In Limpopo Province, which is Great North Transport (GNT) s home of origin, the company provides transportation and commuting services to mostly public servants, scholars and daily passengers to various destinations across the five districts and the eastern part of Mpumalanga Province. The continued important role of this company remains a strategic thrust in the socio-economic development agenda of the country and Limpopo Province in particular. Transport Policy Perspectives The National and Provincial transport plans seek to reduce the number of private cars off the public road through the use of public transport for sustainable development namely Creation of competitive economies Public transport legislation endeavors to reduce poverty among the poor people through affordable pricing to ensure that

3 CHAIRMAN S REPORT savings from subsidies can be used to sustain family livelihoods. Transport contributes 20% of household spending in South Africa and that erode the socio-economic developments of the rural economies over long term. What remains critical to GNT is to continue creating the necessary efficiencies across the entire business value chain to remain service delivery effective and commercially sustainable. Legislation requires that as a country we reduce carbon emissions and footprint for sustainable development. Our vehicles are well positioned to provide commuting for employees, scholars and casual passengers to various destinations to reduce the aggregate consumption of fuels and carbon emissions by private cars. Our future procurement of vehicles incorporates compliance to global standards to comply with legislation. Road infrastructure Road infrastructure in Limpopo Province has improved tremendously between towns and semi-urban areas although Municipal roads need to be tarred for safe and efficient use by public transport. The provincial and municipal road infrastructure plans, which are integral part of transport intermodal strategies of the province, seek to integrate the entire road network to ensure that public transport become the most attractive mode of transport for communities. The intention aims to reduce private cars travelling into towns in order to alleviate congestions during peak periods. As the public transport company, our cost of providing safe, affordable and reliable services depends on well developed infrastructure. The year under review Bus Rapid Transport System (BRT) GNT remains committed to the bus rapid transport system, namely, Leeto la Polokwane which was launched in the previous financial year by the City of Polokwane and other key stakeholders. Our deep-rooted passion for effective transport system in the city and far flung areas of the province requires integration of all key role players. Taxi transport services The taxi industry remains our key stakeholder and during the year under review our relationship has seen the collaboration together with Polokwane municipality signing the Memorandum of Agreement (MOU) for joint management of Leeto la Polokwane. During the year under review both bus and taxi operators co-existed without any challenges. Sustainable economic development Great North Transport is not only the backbone of the provincial economy, but also contributes to enterprise development through the use of its procurement spent on operational consumables including but not limited to fuel, tyres, stationery, mechanical and electrical spares, etc. With its eleven depots situated in the five districts of the province and Bohlabela in Mpumalanga respectively, the company contributes towards the growth of SMMEs and create employment opportunities. Unqualified audit opinion The Board of Directors welcome the 2017 audit outcome. This confirms the adherence to applicable policies and legislations by management and staff. Over the past five years, GNT achieved the unqualified audit opinion and with our commitment to provide continued oversight support, the company will achieve the clean audit. Tribute to GNT Board of Directors The GNT Board of Directors continues to provide oversight on the governance matters within the company with exceptional commitment. It is through the support of this Board that management remains committed to the mandate of the company. I therefore like to pay my gratitude to the entire Board of Directors and the Board committees for their passion in serving this company. To Management and staff of GNT My deep sense of appreciation goes to executive management and staff of GNT for their daily operational commitment to the company in ensuring that our communities are transported to their respective destination. To commuters On behalf of the Board of Directors, Management and staff, I would like to pay tribute to our communities who have remained loyal to the company over the years. M. Maphutha Chairman 3

4 CHIEF EXECUTIVE OFFICER REPORT Introduction Public transport is the backbone of every economy as it provides mobility for labour to various destinations, promotes domestic tourism and therefore remains an integral part of the economic development imperatives. Over the years, government created legislation on public transport to ensure that this system remains intact and viable as societal way of life. Great North Transport (GNT) fulfils this mandate in Limpopo Province and eastern part of Mpumalanga through a network of eleven (11) depots. Being the second biggest commuter bus company in the country, GNT is responsible for a proportional number of workers, casual passengers and scholars that use its transport services daily. Company overview The company worked diligently to resolve the queries emanating from the previous years as raised by the Auditor General of South Africa. The much improved outlook of the company performance result from the commitment and hard work displayed by management and staff during the year under review. Nonetheless, management acknowledges that much of the work still lies ahead to improve both financial and operational performance of the company. Turn Around strategy The turn-around strategy approved by the Board of Directors is yielding some positive results since implementation during the

5 CHIEF EXECUTIVE OFFICER REPORT last few months of the year under review: The transport services The transport service, which represents the biggest portion of the company s operations, has built internal capacity to reduce dependency on external suppliers. This approach has enhanced the company s turnaround with regards to maintenance and costs. Our endeavor to address the different needs of our depots resulted in the movement of buses between depots. To date the company has seen some improvement in terms of reliability in some depots namely; Mokopane, Hoedspruit and Bushbuckridge respectively. Fleet movement Our endeavour to stabilize the transport services resulted in the exchange of bus fleet between Mokopane, Hoedspruit and Polokwane, Marble Hall and Bushbuckridge to ensure that buses are allocated to depots on the basis of demand and suitability. GNT currently has Scania and M.A.N buses in operation and the road conditions and terrain vary across depots and influence the type of buses that must be allocated. Also, the volumes of passengers dictated the exchange of the buses. Stakeholder Relations and Management The management of relationships with our key stakeholders is at the heart of the company strategy. Our commitment to GNT mandate is contained in the shareholder compact and the executed through quarterly reporting to the Board of Directors, and annually to the broader public of Limpopo Province through annual report. Occasionally, GNT participate and engages with provincial departments to contribute in all endeavours of enhancing public transport and other community developments. At the level of commuters and passengers, the company engages with passenger forums and civic organisations on any matter of concern. GNT continued its membership of South Africa Bus Operators Association (SABOA), an advocacy body whose interest is creation of reputable passenger services among bus companies as well to lobby government on favourable legislation affecting bus operating companies. Annually GNT avail managers to attend SABOA workshops to keep abreast with developments. This association in our view remains a relevant vehicle to articulate on matters of interest to bus operators. Organizational and staff development Organisational development began with filling of critical positions and also adopting plans that looked for internal recruitment drive emphasis. During the year under review, GNT filled the critical positions of Chief Executive Officer, Internal Audit Executive and Training and Development Manager. The company adopted a training and development program that focuses on succession planning. Economic development The economic slowdown in the country had a negative impact on the overall financial performance of the company during the year under review. The inability of GNT to meet the budgeted revenue is partly due to the key economic sectors shrinking year on year, thereby reducing passenger numbers. The rise in interest rate and inflation resulting from the economic downturn contributed to high operational costs. The use of light delivery vehicles to transport passengers also affected our market share tremendously in many areas of the province. The year ahead The company s revised corporate strategy hinges on diversification to unlock untapped business opportunities in the country and the SADC region. The long distance routes which focus on Limpopo and other provinces, as well as cross border in the immediate term are impetus of the new business outlook of the future GNT. The proliferation of mining companies in the province resulted in the influx of migrant workers into the province, creating business opportunities for passenger transport companies, GNT in particular. GNT is well positioned to contribute to regional economic integration in line with the Limpopo Development Plan. The future growth prospects of GNT are related partly to the business diversification strategy. S.J. Keswa Chief Executive Officer 5

6 CORPORATE PROFILE MANDATE To provide a range of diversified profit generating good transport services that will support and enhance the economic sustainability and competitive advantage of Limpopo and the region. GNT s primary task is that of facilitating and providing accessible transport mobility and linkages from Limpopo into South Africa and the broader SADC region. PROMISE Carrying make s the difference - This pay-off line is premised on the vision and mission which focuses provision of safe and reliable service to commuters / passengers in all our operational areas. VISION To be Southern Africa s preferred transport service provider, supporting economic growth and development in the region MISSION To invest in world class operating systems that will ensure sustainable, safe, consistent and dependable transport services for the benefit of our stakeholders CORE VALUES Integrity Respect Reliability Customer Care Vigilance Best-in Class Green orientated STRATEGIC OBJECTIVES A visible, reputable and well governed transport company Transport services that support economic growth and development in the region Short term viability and long term sustainability in revenue and resourcing requirements World class, sustainable and integrated operating systems and service quality A high performance culture in a safe and conducive environment KEY SERVICES Great North Transport continues to provide and facilitate mobility of commuters and passengers throughout Limpopo Province and parts of Mpumalanga Province through the following key services: Commuter Services, Private Hires, Cross-Border Services Contracts Employee / Scholar Services Partially

7 BOARD MEMBERS The Board of Directors are GNT s centre of governance as per the provision of Public Finance Management Act and The Company Act. It provides strategic leadership and guidance to GNT in terms of reviewing, approving annual corporate strategy, business plans, annual budgets, risk and general compliance to statutes and company policies. Annually, the Board of Directors appraise the executive management performance against set targets and objectives. The Board of Directors comprises of the following members: Mr M. Maphutha ( Chairman) Ms K Maroga (Deputy chairman) Mr C Nkadimeng Mr I. Masekwameng Dr S. Nokaneng (Barc Chairman) Mr T. Mokone Mr M. Mphahlele (LEDA Managing Director) Mr M.O. Phasha Mr S Keswa (GNT CEO) Ms C Mokoma (Group Company secretary)

8 EXECUTIVE MANAGEMENT Mr S Keswa Chief Executive Officer Ms M Gololo Chief Financial Officer Mr N Hlungwane Chief Operations Officer Mr M Mogano Internal Audit Executive Mr P Kgaphola General Manager: Human Resource 8

9 SENIOR MANAGEMENT Mr R Dhumazi Regional Manager: Central region Mr T Ralepelle Regional Manager: Eastern Region Mr R Mphohoni Regional Manager: Western Region Mr P Monkoe Manager: Marketing and Communications 9

10 PERFORMANCE OVERVIEw Passenger transportation is the core business of GNT derived from its mandate of facilitating mobility of commuters to different destinations daily. This mandate is also an integral part of various outcomes in the medium term strategy framework for public services. At the heart of GNT s operating model the following aspects are key functions: Bus Operations The bus operation is the biggest key deliverable in the entire business value chain. It is the nucleus of services delivery to millions of commuters and passengers travelling the length and breadth of the province and beyond. With 11 (eleven) depots, GNT is the second largest passenger bus company in South Africa. At capacity the company operates 501 buses covering 800 routes daily. Bus maintenance Bus service reliability and availability depend to a large extent on the capacity of the maintenance function to provide timeous preventative and detective maintenance. Whilst the company operates with different bus models, particularly in Seshego, Marble Hall, Hoedspruit and Bushbuckridge compared to one type in the rest of the depots, our maintenance department strived to have sufficient number of buses in operation daily during the year under review.

