Trade & InvesTMenT acir K F W a a H Z T U U L O U s n - L a T a ANNUAL REPORT2015/16

Transcription

1 SOUTH AFRICA Trade & InvestMENT KWAZULU-NATAL ANNUAL REPORT2015/16

2 ~ Umhlanga Lighthouse TRADE & INVESTMENT KWAZULU-NATAL S GENERAL INFORMATION REGISTERED NAME: Trade & Investment KwaZulu-Natal PHYSICAL ADDRESS: Trade and Investment House, 1 Arundel Close, Kingsmead Office Park, Durban, 4001 POSTAL ADDRESS: P O Box 4245, Durban, 4000 TELEPHONE NUMBER: ADDRESS: info@tikzn.co.za WEBSITE ADDRESS: MANDATE Promote, brand and market the province of KwaZulu-Natal as an investment destination; Facilitate trade by assisting local companies to access international markets; Identify, develop and package investment opportunities in KwaZulu-Natal; Provide a professional service to all clientele; Retain and expand trade and export activities; and Link opportunities to the developmental needs of the KwaZulu-Natal community.

3 TABLE OF CONTENT PART A: GENERAL INFORMATION 1. MEC s Foreword Chairperson s Statement CEO s Review Statement of Responsibility Strategic Overview Legislative and Other Mandates Organisational StructurE Management StructurE 17 PART B: PERFORMANCE INFORMATION 9. Overview of the Trade and Investment Environment Overview of the organisational Environment Trade & Investment KwaZulu-Natal Programmes 33 PART C: GOVERNANCE 12. Corporate Governance Statement 45 PART D: HUMAN RESOURCES MANAGEMENT 13. HUMAN RESOURCES MANAGEMEnt 53 PART E: Annual Financial Statements 14. Annual Financial Statements Board s Responsibilities and Approval Audit Committee Report AUDITOR GENERAL S REport 68 Trade & Investment KwaZulu-Natal Annual Report 2015/16 1

4 Table of Acronyms AFS Annual Financial Statements AG Auditor-General APP Annual Performance Plan ASB Accounting Standards Board BAC Bid Adjudication Committee BBBEE Broad-Based Black Economic Empowerment BEE Black Economic Empowerment BPO Business Process Outsourcing BREU Business Retention and Expansion Unit BRICS Brazil, Russia, India, China and South Africa CEO Chief Executive Officer CFO Chief Financial Officer DDI Domestic Direct Investment DIRCO Department of International Relations and Co-operation DRC Democratic Republic of Congo DTI Department of Trade and Industry DTP Dube Trade Port EAP Employee Assistance Programme EDTEA Economic Development, Tourism and Environmental Affairs EDPU Export Development and Promotion Unit EIA Environmental Impact Assessment ESID Effective States and Inclusive Development EU European Union FDE Finance Director Europe FDI Foreign Direct Investment GAAP Generally Accepted Accounting Practice GDP Gross Domestic Product GRAP Generally Recognised Accounting Practice ICT Information Communications Technology IDZ Industrial Development Zone IEH Industrial Economic Hub IGRAP Interpretations of the Standards of Generally Recognised Accounting Practice IPA Investment Promotion Agency IPAP2 Industrial Action Policy Plan 2 IT Information Technology 2

5 JSE Johannesburg Stock Exchange KM Knowledge Management KSIA King Shaka International Airport KZN KwaZulu-Natal M&A Mergers and Acquisitions MCU Marketing and Communications Unit MOU Memorandum of Understanding MPP Member of Provincial Parliament MSc Masters in Science NAMEC National Association of Manufacturers in Electronic Components NDP National Development Plan NGP National Growth Plan PAA Public Audit Act PFMA Public Finance Management Act PGDP Provincial Growth and Development Plan PGDS Provincial Growth and Development Strategy PhD Doctor of Philosophy (PTY) LTD Proprietary Limited PUM Programma Uitzending Managers RBIDZ Richards Bay Industrial Development Zone SA South Africa SADC Southern African Development Community SAITEX South African Trade Exhibition SAOGA South African Oil and Gas Association SARS South African Revenue Service SCM Supply Chain Management SCOPA Standing Committee on Public Accounts SETA Sector Education and Training Authority SEZ Special Economic Zone TAF Technical Assistance Fund TIKZN Trade & Investment KwaZulu-Natal TKZN Tourism KwaZulu-Natal TNCs Trans National Companies TOR Terms of Reference UAE United Arab Emirates UK United Kingdom UKZN University of KwaZulu-Natal UNCTAD United Nations Conference for Trade and Development USA United States of America WTO World Trade Organisation Trade & Investment KwaZulu-Natal Annual Report 2015/16 3

6 PART A GENERAL INFORMATION ~ Sumitomo Factory, Ladysmith 4

7 01 MEC s Foreword Mr S Zikalala, MPL MEC for Economic Development, Tourism and Environmental Affairs The global economic performance continues to be subdued following the 2008 world economic meltdown. The recovery of world economies from this meltdown has not yet been fully achieved but the progress made so far brings hope. According to the International Monetary Fund s (IMF s) January 2016 World Economic Outlook (WEO) Report, forecasts have been revised downward by 0.2% for both 2016 and 2017 (that is, the global economy is now expected to grow at 3.4% and 3.6% in 2016 and 2017, respectively from 3.6% and 3.8% estimated in October 2015). It is a testament to this country and her people that in spite of declining global and domestic growth prospects, South Africa and the province of KwaZulu-Natal in particular continue to serve as attractive destinations for foreign and domestic investment. Our data from the past financial year shows that KwaZulu-Natal managed to attract a range of new investments amounting to R5 billion. This investment has a potential to create an estimated much-needed jobs, and will be a real shot in the arm for the provincial economy. The investment potentials that the province has realized is attributed to a range of entities who work tirelessly and collectively to ensure the visibility of the province as an investment option and to facilitate investments in accordance with the developmental needs of the people of KwaZulu-Natal. One such entity is Trade & Investment KwaZulu-Natal (TIKZN) which has been set up not only to promote the province to potential investors but to facilitate trade by assisting local companies to access international markets. As this Annual Report shows, nearly R2- billion of these new investments last year came through the efforts of TIKZN. Since its establishment, TIKZN has worked well to establish itself as a dynamic, effective and innovative organization. The implementation of the TIKZN Marketing Strategy and Investment Attraction Plan, for example, has now yielded the positive outcome referred to above: six new investment projects during the year worth R1.98 billion. In addition, TIKZN was able to assist local exporters to access 121 new markets. Services to local exporters include the provision of market intelligence and facilitation of linkages with distributors in key markets. As TIKZN continues to focus on Africa through market development programmes KwaZulu-Natal exporters have now gained market access in countries like Angola, Ghana, Nigeria, Mozambique and Botswana. Trade & Investment KwaZulu-Natal Annual Report 2015/16 5

8 As part of its knowledge repository, TIKZN in partnership with the North-West University, modified the Decision Support Model (DSM) tool which is a quantitative instrument that uses trade data and various filters to determine the potential export opportunity of products into various markets. TIKZN also packaged 11 high-impact investment opportunities for investors relating to renewable energy, agroprocessing, hydro-electrical, aqua-culture, property development and infrastructure. These projects are in line with the Provincial Growth and Development Plan as well as the Strategic Infrastructure Projects (SIP) document. The process going forward is to attract investors that will take up these opportunities and possibly partner with our local companies in realising the benefits of these projects. Foreign and domestic investment has great potential to support the priorities of our government and it is crucial for the growth of KwaZulu-Natal that we broaden the global base from which foreign investments are attracted. In this regard, I must commend the Board and Executive Management of Trade and Investment KwaZulu-Natal for working tirelessly to ensure that we realize this potential... Mr S Zikalala, MPL MEC for Economic Development, Tourism and Environmental Affairs 6

9 02 CHAIRPERSON S STATEMENT Ms CM Cronje Chairperson Against the backdrop of testing global, national and provincial economic conditions, which created greater competition for a substantially reduced investment and trade base, Trade & Investment KwaZulu- Natal (TIKZN) has made a commendable contribution over the last financial year to raise the visibility of the Province as an investment destination and facilitating trade and investment opportunities in KwaZulu- Natal. As this Annual Report illustrates, the organisation consolidated its position over the past financial year as an effective provincial agency and knowledge leader in investment and trade promotion. TIKZN continues to enjoy political support and good relationships with key decision makers and stakeholders. Over the year the organisation has also made progress in positioning the TIKZN brand as a means to achieve a greater competitive advantage and attract investor interest. Out of an extensive list of performance indicators, several targets were surpassed, including those representing a commitment of R1,98 billion in new investment projects. An additional R581 million was achieved in this category through high value property development projects of R1,2 billion. As this report shows, only a couple of indicator targets were not met, the first due to human resource constraints within the organisation, and the second due to capacity shortfalls in municipal partners, the latter being beyond TIKZN s direct control. In the case of deficiencies emanating from within the organisation, corrective measures have been taken. In this regard TIKZN has identified human resources development as a key strategic area and has put in place retention strategies and programmes for staff to participate in local and international training programmes to enhance the organisational skills base and service delivery. The development of staff is of paramount importance to the organisation and as such, the amount of money spent is regarded as investment. TIKZN s training and development policy places emphasis on continuous enhancement of the skills as a way of empowering staff so that they are able to deliver on the organisational mandate. TIKZN continues to provide learning opportunities for students as part of its contribution to the reduction of unemployment. This initiative is also part of TIKZN s contribution to skills development initiatives as expressed in the NSDSIII, NGP, PGDS, NDP Vision 2030 objectives. In addition, greater investment is being made in research and knowledge management capabilities which are necessary to improve TIKZN s performance, and to identify further growth opportunities. There is also a strategic plan to strengthen the role of trade development and policy advocacy. Trade & Investment KwaZulu-Natal Annual Report 2015/16 7

10 Good corporate governance, which promotes greater corporate accountability, transparency and stakeholder confidence continues to be a priority at TIKZN, particularly with the increased accountability given to company directors regarding risk control within their organisations. TIKZN will therefore continue to conform to international best business practices by implementing sound corporate governance principles and practices in all its endeavors, and adhering to the policies and legislation governing its operations. On behalf of the Board and staff of TIKZN I extend my appreciation to the former MEC for Economic Development, Tourism and Environmental Affairs, Mr Michael Mabuyakhulu for his unwavering support and astute leadership during his term of office. We furthermore extend a warm welcome the newly appointed MEC for Economic Development, Tourism and Environmental Affairs, MEC Sihle Zikalala. We congratulate him on his appointment and wish him success in this challenging portfolio. We have no doubt that he will steer the economy of KwaZulu-Natal to even greater heights. In conclusion, it has been a great privilege for me to work with our Board members, CEO and staff your support, loyalty, vision, knowledge and wisdom are greatly valued and appreciated... Ms CM Cronjé Chairperson 8

11 03 CEO s Review Mr ZA Gwala Chief Executive Officer The South African real gross domestic product (GDP) increased by 1,3% in The nominal GDP at market prices in 2015 was R4,0 trillion, which is R194 billion more than in KwaZulu-Natal s contribution to national GDP is 16% and is statistically the second largest GDP per region in South Africa. It is evident from the above figures that the economy of KwaZulu-Natal continues to emerge as a major contributor to the national economic climate, and continues to set the tone for the country s economic movement. NEW INVESTMENTS During the year under review, TIKZN successfully committed 6 new investment projects valued at about R1.98 billion to create more than new jobs within ilembe, ethekwini, Zululand, uthukela and umkhanyakude District Municipalities. The committed projects were in the field of the business process outsourcing and call centre industry, as well as infrastructure and tourism. The organisation assisted 44 companies with export promotion and market development initiatives and 121 new exports markets were unlocked for individual companies. TIKZN assisted 13 companies with export readiness interventions and our ongoing monitoring and support of these interventions will unlock further potential. TIKZN was also involved in a series of outbound missions as pro-active measure in promoting KwaZulu-Natal to target specific markets abroad. Outbound mission destination included Zambia, Zimbabwe, Bahrain, China and Italy. PARTICULAR HIGHLIGHTS OF THE YEAR UNDER REVIEW Seychelles Investment Seminar From the 30th of July 2015 to 2nd of August 2015 the country of Seychelles in the city of Mahe hosted the east3route prestigious event as the fourth member of this regional Trade and Investment development initiative. The successful investment seminar was a joint effort of TIKZN and other Investment Promotion Agencies in the member countries, which was aimed at providing a platform for engagement on economic and tourism activities in the east3route region. International Airline Summit The city of Durban once again put South Africa on the map by hosting the World Routes Summit for the first time on African soil. The world s largest gathering of airline route development professionals was held in Durban which saw the launch of three new direct airlines to King Shaka International Airport. Trade & Investment KwaZulu-Natal Annual Report 2015/16 9

