FOODBEV SETA ANNUAL REPORT 1 APRIL MARCH FoodBev SETA

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1 FOODBEV SETA ANNUAL REPORT 1 APRIL MARCH 2008 FoodBev SETA

2 Vision To have sufficient and appropriate knowledge and skills available in the food and beverages manufacturing sector in order to contribute to: the growth and development of the sector; a safe, healthy, productive and competitive industry; the promotion of access to quality education and training to participate in work and life, and the redress of past inequalities in education and training. Mission The stakeholders of the food and beverages manufacturing sector are committed to ensuring that: relevant and quality learning standards and qualifications are available in this sector; a high quality of learning provision is maintained in this sector, and access to knowledge and skills is improved for all in the sector. RP75/2008 ISBN:

3 Contents Chairperson s report Chief executive officer s report Governance Employment equity Skills planning ETQA Performance against NSDS 2007/8 targets Report of the audit committee Report of the Auditor-General Annual financial statements: - Report of accounting authority Statement of financial performance Statement of financial position Statement of changes in net assets Cash flow statement Notes to the annual financial statements Acronyms /9 priorities and targets ibc FoodBev Annual Report

4 Chairperson s report As the prospect of a new Seta scenario moves closer, FoodBev is positioning itself to be ready for whatever happens. This year closed with another great performance on all levels, which contributes to an ever-strengthening platform for future growth and development. Notably, we emerged from 2007/8 dotting the i s and crossing the t s of our new constitution based on the Department of Labour (DoL) model. The process was thorough and consultation wide to ensure that the document would provide a fitting framework for activities in the years to come. Factors such as council composition and efficacy of chamber committees were taken into account in determining the appropriateness of the Seta structures and committees in a changing corporate governance environment. We feel we have satisfied most, if not all, the concerns expressed in different quarters about the structure of the bodies overseeing operations in the Setas as a whole. The National Economic, Development and Labour Council (Nedlac), in its review of the Setas published towards the end of 2007, refers to an overwhelming consensus that Seta boards should be strengthened and better managed to ensure good corporate governance. Boards, the report continues, should be smaller and comprise people with sector knowledge, skills development understanding and experience of governance. In terms of our new constitution, the council will be smaller and more focused. It is hoped that by restricting the body to 12 members six each from business and labour decision-making will become less timeconsuming, flexibility will be enhanced and governance systems strengthened. A more diverse skills mix will be sought during the election process, which will be managed by the Institute of Directors. In my last chairperson s report, I commented on the withdrawal from the council of the Food and Allied Workers Union (Fawu), the largest union in our sector, following lengthy negotiations and much frustration for all parties involved. I am pleased to report that Fawu is back, with council representation commensurate with its size. Whilst we had accepted its decision to leave, the union was instrumental in shaping the Seta into what it is today and it is fitting that it is once again part of the fold. Public Finance Management Act Skills Development Act Skills Development Levies Act South African Qualifications Authority Auditor General Audit committee Internal auditors Remuneration committee FOODBEV SETA COUNCIL Service level agreement with DoL Performance agreement Chief executive officer Exco Baking, cereals, confectionery and snacks chamber Beverages chamber Dairy chamber Food preparation chamber Processed and preserved meat, fish, fruit and vegetables chamber Chamber manager Standing committees 2 FoodBev Annual Report 2008