11 PERFORMANCE OVERVIEw Inspectorate The inspectorate department, which focuses on oversight of bus operations in the various routes, incorporates processing of customers queries to bring about overall satisfaction. During the year under review, GNT strengthened its inspectorate department through centralized reporting. That enhanced the coordination of routine inspections by management. Bus Operations During the year under review the Operations portfolio was structured and operated as follows: No. of Depots No. of Buses No. of Passengers Million Stakeholder relationship management GNT on talk shows with radio stations in Limpopo Interacting with broad public in Limpopo Province is seen by management of GNT as necessary and critical in brand equity development in the company s home of origin, Limpopo Province. To that end the company embarked on a public relations campaign through talk shows on both commercial and local community radio stations. Although the campaign is well underway, much work still lie ahead to ensure that our medium to long term goals of achieving the GNT brand equity in the province is indeed achievable. Among the many issues discussed across on these print and electronic mediums, the company recommitted to improving its service offerings to the entire province Passenger transport forums The establishment of passenger forums across all depots provides both management and passengers with platforms for engagement on pertinent issues of common interest. Through stakeholder engagement programme, GNT interact with passengers on a monthly basis and has produced improved stakeholder relationships. Carrying Makes a Difference - GNT on Brand Strategy workshops- The success of every company hinges around the strength and influence of its brand forward into the market and backward into the organization. It is on that basis that GNT embarked on a brand strategy workshop to lay a foundation for organization-wide brand education. Carrying makes a difference, is GNT s value proposition, a pay-offline, a brand promise and the company s working focus. This slogan is the brand philosophy that must permeate across all levels of the organization to achieve a single brand culture. OFFICE of Chief Executive Officer The Office of the Chief Executive Officer is the strategic nerve centre of the company. It coordinates company strategy and provides strategic direction of the company. Office of the Chief Financial Officer The role of finance it to direct and manage the provision of a comprehensive and well governed financial management service to GNT by developing and implementing policies, procedures, standards and systems to ensure: Integrated, long term financial planning capacity in GNT; Financing of GNT s strategic plans and objectives; Sound, complete and accurate financial management, financial accounting and supply chain management, in accordance with relevant legislative and financial standards and prescripts; and An accurate and up to date accounting system and related processes. Thereby securing the financial sustainability and viability of GNT, which underpins the strategic outcomes and impact that GNT seeks to achieve. In addition to overall financial management, the finance division is responsible for also Information and technology and Supply Chain Management. 11

12 PERFORMANCE OVERVIEw Information Technology division (IT) The Information and Technology Department is the backbone of enabling the company to systematically integrate and process data through different applications on the IT platforms. During the year under review the IT department provided support to the company with of office automation, bus fleet management systems, and communication and networking tools. Revenue Management division On daily basis, this department through the use of finance application monitors revenue centrally from the company head office. Generated reports are analysed and presented to user departments and the executives. The revenue management department keeps the organisation in check on revenue generation throughout the year. Procurement Management Procurement department is at the heart of the day to day purchase of a range of goods and services. Procurement provides guidelines on the policy requirements to all user departments to ensure compliance at all times. During the year under review, the department assisted with access to goods and services that kept depots and the head office running within the bounds of supply chain management policy and other relevant legislation. The Internal audit function Internal audit function provides oversight to the effective application and adherence to company policies throughout the financial year. The division provides an unbiased and objective view of work undertaken by the organization. Whilst it operates within the company, the division is independent from the operations it evaluates and reports matters of interest to the highest level in an organization; accounting officers, audit committee and / board of directors. The Human Resource Division The human resources department provides the company with the provisioning and administrative function of the human capital. The critical functions of human resources within the company are: Human resource recruitment and selection The human resource department ensures that GNT has the right people, in the right positions, with the right skills, thereby enhancing productivity. The recruitment department also, manage the staff movement in the form of transfers, promotions and placement of staff in line with the human resource policy. Industrial Relations Management of employee relations is among the functions of the human resource department. In a unionised business environment within GNT, the role of this function becomes even more important. During the year under review, the labour relations functions organised team building workshops and broader forums conducive for sound industrial relations. Training and development Human resource training and development is another function within the human resource department that provides workshops and coordinates training programmes for staff and management. The function also coordinates internship and learner ship programmes for the company through Transport Education and Training Authority (TETA). During the year under review, the function coordinated internship programmes with TETA and Capricorn FET College for 10 learners. Personal Administration The administration of personnel is key to the operations of the organization. Central to the personnel administration is payroll function, leave management and statutory obligations, etc. During the year under review the company the administration of personnel administration reflected the following outlook. During the year under review the HR Department undertook activities as follows: 12

13 GREAT NORTH TRANSPORT EMPLOYEES IN ALL DEPOTS and HEAD OFFICE Name of Location Males Females Head Office Seshego Tzaneen Giyani Makhado Hoedspruit Phalaborwa Bosbokrand Motetema Mokopane Bapedi Marble hall TOTAL NUMBER OF EMPLOYEES Total number of employees Occupational Category Males Females Total Executive Management Senior Management Middle Management Professional Officer Semi Skilled Unskilled Total Total number of employees Males Total number of employees Females Total number of employees Total 13

14 YOUTH COMPOSITION WITHIN GNT Males Females Males 41 Females EMPLOYEE TURNOVER (RESIGNATIONS/DISMISSALS/RETIREMENTS) Employee turnover( Resignations/Dismissals/Retirements): Occupational Category Males Females Total Executive Management Senior Management Middle Management Professional Officer Semi Skilled Unskilled Total Males Females Total ACTING APPOINTMENT Acting Appointment Occupational Category Males Females Total Executive Management Senior Management Middle Management Professional Officer Semi Skilled Unskilled Total Males Females Total 14

15 ANNUAL PERFORMANCE REPORT In turn, each of the 5 GNT Strategic Goals (outcomes) and their aligned objectives (outputs) are unpacked into performance indicators, baselines and annual targets with corresponding quarterly targets for the financial year of 2016/17. The focus is on ensuring that the specified GNT goals are unpacked in such a way as to be specific and measurable, and against which the programmes and activities of the GNT might be implemented and reported upon, as is reflected in the following. The table below is a logframe.

16 GNT STRATEGIC GOAL (OUTCOME) GNT STRATEGIC OBJECTIVE Expected 5 Year Result by 2019/20 Baseline 2012/ / /15 Performance Measure / Indicator 2016/17 Estimated Performance Means of Verification 1. A visible, reputable and well governed transport company 1.1. Compliance and sound corporate governance Compliance and sound governance and a sustainable organisation 100+/ / 48 61/61 Proportion of AG queries resolved New indicator 193/ / 54 Percentage of Internal Audit queries resolved per target date 100% Audit Report 100% Internal Audit Report 1.2. Best-inclass corporate image and increased customer satisfaction Enhanced positioning and awareness of the GNT brand Increased levels of customer satisfaction Improvement in Brand Perception Survey result Improvement in GNT Customer survey results New indicator New indicator Brand Perception Survey report GNT Customer survey results consolidate to group rating 2. Transport services that support economic growth and development in the region 2.1. Enhanced commuter / passenger services Increased customer / passenger volumes 33 million 31 million 28 million Number of passengers 29 million Q-merit system Increase in targeted revenue R 564 million R 578 million R 605 million Rand Value of Revenue R 673 million Statistics / Monthly Reports Financial reports 2.2. Enhanced non-passenger services Establishment of central workshop and refurbishment Feasibility study for introduction of a central workshop and refurbishment finalised New indicator Approved feasibility study Action Plan Diversify services and into freight and logistics services Feasibility study for diversified services (including freight and logistics services) finalised New indicator Approved feasibility study Action Plan 2.3. Enhanced transport services infrastructure Effective preventative maintenance 98% 98% 98% Reliability rate 99% Technical report 3. Short term viability and long term 3.1. Sustained financial management Revenue Growth 9% 1% 5% Year on year % growth in revenue 10% Report from Pastel Evolution 16

17 Reported on by which Division / Unit Reporting Cycle 1 Apr Mar 2017 Annual Actual Variance Comments Finance Quarterly 100% Resolved 79% -21% Four findings could not be resolved by year-end, but the process had already commenced. Internal Audit Annually 100% of queries resolved as per target date 79% -21% negative variance 32 out of 151 findings from 2015/16 audit reports not implemented. Marketing and Communications Quarterly Improvement in Brand Perception Survey result Survey conducted and finalised (100%) Target revised for included in the corporate plan Marketing and Communications Quarterly Improvement in GNT Customer survey results Customer satisfaction rating finalised (100%) Target revised for included in the corporate plan Transport Operations Quarterly 29 million 22.1million -6.9million negative variance High number of breakdowns and buses off the road Transport Operations Quarterly R 673 million R583 million R90 million High number of breakdowns and buses off the road Office of the CEO Quarterly Commence feasibility study Concluded and approved feasibility study Finalise action plan on findings of feasibility study Office of the CEO Quarterly Commence feasibility study Concluded and approved feasibility study Finalise action plan on findings of feasibility study Done Done This is done in conjunction with Trade Investment Promotion Division of LEDA Discussions underway with farmers in Hoedspruit Transport Operations Quarterly 99% 92.28% -6.7% High number of breakdowns and buses off the road. Transport Operations Quarterly 10% -3% 13% Aged fleet resulting in high number of breakdowns and buses off the road reducing revenue by 3%. 17

18 GNT STRATEGIC GOAL (OUTCOME) GNT STRATEGIC OBJECTIVE Expected 5 Year Result by 2019/20 Baseline 2012/ / /15 Performance Measure / Indicator 2016/17 Estimated Performance Means of Verification sustainability in revenue and resourcing requirements control and performance A sustainable business Return on assets -3% -1% -4% Percentage net profit margin -6% -2% -7% Percentage Return on Assets 0% Report from Pastel Evolution 0% Balance sheet Effective budget management 1% 14% 5% Percentage variance on expenditure budget <4% Report from Pastel Evolution 4. World class, sustainable and integrated operating systems and service quality 4.1. Enhanced business integration and organisational effectiveness Development and implementation of ICT Master plan New Indicator Integration of Pastel Evolution, VIP (ESS), Cloud Computing, and infrastructure upgrade (40%) - Implementation of 3 year ICT Master Plan as per agreed milestones (ERP) Fleet Management, Cloud Computing (100%) Milestones in the approved master plan 4.2.Enhanced environmental compliance Recapitalisation of buses to comply with Euro 4 upwards standard New Indicator Number of new buses complying with Euro 4 upwards standard 100 Certification from the service provider 5. A high performance culture in a safe and conducive environment 5.1. An optimally capacitated, capable and sustainable organisation An enhanced and capacitated organisation structure which supports the GNT strategy Rand value revenue generated per employee as a productivity proxy R45000/ employee/ month Report on revenue per Employee 5.2. Enhanced Performance and Employee Management Improved organisational performance towards a high performing organisation Establish organisation performance baseline from 2016/17 performance assessment New Indicator Organisational Performance Report Maintain employment relations as per legislation (LR) New Indicator Maintain a level of no more than 45 outstanding cases per quarter Maintain a level of no more than 45 outstanding cases per quarter Number of outstanding IR cases within the company Maintain a level of no more than 45 outstanding cases per quarter IR Reports 5.3. A safe and conducive working environment Compliance with Occupational Health and Safety and SHEQ requirements Conduct SHEQ assessment and establish baseline New Indicator Assessment Report 18

19 Reported on by which Division / Unit Reporting Cycle 1 Apr Mar 2017 Annual Actual Variance Comments Transport Operations Quarterly 0% 1% 1% Aged fleet resulting in high number of breakdowns and buses off the road, net profit margin of +1% achieved due to grant received. Finance Quarterly 0% 2% 2% Aged fleet resulting in high number of breakdowns and buses off the road, and revenue Finance Quarterly <4% 14% 10% Achieved Organisational Effectiveness Quarterly e-ticketing Enhancing and finalising system to be fully fledged ERP (100%) Not incomplete (60% of other systems completed) -40% Document Management System, Human Resources Management System (VIP) and Fleet Management System have been completed. Finance and Revenue collection systems will be completed in new financial year.. Transport Operations Quarterly The target was linked to the procurement of new buses Organisational Effectiveness Quarterly R / employee R41495 R3 505 Not achieved. Aged fleet resulting in high number of breakdowns and buses off the road, reduced revenue. Organisational Effectiveness Annually Establish organisational performance baseline from 2016/17 performance assessment Not yet completed Not yet completed Performance Agreements for all employees have been signed and annual performance assessment will be finalised in the first quarter of the new financial year Organisational Effectiveness Quarterly < A plan to train more senior managers on handling disciplinary hearings has been put in place. The recruitment process for Manager:IR will be finalised by end of July 2017 Transport Operations Quarterly Conduct SHEQ assessment and establish baseline SHEQ assessment was conducted (100%) None Achieved. 19

20 CORPORATE SOCIAL INVESTMENT PROGRAMME GNT on quality of learning environment - The culture of learning and teaching are the hallmarks of a successful society and therefore public and private sector companies ought to make contribution in communities towards sustainable teaching and learning. Over years GNT prides itself not only with leaner/ teacher transportation services daily, but also provision of enabling facilities / equipments for use by schools. Items such as photo copying machines with multiple capabilities are a standard give away to school environment on yearly basis. Equally GNT is home to graduates and post matriculates wanting to gain workplace experience in their field of studies. Annually GNT enlist learners into the internship and learner ship programme with a view to skilling them in various discipline ranging from human resource management, auditing and finance management, and driving and operations management. That way, learners are able to get employment opportunities not only within GNT at completion but also in the broad commerce and industry. Great North Transport partnered with Capricorn FM for Youth Business Seminar Dubbed the epitome of youth entrepreneurship engagement by local standards, the annual Capricorn FM Youth business seminar has arguably grown in stature and prestige over the past seven years. Hosted in Polokwane annually, the seminar attracts youth delegates in excess of 500 from across Limpopo Province. Themed Agro-Processing Youth Business Seminar, the event was characterised by high powered presentation on the enterprise support services for start-ups and existing enterprises by LEDA, Industrial Development Corporation and Livity Africa that brought about role modelling presentation to provide a practical environment of business. The keynote address delivered by MEC Seaparo Sekoati of Economic Development, Environment and Tourism focused on the Agro-processing sector as key and its contribution to the GDP of the province. Having transported these youth delegates from Vhembe, Mopani and Waterberg districts respectively, GNT played an important social investment role that contributed to the success of the event. Career exhibition, information dissemination is key to Youth development Key to the development of young people is proper guidance, information and exposure at both school level and workshops to ensure that their future decisions are based on informed perspectives. GNT is an integral part of development and catalyst in facilitating mobility scholars to various school destinations across the length and breadth of the province. The June month is on the national calendar and celebrated across the country for its significance in the new dispensation. GNT made other donations in the form of transport for learners attending exhibitions. During the year under review five high schools in Ga-Molepo were assisted to participate in the career exhibition hosted by Zoetfontein Secondary school. Over 700 learners participated in the event and benefited from the many presentations from institutions of higher learning, departments of government and Non- Governmental institutions that were invited to make presentation.