12 Investment Promotion Executive Programme Global and regional competition in attracting foreign direct investment continues to intensify as traditional competitive advantages are eroded and information about investment destinations becomes easily accessible to investors. Several factors are important for remaining competitive in this constantly changing trade and investment environment. Amongst these, it is critical for investment promotion agencies to resource themselves with professionals who are highly competent and possess pertinent technical and a range of soft skills. With respect to technical skills, an investment promotion professional should have a comprehensive knowledge and understanding of development economics and the role of investment promotion as a lever for economic development. It is within this context that Trade & Investment KwaZulu-Natal signed a memorandum of understanding with the University of KwaZulu-Natal to offer an advanced degree programme focusing on development economics, trade and investment promotion and development finance. Our management team, together with all staff members have once again demonstrated tenacity in terms of the organisational output in ensuring that the province of KwaZulu- Natal remains as an investment destination, more than ever during the current fiscal cliff when the economic climate remains uncertain and requires vigilant spending. CONCLUSION Trade & Investment KwaZulu-Natal reaffirms its commitment to promote the investment opportunities which exist in this province and we seize every opportunity to market the KZN province as the investment destination going forward... Mr ZA Gwala Chief Executive Officer APPRECIATION Trade & Investment KwaZulu-Natal greatly appreciates the support it is accorded by the Board of Directors under the leadership of the Board Chairperson, Ms Ina Cronjé for the acumen collective wisdom and strategic leadership they have imparted during the 2015/16 financial year. 10

13 04 Statements of Responsibility and Confirmation of Accuracy for the Annual Report To the best of my knowledge and belief, I confirm the following: a) All information and amounts disclosed in the annual report is consistent with the annual financial statements audited by the Auditor-General. b) The annual report is complete, accurate and is free from any omissions. c) The annual report has been prepared in accordance with the guidelines on the annual report as issued by National Treasury. d) The Annual Financial Statements (Part E) have been prepared in accordance with the Generally Recognised Accounting Practice (GRAP) standards applicable to the Public Entity. e) The accounting authority is responsible for the preparation of the annual financial statements and for the judgments made in this information. f) The accounting authority is responsible for establishing and implementing a system of internal control that has been designed to provide reasonable assurance as to the integrity and reliability of the performance information, the human resources information and the annual financial statements. g) The external auditors are engaged to express an independent opinion on the annual financial statements. h) In our opinion, the Annual Report fairly reflects the operations, the performance information, the human resources information and the financial affairs of the public entity for the financial year ended 31 March Yours faithfully.... Mr ZA Gwala Mrs L Nyamande Chief Executive Officer Chief Financial Officer Date: 30 May 2016 Date: 30 May 2016 Trade & Investment KwaZulu-Natal Annual Report 2015/16 11

14 05 Strategic Overview Trade & Investment KwaZulu-Natal (TIKZN) is a trade and inward investment promotion agency established to promote the Province as a premier investment destination and to facilitate trade by assisting locally-based business enterprises access international markets. The organisation is listed under Schedule 3C of the PFMA headed by Chief Executive Officer (CEO) Mr. Zamo Gwala who reports to the Board of Directors appointed by the MEC for Economic Development, Tourism and Environmental Affairs. Operating in globally competitive markets, TIKZN is internationally acclaimed for positioning South Africa and KwaZulu-Natal as world class investment destinations while at the same time creating substantial and sustainable export opportunities for locally-based industries. Competition for Foreign Direct Investment (FDI) requires that TIKZN employs specialists and professionals who are at the cutting edge of their respective spheres including investment promotion, strategy, research, project management, finance, marketing and human resources. TIKZN is dedicated to creating an environment in the Province that is conducive to business development and that is attractive to both local and international investors and traders. Fortunately, KwaZulu-Natal has several distinct advantages that make it a prime trade and investment destination. KwaZulu-Natal (KZN) is home to South Africa s second largest economy and is situated on the east coast of South Africa and spans an area of km 2. The warm Indian Ocean lapping its shores together with its rich history and biodiversity, makes KwaZulu-Natal not only a prime tourist destination but also a significant hub for industrial development and a gateway into the rapidly emerging sub-saharan economies and markets. KwaZulu-Natal offers: a) Superb natural resources. b) Exceptional productive capacity. c) Highly developed first-world infrastructure. d) A valuable coastal location featuring two of South Africa s primary harbours - Durban, one of the busiest in Africa and Richards Bay, the deepest break bulk in Africa. e) The Dube Tradeport, home to the King Shaka International Airport (KSIA), and the first purpose-built Aerotropolis. f) An enviable lifestyle complemented by an idyllic climate. The Province offers an extensive range of economic activities, including capital intensive manufacturing, logistics, communications, finance, tourism and business services, as well as highly productive agricultural, forestry and fishing sectors. TIKZN actively promotes these advantages in an effort to leverage an increased share of the global investment market. Accordingly, the organisation sets out to facilitate the formation of new local and foreign investment, support retention and expansion of businesses already operating in the Province, and, provides professional after-care services in a concerted and ongoing bid to support sustainable economic growth in KwaZulu-Natal. 12

15 VISION, MISSION AND OBJECTIVES Vision To be the leader in developing and promoting export trade in KwaZulu-Natal and to position the Province as a premier destination for investment. This will be done on behalf of the Province of KwaZulu-Natal with a view to: a) Attract new investments. b) Facilitate export opportunities; c) Facilitate business retention and expansion programmes Ultimately the success of TIKZN will help support sustainable growth in KwaZulu-Natal for the benefit of all its citizens. Mission a) Identify and package investment opportunities in KZN b) Brand and market KZN as an investment destination c) Link opportunities to the developmental needs of the KZN community, and d) Ensure easy access to investment and export trade opportunities Objectives To meet shareholder and stakeholder expectations, TIKZN aims to deliver exceptional levels of professional services and support to clients and stakeholders through: a) The attraction, development and retention of high performing employees who have the skills and competencies required to manage key internal business processes including the marketing of TIKZN as an investment promotion agency. b) Enhancing the research and knowledge capabilities of TIKZN and making use of technology as an enabler for TIKZN s business. c) Ensuring compliance with corporate governance and financial reporting standards. d) Advocating for a conducive business environment in KZN and marketing the Province as a premier business destination. Key Services Trade & Investment KwaZulu-Natal undertakes a diverse range of key activities and the provision of support services designed to ensure the successful promotion of business investment and trade development. Such activities and support include: a) Joint venture facilitation. b) Business linkages between small and big businesses. c) The timely provision of relevant and reliable information to both potential and existing investors and traders. d) Assistance to both existing and new investors regarding applications for both investment and export marketing incentives. e) Applications for business permits for foreign investors. f) Negotiation for local government incentives on behalf of investors. g) The provision for project support and after-care services to investors. h) The provision for assistance to emerging international traders. i) International trade enquiry assistance. j) Locating suitable premises for investors. k) Assisting in securing project and operational finance. Trade & Investment KwaZulu-Natal Annual Report 2015/16 13

16 Strategic Partners TIKZN has, through a number of strategic partnerships, aligned itself with like-minded stakeholders with a view to synergistically and consistently promoting the province s attributes. Such linkages have seen a number of effective collaborations on projects, inclusive of in and outbound missions, events and promotional activities, all designed to leverage the expansion of the agency s overall business activities. Key strategic partners include: a) Public entities. b) Financial institutions. c) Tertiary educational and research institutions. d) Business, commerce and industry associations. e) The Business Chamber movement, at both provincial and national levels. f) Economic development agencies. g) Municipalities in KwaZulu-Natal. h) Other investment promotion agencies (national and international). i) Provincial and national government departments. TIKZN is equipped with the professional expertise, experience and national and international networks to maintain and grow KwaZulu-Natal s competitive advantage as the premier investment destination and the leader in export trade. 14

17 06 Legislative and Other Mandates TIKZN is listed under schedule 3C of the Public Finance Management Act (PFMA) the entity is required to comply with: Trade & Investment KwaZulu-Natal (TIKZN) Act No.5 of 2010; Public Finance Management Act (PFMA); National Development Plan (NDP); Treasury Regulations; Policies and directives of Department of Economic Development, Tourism and Environmental Affairs (EDTEA); Provincial and National Priorities; Memorandum of Understanding signed with various countries around the world; and Provincial Growth and Development Plan. Trade & Investment KwaZulu-Natal Annual Report 2015/16 15

18 07 Organisational Structure Board of Directors Ms CM Cronjè Chairperson Mrs LCZ Cele Deputy Chairperson Dr JJ Van Zyl Member Mr CS Gina Member Cllr DCP Mazibuko Member Dr VF Mahlati Member Dr NS Msomi Member Prof W Viviers Member Dr MAI Velia Member Mr GW Bell Member Mr MA Tarr Member 16

19 08 MANAGEMENT Structure ZA Gwala Chief Executive Officer NNC Gumbi Company Secretary NST Matjie Executive Manager: Strategy and Operations L Nyamande Chief Financial Officer IM Manyakanyaka Executive Manager: Corporate Services LBU Sibanyoni Executive Manager: Knowledge Management LG Bouah Executive Manager: Export Promotions RN Ngcamu Executive Manager: Investment Promotions AST Zuma General Manager: Marketing & Communication Vacant General Manager: Human Resources IS Hlongwana Acting General Manager: Investment Promotion D Pethan General Manager: Business Retention Trade & Investment KwaZulu-Natal Annual Report 2015/16 17

20 PART B PERFORMANCE INFORMATION ~ Ridgeside, Durban 18

21 09 OVERVIEW OF THE TRADE AND INVESTMENT ENVIRONMENT Background The financial year 2015/16 was quite an eventful one, reversing almost all the gains the developing countries had enjoyed since the rise of the South. This was fuelled mainly by a slow return to normalisation in the United States, when for the first time since 2008, the US Federal Reserve Bank revised its lending rate from % to %. This brought to an end an era of unprecedented expansionary financial stance in the world s largest economy. The global economy has also been ailing, showing signs of weakness last seen during the global recession. For the first time since 2010, the value of global exports declined in 2015 compared to the previous year. The crude oil price, which started falling in January 2015 continued to plummet to below US$40 per barrel the lowest price in 15 years sending oil-exporting countries, particularly resource-cursed African states reeling, severing government revenues and forcing strict fiscal consolidations and extreme debt management. As expenditures exceeded revenues, credit ratings agencies also breathed down the necks of the cash-strapped governments, forcing the latter to practicalise debt management. With China hope of the world continuing on its new growth model away from excessive investments to manufacturing and services, that country s trading partners particularly African ones are being dealt a double blow as their export demand continue to suffer, adding more pressure to their foreign exchange revenues already severed by low commodity prices. In South Africa, the falling demand for our commodities particularly steel, which has be crucial to China s investment drive and the subsequent fall in steel revenue, sent most companies in the manufacturing of steel industry reeling. This was coupled with increased imports of the same products from China, forcing the industry to secure government intervention in an attempt to protect the ailing sector. The tug-of-war between South African boiler farmers and their American counterparts threatened to bring to an end South Africa s inclusion in the AGOA (African Growth and Opportunity Act), sending waves of despair through the entire economy, since AGOA affords 6,400 tariff lines from Africa duty-free entry to the US market. In the midst of all these upheavals, the South African government narrowly escaped possible sovereign credit rating downgrade by the major credit ratings agencies (Moody s, S&P Global and..). While it could have simply possibly blamed the downgrade on the weak external demand, the South African government implemented painful but necessary fiscal discipline. As if that was not enough, the country and the entire Sub-Saharan African region was confronted by the worst drought in decades, which has seriously decimated output in the agricultural sector, sending food inflation through the roof and causing a recession among certain sectors of the economy, particularly manufacturing sector which has a strong backward linkage to the agricultural sector. As a result, the South African economy is faced with a possible recession this year, with an estimated growth rate of 0.2%. Trade & Investment KwaZulu-Natal Annual Report 2015/16 19