5 The five chambers that have represented the different sub-sectors in the food and beverage sector will be replaced by an employer forum and an organised labour forum, which will, inter alia, provide recommendations on strategies for the achievement of National Skills Development Strategy (NSDS) targets, provide input into research on skills needs, monitor effectiveness and promote quality of education and training, and communicate with stakeholders. The executive committee, too, will be slimmer and more focused. We are confident that the provisions of the new constitution will enhance the functioning of the organisation, which is already of a high standard. Nedlac s findings are expected to inform the Seta picture post We have identified five possible scenarios in our strategic planning: the Seta remains as it is; five mega-manufacturing Setas are formed; a food supply chain Seta is established, which would see FoodBev teamed with other labourintensive sectors such as agriculture; joint Seta boards or joint high-level councils replace the current system, or Setas enter project partnerships. Uncertainty aside, the Minister of Labour Membathisi Mdladlana s budget vote speech just after year-end revealed some trends in the 2006/7 year that demonstrate the impact of the Setas efforts. The minister quoted research that revealed that 80% of private sector companies provided some employee training in 2006/7, 20% more than in 2002/3. More than half of all permanent employees received some form of training, and training of non-permanent employees rose in the period from 19% to 34%. The number of employees who received National Qualifications Framework (NQF)-aligned training increased from 9% to 22,1%, whilst training expenditure as a percentage of payroll increased from 2,1% to 3%, a 43% rise. Some 55% of enterprises were claiming grants, against the previous 41%. A study by Productivity SA, he continued, points to a 3,2% per annum increase in private sector productivity since 1996 spurred largely by 3,6% labour productivity. Between September 2001 and September 2007, cumulative employment gains in the South African labour market have totalled 2,1 million jobs. During the year under review, there was further evidence of business s commitment to skills development, when the leaders of South Africa s 70 biggest firms publicly vowed to make skills development a priority. Bobby Godsell, leader of the group, named Business Leadership SA, commented that growth could not be sustained at desired levels without a radically reskilled nation. Deputy President Phumzile Mlambo-Ngcuka welcomed the move, reiterating that "the only time the skills revolution will intensify in earnest is when the private sector at the highest levels raises skills development to a strategic challenge". Most of the bigger companies have been on board from the start, but it is the smaller enterprises that will create opportunity and employment and that are most in need of skills development. FoodBev has enjoyed great success with its initiative to fund training in small and medium enterprises (SMEs). The clamour to obtain the grants demonstrates that small employers are crying out for this type of support. At a time when businesses are in survival mode, with no end in sight to soaring costs, we urge employers not to neglect training and development. Once we emerge from this period in our economy, it will be the skilled and well equipped that lead South Africa into the future. It is up to each employer to ensure that his or her company is among them. This is my final report as FoodBev Seta chairperson, as the guard will change after the upcoming council elections. I wish my successor and the new council of 12 success in the closing stages of NSDS 2. Geoff Ryding Chairperson FoodBev Annual Report

6 Chief executive officer s report A summary of performance such as appears on pages 12 to 18 of this report is recommended reading for a chief executive officer. Once again, we exceeded our NSDS targets, doubling our figures in some areas. Performances were particularly notable in support for non-levy paying companies and non-governmental organisations (NGOs), in the number of employees entering and completing learning programmes and in the number of unemployed people completing programmes. The focus on apprenticeships continued, with the financial incentives offered being doubled with encouraging results. Still there needs to be an increase in the enrolment rate of unemployed persons on apprenticeships to fill the skills gaps in the sector, and indeed the greater economy. Research on which our scarce skills guide of 2006/7 was based revealed a severe shortage of artisans the sector indicated that it will be able to absorb at least new employees by 2010 given a high road scenario. Currently, there is a need for fitters alone. Alliances To increase the level of participation, we entered during the year, into three strategic alliances that will see the development of up to 300 artisans in the period ahead. Our first such partnership was forged with the South African Stainless Steel Development Association (Sassda), which has committed itself to enlisting member companies as host employers for 50 unemployed persons with N2 qualifications on apprenticeships. With a compound annual growth of about 8% over the last 16 years, the importance of skills in this industry is clear. A second agreement was reached with our counterpart in the agricultural sector, Agriseta, in terms of which the Seta will secure workplaces for up to 150 unemployed persons on apprenticeships. A similar arrangement with Coega Development Corporation will see 100 youngsters brought in to further the development of skills essential to that initiative s growth and global export drive. FoodBev will provide R towards the training of each apprentice placed by these three partners. Two further partnerships were forged, with the Consumer Goods Council of South Africa (CGCSA) and with the South African Association for Food Science and Technology (Saafost), to support both to become institutes of sectoral or occupational excellence (ISOEs). Partnerships are also key to the success of our leadership and management development programme, through which employees with leadership potential are being equipped with the skills needed to ease into management and leadership roles in their companies. Here our alliances are with the Unisa Graduate School of Business Leadership in Gauteng and the University of Stellenbosch Business School in the Western Cape, both of which receive R in FoodBev grants towards the development of each candidate. The project responds to the general management needs of the sector by providing pipeline middle management and executive leadership capabilities. Our R23-million National Skills Fund (NSF) project is running well, thanks to the thorough groundwork completed beforehand and the experience we amassed during our highly successful NSF-funded Hlumani project, completed in FoodBev Annual Report 2008