21 CORPORATE GOVERNANCE ADHERENCE TO KING III REPORT The MEC of the Department of Economic Development, Environment and Tourism, is the sole shareholder of Great North Transport (GNT) and is accountable to the Provincial Legislature for all GNT operations. THE MEC appoints non-executive Board Members who are Accounting Authority of GNT and Management executes the mandate of the institution as per the directive from the executive Authority. The Board of Directors reports to the MEC through the Head of Department of Economic Development, Environment and Tourism. The Chief Executive Officer is the Accounting Officer of the institution and ensures that all strategic objectives set out by the shareholder and the Board of Directors is implemented. GNT has always ensured that it subjects to good corporate governance guidelines as contained in the King III Report, Public Finance Management Act (PFMA) and Treasury regulations PERFORMANCE ASSESSMENT The Board of Directors signs an annual performance agreement with the MEC for the Department of Economic Development, Environment and Tourism. Their performance agreement contains clear deliverables that should be achieved by the end of the financial year. BUSINESS PLANNING GNT develops business plan which is aligned to the broader development plan by LEDA on annual basis. GNT management attends strategic workshops convened by LEDA and then develop its own strategic plan, which is then spearheaded by the Board of Directors and executive management committee members. Each business unit with GNT ensures that all staff members are brought on board relating to development of the strategy. Through interaction with passenger forums, GNT ensures that passengers make inputs about challenges that are faced by commuters on daily basis. AUDIT COMMITTEE The purpose of the audit committee is to enhance accountability of the executive management. It consists of members of the Board of Directors. In order to maintain independence the committee is required to have at least one independent member. The primary responsibility of the audit committee is to oversee the following: Internal control structure Financial reporting process Compliance with laws and regulations Independent review of management actions Assurance that accounting system are adhered to INTERNAL CONTROL Internal control is a process, affected by the GNT Board of Directors, Management and other personnel designed to provide reasonable assurance regarding achievement of objectives in the following categories: Effectiveness and effect of operating Reliability of financial reports Compliance with applicable laws and regulation The Board of Directors has overall responsibility for GNT s internal control systems and monitoring effectiveness, implementation and maintenance of the internal control systems are the responsibility of the Audit committee and executive management. INTERNAL AUDIT GNT has in-house internal audit function whose activities are to review and monitor implementation of strategy and adherence to internal control systems. The audit committee reviews the implementation thereof. Internal Audit standards require the function to monitor and evaluate the effectiveness of GNT s risk management process. Risk management relates to how GNT sets objectives, then identifies, analyse and responds to those risks that could potentially impact on its ability to realise its objectives. GNT s internal auditor s advice management regarding the reporting of forward-looking operating measures to the Board of Directors, to help identify emerging risks 21

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23 ANNUAL FINANCIAL STATEMENTS The Board of Directors are required to ensure that adequate accounting records are maintained to disclose at any time, with reasonable accuracy, the financial position of GNT. The Board of Directors is also responsible to taking steps to safeguard the assets of GNT, to prevent and detect fraud and other irregularities.

24 GENERAL INFORMATION Country of incorporation and domicile Nature of business and principal activities Directors Registered office South Africa Public transport services providing subsidized public transport and is governed by the Public Finance Management Act 1 of 1999, schedule 3D Provincial Government Business Enterprise Entity. M. Maphutha K.M. Maroga S.C. Nkadimeng N.I. Masekwameng T.A. Mokone M.B. Mphahlele S.J. Keswa M.O. Phasha 130A Marshall Street Polokwane 0699 Postal address P.O. Box 1839 Polokwane 0700 Holding company Ultimate holding company Bankers Auditor Secretary Limpopo Economic Development Agency incorporated in South Africa Limpopo Department of Economic Development, Environment and Tourism incorporated in South Africa Standard Bank of South Africa Limited Auditor General of South Africa M.C. Mokoma Company registration number 1970/009472/30 Level of assurance Preparer Issued Rounding These financial statements have been audited in compliance with the applicable requirements of the Public Audit Act of South Africa, 2004 (Act 25 of 2011). The financial statements were internally compiled by: M.N. Gololo Chief Finance Officer 31 July 2017 Rounding to the nearest Rand has been applied. 24

25 INDEX AUDIT COMMITTEE REPORT 26 DIRECTORS RESPONSIBILITIES AND APPROVAL 28 COMPANY SECRETARY S CERTIFICATION 29 DIRECTORS REPORT 30 AUDIT REPORT 32 ANNEXURE TO THE AUDIT REPORT 36 STATEMENT OF FINANCIAL POSITION 37 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 38 STATEMENT OF CHANGES IN equity 39 STATEMENT OF CASH FLOws 40 ACCOUNTING POLICIES 41 NOTES TO THE FINANCIAL STATEMENTS 51 DETAILED INCOME STATEMENT 75

26 AUDIT COMMITTEE REPORT This report is provided by the Audit Committee appointed in respect of the 2017 financial year of Great North Transport (SOC) Ltd. In meeting its responsibilities and in executing its duties, the Board Audit Committee is required to consider the adequacy and effectiveness of the Company's internal controls and the quality of its financial information. In order to discharge its responsibilities, the Committee has reviewed, on a regular basis during the year under review, the risk areas of the Company's operations to be covered in the scope of internal audits, activities of the internal audit function to determine the effectiveness thereof, internal audit reports, including the response of management issues raised therein, the external audit scope to ensure that the critical areas of the business are being addressed, the external auditors' report and management letter, the operational effectiveness of the Company's policies, systems and procedures, the effectiveness of the system for monitoring compliance with laws and regulations, and the annual financial statements. Based on the outcome of such reviews and information provided by Management, we are of the view that the internal controls of the Company have been fairly designed, however the Audit and Risk Committee is concerned about the effectiveness of oversight and implementation of the internal controls throughout the year under review. 1. Members of the Audit Committee The members of the audit committee are all independent non-executive directors of the company and include: Name Qualification S. Nokaneng - resigned 31/01/2017 P.h.D, MCom, BCom Hons & BCom Ed S.C. Nkadimeng Masters PA, B lur & EDP (NQF7) N.I. Masekwameng BA UED & B ED T.A. Mokone - Appointed 01/03/2017 BA Edu, Project Magt, & Construction contract The Committee is satisfied that the members thereof have the required knowledge and experience as set out in Section 94(5) of the Companies Act 71 of 2008 and Regulation 42 of the Companies Regulation, Meetings held by the Audit Committee The Audit Committee performs the duties laid upon it by Section 94(7) of the Companies Act 71 of 2008 by holding meetings with the key role players on a regular basis and by the unrestricted access granted to the external auditor. During the year under review, Audit Committee meetings were held on 18 May 2016, 27 June 2016(special), 26 August 2016, 28 September 2016(special), 02 November 2016, 14 March 2017 and 22 March External auditor The Committee satisfied itself through enquiry that the external auditor is independent as defined by the auditing standards and as per the standards stipulated by the auditing profession. Requisite assurance was sought and provided by the Companies Act 71 of 2008 that internal governance processes within the firm support and demonstrate the claim to independence. The Audit Committee in consultation with executive management, agreed to the terms of the engagement. The audit fee for the external audit has been considered and approved taking into consideration such factors as the timing of the audit, the extent of the work required and the scope. 4. Financial statements Following the review of the financial statements the Audit Committee recommend Board approval thereof. The Audit Committee would like to thank management for their hard work put into completing the financial statements. 26

27 AUDIT COMMITTEE REPORT 27

28 DIRECTORS RESPONSIBILITIES AND APPROVAL 31 July

29 COMPANY SECRETARY S CERTIFICATION 29

30 DIRECTORS REPORT The directors have pleasure in submitting their report on the financial statements of for the year ended 31 March Incorporation The company was incorporated on 21 July 1970 and obtained its certificate to commence business on the same day. 2. Nature of business was incorporated in South Africa with interests in the passenger transport industry which operates 503 buses mainly in the Limpopo Province and parts of the Mpumalanga Province. There have been no material changes to the nature of the company's business from the prior year. 3. Review of financial results and activities The financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice as per the directive of the South African Accounting Standards Board s pending finalisation of the accounting framework for South African State-owned entities. The accounting policies have been applied consistently compared to the prior year. The company recorded a net profit after tax for the year ended 31 March 2017 of R This represented a decrease in the net loss of 115.5% from the net loss after tax of the prior year of R( ). Company revenue decreased by 2,84% from R in the prior year to R for the year ended 31 March Company cash flows from operating activities decreased by 40,90% from R in the prior year to R for the year ended 31 March Share capital There have been no changes to the authorised or issued share capital during the year under review. 5. Directorate The directors in office at the date of this report are as follows: Directors Office Changes M. Maphutha Chairperson K.M. Maroga Deputy Chairperson S.C. Nkadimeng Director N.I. Masekwameng Director S. Nokaneng Director Resigned 31 January 2017 T.A. Mokone Director M.B. Mphahlele Director N.P. Hlungwane Chief Operating Officer Resigned 31 July 2016 S.J. Keswa Chief Executive Officer Appointed 01 August 2016 M.O. Phasha Director Appointed 31 May Holding company The company's holding company is Limpopo Economic Development Agency which holds 100% (2016: 100%) of the company's equity. Limpopo Economic Development Agency is incorporated in South Africa. 7. Ultimate holding company The company's ultimate holding company is Limpopo Department of Economic Development, Environment and Tourism which is incorporated in South Africa. 30

31 DIRECTORS REPORT 31 July

32 AUDIT REPORT of the Auditor General to the Limpopo Provincial Legislature on Great North Transport (SOC) LTD Opinion 1. I have audited the financial statements of the set out on pages 7 to 53, which comprise statement of financial position as at 31 March 2017, and the statement of profit or loss and other comprehensive income, statement of changes in equity, and statement of cash flows for the year then ended, as well as the notes to the financial statements, including a summary of significant accounting policies. 2. In my opinion, the financial statements present fairly, in all material respects, the financial position of the Great North Transport (SOC) Ltd as at 31 March 2017, and its financial performance and cash flows for the year then ended in accordance with South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) and the requirements of the Public Finance Management Act of South Africa, 1999 (Act No. 1 of 1999) (PFMA) and the Companies Act of South Africa, 2008 (Act No. 71 of 2008) (CompaniesAct). Basis for opinion 3. I conducted my audit in accordance with the International Standards on Auditing (ISAs). My responsibilities under those standards are further described in the auditor-general s responsibilities for the audit of the financial statements section of my report. 4. I am independent of the entity in accordance with the International Ethics Standards Board for Accountants Code of ethics for professional accountants (IESBA code) together with the ethical requirements that are relevant to my audit in South Africa. I have fulfilled my other ethical responsibilities in accordance with these requirements and the IESBA code. 5. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion. Emphasis of matters 6. I draw attention to the matters below. My opinion is not modified in respect of these matters. Significant uncertainty 7. With reference to note 23 to the financial statements, the entity is the defendant in a multiple lawsuits. The ultimate outcome of the matters cannot presently be determined and no provision for any liability that may result has been made in the financial statements. Irregular expenditure 8. As disclosed in note 31 to the financial statements, irregular expenditure to the amount of R was incurred, as a proper tender process had not been followed. Restatement of corresponding figures 9. As disclosed in the note 25 to the financial statements, the corresponding figures for 31 March 2016 have been restated as a result of errors discovered in the financial statements of the entity at, and for the year ended, 31 March Other matters 10. I draw attention to the matters below. My opinion is not modified in respect of these matters. Unaudited supplementary schedule 9 32