22 Trade analysis Markets The World Trade Organisation estimates that goods worth US$16.5 trillion changed hands in 2015, compared to US$18.9 trillion in The world s largest destination markets in 2015 were the United States of America ($2.31tr or 14%), China ($1.68tr), Germany ($1.06tr), France (leapfrogging the UK and unseating Japan at $651.50bn or 3.9%), United Kingdom ($687.27bn), and all the other markets as depicted in Figure. Figure : World s largest destination markets, 2015 (% share of world imports) Canada 2.5 Italy 2.5 Korea, Republic of 2.6 Hong Kong, China 3.3 Japan 3.8 United Kingdom 3.8 France 3.9 Germany 6.4 China 10.2 USA Source: TradeMap (2016) The world s largest source markets were China ($2.28tr), United States of America ($1.50tr), Germany ($1.33tr), Japan ($625.02bn), France ($573.06bn), Korea Republic ($526.9bn), Netherlands ($672.43bn), Hong Kong, China ($498.56bn), the United Kingdom ($465.09bn) and Italy ($458.75bn). Products Electrical, electronic equipment ($2.48tr or 15.1%); Machinery, nuclear reactors, boilers, etc ($1.99tr or 12%); Mineral fuels, oils, distillation products, etc, ($1.87tr); Vehicles other than railway, tramway ($1.32tr); Plastics and articles thereof ($557.93bn); Optical, photo, technical, medical, etc apparatus ($536.33bn); Pearls, precious stones, metals, coins, etc ($515.82bn), Pharmaceutical products ($513.73bn), Organic chemicals ($398.74bn), and Iron and steel ($339.0bn) were the most traded import products (Figure ). 20

23 Figure : World s most traded products, 2015 (% share of world imports) Iron and steel 2.1% Organic chemicals 2.4% Pharmaceutical products 3.1% Pearls, precious stones, metals coins, etc Optical, photo, technical, medical, etc apparatus 3.1% 3.3% Plastics and articles thereof 3.4% Vehicles other than railway, tramway Machinery, nuclear reactors, boilers, etc Electrical, electronic equipment Mineral fuels, oils, distillation products, etc 8.0% 11.4% 12.0% 15.1% Source: TradeMap (2016) 0% 4% 8% 12% 16% 20% South Africa s overview South Africa was the world s 35th largest import market, importing goods worth US$79.59 billion in 2015, a decrease of R20.3 billion from US$99.89 billion reported in The country was the 39th largest export market (a notch higher than in 2014), supplying the other markets with merchandise valued at US$69.63 billion, which value was a decline from US$90.61 billion reported in While the South African exchange rate of the rand continued to slide tipping around R20/ USD, the country s trade balance, which could otherwise have benefited from the cheap currency and boosted exports, worsened to US$9.96 billion in 2015, from US$9.28 billion in 2014, which itself was wider than US$8.33 billion recorded in This could partly be explained by a decrease in demand for the country s goods by its major export markets such as China, the US and Japan. In addition, South Africa s rand-based trade balance was also a wider R billion, from R billion in 2014, mainly because of the country s export basket which is at least 48.3% primary products, usually priced in US dollars, inhibiting the country from taking advantage of the weaker currency. Products and markets South Africa s leading export markets remained China (R73.6bn), the US (R66.6bn), Germany (R53.7bn unseating Japan, Botswana and Namibia), Namibia (48.8bn), Botswana (48.1bn), Japan (R46.2bn), India (R39.9bn), the United Kingdom (R38.8bn), Belgium (R29.1bn unseating Mozambique), Zambia (R27.8bn) and Mozambique (R27.2bn). The country s export products were still (i) pearls, precious stones, metals & coins, etc (R132.5bn or 15% of total of which raw platinum was R82.3bn, raw gold R25.4bn, and raw diamonds R20.3bn) and (ii) Mineral fuels, oil & distillation products which contributed R103.7 billion, led by coal (R53.9bn), and petroleum oil valued at R35.4 billion destined for Ship Shores and Bunkers, Botswana, Namibia, Swaziland, Zambia and Lesotho; (iii) exports of vehicles (R101.9bn of which cars fetched R60.0bn, trucks and bakkies fetched R28.3bn, and parts of motor vehicles earned R7.2bn); and (iv) exports of ores, slag and ash which amounted to some R87.01billion made up of iron ores (R33.6bn), chromium ores and manganese ores (R15.3bn each), nobium (R5.5bn) and titanium ores (R4.2bn). Trade & Investment KwaZulu-Natal Annual Report 2015/16 21

24 The KZN overview Quantec estimates that in 2015, the provincial outbound trade was valued at R116.9 billion, from R111.0 billion in At this level, the provincial trade was 11.5% of the South Africa total of R1.0 trillion in the same year. For the first time since 1995 (the earliest year for which provincial trade data are available), KwaZulu-Natal stood as South Africa s 4th largest exporting province after Gauteng, North West and Western Cape; KZN has always been the third largest source of South African exports. Products Unmistakably, KZN export products included motor vehicles for the transport of goods, raw aluminium, flat-rolled stainless steel, and chemical wood pulp dissolving grades (whose export value jumped from R3,492 in 2014 to R6.9bn). Titanium ores, motor vehicles for the transport of persons, aluminium plates, and niobium tantalum vanadium zirconium ores, were also high on the province s list of exports. Large shocks were recorded in the exports of monitors and projectors not of television reception (whose value shrank from R1.6bn in 2014 to R196.9m in 2015), ferrous waste and scrap of iron and steel (R1.2bn to R894.9m), and ferro-alloys (R1.0bn to R801.8m). Markets The province s leading export markets remained the United States of America (R10.62bn from R10.65bn), China (R7.7bn from R4.9bn), Namibia (R7.4bn from R6.9bn), the United Kingdom (R5.98bn from R5.14bn), Japan (R5.73bn from R6.09bn), Botswana (R4.60 from R4.99bn), Netherlands (R4.21bn from R3.93bn), India (R4.13bn from R2.14bn), Germany (R3.66bn from 2.73bn), and Mozambique (R.45bn from R3.64bn). It is quite evident here that China is fast becoming KZN s main destination market as it is for the country. Investment analysis Inflows The United Nations Conference on Trade and Development (UNCTAD), estimates that global foreign direct investment (FDI) flows jumped 36% in 2015 to an estimated US$1.7 trillion, the highest level since the global economic and financial crisis. A 90% surge in FDI targeting developed economies was the principal factor behind the global rebound, with strong growth in flows reported in the European Union (EU) as well as the US, where FDI reportedly quadrupled. As a result, the structure of FDI by economic grouping tilted in favour of the developed countries, which now account for 55% of global FDI in 2015 (or UD$936bn). Nonetheless, the impressive growth in global FDI flows and those targeted for the developed countries was largely due to mergers and acquisitions (M&As), with only limited contribution from greenfield investment projects cross-border M&As increased by 61% in 2015, while the overall value of announced greenfield investment projects registered little change or even a decline from the previous year (UD$439.4bn vs US$459.1 in 2014). In addition, UNCTAD attributes a part of FDI flows to corporate reconfigurations involving large values in the financial account of the balance of payments but little movements in actual resources this is typical of another financial engineering similar to the one that sent the world nose-diving in

25 Table 1: FDI inflows, cross-border M&As and announced greenfield projects, by region and major economy, Region / economy FDI inflows a Growth rate (%) Cross-border M&As Growth rate (%) Announced greenfield project values Growth rate (%) World Developed economies European Union North America Developing economies Africa Latin America and the Caribbean Developing Asia Transition economies Adapted from UNCTAD (2016); a Preliminary estimates According to UNCTAD, developing countries saw their FDI reaching a new high of US$741 billion, 5.3% higher than US$703 billion reported in Developing Asia, with its FDI inflows in excess of US$1/2 trillion, remained the largest FDI recipient region in the world, accounting for a third of global FDI inflows. FDI flows faltered in Africa and Latin America and the Caribbean (LAC), a response to plummeting prices of their principal commodities exports. There was also a decline in announced greenfield investments into developing countries, a sigh of growing weakness in multinational enterprises (MNE s) capital expenditures. Notwithstanding another wave of M&A deals and corporate reconfigurations, UNCTAD expects flows to decline in 2016, in tandem with the weak global economy, volatility of global financial markets, weak aggregate demand and a significant deceleration in some large emerging market economies. South Africa s renewable energy still a darling On the domestic front, South Africa attracted a total of 128 foreign direct investment (FDI) projects in 2015 valued at R57.1 billion. The highest number of FDI projects as tracked by the Financial Times FDI Markets was recorded in Gauteng (55), followed by the Western Cape (24) and KwaZulu-Natal (15). In rand values, Northern Cape attracted the highest at R21.7 billion mainly in the renewable energy space followed by Gauteng (R10.1 billion) and the Eastern Cape (3.5 billion). While KZN did not perform as well as the other provinces in attraction of FDI in 2015, the province performed quite impressively, recording some 15 known FDI projects into its shores bringing the total number investments attracted since between 2003 and 2015 to 109. An additional four (4) known FDI projects into the province were announced in the first quarter of Trade & Investment KwaZulu-Natal Annual Report 2015/16 23

26 CONCLUSION It is evident once again that the global economy is still weak and its growth volatile. However, the developing economies are still the place to do business, as witnessed by a high number of announced greenfield investment projects, in the presence of financial engineering taking place again in the west. In relation to investment inflows, Africa is still not faring well, and needs to work on the investment environment to make international investment feel at home. The fluctuation in prices of commodities is more than a wakeup call for Africa to diversify investments into other sectors so as to avoid economic excessive volatility. This goes hand in hand in investing in the continent s human capital for skills transfer, and technological infrastructure for increased efficiency and profitability, and the general wellbeing of all Africans. 24

27 10 OVERVIEW OF THE ORGANISATIONAL ENVIRONMENT The organisation s operations are managed by the CEO, there are executive managers appointed to each TIKZN Business Unit reporting directly to the CEO. Currently the Business Units are: a) Finance (including Supply Chain Management). b) Corporate Services (incorporating Human Resources and Marketing and Communications). c) Investment Promotion and Facilitation (including Business Retention and Expansion). d) Export Development and Promotion. e) Knowledge Management (including ICT). f) Office of the CEO (which includes the Gauteng Office, Policy Advocacy and Strategy). During the year under review, the TIKZN budget approved by the Department of Economic Development, Tourism and Environmental Affairs for the current medium-term expenditure framework was R73.4 million and includes an additional R4 million approved by Treasury for the Technical Assistance Fund (TAF). The funds are managed and spent in line with the Public Finance Management Act (PFMA) and Treasury Regulations. The board held its strategic plan for and aligned TIKZN s vision, mission and strategic objectives to the five-year plan. KEY POLICY DEVELOPMENTS AND LEGISLATIVE CHANGES There have been no policy changes to the entity s mandate. Strategic Outcome-Orientated Goals The following are strategic performance objectives endorsed by the TIKZN board: a) Improve market visibility and increase brand awareness of TIKZN services locally and internationally. b) Comply with national and provincial Treasury regulatory reporting standards. c) Improve human capability to create an effective and efficient organisation. d) Improve organisational effectiveness and efficiency through the use of information technology. e) Promote and facilitate new fixed investments in the KwaZulu-Natal province. f) Promote and develop exports from the KwaZulu-Natal province. g) Advocate for a conducive business environment in the KwaZulu-Natal Province. h) Enhance TIKZN research and knowledge capabilities to effectively disseminate comprehensive business intelligence to stakeholders. i) To facilitate trade and investment opportunities in the KwaZulu-Natal Province (Gauteng Office). Trade & Investment KwaZulu-Natal Annual Report 2015/16 25