33 AUDIT REPORT of the Auditor General to the Limpopo Provincial Legislature on Great North Transport (SOC) LTD 11. The supplementary information set out on pages 54 to 55 does not form part of the financial statements and is presented as additional information. I have not audited these schedules and, accordingly, I do not express an opinion thereon. Responsibilities of accounting authority for financial statements 12. The board of directors, which constitutes the accounting authority is responsible for the preparation and fair presentation of the financial statements in accordance with SA Statements of GAAP and the requirements of the PFMA and the Companies Act and for such internal control as the accounting authority determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 13. In preparing the financial statements, the accounting authority is responsible for assessing the entity s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless there is an intention either to liquidate the entity or to cease operations, or there is no realistic alternative but to do so. Auditor-general s responsibilities for the audit of the financial statements 14. My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 15. A further description of my responsibilities for the audit of the financial statements is included in the annexure to the auditor s report. Report on the audit of the annual performance report Introduction and scope 16. In accordance with the Public Audit Act of South Africa, 2004 (Act No. 25 of 2004) (PAA) and the general notice issued in terms thereof I have a responsibility to report material findings on the reported performance information against predetermined objectives for selected objectives presented in the annual performance report. I performed procedures to identify findings but not to gather evidence to express assurance. 17. My procedures address the reported performance information, which must be based on the approved performance planning documents of the entity. I have not evaluated the completeness and appropriateness of the performance indicators included in the planning documents. My procedures also did not extend to any disclosures or assertions relating to planned performance strategies and information in respect of future periods that may be included as part of the reported performance information. Accordingly, my findings do not extend to these matters. 18. I evaluated the usefulness and reliability of the reported performance information in accordance with the criteria developed from the performance management and reporting framework, as defined in the general notice, for the following selected objectives presented in the annual performance report of the entity for the year ended 31 March 2017: Objectives Pages in the annual performancereport Objective 2 Transport services that support economic growth development in the region and 14 Objective 3 Short term viability and long term sustainability in revenue and resourcing requirements Objective 4 World class, sustainable and integrated operating systems and service quality

34 AUDIT REPORT of the Auditor General to the Limpopo Provincial Legislature on Great North Transport (SOC) LTD 19. I performed procedures to determine whether the reported performance information was properly presented and whether performance was consistent with the approved performance planning documents. I performed further procedures to determine whether the indicators and related targets were measurable and relevant, and assessed the reliability of the reported performance information to determine whether it was valid, accurate and complete. 20. I did not identify any material findings on the usefulness and reliability of the reported performance information for the following objectives: Programme 2: Transport services that support economic growth and development in the region. Programme 3: Short term viability and long term sustainability in revenue and resourcing requirements Programme 4: World class, sustainable and integrated operating systems and service quality Other matters 21. I draw attention to the matter below. Achievement of planned targets 22. Refer to the annual performance report on pages 14 to 15 for information on the achievement of planned targets for the year and explanations provided for the underachievement of a significant number of targets. Adjustment of material misstatements 23. I identified material misstatements in the annual performance report submitted for auditing. These material misstatements were on the reported performance information of Transport services that support economic growth and development in the region and World class, sustainable and integrated operating systems and service quality. As management subsequently corrected the misstatements, I did not report any material findings on the usefulness and reliability of the reported performance information. Report on audit of compliance with legislation Introduction and scope 24. In accordance with the PAA and the general notice issued in terms thereof I have a responsibility to report material findings on the compliance of the entity with specific matters in key legislation. I performed procedures to identify findings but not to gather evidence to express assurance. 25. The material findings in respect of the compliance criteria for the applicable subject matters are as follows: Annual financial statements, performance report and annual report 26. The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework and supported by full and proper records as required by section 55(1)(a) and (b) of the PFMA. Expenditure management 27. Effective steps were not taken to prevent irregular expenditure amounting to R as disclosed in note 31 to the annual financial statements, as required by section 51(1)(b)(ii) of the PFMA. Consequence management 28. Disciplinary steps were not taken against officials who had incurred and permitted irregular expenditure, and fruitless and wasteful expenditure, as required by section 51(1)(e)(iii) of the PFMA. Other information 29. The entity is responsible for the other information. The other information comprises the information included in the 34 11

35 AUDIT REPORT of the Auditor General to the Limpopo Provincial Legislature on Great North Transport (SOC) LTD annual report which includes the director s report, the audit committee s report and the company secretary s certificate as required by the Companies Act. The other information does not include the financial statements, the auditor s report thereon and those selected objectives presented in the annual performance report that have been specifically reported on in the auditor s report. 30. My opinion on the financial statements and findings on the reported performance information and compliance with legislation do not cover the other information and I do not express an audit opinion or any form of assurance conclusion thereon. 31. In connection with my audit, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements and the selected objectives presented in the annual performance report, or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information obtained prior to the date of this auditor s report, I conclude that there is a material misstatement of this other information, I am required to report that fact. Internal control deficiencies 32. I considered internal control relevant to my audit of the financial statements, reported performance information and compliance with applicable legislation; however, my objective was not to express any form of assurance thereon. The matters reported below are limited to the significant internal control deficiencies that resulted in the findings on the findings on compliance with legislation included in this report: Leadership 33. Management established a formal code of conduct that addressed appropriate ethical and moral behaviour, but the code was not communicated to all staff and staffs were not trained to properly understand and implement the code. Financial and performance management 34. Non-compliance with legislation could have been prevented had compliance been properly reviewed and monitored. Other reports 35. I draw attention to the following engagements conducted by various parties that had, or could have, an impact on the matters reported in the entity s financial statements, reported performance information, compliance with applicable legislation and other related matters. These reports did not form part of my opinion on the financial statements or my findings on the reported performance information or compliance with legislation. 36. There are three allegations of fraud, misconduct and other improper conduct reported through the auditee's internal mechanisms of which are currently under investigation. Polokwane 31 July

36 annexure - auditor-general s RESPONSIBILITY FOR THE AUDIT 1. As part of an audit in accordance with the ISAs, I exercise professional judgement and maintain professional scepticism throughout my audit of the financial statements, and the procedures performed on reported performance information for selected objectives and on the entity s compliance with respect to the selected subject matters. Financial statements 2. In addition to my responsibility for the audit of the financial statements as described in the auditor s report, I also: identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. obtain an understanding of internal control relevant to the audit 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. evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the board of directors, which constitutes the accounting authority. conclude on the appropriateness of the board of directors, which constitutes the accounting authority, s use of the going concern basis of accounting in the preparation of the financial statements. I also conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Great North Transport SOC (Ltd) ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor s report to the related disclosures in the financial statements about the material uncertainty or, if such disclosures are inadequate, to modify the opinion on the financial statements. My conclusions are based on the information available to me at the date of the auditor s report. However, future events or conditions may cause a entity to cease to continue as a going concern. evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the financial statements. I am responsible for the direction, supervision and performance of the group audit. I remain solely responsible for my audit opinion. Communication with those charged with governance 3. I communicate with the accounting authority regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that I identify during my audit. 4. I also confirm to the accounting authority that I have complied with relevant ethical requirements regarding independence, and communicate all relationships and other matters that may reasonably be thought to have a bearing on my independence and here applicable, related safeguards. 36

37 STATEMENT OF FINANCIAL POSITION Figures in Rand Notes Restated * Assets Non-Current Assets Property, plant and equipment Intangible assets Current Assets Inventories Trade and other receivables Short-term portion of prepaid expenses Cash and cash equivalents Total Assets Equity and Liabilities Equity Share capital Retained income Liabilities Non-Current Liabilities Finance lease liabilities Retirement benefit obligation Provisions Current Liabilities Trade and other payables Loan from shareholder Finance lease liabilities Retirement benefit obligation Provisions Total Liabilities Total Equity and Liabilities * See Note 25 37

38 STATEMENT OF PROFIT OR LOSS AND other COMPREHENSIVE INCOME Figures in Rand Notes Restated * Revenue Other operating income Grant received - LEDET Other operating gains (losses) Other operating expenses ( ) ( ) Operating profit (loss) ( ) Investment income Finance costs 20 ( ) ( ) Profit (loss) for the year ( ) Other comprehensive income - - Total comprehensive income (loss) for the year ( ) Profit (loss) attributable to: Owners of the parent ( ) * See Note 25 38

39 statement OF CHANGES IN equity Figures in Rand Note Share capital (Accumulated Loss) / Retained income Total equity Balance at 01 April Loss for the year - ( ) ( ) Other comprehensive income Total comprehensive Loss for the year - ( ) ( ) Opening balance as previously reported Adjustments Prior period adjustments Balance at 01 April 2016 as restated Profit for the year Other comprehensive income Total comprehensive income for the year Balance at 31 March Note 11 * See Note 25 39

40 statement OF CASH FLOws Figures in Rand Notes Restated * Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees ( ) ( ) Cash generated from operations Interest income Finance costs ( ) ( ) Net cash from operating activities Cash flows from investing activities Purchase of property, plant and equipment 3 ( ) ( ) Disposal of plant and equipment Disposal of other intangible assets Net cash from investing activities ( ) Cash flows from financing activities Loan from shareholder Finance lease payments ( ) ( ) Net cash from financing activities ( ) ( ) Total cash movement for the year ( ) ( ) Cash at the beginning of the year Total cash at end of the year * See Note 25 40

41 accounting POLICIES Corporate information is a State-owned company incorporated and domiciled in South Africa. The financial statements of the company are for the year ended 31 March The company is primarily involved in providing essential public transport to the residents of Limpopo Province, entitled to make a profit, as listed in Schedule 3D of the Public Finance Management Act No.1 of 1999 (as amended by Act No.29 of 1999). Great North Transport is a wholly owned subsidiary of the Limpopo Economic Development Agency (LEDA). In accordance with the PFMA the holding company (LEDA) and its subsidiaries has been erroneously classified as a Schedule 3C entity as opposed to a Schedule 3D classification under Limpopo Development Corporation. This meant the financial statement should be prepared on the Standards of Generally Recognised Accounting Practice which is not correct. LEDA has been classified consistently as Schedule 3D in the PFMA and due to the error in the listing when changing its name from Limpopo Economic Development Enterprise to Limpopo Economic Development Agency the latter was incorrectly classified as Schedule 3C. A process is underway to correct the classification in the PFMA as LEDA and its subsidiaries should be classified as a Schedule 3D. 1. Significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. 1.1 Basis of preparation The financial statements have been prepared on the going concern basis in accordance with, and in compliance with, South African Statements of Generally Accepted Accounting Practice as per the directive of the South African Accounting Standards Board s pending finalisation of the accounting framework for South African State-owned entities issued and effective at the time of preparing these financial statements and the Companies Act 71 of 2008 of South Africa, as amended. Where appropriate and meaningful, additional information has been disclosed to enhance the usefulness of the financial statements and to comply with the statutory requirements of the Public Finance Management Act (PFMA), Act 1 of 1999 (as amended by Act 29 of 1999), and the Treasury Regulations issued in terms of the PFMA and the annual Division of Revenue Act. These accounting policies are consistent with the previous period. 1.2 Significant judgements and sources of estimation uncertainty The preparation of financial statements requires management, from time to time, to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. These estimates and associated assumptions are based on experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Critical judgements in applying accounting policies The critical judgements made by management in applying accounting policies, apart from those involving estimations, that have the most significant effect on the amounts recognised in the financial statements, are outlined as follows: Trade receivables The company assesses its trade receivables for impairment at each reporting date. In determining whether an impairment loss should be recorded in the profit and loss, the company makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The impairment for trade receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. 41

42 accounting POLICIES 1.2 Significant judgements and sources of estimation uncertainty (continued) Provisions Provisions were raised and management determined an estimate based on the information available. Additional disclosure of these estimates of provisions are included in Note 13 - Long service awards. Contingent liabilities Management applies its judgement to the fact patterns and advice it receives from its attorneys, advocates and other advisors in assessing if an obligation is probable, more likely than not, or remote. This judgement application is used to determine if the obligation is recognised as a liability or disclosed as a contingent liability. Useful life and residual values of property, plant and equipment and intangible assets. Depreciation on property, plant and equipment and intangible assets is provided over the useful life of the asset, after taking into account its residual value. The determination of the useful life and residual value of an asset is based on management's judgement and current market trends. The useful life and residual value of an asset is re-assessed on an annual basis. Retirement medical benefit obligations In applying its judgement to defined benefit plans, management consulted with external expert advisors in the post-employment benefit obligation industry. The critical estimates as used in each benefit plan are detailed in Note Property, plant and equipment Property, plant and equipment are tangible assets which the company holds for its own use or for rental to others and which are expected to be used for more than one year. An item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the company, and the cost of the item can be measured reliably. Property, plant and equipment is initially measured at cost. Cost includes all of the expenditure which is directly attributable to the acquisition or construction of the asset, including the capitalisation of borrowing costs on qualifying assets and adjustments in respect of hedge accounting, where appropriate. Property, plant and equipment is subsequently stated at cost less accumulated depreciation and any accumulated impairment losses, except for land which is stated at cost less any accumulated impairment losses. Depreciation of an asset commences when the asset is available for use as intended by management. Depreciation is charged to write off the asset's carrying amount over its estimated useful life to its estimated residual value, using a method that best reflects the pattern in which the asset's economic benefits are consumed by the company. Leased assets are depreciated in a consistent manner over the shorter of their expected useful lives and the lease term. Depreciation is not charged to an asset if its estimated residual value exceeds or is equal to its carrying amount. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or derecognised. 42