28 The key organisational strategic objectives are encapsulated in the following four programmes with measurable indicators: a) Corporate Services (including Executive Management) b) Investment Promotion and Facilitation c) Export Development and Promotion d) Knowledge Management The achievements made in terms of the above strategic outcome-orientataed goals are outlined under performance information section. 1. MARKETING AND COMMUNICATIONS Performance Indicator Number of marketing campaigns implemented to promote TIKZN and the KZN province Number of public relations programmes implemented to enhance the image of TIKZN and the Province. Number of advertising campaigns implemented showcasing success stories Improve market visibility and increase brand awareness of TIKZN s services locally and internationally (Marketing and Communications) Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations New In order to maximise the marketing of the province TIKZN, with strategic partners, increased in-conversation Sessions into Gauteng and the Western Cape. New As a result of TIKZN s efforts in building relations with the media, this resulted in additional PR coverage. New TIKZN intensified advertising, leveraging of larger platforms such as east3route and Export Week and improved relations with the media. 2. FINANCE Performance Indicator Comply with national and provincial treasury regulatory reporting standards. (Finance) Actual Achievement 2014/15 To achieve a clean audit Unqualified Audit Planned Target 2015/16 Clean Audit Actual Achievement 2015/16 Variance from Target 2015/16 Clean Audit Target Achieved Target Achieved Comment on Variations Percentage of BEE suppliers in procurement spend 84.5% 75% 90.25% 15.25% Focus has been placed on developing up and coming businesses and ensuring that suppliers are rotated to give opportunity to all companies that bid for contracts. 26

29 Performance Indicator Percentage of internal audit findings resolved prior to AG audit Percentage of risks identified and properly mitigated or resolved (As identified through the risk management process and documented in the risk register) Comply with national and provincial treasury regulatory reporting standards. (Finance) Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations 93% 90% 93% 3% Concerted effort was made to ensure that the internal audit findings were resolved 94% 90% 93% 3% Concerted effort was made to ensure that the risks identified have been properly mitigated or resolved 3. HUMAN RESOURCES Performance Indicator Improving human capital capability to create an effective and efficient organisation. (Human Resources). Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations Staff performance rating 70% 75% 70% 5 Due to limited resources. i.e budget restrictions and compliance to the cost cutting measures, vacant posts could not be filled. Number of training programmes implemented to enhance critical competencies Number of staff that participate in secondment and staff rotation programmes Number of programmes implemented by the change management facilitators Number of employee wellness programmes implemented New Continuous improvement in critical skills is important to the organisation. This resulted in additional programmes being implemented New 4 4 Target Achieved Target Achieved New An additional session was implemented by the change management facilitators to enhance the change management programme New 6 6 Target Achieved Target achieved Trade & Investment KwaZulu-Natal Annual Report 2015/16 27

30 4. INFORMATION AND COMMUNICATION TECHNOLOGY Performance Indicator Improve organisational effectiveness and efficiency through the utilisation of Information Technology Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations Percentage of IT systems uptime and availability 99.9% 95% 99.86% 4.86% Systems uptime and availability with planned maintenance windows outside of normal working hours Number of successfully implemented projects arising from revised IT strategy and governance framework New 5 (phase 1) 8 3 An increased effort was made to finalise the tasks from the implementation plan which resulted in a positive increased target Percentage of IT audit findings resolved 82.4% 80% 84.6% 4.6% 11 out of 13 audit findings cleared with 2 still in progress Percentage of IT requests addressed within specified SLA turnaround time with internal business units Number of projects implemented to enhance the organisation s digital presence 100% 90% 100% 10% 100% queries resolved timeously New Target exceeded due to new initiatives which were implemented in order to improve the organisation s digital presence 5. INVESTMENT PROMOTION AND FACILITATION PROGRAMME Performance Indicator Promote and facilitate new fixed investments in the KZN Province (Facilitation of Pre-investment opportunities) Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations Rand value of new investment projects committed. R1,68bn R1,4bn R1,981bn R581m An additional R581 million investment was achieved through high value property development projects of R1,2 billion. These were Tongaat Hulett Developments Isibaya Node 1 and umhlanga Ridgeside Number of potential jobs created through new projects The target was exceeded due to high job creation from Business Processes Outsourcing investments. This sector alone contributed about jobs during the financial year. Number of new KZN investment opportunities facilitated for stakeholders in conjunction with SEZs, industrial hubs, district and municipal IPAs Intensified engagements and positive co-operation received from SEZs and municipals resulted in 18 additional new investments opportunities facilitated. 28

31 Performance Indicator Promote and facilitate new fixed investments in the KZN Province (Facilitation of Pre-investment opportunities) Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations New projects added to the investment pipeline (49) Due to human resources challenges experienced, including resignations of 4 Project Managers during the financial year, this impacted negatively on the achievement of the set target. Number of investment attraction missions facilitated (inward and outward) Number of key stakeholder platforms in partnership with KZN Big 5 investment ambassadors, i.e. FDE, FDI, Africa-Singapore, etc. New The target was exceeded due to an increased interest and requests from diplomatic missions and trade agencies for TIKZN to host delegations from their respective countries. New 5 5 Target met Target met 6. BUSINESS RETENTION AND EXPANSION Performance Indicator Rand value of successful company expansion projects committed. Develop and retain KZN Businesses. (Facilitation of post-investment opportunities) Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations New R400m R509,33m R109,33m The target was exceeded as a result of the increase in company expansion projects. These are categorised in the priority sectors, in which government incentives had been accessed for the purpose of improving business efficiencies. Number of jobs created from company expansions More jobs were created from company expansions which were categorized in the priority sectors, where incentives were accessed for the purpose of improving business efficiencies. Number of companies successfully assisted with backward business linkages Number of Municipality BRE programmes implemented. New The target was exceeded due to an increased awareness of TIZKN offerings which resulted in an increased number of companies seeking assistance with backward business linkages (4) The target was not achieved. In some instances TIKZN had to spend more time in supporting municipalities to develop a Municipality Business Retention and Expansion Policy Framework. This had an impact on the roll-out and implementation of the programme. Trade & Investment KwaZulu-Natal Annual Report 2015/16 29

32 Performance Indicator Number of Business development programmes Implemented for companies with strategic partners Number of business permits, incentive and finance applications facilitated. Develop and retain KZN Businesses. (Facilitation of post-investment opportunities) Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations The support and commitment received from strategic partners such as the Chambers of Commerce and Industry, resulted in an increased number of business development programmes facilitated Improved relationships with entities such as the DTI, IDC, KZN Growth Fund and NEF resulted in increased number of permits, incentives and finance applications facilitated. 7. EXPORT DEVELOPMENT AND PROMOTION PROGRAMME Performance Indicator New export markets and intra-trade accessed for KZN companies Number of market access programmes facilitated (BRICS, Africa, traditional and emerging) Number of KZN companies assisted with provincial and national export incentives (SSAS, EMIA, etc) Number of current KZN export companies that successfully completed the export development programme Number Export Readiness programmes for emerging exporters implemented Number of export awareness promotional sessions implemented (export week, export breakfast, lunches, launches) Promote and develop exports from KZN Province (Export Promotion) Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations TIKZN exceed the target by 57 due 4 Sector Specific Assistance Scheme (SSAS) application which were approved by DTI and further collaborated with three additional stakeholders providing more opportunities for KZN companies Markets (178 Companies) (48) markets The wording of this indicator was incorrect and should have been measuring the number of companies rather than markets. In total, 178 KwaZulu-Natal companies were provided access to 22 foreign and inter-provincial markets Constant support provided to KZN companies throughout the year has contributed to TIKZN exceeding this target The content of the export development programmes offered by TIKZN has resulted in attracting more KZN companies. This resulted in the target being exceeded In order to increase the offering to emerging exporters, TIKZN introduced an added Export Readiness programme called Export Essentials TIKZN exceeded the target by introducing Export Awareness programmes in municipalities 30

33 8. POLICY ADVOCACY Performance Indicator Number of interventions facilitated through the Project Brokering Unit Number of inter-governmental relations activities facilitated Number of policy guidelines disseminated and round table sessions hosted Number of formal engagements with UN/International Agencies (Trade & Investment related) Number of development programmes implemented in partnership with SALGA and Municipalities (e.g. Development Agencies) Actual Achievement 2014/15 Advocate for conducive business environment in the KZN province Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations The PBU has intervened in key government and private sector projects that were delayed as a result of various reasons. There was an increase in the projects facing challenges As a result of closer engagements and working relations with the Diplomatic Corps, there was an increase in this target. New Additional sessions were: Policy session on the Immigration Regulations was hosted, where Deputy Minister Chohan was guest Speaker. Session on governance within District Development Agencies hosted with COGTA. New An additional session was hosted with the Polish Trade Commissioner. New 6 6 Target Achieved Target Achieved 9. KNOWLEDGE MANAGEMENT Performance Indicator Number of macro-economic research reports developed and disseminated Number of sector analysis reports developed and disseminated Number of product opportunities packaged for export and disseminated Enhance TIKZN research and knowledge capabilities to effectively disseminate comprehensive business intelligence to stakeholder. Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations The target was exceeded due to additional research work delivered The Overall target was exceeded due an additional sector analysis report which was completed Target Achieved Target Achieved Trade & Investment KwaZulu-Natal Annual Report 2015/16 31

34 Performance Indicator Number of high impact investment opportunities packaged and disseminated in conjunction with Investment Promotion and relevant stakeholders Enhance TIKZN research and knowledge capabilities to effectively disseminate comprehensive business intelligence to stakeholder. Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations Three additional high impact projects were packaged, hence the over achievement on this deliverable. Number of sector strategies developed New Target Achieved 10. THE GAUTENG OFFICE Performance Indicator Number of qualified trade and investment leads generated and handed over from Gauteng Number of international organisational / foreign Gauteng hosted investor sessions Number of inward investment and buying missions recruited for KZN Number of business development initiatives undertaken in strategic foreign markets Number of sector-specific business linkage sessions hosted for KZN companies Facilitate trade and investment opportunities into the KZN Province (Gauteng Office) Actual Achievement 2014/15 Planned Target 2015/16 Actual Achievement 2015/16 Variance from Target 2015/16 Comment on Variations As a result of an increase in the presence of the office in Gauteng, the organisation realised additional qualified leads The Diplomatic relations with Foreign Missions is intergral to our presence in Gauteng. Due to increased activities this target has been exceeded TIKZN s marketing of KwaZulu-Natal to delegation organisers and missions has been successful. This resulted in increased incoming missions recruited for KwaZulu-Natal Target Achieved Target Achieved In order to address the provincial priorities, the organisation hosted additional sector-specific sessions to promote the attractiveness of the province to investors. 32

35 11 Trade & Investment KwaZulu-Natal Programmes MARKETING AND COMMUNICATIONS Introduction The programme, Marketing and Communications, provide support to TIKZN marketing needs, such as the corporate brand, public relations, event management, stakeholder engagements and general marketing. The unit supports platforms for the branding and positioning of TIKZN domestically and internationally. Regional Marketing Connecting Africa The role of the Public Private Partnership is an integral platform in promoting and marketing the province of KwaZulu-Natal as an investment destination. During the year under review, TIKZN in partnership with Tourism KwaZulu-Natal and East Coast Radio collaborated in a campaign called Connecting Africa. This campaign was aimed at promoting the province as a tourism, trade and investment destination in Gauteng, Zambia and Zimbabwe. This platform further expanded trade relations within the participating countries. east3route Investment Seminar and the east3route Expedition From the 30th of July 2015 to 2nd of August 2015 the country of Seychelles in the city of Mahe hosted the east3route prestigious event as the fourth member of this regional trade and investment development initiative. The theme of the 2015 Investment seminar was Exploring Economic Growth through cross Border Trade. Following its theme, the seminar opened by tabling the economic report for four economies and provided a background and direction to the areas of focus. The following topics were presented and discussed, Regional Indicative Strategic Development Plan; Blue Economy unlocking economic value through ocean world; Integrated Airlift Strategy and its impact on Tourism Development. The event received media coverage from South Africa, Seychelles, Mozambique, Swaziland, Zimbabwe and Zambia. Domestic Marketing District Municipality Road Shows Furthering the endeavors that seek to unlock the investment opportunities across the province, the entity continues to stamp authority by partnering all spheres of government, particularly the District Municipalities which are the foundation of investments across the province. During the period under review, TIKZN visited three districts in an effort to improve relationships and to promote its services to local business and the public sector. The municipalities visited were Umkhanyakude, ilembe and Zululand Districts. These events enjoyed full municipal and development agency support including support from business representatives within the regions. Trade & Investment KwaZulu-Natal Annual Report 2015/16 33