43 accounting POLICIES 1.3 Property, plant and equipment (continued) The useful lives of items of property, plant and equipment have been assessed as follows: Item Depreciation method Average useful life Land owned Straight line Indefinite useful life Permanent buildings Straight line 50 years Property on leasehold land and structures Straight line 10 years Operating equipment Straight line 4 years Workshop equipment Straight line 6.6 years Office furniture Straight line 10 years Office and computer equipment Straight line 4-5 years Buses Straight line 10 years Ancillary vehicles Straight line km The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting year. If the expectations differ from previous estimates, the change is accounted for prospectively 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 year is recognised in profit or loss unless it is included in the carrying amount of another asset. Impairment tests are performed on property, plant and equipment when there is an indicator that they may be impaired. When the carrying amount of an item of property, plant and equipment is assessed to be higher than the estimated recoverable amount, an impairment loss is recognised immediately in profit or loss to bring the carrying amount in line with the recoverable amount. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its continued use or disposal. Any gain or loss arising from the derecognition of an item of property, plant and equipment, determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, is included in profit or loss when the item is derecognised. Ancillary vehicles are depreciated per kilometre travelled over the life expectancy of the vehicle with a residual value of 30% of the original cost price. Buses are depreciated between 10% - 20%, depending on the initial lease type, with a residual value of 30% of the original cost price. 1.4 Intangible assets An intangible asset is recognised when: it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and the cost of the asset can be measured reliably. Intangible assets are initially recognised at cost. Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight line basis over their useful life. The amortisation period and the amortisation method for intangible assets are reviewed every period-end. Reassessing the useful life of an intangible asset with a finite useful life after it was classified as indefinite is an indicator that the asset may be impaired. As a result the asset is tested for impairment and the remaining carrying amount is amortised over its useful life. 43

44 accounting POLICIES 1.4 Intangible assets (continued) Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows: Item Bus routes Computer software Useful life Indefinite useful life 4-5 years 1.5 Financial instruments Classification The company classifies financial assets and financial liabilities into the following categories: Loans and receivables Financial liabilities measured at amortised cost Classification depends on the purpose for which the financial instruments were obtained / incurred and takes place at initial recognition. Classification is re-assessed on an annual basis, except for derivatives and financial assets designated as at fair value through profit or loss, which shall not be classified out of the fair value through profit or loss category. Initial recognition and measurement Financial instruments are recognised initially when the company becomes a party to the contractual provisions of the instruments. The company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are measured initially at fair value, except for equity investments for which a fair value is not determinable, which are measured at cost and are classified as available-for-sale financial assets. For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument. Subsequent measurement Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Financial liabilities at amortised cost are subsequently measured at amortised cost, using the effective interest method. Derecognition Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the company has transferred substantially all risks and rewards of ownership. Fair value determination The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the company establishes fair value by using valuation techniques. These include the use of recent arm s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs. Loans to shareholders, directors, managers and employees These financial assets are classified as loans and receivables. 44

45 accounting POLICIES 1.5 Financial instruments (continued) Trade and other receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss 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 asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss. Trade and other receivables are classified as loans and receivables. Trade and other payables Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. Bank overdraft and borrowings Bank overdrafts and borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the company s accounting policy for borrowing costs. 1.6 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. The 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 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. This liability is not discounted. Any contingent rents are expensed in the period they are incurred. 45

46 accounting POLICIES Accounting Policies 1.7 Inventories Inventories are measured at the lower of cost and net realisable value. Inventories (tyres) are measured at the lower of cost and net realisable value on the first-in-first-out basis. The cost of other inventories (diesel and stationary) is assigned using the weighted average cost formula. The same cost formula is used for all inventories having a similar nature and use to the entity. When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, are recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. 1.8 Impairment of assets The company assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the company estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the company also: tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period. tests goodwill acquired in a business combination for impairment annually. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease. 1.9 Share capital and equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Ordinary shares are classified as equity. Share capital is a contribution by the executive authority of capital. This is authorised for issue in the Government Gazette Employee benefits Short-term employee benefits The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted. 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 expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance. 46

47 accounting POLICIES 1.10 Employee benefits (continued) Defined contribution plans Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to industry-managed (or state plans) retirement benefit schemes are dealt with as defined contribution plans where the company s obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan. Defined benefit plans: Retirement medical care benefits For defined benefit plans the cost of providing the benefits is determined using the projected unit credit method. Actuarial valuations are conducted on an annual basis by independent actuaries separately for each plan. Consideration is given to any event that could impact the funds up to the end of the reporting period where the interim valuation is performed at an earlier date. Past service costs are recognised immediately to the extent that the benefits are already vested, and are otherwise amortised on a straight line basis over the average period until the amended benefits become vested. To the extent that, at the beginning of the financial year, any cumulative unrecognised actuarial gain or loss exceeds ten percent of the greater of the present value of the projected benefit obligation and the fair value of the plan assets (the corridor), that portion is recognised in profit or loss over the expected average remaining service lives of participating employees. Actuarial gains or losses within the corridor are not recognised. Actuarial gains and losses and finance costs are recognised in the year in which they arise, in other comprehensive income. Gains or losses on the curtailment or settlement of a defined benefit plan is recognised when the company is demonstrably committed to curtailment or settlement. When it is virtually certain that another party will reimburse some or all of the expenditure required to settle a defined benefit obligation, the right to reimbursement is recognised as a separate asset. The asset is measured at fair value. In all other respects, the asset is treated in the same way as plan assets. In profit or loss, the expense relating to a defined benefit plan is presented as the net of the amount recognised for a reimbursement. The amount recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduces by the fair value of plan assets. Any asset is limited to unrecognised actuarial losses and past service costs, plus the present value of available refunds and reduction in future contributions to the plan Provisions and contingencies Provisions are recognised when: the company has a present obligation as a result of a past event; it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and a reliable estimate can be made of the obligation. The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision. Provisions are not recognised for future operating losses. If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision. 47

48 accounting POLICIES 1.11 Provisions and contingencies (continued) Contingent assets and contingent liabilities are not recognised. Contingencies are disclosed in note Government grants (Department of Roads and Transport subsidies) Government grants are recognised when there is reasonable assurance that: the company will comply with the conditions attaching to them; and the grants will be received. Government grants are recognised as income over the periods necessary to match them with the related costs that they are intended to compensate. A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs is recognised as income of the period in which it becomes receivable. Grants related to income are presented as a credit in the profit or loss Revenue Revenue from the sale of goods is recognised when all the following conditions have been satisfied: the company has transferred to the buyer the significant risks and rewards of ownership of the goods; the company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the company; and the costs incurred or to be incurred in respect of the transaction can be measured reliably. When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the end of the reporting period. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the company; the stage of completion of the transaction at the end of the reporting period can be measured reliably; and the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable. Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value added tax. Interest (investment revenue) is recognised, in profit or loss, using the effective interest rate method Borrowing costs All other borrowing costs (including finance costs) are recognised as an expense in the period in which they are incurred Events after the reporting period Events after the reporting date are those events, both favourable and unfavourable, that occur between the reporting date and the date when the financial statements are authorised for issue. Two types of events can be identified: Those that provide evidence that existed at the reporting date (adjusting events after the reporting date); and Those that are indicative of conditions that arose after the reporting date (non-adjusting events after the reporting date). 48

49 accounting POLICIES 1.16 Related parties operates in an economic environment currently dominated by entities directly or indirectly owned by the South African Government. As a result of the constitutional independence of all three spheres of government in South Africa, only parties within the provincial sphere of Government will be considered to be related parties. Transactions between related parties are recognised at arms-length. Key management is defined as being individuals with the authority and responsibility for planning, directing and controlling the activities of the entity. We regard all individuals from the level of Executives up to the Board of Directors as key management per the definition of the standard. Close family members of key management personnel are considered to be those family members who may be expected to influence, or be influenced by key management individuals in their dealings with the entity. Other related party transactions are also disclosed in terms of the requirements of the standard. The objective of the standard and the financial statements is to provide relevant and reliable information and therefore materiality is considered in the disclosure of these transactions Irregular and 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 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 period and which was condoned before the end of the year financial period 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 period and for which condonement is being awaited at period-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 period, the register and the disclosure note to the financial statements must be updated with the amount condoned. Irregular expenditure that was incurred and identified during the current financial year and which was not condoned by the National Treasury or the relevant authority must be recorded appropriately in the irregular expenditure register. If liability for the irregular expenditure can be attributed to a person, a debt account must be created if such a person is liable in law. Immediate steps must thereafter be taken to recover the amount from the person concerned. If recovery is not possible, the accounting officer or accounting authority may write off the amount as debt impairment and disclose such in the relevant note to the 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. 49

50 accounting POLICIES 1.18 Commitments Items are classified as commitments when an entity has committed itself to future transactions that will normally result in the outflow of cash. Disclosures are required in respect of unrecognised contractual commitments. Commitments for which disclosure is necessary to achieve a fair presentation should be disclosed in a note to the financial statements, if both the following criteria are met: Contracts should be non-cancellable or only cancellable at significant cost (for example, contracts for computer or building maintenance services); and Contracts should relate to something other than the routine, steady, state business of the entity therefore salary commitments relating to employment contracts or social security benefit commitments are excluded. 50

51 notes TO THE FINANCIAL STATEMENTS 2. New Standards and Interpretations 2.1 Standards and interpretations not yet effective The company has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the company s accounting periods beginning on or after 01 April 2017 or later periods: IFRS 16 Leases IFRS 16 Leases is a new standard which replaces IAS 17 Leases, and introduces a single lessee accounting model. The main changes arising from the issue of IFRS 16 which are likely to impact the company are as follows: Company as lessee: Lessees are required to recognise a right-of-use asset and a lease liability for all leases, except short term leases or leases where the underlying asset has a low value, which are expensed on a straight line or other systematic basis. The cost of the right-of-use asset includes, where appropriate, the initial amount of the lease liability; lease payments made prior to commencement of the lease less incentives received; initial direct costs of the lessee; and an estimate for any provision for dismantling, restoration and removal related to the underlying asset. The lease liability takes into consideration, where appropriate, fixed and variable lease payments; residual value guarantees to be made by the lessee; exercise price of purchase options; and payments of penalties for terminating the lease. The right-of-use asset is subsequently measured on the cost model at cost less accumulated depreciation and impairment and adjusted for any re-measurement of the lease liability. However, right-of-use assets are measured at fair value when they meet the definition of investment property and all other investment property is accounted for on the fair value model. If a right-of-use asset relates to a class of property, plant and equipment which is measured on the revaluation model, then that right-of-use asset may be measured on the revaluation model. The lease liability is subsequently increased by interest, reduced by lease payments and re-measured for reassessments or modifications. Re-measurements of lease liabilities are affected against right-of-use assets, unless the assets have been reduced to nil, in which case further adjustments are recognised in profit or loss. The lease liability is re-measured by discounting revised payments at a revised rate when there is a change in the lease term or a change in the assessment of an option to purchase the underlying asset. The lease liability is re-measured by discounting revised lease payments at the original discount rate when there is a change in the amounts expected to be paid in a residual value guarantee or when there is a change in future payments because of a change in index or rate used to determine those payments. Certain lease modifications are accounted for as separate leases. When lease modifications which decrease the scope of the lease are not required to be accounted for as separate leases, then the lessee re-measures the lease liability by decreasing the carrying amount of the right of lease asset to reflect the full or partial termination of the lease. Any gain or loss relating to the full or partial termination of the lease is recognised in profit or loss. For all other lease modifications which are not required to be accounted for as separate leases, the lessee re-measures the lease liability by making a corresponding adjustment to the right-of-use asset. * See Note 25 51

52 notes TO THE FINANCIAL STATEMENTS 2. New Standards and Interpretations (continued) Right-of-use assets and lease liabilities should be presented separately from other assets and liabilities. If not, then the line item in which they are included must be disclosed. This does not apply to right-of-use assets meeting the definition of investment property which must be presented within investment property. IFRS 16 contains different disclosure requirements compared to IAS 17 leases. Company as lessor: Accounting for leases by lessors remains similar to the provisions of IAS 17 in that leases are classified as either finance leases or operating leases. Lease classification is reassessed only if there has been a modification. A modification is required to be accounted for as a separate lease if it both increases the scope of the lease by adding the right to use one or more underlying assets; and the increase in consideration is commensurate to the stand alone price of the increase in scope. If a finance lease is modified, and the modification would not qualify as a separate lease, but the lease would have been an operating lease if the modification was in effect from inception, then the modification is accounted for as a separate lease. In addition, the carrying amount of the underlying asset shall be measured as the net investment in the lease immediately before the effective date of the modification. IFRS 9 is applied to all other modifications not required to be treated as a separate lease. Modifications to operating leases are required to be accounted for as new leases from the effective date of the modification. Changes have also been made to the disclosure requirements of leases in the lessor's financial statements. Sale and leaseback transactions: In the event of a sale and leaseback transaction, the requirements of IFRS 15 are applied to consider whether a performance obligation is satisfied to determine whether the transfer of the asset is accounted for as the sale of an asset. If the transfer meets the requirements to be recognised as a sale, the seller-lessee must measure the new right-ofuse asset at the proportion of the previous carrying amount of the asset that relates to the right-of-use retained. The buyer-lessor accounts for the purchase by applying applicable standards and for the lease by applying IFRS 16 If the fair value of consideration for the sale is not equal to the fair value of the asset, then IFRS 16 requires adjustments to be made to the sale proceeds. When the transfer of the asset is not a sale, then the seller-lessee continues to recognise the transferred asset and recognises a financial liability equal to the transfer proceeds. The buyer-lessor recognises a financial asset equal to the transfer proceeds. The effective date of the standard is for years beginning on or after 01 January The company does not envisage the adoption of the standard until such time as it becomes applicable to the company's operations. The impact of this standard is currently being assessed. Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts The amendment to IFRS 4 provides a temporary exemption, allowing insurers to apply IAS 39 rather than IFRS 9. The exemption only applies in certain circumstances and only for annual periods beginning before 1 January The exemption also introduces an "overlay approach" in specific circumstances. This approach requires the insurer to reclassify an amount between other comprehensive income and profit or loss. This results in the profit or loss for designated financial assets being the same as if the insurer had applied IAS 39 rather than IFRS 9. The effective date of the amendment is for years beginning on or after 01 January The company does not envisage the adoption of the amendment until such time as it becomes applicable to the company's operations. The impact of this amendment is currently being assessed. Amendments to IFRS 15: Clarifications to IFRS 15 Revenue from Contracts with Customers * See Note 25 52

53 notes TO THE FINANCIAL STATEMENTS 2. New Standards and Interpretations (continued) The amendment provides clarification and further guidance regarding certain issues in IFRS 15. These items include guidance in assessing whether promises to transfer goods or services are separately identifiable; guidance regarding agent versus principal considerations; and guidance regarding licenses and royalties. The effective date of the amendment is for years beginning on or after 01 January The company does not envisage the adoption of the amendment until such time as it becomes applicable to the company's operations. The impact of this amendment is currently being assessed. IFRS 9 (AC 146) Financial Instruments IFRS 9 issued in November 2009 introduced new requirements for the classification and measurements of financial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a)impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a "fair value through other comprehensive income" (FVTOCI) measurement category for certain simple debt instruments. Key requirements of IFRS 9: All recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the outstanding principal are generally measured at amortised cost at the end of subsequent reporting periods. Debt instruments that are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on outstanding principal, are measured at FVTOCI. All other debt and equity investments are measured at fair value at the end of subsequent reporting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income with only dividend income generally recognised in profit or loss. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of the liability is presented in other comprehensive income, unless the recognition of the effect of the changes of the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Under IAS 39, the entire amount of the change in fair value of a financial liability designated as at fair value through profit or loss is presented in profit or loss. In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. It is therefore no longer necessary for a credit event to have occurred before credit losses are recognised. The new general hedge accounting requirements retain the three types of hedge accounting mechanisms currently available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been replaced with the principal of an "economic relationship". Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity's risk management activities have also been introduced. The effective date of the standard is for years beginning on or after 01 January The company does not envisage the adoption of the standard until such time as it becomes applicable to the company's operations. * See Note 25 53

54 notes TO THE FINANCIAL STATEMENTS 2. New Standards and Interpretations (continued) The impact of this standard is currently being assessed. IFRS 15 Revenue from Contracts with Customers IFRS 15 supersedes IAS 11 Construction contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programmes; IFRIC 15 Agreements for the construction of Real Estate; IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue - Barter Transactions Involving Advertising Services. The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: Identify the contract(s) with a customer Identify the performance obligations in the contract Determine the transaction price Allocate the transaction price to the performance obligations in the contract Recognise revenue when (or as) the entity satisfies a performance obligation. IFRS 15 also includes extensive new disclosure requirements. The effective date of the standard is for years beginning on or after 01 January The company does not envisage the adoption of the standard until such time as it becomes applicable to the company's operations. The impact of this standard is currently being assessed. Amendments to IAS 7: Disclosure initiative The amendment requires entities to provide additional disclosures for changes in liabilities arising from financing activities. Specifically, entities are now required to provide disclosure of the following changes in liabilities arising from financing activities: changes from financing cash flows; changes arising from obtaining or losing control of subsidiaries or other businesses; the effect of changes in foreign exchanges; changes in fair values; and other changes. The effective date of the amendment is for years beginning on or after 01 January The company does not envisage the adoption of the amendment until such time as it becomes applicable to the company's operations. The impact of this amendment is currently being assessed. * See Note 25 54

55 notes TO THE FINANCIAL STATEMENTS 2. New Standards and Interpretations (continued) IFRS 1 First time adoption of International Financial Reporting Standards The standard on First Time Adoption of International Financial Reporting Standards (IFRS 1) has not been adopted by the company as per the notice to all State Owned Enterprises previously on SA GAAP due to review by the South African Accounting Standards Board. The effective date of the amendment is for years beginning on or after 01 April The impact of this amendment is currently being assessed. * See Note 25 55

56 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 3. Property, plant and equipment Cost Accumulated depreciation Carrying value Cost Accumulated depreciation Carrying value Land 3,255,786-3,255,786 3,255,786-3,255,786 Buildings 11,720,047 (5,854,239) 5,865,808 11,570,419 (5,598,950) 5,971,469 Workshop equipment 924,885 (711,862) 213, ,662 (735,120) 195,542 Furniture and fixtures 2,407,701 (1,821,736) 585,965 2,520,965 (1,696,531) 824,434 Buses and vehicles 394,268,858 (139,742,593) 254,526, ,736,636 (123,712,065) 272,024,571 Office equipment 3,338,258 (2,920,691) 417,567 3,763,694 (3,256,946) 506,748 IT equipment 436,478 (387,898) 48,580 1,525,479 (1,435,114) 90,365 Operating equipment 6,809,527 (6,412,292) 397,235 9,859,541 (9,351,553) 507,988 Total 423,161,540 (157,851,311) 265,310, ,163,182 (145,786,279) 283,376,903 Reconciliation of property, plant and equipment Opening Additions Disposals and Depreciation Total balance write-offs Land 3,255, ,255,786 Buildings 5,971, ,600 (5,343) (259,918) 5,865,808 Workshop equipment 195,542 69,746 (6,107) (46,158) 213,023 Furniture and fixtures 824,434 - (28,117) (210,352) 585,965 Buses and vehicles 272,024,571 - (689,886) (16,808,420) 254,526,265 Office equipment 506, ,799 (33,873) (251,107) 417,567 IT equipment 90,365 21,674 (1,969) (61,490) 48,580 Operating equipment 507, ,002 (2,565) (219,190) 397,235 Reconciliation of property, plant and equipment ,376, ,821 (767,860) (17,856,635) 265,310,229 Opening balance Additions Depreciation Impairment loss Total Land 3,255, ,255,786 Buildings 6,068, ,220 (252,773) - 5,971,469 Workshop equipment 144,166 96,536 (45,160) - 195,542 Furniture and fixtures 953,497 81,586 (210,649) - 824,434 Buses and vehicles 282,138,376 13,486,777 (21,399,662) (2,200,920) 272,024,571 Office equipment 665, ,816 (274,598) - 506,748 IT equipment 186,351 - (95,986) - 90,365 Operating equipment 1,063,611 - (555,623) - 507,988 Property, plant and equipment encumbered as security 294,475,339 13,936,935 (22,834,451) (2,200,920) 283,376,903 Refer to note 12 for details of property, plant and equipment encumbered as security for borrowings. * See Note 25 56

57 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 3. Property, plant and equipment (continued) Net carrying amounts of leased assets Buses 122,902, ,914,115 The company leases buses under a number of finance lease agreements. The leased bus fleet secures the lease obligations. Refer to Note 12. The residual values and useful lives of property, plant and equipment were reviewed and possible impairment has been assessed at reporting date. The residual values and useful lives of these assets were reviewed by Management as per IAS 16, 36 and 38, as well as reports were obtained from bus manufacturers. There is no material changes in manner or pattern in which assets are used. Therefore, the current residual values and useful lives of the assets were found appropriate. Details of properties A Register containing the information required by paragraph 25(3) of Schedule 4 of the Companies Act is available for inspection at the registered office of the company. Land with a cost price of R is registered in the name of the Parent company, Limpopo Economic Development Agency. Limpopo Economic Development Agency has 100% shareholding in Great North Transport. Great North Transport is currently transferring these stands into its own name. Land with a cost price of R are registered in the name of Municipalities. Great North Transport is currently transferring these stands into its own name. 4. Intangible assets Cost / Valuation Accumulated Carrying value Cost / amortisation Valuation Accumulated Carrying value amortisation Computer software 669,390 (669,379) ,955 (555,848) 4,107 Bus routes 2,675,000-2,675,000 2,675,000-2,675,000 Total 3,344,390 (669,379) 2,675,011 3,234,955 (555,848) 2,679,107 Reconciliation of intangible assets Opening balance Write-offs Amortisation Total Computer software 4,107 (1) (4,095) 11 Bus routes 2,675, ,675,000 2,679,107 (1) (4,095) 2,675,011 Reconciliation of intangible assets Opening Amortisation Total balance Computer software 16,394 (12,287) 4,107 Bus routes 2,675,000-2,675,000 2,691,394 (12,287) 2,679,107 * See Note 25 57

58 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 4. Intangible assets (continued) Other information The residual values and useful lives of intangible assets were reviewed and possible impairment has been assessed at reporting date. The residual values and useful lives of these assets were reviewed by Management as per IAS 16, 36 and 38, as well as reports were obtained from independent valuators. There is no material changes in manner or pattern in which assets are used. Therefore, the current residual values and useful lives of the assets were found appropriate. 5. Loan from shareholder Limpopo Economic Development Agency ( ) ( ) The loan bears no interest. No securities are in place for the loan and no fixed terms of repayment has been negotiated. The maximum exposure to credit risk at the reporting date is the fair value of each class of loan mentioned above. The company does not hold any collateral as security. Fair value of loan from shareholder Loan from shareholder ( ) ( ) The maximum exposure to credit risk at the reporting date is the fair value of each class of loan mentioned above. The company does not hold any collateral as security. 6. Retirement benefits Defined benefit plan Employees and retired employees of Great North Transport participate in Resolution Health Supreme, Bonitas Medical Fund, Commed Medical Scheme, Spectramed Azure, Discovery Medical Aid and Sizwe Medical Fund respectively. The post-employment subsidy policy is summarised below: Members and their dependents who have retired before 2011 are entitled to a 70% subsidy of their medical aid contributions, including savings and retirement. Great North Transport subsidises 100% of AdmedGap contributions, in retirement for qualifying members. Dependents of members who die whilst in service are entitled to a subsidy of their medical aid contributions, as set out above. This benefit is limited to employees who have already retired. Great North Transport embarked on a reduction exercise to better manage their post-employment health care liability. A consultative process was entered into with retired members who are currently in receipt of the benefit and negotiations are still ongoing. Future retirees will no longer qualify for post-employment health care subsidisation. The last external actuarial valuation was performed for the period as at 31 March The principal actuarial assumptions at the reporting date are expressed according to the projected unit credit method. In order to undertake the valuation of the company's post-employment health care liability, it is necessary to make a number of assumptions. The most significant assumptions are set out below: * See Note 25 58