36 In-Conversation with KwaZulu-Natal TIKZN in collaboration with its strategic development partners; Dube Trade Port (DTP), Durban Chamber of Commerce and Industry (DCCI), KwaZulu-Natal Growth Fund (KZNGF) and Richards Bay Industrial Development Zone (RBIDZ), hosted a business information sharing session in Gauteng and Cape Town. These sessions were aimed at collectively promoting the province of KwaZulu-Natal as an eminent trade partner, as well as assisting KwaZulu-Natal-based companies to export. Stakeholder Collaborations Stakeholder relations continue to be a key focus in development and maintaining strategic collaborations within public entities. TIKZN approached certain strategic stakeholders, namely; DTP, RBIDZ, KwaZulu-Natal Film Commission, DCCI and the Newcastle Chamber for barter deal exchanges using the revamped external newsletter Emnothweni to maximise media advertising. This was welcomed by these stakeholders as it widened the reach for advertising messages. Africa Frontier Forum Frontier Advisory Deloitte is the Africa research, thought leadership, insights and advisory arm that assist clients to improve their competitiveness, as well as navigate the opportunities and challenges in the African continent and emerging market economies. TIKZN partnered with Frontier Advisory Deloitte in hosting an Africa Frontier Forum thought leadership discussion. This event focused on the Agri-Business in KZN. East Coast Radio / GIBS Partnership TIKZN s ongoing partnership with the East Coast Radio Station is proving a valuable platform. In particular, TIKZN s sponsorship of the annual Gordon Institute of Business (GIBS) Executive Business Breakfast has created widely-known and highly respected stakeholder session, enabling the organisation to access a wide audience and increase the potential market with which it communicates INVESTMENT PROMOTION This programme is three-fold in that it consists of: Investment Facilitation - responsible for investments attraction into the province of KwaZulu-Natal; Destination Marketing - that promotes the province of KwaZulu-Natal globally as a premier investment and trade destination. Business Retention and Expansion - that supports and facilitates business retention and expansions throughout the province. INVESTMENT FACILITATION The implementation of TIKZN Marketing Strategy and Investment Attraction Plan yielded positive outcomes resulting in the growth on fixed investments and job creation. Through extensive promotion and facilitation initiatives, TIKZN committed nine new investment projects worth R1,98 billion as depicted below: 34

37 a) Committed Projects for 2015/16 FY No Project Name Location Rand Value Potential Jobs 1. Viva Contact Centres ilembe District R170m Call Insight Quality Assurance ethekwini Municipality R140m Teledirect Contact Centres ethekwini Municipality R250m Active Blue Trading Zululand District R47,3m Ladysmith Private Hospital uthukela District R98m Sibaya Node 1 ethekwini Municipality R1,2bn Yiting Africa (Pty) Ltd ilembe District R50m Royal Tembe Safari Lodge umkhanyakude District R11m Ladysmith Crushing Stone uthukela District R15m 20 Totals R1,98bn DESTINATION MARKETING a) Inward Missions Part of TIKZN s facilitation and promotion role is to generate credible leads and to attract inward buying missions that will expose investment opportunities and products for export. This is achieved by hosting business delegations and ensuring strategic links with foreign embassies. Twelve inward missions were hosted in the year under review. These included: INWARD MISSIONS Country Event Name Outcome Multiple Countries Zambia & Zimbabwe China United States of America World Routes 2015 KZN Export Week 2015 Guangdong-KZN Bilateral Cooperation Seminar Milwaukee Wisconsin Mission to KwaZulu-Natal More than 175 airlines and 2500 delegates from the airline, airports and related sectors on all continents came to Durban to participate. The Province of KwaZulu-Natal concluded agreements with four airlines for flights to Durban: Ethiopian, Qatar and Turkish Airlines with a regional carrier from Lusaka, Proflight also confirmed the new route. TIKZN hosted South Africa s FER to Harare, the CEO and Public Relations Head of ZimTrade together with two companies from Zimbabwe as well as eight companies from Zambia participated in the event. TIKZN hosted 34 companies together with 5 representatives of CCPIT in Durban. This was part of a larger delegation comprising an Official Delegation headed by the Vice-Governor of Guangdong and a delegation from the Guangdong Tourism Bureau. The two provinces signed cooperative agreements as well as Durban Tourism and Guangdong Tourism, and Shree Properties, a local management company. TIKZN, hosted a delegation of businesses to KZN from 23 to 26 February Business round tables in Durban and Richards Bay with public and private sector representatives and a tourism component to Hluhluwe Game Reserve. The delegation also participated in the Umhlathuze Economic Development, Transformation and Job Creation Summit. Trade & Investment KwaZulu-Natal Annual Report 2015/16 35

38 INWARD MISSIONS Country Event Name Outcome United Kingdom United States of America UKTI Northeast Powerhouse Mission to KZN AGCO Agricultural automotive b) Outward Missions TIKZN assisted in coordinating a cocktail reception for the UK Delegation and the new United Kingdom Trade and Investment (UKTI) Trade Commissioner for Southern Africa. A briefing session with delegates was held and Companies engaged in one-on-one business meetings at the Durban Chamber and also conducted site visits. TIKZN hosted AGCO agricultural tractors and implements manufacturer. The company is looking to invest in KZN for the manufacturing of tractors. TIKZN coordinated and facilitated numerous outward missions in the period under review. These included the following: OUTWARD MISSIONS Country Event Name Outcome Zambia & Zimbabwe Bahrain Malta China Italy China Technical Visit Export Facilitation and Investment Attraction Mission Routes Middle East & Africa Regional Conference Commonwealth Business Forum Free Trade & Special Economic Zones Summit Due Diligence on Inoxa Industries Due Diligence on SA Health Condom Manufacturing This mission was a technical visit to Harare and Lusaka to meet with the City and National Chambers in each city as well as the Export and Investment Development Agencies in each city. These meetings were undertaken with support of the SA Embassy in Zimbabwe and the SA High Commissioner in Zambia. This outward mission was conducted as part of the Province s Airline Route Development activities, as part of the ongoing campaign to engage with Airlines and other Aviation Stakeholders in support of KwaZulu-Natal s ambitions to secure direct air connectivity to Durban. The entity participated in a Delegation led by the Durban Chamber of Commerce to the Commonwealth Business Forum (CBF) in Malta. The objective of the mission was to develop relationships and explore the Forum as a vehicle for leveraging of business opportunities during the Commonwealth Games Durban in This outward delegation included the Mayors of Uthukela and Umnambithi together with EDTEA representatives from the District and Local Municipalities. The visit included site visits in Beijing and Shanghai to operational Economic Zones. The major part of the mission was the participation in the Free Trade & Special Economic Zones Summit in Shanghai on the 9 and 10 December This trip was conducted by potential funders as part of due diligence process, of the equipment that they needed to procure for the manufacturing plant in Richards Bay. The intention was to conduct a project due diligence in a similar production plant in China: Guilin City. SA Health sister company to HBM Healthcare, Inc and KZN Growth Fund participated on the mission. 36

39 BUSINESS RETENTION AND EXPANSION The Business Retention and Expansion Unit (BREU) focuses on developing and implementing programmes aimed at retaining and expanding foreign and domestic investments in KwaZulu-Natal. Such initiatives enable businesses to improve its profitability and to reaffirm its commitment to remain invested in KwaZulu-Natal. Company Retention and Facilitation Services In the quest of becoming Knowledge Partner in Business, TIKZN s professional support services, networks and repository of cutting edge data has proven to be of significant value to businesses seeking to explore the full spectrum of KwaZulu-Natal s competitive advantages. The post-investment support to companies had resulted in R509,33m in expansion projects, job creation opportunities and 35 companies were assisted with business linkages. Expansion Projects Facilitated In 2015/16 FY No Project Name Location Rand Value Potential Jobs 1. 1st Call Group ethekwini Municipality R3m Laser Junction ethekwini Municipality R55m President Plastics Newcastle Municipality R9,5m - 4. Prime Talk ethekwini Municipality R25,7m Global Bag Manufacturers ethekwini Municipality R8,4m Enermous Investments Msunduzi Municipality R5,2m Morgancoat ethekwini Municipality R4,1m Rio Ridge Property umngeni Municipality R3,1m 5 9. Iqlaas Foods ethekweni Municipality R15m GPT Concrete Products South Africa (Pty) Ltd Emnambithi / Ladysmith Municipality R125m SN Canvas ethekwini Municipality R3m Union Canvas ethekwini Municipality R3m Tartan Timbers (Pty) Ltd umhlatuze Municipality R100k Allimor Footwear CC Emnambithi / Ladysmith R12m 200 Municipality 15. Hikma Marketing T/A Hikma Emnambithi / Ladysmith R94,8m 138 Soap Manufacturing Municipality 16. Mninizo Co operative ethekwini Municipality R2m Al-Hamd Foods CC ethekwini Municipality R7,1m Brace Able Manufacturing ethekwini Municipality R10,2m Jennings Fine Foods ethekwini Municipality R1,5m Solar PriMeg ethekwini Municipality R77m Edamame Development ethekwini Municipality R15m 200 Programme 22. Astrum Peripherals ethekwini Municipality R4,1m Fairpoint Investments CC ethekwini Municipality R2,73m 6 Totals R509,33m Trade & Investment KwaZulu-Natal Annual Report 2015/16 37

40 Business Development Programmes with Strategic Partners TIKZN recognises that there are many key stakeholders and industry associations which have similar and common objectives of assisting companies with business growth and development. In this regard, TIKZN in collaboration with key stakeholders and industry associations provided the platform to support companies business development opportunities in areas such as identifying potential dynamic business partners that could bring new expertise, identification of new technologies applicable in specific sectors, and providing linkages between small-size firms and large scale firms. In total 14 programmes were held with strategic partners including the following initiatives: TIKZN and National African Federation of the Building Industry (NAFBI) collaboration in order to publicise the Contractors Warehouse Programme implemented by NAFBI. National Localisation Indaba 2015 (TIKZN supported initiative with Durban Automotive Cluster). Production Incentive Workshop (TIKZN in collaboration with DTI and Clothing/Textile Bargaining Council) held in Durban, Newcastle and Ladysmith. Durban Chemicals Cluster Imbizo 2015 (TIKZN supported initiative with Durban Chemicals Cluster). Durban Boat and Lifestyle Show 2015 (TIKZN collaboration with ethekweni Maritime Cluster and SASSDA). Integrated Sustainability Management Workshop - Durban. TIKZN collaboration with NAFBI in Supplier Development Programme in Empangeni, Ladysmith and Durban. Monyetla Work Readiness Programme (the DTI Business Processes Outsourcing incentive) Workshop hosted in collaboration with the DTI. Uthungulu Agribusiness Information Sharing. Black Industrialist Scheme Information Sharing Workshop hosted with the DTI. Municipality Business Retention and Expansion Programmes The Municipality Business Retention and Expansion (BR&E) Programme is an internationally accredited programme adopted for and adapted to South African conditions aimed at creating a healthy, inclusive, sustainable and enterprising business communities in each Municipality. For this programme to be successful, it must be implemented alongside with other development initiatives in support of local business retention, expansion and new job creation. TIKZN had interactions with several local municipalities to implement the business retention and expansion programmes. During financial year; the following municipalities have committed to and commenced with the implementation of the Municipality BRE Programme: Umhlathuze Municipality BRE Programme Msunduzi Municipality BRE Programme Ulundi Municipality BRE Programme umfolozi Municipality EXPORT DEVELOPMENT AND PROMOTION Despite the uncertain and volatile economic landscape in South Africa and in Emerging Markets, TIKZN has done fairly well during the review period of 2015/2016. The Export Development and Promotion Unit (EDPU) within TIKZN, had embarked on a number of Export Development Capacity Building and Training Sessions for Emerging and Existing Exporters and facilitated access for KZN Exporter (Emerging, Existing and Seasoned) to local and international platforms that covered a range of sectors across several key markets in an effort to increase the export propensity of KZN. 38

41 Training and Enterprise Development Initiatives In the area of Export Development, TIKZN offered a range of capacity building, development and focused training sessions for KZN companies who are emerging and existing Exporters. The table below provides an indication of the activities that were successfully implemented. # Programme Sector Sessions Number of participants 1 Emerging Exporter Workshops Multi Export Essentials Multi Enterprise Development Multi PUM (Mentorship with Dutch Experts Multi International Collaborations (SIPPO etc) Multi KZN Fashion Council Clothing and 2 20 Textiles 7 Productivity SA Multi 1 35 Market Access Activities In the period under review TIKZN had created 121 Export opportunities for KZN Exporters, facilitated access to 22 markets for 178 companies in KZN and assisted 115 companies with access to provincial and national government incentives. Event Date Sector Country No. Participants FOODEX Japan 2016 (National Pavilion) Gulfood 2016 (National Pavilion) WWD Magic 2015 (SSAS Funded Event - Collaboration with SAFLEC) FET Afrik (KZN Pavilion) IFSEC International 2016 (SSAS Funded Event) PLMA 2015 (SSAS Funded Event) ITI Admission 2016 New York Now (SSAS Funded Event) Index International Design Exhibition (SSAS Funded Event) L Artigiano in Fiera (SSAS Funded Event - Collaboration with ECDC) 8 to 11 March to 25 February to 18 February May to 18 June to 20 May to 11 March to 19 August to 21 May December 2015 Agro Processing Agro Processing Clothing and Apparel Tokyo, Japan 5 Dubai, UAE 7 Las Vegas, USA Multi-Sector Seychelles 5 Security London, UK 9 Multi-Sector Multi- Sector Creative Industry Creative and Decor Industry Creative (arts & crafts; clothing; jewellery) Amsterdam, 10 Netherlands Addis Ababa, 5 Ethiopia New York, 7 USA Dubai, UAE 9 5 Milan, Italy 6 Trade & Investment KwaZulu-Natal Annual Report 2015/16 39

42 TIKZN Export Support and Developmental Tools KZN Export Informational Portal Having being operational for the last 18 months the portal has yield the following results. Description (period Jan 2015-Dec 2015) Total Number of Hits Number of Unique Visitors Number of Visits Pages Visited The Trade-DSM (Decision Support Model) TIKZN recently acquired the usage of the DSM that was developed by the of North-West University over a period of 10 years. The purpose of the model is to more scientifically assist in identify probable markets for KZN Exporters. Using a number of intricate databases with appropriate filtering mechanism the model can give an indication of the likelihood and opportunities available in markets across the globe. In the short period of the last 3 months of utilization TIKZN has presented analysed results to at least 10 KZN companies, looking at the products and areas of interest from and export perspective. DTI Incentives With diminishing budgets, TIKZN had to be creative in assisting companies in accessing new markets. Advantage was taken of the DTI incentives scheme in this regard. During the 2015/16 financial year TIKZN has accessed funding to the tune of R4,614 million participating in 4 Sector Specific Missions (SSAS) benefiting 34 KZN companies. Event Date Country No of KZN Participants IFSEC London 2015 (SSAS Funded Event) PLMA, Amsterdam 2015 (SSAS Funded Event) Index Dubai (SSAS Funded Event) 16 to 18 June to 20 May to 21 May 2015 NY Now 16 to 19 Aug 2015 Value of Funding accessed London, UK 8 R Amsterdam, Netherlands 10 R Dubai, UAE 9 R New York, USA 7 R Total 34 R Local Exhibitions Event Date City Sector No of KZN Participants Food Hospitality World Source Africa SAITEX Automechanika Johannesburg th - 22nd May May June th - 9th May 2015 Cape Town Creative and Decor Industry 6 Cape Town Clothing and 8 Apparel Johannesburg Multi-Sector 10 Johannesburg Automotive 8 40

43 Event Date City Sector No of KZN Participants Decorex 6th -10th Johannesburg Internal Décor 5 August 2015 Total 37 TIKZN facilitated participation of 37 KZN companies at 5 selected local events as a way of promoting inter-provincial trade as well as to further provide exposure and opportunities for emerging exporter to gain value experience in promoting their products. Export Week (17-22 November 2014) The 4th Annual KZN Export Week was held from October 2015 at Sun Coast Casino and Conference Centre. In excess of 400 delegates participated in the various sessions, from an Emerging Export Session, a two day Export Summit and a Master Class Session focusing on the Establishment of an EXIM Bank. International delegates from Zimbabwe, Zambia and Mozambique attended the 3 day event. Below is a table of feedback from delegates KNOWLEDGE MANAGEMENT Knowledge Management (KM) refers to the multi-disciplined approach of effectively generating, preserving and using organisational knowledge to achieve organisational objectives. KM sets the strategic foresight for the Organisation. As Your Knowledge Partner in Business, TIKZN has elevated KM as a core business strategy with the business unit providing professional support services to sister departments, research and data and database management, information technology systems and organisational learning. The unit plays a direct role in shaping policy, sector intelligence development, project conceptualisation and packaging new investment opportunities and using KM as a tool to gain competitive advantage. High impact investment opportunities packaged were: Umzimkhulu Hydroelectric Located in the Harry Gwala District, Umzimkhulu Local Municipality (Mzimkhulu River in between Port Shepstone and Ixopo), this project, the first of its kind in KwaZulu-Natal, looks at the development of a 5-7MW run of the river hydroelectric project and provide power to 7500 homes. Developed by the Mzimkhulu Hydroelectric (Pty) Ltd, it is hoped that upon completion it will generate R20-R30 million per year once commissioned. Biogas Digester Manufacturing Facility This project which will be located at the Dube Tradeport in the ilembe District Municipality, Kwa Dukuza Local Municipality intends to develop a manufacturing facility which will cater for the South African and broader African biogas market and in the process, demonstrate the viability of small scale digestion technology. Vulamehlo Mini Grid System Located in the Ugu district municipality, this R100 million project the establishment of a rural mini grid system. Wherein the community will have an integrated Renewable energy system that provides them with electricity and a revenue stream. Halal Hub Project The location of this plus or minus R600 Million project is still to be announced. This project which is part of a national investment strategy concerns the establishment of a Halaal hub in KwaZulu-Natal. It will incorporate linkages with other provinces. Trade & Investment KwaZulu-Natal Annual Report 2015/16 41

44 Centennial Private Hospital Project Located in the ethekwini Metro, this R580 million project is the development of a 195 bed hospital with specialists units such as Oncology, Renal, Paediatric, ICU, High care, 4 operations theatre including a Laminar flow theatre. Campsdrift Waterfront Mixed Use Development Located in the Umgungundlovu District Municipality, this R2 Billion project is a mixed use development comprising of waterfront park and environmental upgrade, office precinct, specialized retail precinct, medium to Upmarket residential units, 80 bed 4 star hotel, general infrastructure upgrade including roads and services within the boundary of the site. Bhambatha Lodge Development Located in the Umzinyathi District Municipality, this R60 million project is the development of a 42 bed facility, with a 8 bed luxury camp site, conference and restaurant facilities including a game reserve with two of the big FIVE. Umkhanyakude Feedlot Project Located in the Umkhanyakude district municipality, this R117 Million project involves the establishment of 11 feedlots to provide feedstock to the recently established Bambanana abattoir. Imfe (Sweet Sorghum) Project Located in the Ugu district municipality, this R3.2 Billion project is an establishment of a biofuels plant. The biofuels will be produced from sweet sorghum which will be grown by local communities residing within the project area. Catfish Project Located in the Umkhanyakude district municipality, this R40 Million project is a rural woman aquaculture cooperative. The project seeks to produce cat fish to ensure food security in rural Jozini and surrounding communities as well as supply local school feeding schemes. Vegetables Processing Project Located in the Umngungundlovu district municipality, this R41 Million project is an entrepreneurial initiative to close the gap in the local market for processed vegetables. The project grows as well as buys vegetables from local farmers, which are processed and sold to caterers as well as school feeding schemes. Information Technology The ICT function is seen as a core enabler for the organisation to achieve its vision, mission and objectives. The outcomes of the revised ICT strategy and governance framework are currently being implemented. During the financial year, there were no reported IT systems failures meaning the Agency achieved and annual systems uptime of 99,9% to allow for any unreported issues. TIKZN continued to pay particular attention to the clearing of audit findings and to also risk management. A project tracking toll was developed in-house and implemented. The purpose of this tool is to ensure that institutional memory is preserved and it also provides a dashboard on the status of packaged and facilitated projects. It also provides information on all historical projects. Various sub-sites were developed for events such as the east3route Investment Conference, World routes 2015 and Export Week 2015, amongst others. Linked to this, was the creation of an online booking system for B2B meetings related some of the events. 42

45 11.5. GAUTENG OFFICE TIKZN Gauteng Office had aan excellent promoting TIKZN as an inward investment destination and export trade opportunities. The major function of the Gauteng office is business development (lead generation), stakeholder management and destination marketing in order to improve marketing and image building with national and international stakeholders. The specific areas of responsibility for the Office are: Generation of qualified trade and investment leads Hosting of Inward Delegations and interacting with Foreign Organisations Hosting of Sector Based events in Gauteng promotion opportunities in KwaZulu- Natal Identification of and referral of relevant Business delegations to KwaZulu-Natal Development of new and untapped foreign markets for KwaZulu-Natal The table below provides an account of the Gauteng Office activities for the year under review. The most imminent leads came from the agri-processing, automotive, infrastructure, food and beverage and ICT sectors as well as the tourism industry. Leads (both investment and export) were from UK, United States, Sweden, Switzerland, Denmark, Thailand, Norway, Belgium and Visegrad region. Key performance Indicator Qualified trade and investment leads generated Sessions hosted with foreign organisations/ incoming delegations Sector-based events implemented in conjunction with TIKZN units Business delegations referred to KwaZulu-Natal Business Development Initiatives undertaken in foreign markets Activities The most imminent leads are from: USA Switzerland Sweden Denmark UK Southern African Railway speakership opportunity Visegrad region information session with trade commissioners and follow-up session at Export Week Africa trade office session with DCCI Innovative energy workshop with University of Pretoria Ambassador Luncheon in Gauteng for EU and SADC Ambassadors to discuss Pan-African Exports with SA-Netherlands Chamber Joint marketing event on property developments with Tourism KZN and Tongaat Hulett Port and Cargo show speakership for TIKZN DTP and RBIDZ SAITEX business networking lounge hosting SANEC Ambassadors Luncheon on Pan-African exports Association of Representatives from Electronic Industry Expo Canada High Commission Dutch RE project Global Doors UK TOTVS Brazil Brand SA s Global South Africa campaign in Dubai Joint mission with Enterprise Florida to USA Gauteng Office also represents TIKZN on 2 international Boards namely the EXCO of the European Union Chamber of Commerce in SA. Trade & Investment KwaZulu-Natal Annual Report 2015/16 43

46 PART C GOVERNANCE ~ Cappeny Estates Strawberry Farm 44

47 12 Corporate Governance Statement Introduction Corporate Governance embodies processes and systems by which public entities are directed, controlled and held to account. In addition to legislative requirements based on a public entity s enabling legislation, and the Companies Act, corporate governance with regard to public entities is applied through the Public Finance Management Act (PFMA) and run in tandem with the principles contained in the King Report on Corporate Governance. Portfolio Committees Trade and Investment KwaZulu-Natal (TIKZN) reports to the Economic Development, Tourism and Environmental Affairs portfolio committee, the finance portfolio committee as well as the Standing Committee on Public Accounts (SCOPA). Executive Authority The MEC for Economic Development, Tourism and Environmental Affairs is responsible for providing oversight over TIKZN, which includes the appointment and dismissal of the board of TIKZN and ensuring that the appropriate mix of executive and non-executive directors are appointed and that they possess the necessary skills to guide the entity. THE ACCOUNTING AUTHORITY Introduction The Board of TIKZN is the Accounting Authority for the entity. All Non-Executive Board Members of TIKZN are appointed in accordance with Section 5 of the TIKZN Act; No. 05 of 2010 ( the Act ) by the MEC for Economic Development, Tourism and Environmental Affairs. The Board Members are accountable to the shareholder, and they owe a duty of care and diligence to the public entity. They act in the best interest of the entity and consequently its shareholder. The roles and responsibilities of the Board are clearly defined in the Act and are also guided by the principles of good corporate governance, which include inter alia: Recruitment of the Chief Executive Officer (CEO); Provide strategic direction to the entity. The Board has a strategic function in providing the vision, mission and goals of the entity. These are determined in combination with the CEO and the executive team; Retaining full and effective control and management over the affairs of the entity; Provide oversight over the performance of the entity; Formulate, monitor, review corporate strategy, major plan of action, risk policy, annual budgets and business plans; Ensuring full and timely disclosures of material matters affecting the entity; Ensuring the implementation of an effective compliance framework and ensuring that the entity complies with applicable laws, regulations and government policy; The implementation of a Code of Conduct, as well as safety, health and environmental issues that may impact on the entity; Trade & Investment KwaZulu-Natal Annual Report 2015/16 45