59 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 6. Retirement benefits (continued) Carrying value Continuation members (14,858,000) (14,574,000) Non-current liabilities (13,505,000) (13,202,000) Current liabilities (1,353,000) (1,372,000) The fair value of plan assets includes: Movements for the year (14,858,000) (14,574,000) Opening balance (14,574,000) (12,730,000) Contributions by members 1,267,000 1,267,000 Net (income) / expense recognised in profit or loss (1,551,000) (3,111,000) Net (income) / expense recognised in profit or loss (14,858,000) (14,574,000) Interest cost (1,278,000) (1,278,000) Actuarial gain / (loss) (273,000) (1,833,000) Key assumptions used Assumptions used on last valuation on 31 March (1,551,000) (3,111,000) Discount rates used 9.00 % 9.17 % Health care cost inflation 8.02 % 8.25 % Contribution of membership % % Sensitivity analysis Health care cost inflation Variation of +1% will result in an increase of 7.6% in past service contractual liabilities and a 8.0% increase in service cost. Variation of -1% will result in a decrease of -6.8% in past service contractual liabilities and a -7.2% decrease in service cost. Mortality Variation of +1% will result in a decrease of -7.4% in past service contractual liabilities and a -7.8% decrease in service cost. Variation of -1% will result in an increase of 8.4% in past service contractual liabilities and a 8.8% increase in service cost. 7. Long term prepaid expenses Prepaid expenses 5,659,336 6,089,440 Less: current portion (5,659,336) (6,089,440) - - * See Note 25 59

60 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 8. Inventories Consumables 2,211,833 2,548, Trade and other receivables Trade receivables 8,417,568 6,769,771 Private hire receivables 4,042,888 4,043,248 Sundry receivables 315,567 1,193,418 12,776,023 12,006,437 Provision for bad debts (4,526,673) (7,204,141) Fair value of trade and other receivables 8,249,350 4,802,296 Trade and other receivables 8,249,350 4,802,296 Trade and other receivables past due but not impaired The ageing of amounts past due but not impaired is as follows: 1 month past due 6,432,564 3,641,230 2 months past due 215, ,078 3 months past due 6,127,902 8,111,129 Trade and other receivables impaired The amount of the provision was R (4,526,673) as of 31 March 2017 (2016: R (7,204,141)). The ageing of these loans is as follows: 12,776,023 12,006,437 Over 6 months 4,526,673 7,204,141 Reconciliation of provision for impairment of trade and other receivables Opening balance (7,204,141) (7,193,299) Provision for impairment (430,077) (10,842) Amounts written off as uncollectable 3,107, Cash and cash equivalents Cash and cash equivalents consist of: (4,526,673) (7,204,141) Cash on hand 11,000 11,000 Bank balances 29,007,127 27,724,478 Short-term deposits - 12,605,091 29,018,127 40,340,569 * See Note 25 60

61 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 10. Cash and cash equivalents (continued) Restricted suretyship to the amount of R is provided by Limpopo Economic Development Agency on the above mentioned bank balances. 11. Share capital Authorised 500 Ordinary shares of R1 each 500, ,000 Issued Ordinary 500, ,000 The company is a wholly owned subsidiary of the Limpopo Economic Development Agency that has all voting rights. 12. Finance lease liabilities Minimum lease payments due - within one year 30,742,550 30,525,174 - in second to fifth year inclusive 76,675, ,743, ,417, ,268,176 less: future finance charges (14,935,990) (25,483,816) Present value of minimum lease payments 92,481, ,784,360 Present value of minimum lease payments due - within one year 21,395,624 19,641,233 - in second to fifth year inclusive 71,086,220 92,143,127 92,481, ,784,360 Non-current liabilities 71,086,220 92,143,127 Current liabilities 21,395,624 19,641,233 It is company policy to lease certain buses and vehicles under finance leases. 92,481, ,784,360 The company's obligations under finance leases are secured by the lessor's charge over the leased assets. Refer note 3. Finance leases represent financing obtained by Great North Transport (SOC) Limited from MAN Financial Services (SA) Pty Ltd for the purchase of buses. Interest rates are linked to prime at the contract date. The average interest rate during the period was 10.50%. All leases have fixed repayments and no arrangements have been entered into for contingent rent. Leases are repayable in monthly installments of R The leases are to mature between the 2019 and 2021 financial year ends. 13. Provisions Reconciliation of provisions Opening balance Net expense Contributions recognised in and payments the income statement Long service awards 6,212,000 1,168,000 (1,232,000) 6,148,000 Total * See Note 25 61

62 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 13. Provisions (continued) Reconciliation of provisions Opening balance Net expense Contributions recognised in and payments the income statement Long service awards 6,422, ,000 (946,000) 6,212,000 Total Non-current liabilities 5,020,000 4,931,000 Current liabilities 1,128,000 1,281,000 6,148,000 6,212,000 Net expense recognised in the income statement Service cost 608, ,000 Interest cost 515, ,000 Actuarial (gain) / loss 64,000 (371,000) Key assumptions used The last external actuarial valuation was performed for the period as at 31 March ,187, ,000 Assumptions used in the actuarial valuation of 31 March 2017 Discount rate 9.05 % 9.20 % Active members 1,120 1,163 Expected average retirement age Liability duration in years Sensitivity analysis Benefit inflation Variation of +1% will result in an increase of +5.5% of the past service contractual liability and +6.4% in the service and interest cost. Variation of -1% will result in a decrease of -5.1% of the past service contractual liability and -5.9% in the service and interest cost. Mortality Variation of +1% will result in a decrease of -5,1% of the past service contractual liability and -5,9% in the service and interest cost. Variation of -1% will result in an increase of +5,6% of the past service contractual liability and +6,5% in the service and interest cost. Resignation Variation of +1% will result in a decrease of -5.2% of the past service contractual liability and -6.0% in the service and interest cost. Variation of -1% will result in an increase of +5.6% of the past service contractual liability and +6.6% in the service and interest cost. * See Note 25 62

63 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 14. Trade and other payables Trade payables 42,093,775 58,835,420 Amounts received in advance 3,359, ,364 Other payables 22,946,014 24,427,168 Accrued expenses 16,031,919 9,032,018 Leave and bonus provisions 26,308,434 31,173,009 Fair value of trade and other payables 110,740, ,426,979 Trade payables 110,740, ,426, Revenue Casual passengers 135,243, ,764,942 Subsidised tickets 108,300, ,940,867 Subsidy received from Department of Roads and Transport 295,188, ,388,935 Private hire and contract revenue 36,317,504 35,777, Operating loss Operating loss for the year is stated after charging (crediting) the following, amongst others: 575,050, ,872,219 Auditor's remuneration - external Audit fees 3,532,793 2,878,904 Remuneration, other than to employees Administrative and managerial services 9,863,551 8,356,251 Consulting and professional services 4,483,906 2,166,440 Employee costs 14,347,457 10,522,691 Salaries, wages, bonuses and other benefits 207,275, ,058,825 Other short term costs 57,308,115 54,397,569 Total employee costs 264,583, ,456,394 Leases Operating lease charges Operating lease other 14,369,680 18,932,521 Depreciation and amortisation Depreciation of property, plant and equipment 17,856,635 22,834,451 Amortisation of intangible assets 4,096 12,283 Total depreciation and amortisation 17,860,731 22,846,736 * See Note 25 63

64 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 16. Operating loss (continued) Impairment losses Property, plant and equipment - 2,200,920 Other Other operating gains (losses) 2,839, Employee costs Employee costs Basic 194,263, ,742,339 SDL 2,226,672 2,159,864 Leave pay provision charge 10,785,237 22,156,622 Other short term costs 57,308,115 54,397, Depreciation, amortisation and impairment losses 264,583, ,456,394 Depreciation Property, plant and equipment 17,856,635 22,834,451 Amortisation Intangible assets 4,096 12,283 Impairment losses Property, plant and equipment - 2,200,920 Total depreciation, amortisation and impairment Depreciation 17,856,635 22,834,451 Amortisation 4,096 12,283 Impairment losses - 2,200, Investment income 17,860,731 25,047,654 Interest income From investments in financial assets: Bank and other cash 793,827 1,346, Finance costs Finance leases 11,453,450 9,954,711 SARS and creditors 2,924,708 2,710,677 Total finance costs 14,378,158 12,665,388 * See Note 25 64

65 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 21. Cash generated from operations (Loss) profit before taxation ( ) Adjustments for: Depreciation and amortisation Gains on disposals and scrappings of assets ( ) - Interest income ( ) ( ) Finance costs Impairment losses and reversals Movements in retirement benefit assets and liabilities Movements in long service awards (64 000) ( ) Movement in bad debt provision ( ) Apportionment of prepaid expenses Changes in working capital: Inventories Trade and other receivables ( ) ( ) Trade and other payables ( ) Commitments Operating leases as lessee (expense) Minimum lease payments due - within one year in second to fifth year inclusive Operating lease payments represent rentals payable by the company for certain of its properties, offices equipment and sleeping grounds. Leases are negotiated for an average term of five years and rentals are fixed for an average of three years. No contingent rent is payable. Other Commitments - Service Level Agreements Minimum lease payments due - within one year in second to fifth year inclusive Total Commitments Other commitments are payments payable by the company for service level agreements (SLAs) entered into with various service providers such as security services, cash collections, bus repairs and maintenance with an average term of five years. * See Note 25 65

66 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 23. Contingencies Labour Disputes Litigation is in process against the company by twelve (2016: five) former employees relating to labour disputes. The following table refers: Parties Description M.I. Mohlatlole Dismissal R T.J. Sekgobela Dismissal Cannot be estimated reliably P. Motshane Dismissal Cannot be estimated reliably R Kabini Dismissal Cannot be estimated reliably M.T. Nonyane Dismissal Cannot be estimated reliably S. Makgakga Dismissal Cannot be estimated reliably VF Maluleke Dismissal R Cannot be estimated reliably S Makgakga & N. Hlungwane Dispute over acting allowance Cannot be estimated reliably V. Rikhotso Dismissal Cannot be estimated reliably L. Notley Dispute over settlement award Cannot be estimated reliably D. Mokoena Dismissal Cannot be estimated reliably R. Makgoka Dismissal Cannot be estimated reliably S. Maphosa Dismissal Cannot be estimated reliably Mr. Makgatho Dismissal Cannot be estimated reliably Cannot be estimated reliably 66

67 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 23. Contingencies (continued) Other Contigencies 2017 Litigation is in process against the company relating to the loss of income, suffering/trauma and medical expenses, after an employee was shot at by another employee on company premises. The amount of the claim is R 3.5 million. The Company is been sued by Mr Maila for R 900,000 vicariously for defamatory s sent to his employer. The Company is being sued by Mr MM Seakamela for R for negligent driving. Litigation is in process against the company by Kgaphola Investments. The disputes is for bus routes. The amount of is the claim is R 29 million. GNT is been sued jointly and severally together with Sanlam by a former employees daughter on behalf of whom a trust was established and administered. The amount of the claim is R 2.2m. Management is of the opinion that, after consultation with the company's legal advisors, the above claims, which amount to an estimated total of R 35,8 million, against the company will not succeed and has therefore not provided for any losses. Contingent assets Litigation is in the process by GNT against Nnyofu Attorneys. The company is suing for services paid for but not provided by the supplier. The company is yet to estimate to the total claim against the attorney Litigation is in process against the company relating to the loss of income, suffering/trauma and medical expenses, after an employee was shot at by another employee on company premises. The amount of the claim is R 3.5 million. The Company is been sued by Mr Maila for R 900,000 vicariously for defamatory s sent to his employer. Litigation is in process against the company by Kgaphola Investments. The disputes is for bus routes. The amount of is the claim is R 29 million. GNT is been sued jointly and severally together with Sanlam by a former employees daughter on behalf of whom a trust was established and administered. The amount of the claim is R 2.2m. Management is of the opinion that, after consultation with the company's legal advisors, the above claims, which amount to an estimated total of R 42.6 million, against the company will not succeed and has therefore not provided for any losses. Contingent assets Litigation is in the process by GNT against Nnyofu Attorneys. The company is suing for services paid for but not provided by the supplier. The company is yet to estimate to the total claim against the attorney. 67