48 Board Charter The Board has a formal Board Charter which provides guidance as well as assists in ensuring all responsibilities of the Board are discharged as required by the TIKZN Act, the PFMA as well as King III standards of Good Corporate Governance. In keeping with the principles of good corporate governance, the Board Charter is reviewed annually. Under the current year of review the Charter was reviewed and approved on 11 March The salient features of entity s adoption of the Board Charter are outlined as follows: The members of the Board: Retain full control over the entity, its plans and strategy; Acknowledge their responsibilities with regards to strategy, compliance with internal policies, external laws and regulations, effective risk management and performance assessment, transparency and effective communication both internally and externally by the entity Are responsible for the effectiveness of the Audit, risk and compliance committee, Human and Resources committee and other corporate governance structures. Composition of the Board The TIKZN Act codifies the Board s composition, appointment, authorities, responsibilities and processes. In terms of the Act, the Board should consist of at least five, but not more than 20 members appointed by the responsible MEC. As at 31 March 2016, the Board comprised of eleven (11) non-executive Board members, who met Five (5) times during the year: four ordinary Board meetings and one strategy review meeting. The details of the Board members appointed by the MEC for Economic Development, Tourism and Environmental Affairs are as follows, including an indication of their attendance at meetings and remuneration paid during the financial year as contained in the annual financial statements. Membership and attendance: Board Meetings in 2015/16 Name Designation Date Appointed Ms CM Cronjé Mrs LCZ Cele Mr GW Bell Mr CS Gina Dr VF Mahlati Cllr DCP Mazibuko Qualification Chairperson 1/09/14 BA Honors Degree, B Proc Degree Deputy Chairperson 1/09/14 MAcc, Taxation Area of Expertise Member 1/09/14 Investment Promotion Member 1/06/12 Executive Development Programme Member 1/06/12 PhD, Policy Speciality Member 1/06/12 Hon, BEd Management and Administration No. of Meetings held No. of Meetings attended Legal Finance Investment/ export 5 5 Finance 5 4 Human Resource Planning Development skills Human Resource Planning Development skills Community development skills Planning Development skills

49 Name Designation Date Appointed Dr NS Msomi Mr MA Tarr Dr JJ Van Zyl Dr MAI Velia Prof W Viviers Qualification Member 1/06/12 PhD, Molecular Genetics Member 1/06/12 MSc, Agricultural Economics Member 1/06/12 DCom, Business Management, Marketing Management Member 1/06/12 PhD, Economics Member 1/06/12 DCom, Economics There were no outgoing members in this period. Board Committees Area of Expertise Finance Information Technology Finance Investment Export Investment Export Investment Export Planning Development Export Investment No. of Meetings held No. of Meetings attended Committee Committee function No. of Meetings held Audit, Risk and Compliance Committee Human Resources and Remuneration Committee No. of Members Name of Members See below 4 3 Mrs LCZ Cele Dr NS Msomi Mr MA Tarr The Committee is responsible for human resource matters focusing on remuneration, employment equity, succession planning, training, development and retention of staff. In terms of the Board Charter, the role of the Ethics Committee has been delegated to the Human Resources and Remuneration Committee. During the year under review and in order to assume/fulfil this role, the Human Resources and Remuneration Committee underwent training on the requirements of the Social and Ethics Committee, following which, the HR Committee Charter was revised to include and incorporate the purpose and terms of reference of the Ethics committee. 3 3 Mr CS Gina Dr VF Mahlati Dr MAI Velia Trade & Investment KwaZulu-Natal Annual Report 2015/16 47

50 Remuneration of Board Members The Board is remunerated in terms of a directive issued by the MEC for Economic Development, Tourism and Environmental Affairs in line with the National Treasury guidelines on board remuneration. In the current financial year, a detailed guideline was provided by the department with respect to the adjusted board remuneration fees for all public entities for 2015/16. TIKZN schedules 5 Board meetings per annum and members are then remunerated for attendance at the scheduled Board and/ or quarterly Board committee meetings. Board members are reimbursed for their travelling and related expenses in line with the entity s subsistence and travel policy. Board members are paid a retainer fee quarterly and special meetings are paid at an hourly rate. Name Remuneration (R) Travel and Other Allowance (R) Total (R) Ms CM Cronjé 494,716 27, ,197 Mrs LCZ Cele 313, ,957 Mr GW Bell 91,327-91,327 Mr CS Gina 153,369 9, ,531 Dr VF Mahlati 85,999-85,999 Cllr DCP Mazibuko 77,680-77,680 Dr NS Msomi 93,557-93,557 Mr MA Tarr 144,337 9, ,105 Dr JJ Van Zyl 36,740-36,740 Dr MAI Velia 126, ,447 Prof W Viviers 104,973 2, ,049 Risk Management The entity has an approved risk management framework which includes a risk management policy and plan. On an annual basis the entity, with the assistance of the KZN Provincial Treasury Internal Audit Unit conducts a risk assessment to determine the material risks to which the entity may be exposed and to evaluate the strategy for managing such risks. The strategy is used to direct the internal audit effort and priority, and to determine the skills required to manage the risks. The Audit Risk and Compliance Committee has the overall responsibility for risk management, while management is accountable for designing, implementing and monitoring this process. The Committee defines acceptable risk tolerance levels and determines the continuous monitoring and control processes required across business-specific risk areas to provide the basis for regular and exceptional reporting to business management and the Management Committee and Board. The effectiveness of risk management mechanisms is regular management reporting and the Board receives quarterly reports on the entity s risk management from the Audit Risk and Compliance Committee. The entity s management of risk is maturing slowly. During the year under review, a Risk Maturity Gap Analysis project was undertaken by the Provincial Internal Audit Services assisted by PricewaterhouseCoopers Incorporated. The scope of this project was to assess the risk management practices at TIKZN in order to identify gaps and weaknesses against the requirements of the Public Sector Risk Management Framework (PSRMF) issued by National Treasury and to develop and implement an improvement programme addressing the identified gaps and weaknesses. The Board members and TIKZN Management also received Enterprise Risk Management Training. 48

51 Internal Control Unit The effectiveness of internal control mechanisms is regular management reporting. The CFO reports every quarter on the operation of the financial and accounting control frameworks and the Board also receives assurance from the Audit Risk and Compliance Committee, which derives its information from regular audit reports on risk and internal control throughout the entity. The mechanisms to ensure the effectiveness of internal controls include reviewing the: Effectiveness of the organisation s internal control system and information technology security and control. Control procedures followed by management and assessing their effectiveness. Controls designed to ensure that assets are safeguarded. Fraud and Prevention plan implemented to detect fraud. Risk management and related policies Compliance with prescribed accounting framework. As part of this task, all Finance policies were reviewed and updated to ensure alignment with the new accounting framework as well as to tighten the internal control environment. Internal Audit and Audit Committee The KZN Provincial Treasury Internal Audit Unit performs the internal audit function for the entity and reports to the Audit, Risk and Compliance Committee. The Audit Committee is responsible for ensuring that the Internal Audit function is independent and has the necessary resources, standing and authority within the entity to enable it to discharge its duties. The Audit Committee oversees the interaction between Internal Audit, External Auditor and Management, and ensures that the relationships are productive and add value to the organisation. The Audit Committee also monitors, guides and supervises the functioning of internal audit to ensure that the services of the internal audit and external audit are sufficiently clarified and co-ordinated to provide an objective overview of the entity s operating systems of internal control and reporting. These include the following: Annual approval of the internal Audit Charter to ensure adherence to best practices. Approval of the internal audit plan and work carried out by the Internal Audit to ensure that action plans in place mitigate the risks on matters reported to the Audit Committee. Review the adequacy of corrective action taken in response to significant internal audit findings; Review significant matters reported by the internal audit function Assessing the adequacy of performance of the internal audit function. Reviewing the co-operation and co-ordination between the internal and external audit functions. Evaluating the independence and effectiveness of the internal audit function, including compliance with the Institute of Internal Auditors International Standards for the Professional Practice of Internal Audit. During the financial year, the Audit, Risk and Compliance Committee comprised a minimum of three members who are appointed from the Board. The committee meets not less than three times per annum as required by its terms of reference approved in the Audit Committee Charter. The primary role of the Audit, Risk and Compliance Committee is to ensure the integrity of financial reporting and the audit process as well as the maintenance of sound risk management and internal control systems. In pursuing these objectives, the committee oversees relations with the external auditors, the scope of work, the annual audit and the applicable levels of materiality. The Committee monitors development in corporate governance to ensure that TIKZN continues to apply high and appropriate standards. Trade & Investment KwaZulu-Natal Annual Report 2015/16 49

52 The primary functions of the committee include inter alia reviewing and recommending to the Board the following: Examine and review the Annual Financial Statements with management and the external auditors to ensure that they are complete and consistent with information provided to them prior to submitting to the regulators. Effectiveness of the organisation s internal control system and information technology security and control. Control procedures followed by management and assessing their effectiveness i.e. safeguarding of organizational assets. Fraud and Prevention plan implemented to detect fraud. Annual review of the Risk management plan and related policies and framework Compliance with the prescribed accounting framework, legal, statutory and regulatory matters. Review the external auditor s proposed audit scope, approach and coordination of audit effort with internal audit. Reviewing and confirming the independence of the external auditors Reviewing and assessing the adequacy of the Audit Committee Charter on an annual basis. Ensuring that all responsibilities as outlined in the Charter have been executed. Evaluating the committee s and individual member s performance on a regular basis. The table below discloses relevant information on the Audit, Risk and Compliance Committee members: Name Qualifications Internal/ External If Internal, position in Public Entity Mrs LCZ Cele MAcc, Taxation Internal Independent Non-executive Board Member Dr NS Msomi Mr MA Tarr PhD, Molecular Genetics MSc, Agricultural Economics Internal Internal Independent Non-executive Board Member Independent Non-executive Board Member No. of Meetings attended Compliance with Laws and Regulations The Board is responsible for ensuring that the entity complies with all applicable laws and regulations and this responsibility has been delegated to the Audit, Risk and Compliance Committee to ensure that the task is properly carried out. The Company Secretary assists the Audi Committee to monitor the entities compliance with all relevant laws and regulations and this compliance is considered by the internal Audit function and Audit Committee. Regular compliance updates are submitted to the Audit Committee by means of detailed legal and regulatory compliance checklists which assess the entity s level of compliance to the relevant laws, regulations, codes and standards to ensure that where non-compliance is detected from the internal controls, corrective measure can be taken to address any weakness within a reasonable time. Organisational policies are reviewed annually to ensure alignment with legislation while ensuring adequate governance and operational effectiveness. 50

53 Fraud and Corruption The entity has an approved Fraud Prevention Plan. Compliance therewith is monitored by the Chief Financial Officer and the Company Secretary. In addition, all employees as well as the Board are required to declare any personal financial interest that they may have. During the financial year, the Provincial Treasury Internal Audit Services assisted by KPMG provided fraud risk management support to the entity. For this purpose, the entity would be assisted with the following services: Review of the fraud prevention plans/strategies/practices/controls. This review included an assessment of all fraud related policies and practices (inclusive of, but not limited, to conflict of interest, code of conduct and whistle-blower policies). development of detailed fraud risk registers; and Assistance with the development of comprehensive fraud prevention policies/ plans/ strategies to close the identified gaps. Company Secretary The Company Secretary ensures that Board procedures and relevant legislation and regulation is observed. The Company Secretary provides guidance to the Members on governance, compliance and fiduciary responsibilities. The Company Secretary is also responsible for preparing meeting agendas and ensuring that accurate records of minutes are kept. Trade & Investment KwaZulu-Natal Annual Report 2015/16 51

54 PART D HUMAN RESOURCE MANAGEMENT ~ Port of Durban 52

55 13 Human Resource Management Introduction Overview of Human Resource Matters at the Public Entity The Human Resource Unit is concerned about attraction, developing and retaining the talent. Our HR strategy is aimed at creating the environment that is suitable to achieve this objective. The policies are designed such that total inclusion and buy-in from our employees are secured through genuine consultations during the formulation. The unit s continued commitment to provide leading HR services, approaches and practices to the entity through a concrete plan or roadmap makes the organisation a good benchmark point for other entities. It develops and motivates employees to enhance the entity s goals and objectives. People development is achieved via individual training programmes, succession planning, career pathing and a comprehensive performance management system. The development of our employees remain one of the priorities given the shortage of skills in the investment promotion space and to this effect, during the period under review, was the development of critical competencies which saw a number of our employees embarking on training activities involving project packaging, financial modelling, market intelligence, and business report writing. The highlight of our investment on people development was the ability to access grants totalling R from the Services Seta. Our efforts to create capacity among our employees have also resulted in the signing of the memorandum of understanding with UKZN. This is historic in the sense that this MOU will set the foundation for the establishment of a master s programme in Investment Promotion and UKZN will be one of the very few institutions in the world to facilitate such a programme. HR priorities The HR priorities enshrined in the HR strategy address short and long-term organisational challenges including: a) skills audit/development; b) organisational capacity; c) performance management; d) change management process; e) remuneration strategy; f) risk management. Trade & Investment KwaZulu-Natal Annual Report 2015/16 53

56 Workforce Planning The need to attract, develop and retain the right talent has never been so critical in an investment promotion environment. Workforce planning therefore plays a vital part in the delivery of our HR strategy. To ensure sustainable workforce planning strategy, we have established strong partnerships with recruitment agencies who get inducted into the culture of the organisation so as for them to fully appreciate the environment within which we operate. During the past year the organisation experienced high staff turnover for its size in that we had replaced a total of nine employees ranging from middle to senior management due to some employees leaving for various reasons including starting their own businesses. In order to minimise the negative impact, we created opportunities for students who came in as part of our learnership programme and also provided staff rotation opportunities for some of our employees that needed exposure to other business units. Strategic Alignment & Change Management Process The year under review was the year of fast-tracking the implementation of the TIKZN Alignment & change management process, also known as Continuous Management Process, which was initiated in June It is a strategic organisational development initiative that follows the organisational review and revised strategic plan of 2012, as well as the subsequent new organisational structure (and appointments) that was implemented in late The review, strategy and structure are then the primary points of departure for the alignment & change-management process (the journey). The purpose of the project is to design, implement, facilitate and support a comprehensive and sustainable organizational alignment and change management process to the organisation to enhance its capability to deliver on its mandate and strategy. This essentially involves working inter-actively with the social (human) platform of the organisation, together with the business or technical platform. The focus is on becoming a high-performance enterprise, through a high-performance culture and high-performance teams. It is a process of substantial introspection, engagement, envisioning and planning at all levels - that allows for a transformational dynamic. Certain milestones can be reported on the implementation and these include the leadership journey, staff vision consultations and team journeys. Through this process, our employees have grown tremendously through training interventions, discussion forums and we now have our own internal facilitators. Employee Wellness Programme The well-being of our staff is part our business. As a result, it is part of the organisational strategy to ensure that our employees are encouraged to live healthy lifestyles. This is done through our wellness programme which offers a variety of activities aimed at creating work/ life balance. These activities are always informed by a well-documented report compiled by our wellness service provider. The report itself is informed by a carefully designed questionnaire, which is used to solicit information around employees lifestyles. Some of the activities implemented included health talks, educational talks, finances, and physical activities. Employee assistance programme, healthy lifestyles, educational talks and physical activities e.g Discovery East Coast Radio Big Walk, KPMG Business Relay, World Aids Day etc. Programmes a) Financial Literacy b) Discovery East Coast Radio Big Walk c) World Aids Day d) KPMG Business Relay 54

57 Policy Development It is TIKZN s philosophy that well-developed policies are part of the retention strategy as they ensure compliance while being user-friendly. Policies are continuously updated, but remain aligned to the corporate strategy. The policy formulation process fully includes staff. Achievements a) Investment Promotion Programme - MOU signing between UKZN and TIKZN b) Accessing of a Services Seta grant; c) Enhancements of critical competencies d) The Continuous Improvement Process e) Internship programmes f) Enhancement of the Performance Management System Challenges a) Budget constraints and b) Increased Employment Relations Future HR Plans a) Implementation of the ISO 9001 Quality Management System b) Development of a tool to measure Return On Investment for training c) Implementation of a Succession Plan d) Reviewal of policies Human Resource Overview Statistics Personnel Cost by Programme Programme / Activity / Objective Personnel expenditure for the Entity (R 000) Personnel expenditure. As a % of total exp(r 000) No. of employees Average personnel cost per employee (R 000) Corporate Services R % 17 R and Office of the CEO Investment Promotion R % 18 R Export Development R % 5 R and Promotion Advocacy, Knowledge Management R % 7 R Personnel Cost by Salary Band Level Personnel expenditure (R 000) Personnel exp. As a % of total exp(r 000) No. of employees Average personnel cost per employee (R 000) Top management R % 8 R Senior management R % 3 R Professional qualified R % 20 R Skilled R % 23 R Semi-skilled R % 8 R Unskilled R % 2 R Interns R % 7 R Total R % 71 R Trade & Investment KwaZulu-Natal Annual Report 2015/16 55

58 Performance Rewards Programme/activity/objective Performance Rewards Personnel Expenditure (R 000) Top Management Performance bonus R Senior Management Performance bonus R Professional qualified Performance bonus R Skilled Performance bonus R Semi-skilled Performance bonus R Unskilled Performance bonus R- Total Performance bonus R Training and Development During the period under review, staff within the organisation were identified and trained. These are interventions identified during performance appraisals and included in the Workplace skills plan. Programme/ Activity /Objective Training Expenditure (R 000) No. Of employees trained Average training cost per employee Effective speaking and Presentation skills R R6 110 Creative Negotiation Skills R R5 212 Effective Business writing programme R R6 340 Effective presentation skills R R6 965 Creative writing for Media R R7 499 Best Management Skills Programme R R International Trade ( Export) Training R R Employment Equity Committee Training R R1 368 Social Media Training R R348 Discovering Excel R R1 700 Excel on Steroids R R4 300 Event Coordination, Protocol and Travel R R Management Professional Receptionist R R2 150 Voice and General Communication Skills R R Project Financial Modeling R R Pivotal Training PhD in Agricultural Economics University of KwaZulu- Natal R BTech : Public Management Durban University of Technology R Postgraduate Diploma : Business University of KwaZulu-Natal R Management Matric Grade 12 Anchorlite Independent School R Diploma in International Trade Management ITRISA R Bachelor of Business Administration MANCOSA R

59 BBA in Marketing IMM Graduate School of Marketing R Bachelor of Business Administration MANCOSA R BCom Honours : Industrial Psychology University of South Africa R PhD University of Stellenbosch R Diploma in Marketing Management IMM Graduate School of Marketing R Employment and Vacancies Programme/activity /objective 2015/16 Approved posts Office of the CEO and Gauteng office 2015/16 No. of employees 2015/16 Vacancies % of vacancies % Knowledge Management % Investment Promotion and Business % Retention Finance % Corporate Services ( Marketing % and Human Resources ) Export Development and Promotion % Programme/activity /objective Approved posts No. of employees Vacancies % of vacancies Top management % Senior management % Professional qualified % Skilled % Semi-skilled % Unskilled % Total % Employment Changes Salary Band Appointments Terminations Employment at end of the period Top management Senior management Professional qualified Skilled Semi-skilled Unskilled Total Trade & Investment KwaZulu-Natal Annual Report 2015/16 57

60 Reason for staff Leaving Type of termination Number % of total terminations Death 0 0% Resignation 7 13% Dismissal 0 0 Retirement 2 4% Ill health 0 0% Expiry of contract 0 0% Total 9 17% Labour Relations: Misconduct and disciplinary action Nature of disciplinary action Number Verbal warning 0 Written warning 0 Final written warning 2 Dismissal 0 Equity Target and Employment Equity Status Workforce profile for all employees including people with disabilities Occupational Levels Male Female Foreign Nationals Total A C I W A C I W Male Female Top management Senior management Professionally qualified and experienced specialists and mid-management Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents Semi-skilled and discretionary decision making Unskilled and defined decision making TOTAL PERMANENT Temporary employees GRAND TOTAL

61 Numerical goals for people with disabilities Levels Disabled Staff Male Female Current Target Current Target Top management Senior management Professional qualified Skilled Semi-skilled Unskilled Total Trade & Investment KwaZulu-Natal Annual Report 2015/16 59

62 Annual Financial Statement ~ east3route Investment Seminar 2015, Seychelles 60

63 14 ANNUAL FINANCIAL STATEMENTS General Information Country of incorporation and domicile Legal form of entity Nature of business and principal activities Members Registered office Business address Postal address Bankers Auditors Secretary South Africa Public Entity (PFMA) Trade and Investment Promotion Agency Ms CM Cronjè (Chairperson) Mrs LCZ Cele (Deputy Chairperson) Mr GW Bell Mr MA Tarr Dr JJ Van Zyl Mr CS Gina Cllr DCP Mazibuko Dr VF Mahlati Dr NS Msomi Prof W Viviers Dr MAI Velia Trade and Investment House 1 Arundel Close Kingsmead Office Park Durban 4000 Trade and Investment House 1 Arundel Close Kingsmead Office Park Durban 4000 Trade & Investment KwaZulu-Natal PO Box 4245 Durban 4000 The Standard Bank of South Africa Limited Auditor General of South Africa Ms NNC Gumbi Company registration number Trade and Investment Act No.5 of 2010 Preparer The Annual Financial Statements were internally compiled by: Ms L Nyamande Chief Financial Officer Trade & Investment KwaZulu-Natal Annual Report 2015/16 61

64 Index The reports and statements set out below comprise the Annual Financial Statements presented to the Provincial Legislature: INDEX Page Board s Responsibilities and Approval 63 Audit Committee Report 65 Report of the Auditor General 68 Board s Report 71 Company Secretary s Certification 74 Statement of Financial Position 75 Statement of Financial Performance 76 Statement of Changes in Net Assets 77 Cash Flow Statement 78 Statement of Comparison of Budget and Actual Amounts 79 Accounting Policies 82 Notes to the Annual Financial Statements 95 62

65 15 Board s Responsibilities and Approval The members are required by the Public Finance Management Act (Act 1 of 1999), to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is the responsibility of the members to ensure that the annual financial statements fairly present the state of affairs of the entity as at the end of the financial year and the results of its operations and cash flows for the period then ended. The external auditors are engaged to express an independent opinion on the annual financial statements and are to be given unrestricted access to all financial records and related data. The annual financial statements have been prepared in accordance with Standards of Generally Recognised Accounting Practice (GRAP) including any interpretations, guidelines and directives issued by the Accounting Standards Board. The annual financial statements are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The members acknowledge that they are ultimately responsible for the system of internal financial controls established by the entity and place considerable importance on maintaining a strong control environment. To enable the members to meet these responsibilities, they ensure that the entity complies with the set standards for internal control aimed at reducing the risk of error or deficit in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the entity and all employees are required to maintain the highest ethical standards in ensuring the entity s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the entity is on identifying, assessing, managing and monitoring all known forms of risk across the entity. While operating risk cannot be fully eliminated, the entity endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The members are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement. The members have reviewed the entity s cashflows for the period ended 31 March 2016 and they are confident that the financial status of the entity remains solid. The entity is wholly dependent on the Department of Economic Development, Tourism and Environmental Affairs (EDTEA) for continued funding of operations. The annual financial statements are prepared on the basis that the entity is a going concern and that the Provincial Government has neither the intention nor the need to liquidate or curtail materially the scale of the entity. Trade & Investment KwaZulu-Natal Annual Report 2015/16 63

66 Although the members of the Board are primarily responsible for the financial affairs of the entity, they are supported by the entity s internal auditors. The external auditors are responsible for the audit of the entity s annual financial statements and reporting. These interim annual financial statements have not been examined by the entity s external auditors. The annual financial statements set out on pages 71 to 115, which have been prepared on the going concern basis, were approved by the members of the Board on and were signed on its behalf by:.. Ms CM Cronjé Chairperson 64