68 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 24. Related parties ` Relationships Ultimate holding company Holding company Public transport subsidiaries Directors Limpopo Department of Economic Development, Environment and Tourism Limpopo Economic Development Agency Department of Roads and Transport See list below Related party transactions were made on terms equivalent to those that prevail in arms' length transactions. Related party balances Loan account - Owing to related party Limpopo Economic Development Agency (non-interest bearing) ( ) ( ) Public transport subsidies received Department of Roads and Transport - Limpopo Department of Roads and Transport - Mpumalanga Government grant (equitable share) received Limpopo Department of Economic Development, Environment and Tourism Related party transactions Compensation to directors and other key management Compensation to Directors Name Position Directors' emoluments Travel and subsistence allowance M. Maphutha # Director K.M. Maroga # Director C.S. Nkadimeng # Director N.I. Masekwameng Director Dr. S.H.M. Nokaneng Director T.A. Mokone# Director M.O. Phasha Director Total # - These Directors are also Directors at Limpopo Economic Development Agency and some of the fellow subsidiaries. 68

69 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 24. Related parties (continued) Compensation to Directors Name Position Directors' emoluments Travel and subsistence allowance M. Maphutha # Director 614,450 46, ,204 K.M. Maroga # Director 216,686 38, ,446 S.H.M. Nokaneng Director 129,579 51, ,191 C.S. Nkadimeng Director 211, ,756 N.I. Masekwameng Director 126,754 37, ,435 T.A. Mokone # Director 112, ,136 T.Mhlari Former Director 132,929 8, ,269 L.S. Morallane Former Director 138,486 14, ,583 T. Nkoana Former Director 96,314 5, ,824 Total 1,779, ,754 1,981,844 # - These Directors are also Directors at Limpopo Economic Development Agency and some of the fellow subsidiaries. Payments to Key Management Name Position Salary costs Allowances Total S.J. Keswa CEO 975, ,197 1,473,440 N. Hlungwane COO 1,669,967 15,714 1,685,681 M.N. Gololo CFO 1,035, ,639 1,360,799 P.P. Kgaphola GM: Human Resources 942, ,485 1,153,797 M.D. Mogano Internal Audit Executive 783, ,898 1,060,475 5,406,259 1,327,933 6,734,192 Payments to Key Management Name Position Salary costs Allowances Total T. Nkoana Former Acting CEO 495, ,805 N. Hlungwane COO 1,983,497 48,896 2,032,393 P. Ravhudzulo Acting CFO 90,295-90,295 M.N. Gololo CFO - Appointed 01/01/16 278,638 41, ,403 S. Ledwaba Acting Company 485, ,700 Secretary 3,333,935 90,661 3,424,596 69

70 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 25. Prior period adjustments Disclosures: Contigent liability as a results of labour dispute for an estimated amount of R7m relating to the 2016 financial year was identified during the current year. This was corrected in the current financial year and disclosure note on contigencies has been updated with the comparative figures. Refer disclosure note no. 23 for Contingencies on page 46. Other commitments were not included in the operating leases' commitments disclosure note for the financial year This was corrected during the current financial year resulting in comparative figures for commitments updated. Refer disclosure note no. 22 for Commitments on page 45. Other prior period adjustments: Long service awards with the amount of R and post employment benefits obligation with the amount of R1 000 was under provided in the prior year as a result of a change in the actuaries valuation report. The comparative figures has been corrected in the 2017 financial year. Provision for management fees was over provided with R in the prior year. The transaction has been corrected in the 2017 financial year. Total amount of corrections relating to prior period is R The correction of the adjustments results in adjustments as follows: Statement of Financial Position As per previously reported in 2016 Restated 2016 Adjustment Provisions (4,912,000) (4,931,000) (19,000) Trade and other payables (125,104,408) (124,426,979) 677,429 Retirment benefit obligation (13,201,000) (13,202,000) (1,000) Opening retained earnings 75,969,168 76,626, ,429 Profit or Loss Other operating expenses 624,616, ,958,742 (657,429) 26. Comparative figures Prior period comparative information has been presented in the current year s financial statements. Where necessary figures included in the prior period financial statements have been reclassified to ensure that the format in which the information is presented is consistent with the format of the current year s financial statements. 27. Risk management Financial risk management The company s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. 70

71 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 27. Risk management (continued) Liquidity risk The company s risk to liquidity is a result of the funds available to cover future commitments. The company manages liquidity risk through an ongoing review of future commitments and credit facilities. The table below analyses the company s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. At 31 March 2017 Less than 1 year Between 1 and 2 years Between 2 and 5 years Trade and other payables ( ) - - Shareholders loan ( ) - - Finance lease liability ( ) ( ) ( ) At 31 March 2016 Less than 1 year Between 1 and 2 years Between 2 and 5 years Trade and other payables ( ) - - Shareholders loan ( ) - - Finance lease ( ) ( ) ( ) Interest rate risk As the company has no significant interest-bearing assets, the company s income and operating cash flows are substantially independent of changes in market interest rates. Credit risk Credit risk consists mainly of cash deposits, cash equivalents, derivative financial instruments and trade debtors. The company only deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party. Trade receivables comprise a widespread customer base. Management evaluated credit risk relating to customers on an ongoing basis. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. Sales to retail customers are settled in cash or using major credit cards. Credit guarantee insurance is purchased when deemed appropriate. Financial assets exposed to credit risk at year end were as follows: ` Financial instrument Cash and cash equivalents Trade and other receivables Going concern The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. 71

72 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 28. Going concern (continued) The company is still trading in a very difficult financial environment resulting in making a loss of R19,479,657 R5,520,343 at the end of the 2017 financial year. In order to save costs and get the company back into a profitable position, the Board of Directors have approved a detailed turnaround strategy aimed at reducing costs and improving the cash flow position of the company. The company is currently operating in terms of negotiated subsidy contracts. These contracts are subject to renewal on an annual basis. The financial statements have been prepared on the going concern basis which assumes that the Company is successful in renewing the contracts from time to time. The financial statements do not include any adjustments which may be necessary should this assumption not be valid. Limpopo Economic Development Agency has agreed to assist the Company by subordinating, subject to certain terms and conditions, its claims against the Company and in favour and for the benefit of other creditors of the Company. Based on the information above the Board of Directors are of the opinion that the company will be able to continue trading as a going concern in the near future. 29. Taxation The company has not provided for taxation on the basis that it is exempt from tax in terms of section 10(1)(cA)(ii) of the Income Tax Act. 30. Retirement benefit information The company provides for all it's permanent employees through three defined contribution plans which are subject to the Pension Funds Act, 1956 as amended. The contributions to the above schemes are paid over on a monthly basis. The benefits are insured with Multikor, Alexander Forbes and Momentum in terms of a deposit administration policy. The scheme with Alexander Forbes has a fund value at 31 March 2017 of R and the fund has last been revalued on 31 March The Momentum Employee Benefit Fund has an asset value at 31 March 2017 of R The company provides medical contributions to retired employees. The company's contributions amounted to R (2016: R ) on behalf of retired employees for the year under review. 31. Fruitless and wasteful expenditure The expenses detailed below were discussed at the Board of Directors meeting held on 29th March 2017 and the Board after thorough investigation decided to condone the expenses to the value of R for the 2014/15 financial year. Opening balance 9,985,156 9,985,156 Add: Fruitless & wasteful expenses 5,403,508 6,611,751 DORT - penalties 1,406, ,728 Traffic fines 161, ,824 SARS penalties & interest 2,012,562 2,280,283 Creditors interest 1,110,384 3,147,070 Other 712,331 37,846 Total fruitless & wasteful expenses 15,388,664 16,596,907 Less: Condonement (9,985,156) (6,611,751) Closing balance 5,403,508 9,985,156 72

73 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 31. Fruitless and wasteful expenditure (continued) The company incurred additional fruitless and wasteful expenditure that was identified at year-end following a whistle blowing report relating to Inspectors' accommodation from the previous financial year amounting to R , and the investigation process has not yet been concluded. Condonement of Fruitless and Wasteful expenditure after year-end: During a Board of Directors meeting held on 23 May 2017 the Board reviewed the transactions relating to fruitless and wasteful expenditure. The Board came to conclusion that the expenses were not incurred in vain and therefore the balance of the fruitless and wasteful expenses amounting to R was condoned, excluding the possible additional fruitless and wasteful expenditure that was identified at year-end relating to the previous financial years. 32. Irregular expenditure Set out below is a summary of the irregular expenses incurred. Most of the expenses incurred related to deviations from the procurement policy as the tenders/quotations processes were not followed due to the following: Emergency expenses Contracted suppliers could not timely deliver fuel/tyres Not enough suppliers to obtain three quotations (small town depots). Opening balance 422,939, ,774,653 Add: Irregular expenses 77,574,535 89,164,827 Diesel purchases 3,153,711 11,261,164 Spares 73,757,836 77,056,678 Other operating expenses 662, ,985 Total irregular expenditure 500,514, ,939,480 Less: Condonement / Transfers to receivables Closing balance A detailed register is maintained at Head Office in respect of all the expenses incurred. (493,605,694) - 6,908, ,939,480 The company incurred an irregular expenditure on award of the Bus Repairs and Maintenance contract in contravention with the SCM policy of which the total value is R for the 2016/17 financial year The company extended the repairs and maintenance contracts from 2013 for buses out of their warranty with the original equipment manufacturer (OEM) whom are based within our premises where repairs and services are done. The total irregular expenditure amounts to R of which R for the current year and R relates to the previous years. During the current financial year, irregular expenditure on acting allowances amounting to R from the previous financial year were investigated and subsequently transferred to receivable for debt recovery. Additional irregular expenditure amounting to R was identified at year-end following a whistle blowing report relating to Inspectors' accommodation for the previous financial years, and the investigation process has not yet been concluded. Condonement of Irregular Expenditure after year-end During a Board of Directors meeting held on 23 May 2017, the Board reviewed the transactions relating to irregular expenditure and came to conclusion that the expenses were incurred for operational purposes to ensure that the bus fleet remained operational. Therefore the balance of irregular expenses amounting R was condoned. 73

74 notes TO THE FINANCIAL STATEMENTS Figures in Rand Restated * 33. Public Private Partnership Great North Transport was required to give 10% of its business on the signing of three (3) negotiated contracts (Mokopane, Seshego and Hoedspruit) to small operators. Certain routes were given to small operators (Mathole Bus Service, Madodi and Kopano) in the province as part of empowerment. Kopano was further given the Lebowakgomo corridor as a sub contractor to GNT under the Seshego depot. Permits were transferred to Kopano to operate these routes. Subsidies relating to these routes are claimed by GNT on behalf of Kopano and is paid over to them. The total amount claimed on behalf of Kopano in the current financial year was R9.8m (2016: R 8.3m). This agreement will expire with the expiry of the negotiated contracts held by the company or by mutual agreement of both parties. 74

75 detailed INCOME STATEMENT Figures in Rand Notes Restated * Revenue Casual revenue Subsidised tickets Subsidy received from Department of Roads and Transport Private hire and contract revenue Other operating income Other income Grant received - Limpopo Department of Economic Development, Environment and Tourism Other operating gains (losses) Gains on disposal of assets or settlement of liabilities Expenses (Refer to page 55) ( ) ( ) Operating profit (loss) ( ) Investment income Finance costs 20 ( ) ( ) Profit (loss) for the year ( ) * See Note 25 75

76 detailed INCOME STATEMENT Figures in Rand Note(s) Restated * Other operating expenses Subsidies paid over ( ) ( ) Advertising and marketing expenses ( ) ( ) Amortisation (4 096) (12 283) Auditors remuneration - external auditors 16 ( ) ( ) Bad debts ( ) (13 227) Bank charges ( ) ( ) Computer expenses ( ) ( ) Consulting and professional fees ( ) ( ) Depreciation 18 ( ) ( ) Donations (51 500) (56 079) Employee costs 17 ( ) ( ) Entertainment ( ) ( ) Fines and penalties ( ) ( ) General expense (82 405) (97 615) Inspection cost (34 129) ( ) Impairment 18 - ( ) Insurance ( ) ( ) Lease rentals on operating lease ( ) ( ) Licenses ( ) ( ) Motor vehicle expenses ( ) ( ) Municipal expenses ( ) ( ) Printing and stationery ( ) ( ) Private hire expenses ( ) ( ) Recruitment expense (61 930) ( ) Repairs and maintenance ( ) ( ) Security and cash collection fees ( ) ( ) Stock variances ( ) Uniform (45 345) ( ) Subscriptions ( ) ( ) Telephone and fax ( ) ( ) Tickets ( ) ( ) Tow-in services ( ) ( ) Training ( ) ( ) Transport and travelling expenses ( ) ( ) ( ) ( ) * See Note 25 76