7 Specific objectives include: support to learners from areas with low levels of investment in skills development, such as the Eastern Cape, Mpumalanga, Limpopo and the Cape west coast;. support to companies with potential for employment growth; support to small, medium and micro enterprises (SMMEs) that may lack financial resources to implement learnerships and host young people on internships and apprenticeships; assistance in the achievement of industry charter skills development targets, and development of a skills pool to fill occupations in the sector that are scarce. The main challenge is to encourage companies to take on unemployed people, particularly apprentices. The sector forecasts a need for artisans, yet it remains a challenge to convince companies to take on apprentices. We are, however, confident that our apprenticeship-based alliances will assist in alleviating this problem. Stakeholder satisfaction Stakeholder perceptions of FoodBev s service remain high, as evidenced by responses to our annual customer satisfaction survey. Respondents, whose numbers increased by 37% over the previous year, expressed satisfaction with the Seta s offering, guidance and service, with particular appreciation for the apprenticeships project and other initiatives focused on scarce and critical skills development CONSOLIDATED CUSTOMER SURVEY RATING 2007 % Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree The sixth annual conference and annual general meeting, held in October 2007, provided a valuable opportunity for stakeholder liaison and was well attended by both employers and union representatives. Towards the end of the year under review, FoodBev hosted a series of information sessions in Johannesburg, Cape Town, Durban and Port Elizabeth, whose agenda included grants, projects and the new governance structure. These were followed by regional sessions in seven provinces, at which Seta representatives met with individual stakeholders by appointment to discuss areas of particular interest or concern. Excellence in skills Naturally, the quest for a skills-rich South Africa involves recognition of and reward for those who work hard to better themselves. As has become traditional, FoodBev s annual graduation ceremonies were held in the first quarter of the year in Johannesburg, Cape Town and Durban, During these events, the achievements of more than 700 graduates across the sector were celebrated. FoodBev Annual Report

8 Chief executive officer s report A welcome acknowledgement during the year came from our colleagues at the wholesale and retail Seta, W&RSeta, during the graduation of 500 retail sector learners, among them several graduating from a FoodBev baking learnership. FoodBev s contribution to the success of the event was mentioned by W&RSeta chief executive officer Joel Dikgole. "In an environment in which Setas are often criticised for operating in silos, a demonstration of the synergies we share is welcome," he said. "I have no doubt that the power of Seta teamwork will show itself increasingly in the years to come." For the third successive year, we recognised excellence in skills development, presenting at our annual conference excellence awards and support to the following organisations: Marine Products and Paternoster Vissery, for the highest completion rate of employees on learnerships; Ledig Trust, Dickon Hall Foods and KPK Smokeries, for the highest completion rate of unemployed persons on learnerships; Distell and Bongolethu Fishing, for the highest placement of previously unemployed persons on learnerships; the non-governmental organisations Go Reach, Murara Valley Farm Cooperative, Balco Trust, Mangaung University Community Partnership Project, Siyazisiza Trust, Sakhasive Development Trust. Khatorus Literacy and Employment Creation Organisation and Mmogo Re Ka Kgona Cooperative, for commitment to skills development through efforts to become accredited providers and/or initiatives to develop entrepreneurial skills and spur small business creation. Strategic objectives FoodBev s strategic objectives have again proved a sound framework for the achievement of targets and are worth repeating here: 1. Achieve and exceed the NSDS targets for the food and beverages manufacturing sector: Remain relevant to Asgisa, ie to attain economic growth of more than 6%; Continue to service industry skills needs by: driving numbers of employees and unemployed persons on scarce skills/occupations through learnerships, skills programmes, internships, apprenticeships and bursary schemes; achieving employment equity targets (black, female, disabled). 2. Maintain effective operations within 12,5% of levy income: Improving administrative processes by increasing use of electronic data processing and information management; Consolidating and maximising the use of resources; Continuously reviewing and revamping the activity-cost-chain; Lowering delivery costs due to learning and experience curve benefits. 3. Maintain above average levels of service delivery to our stakeholders: By enhanced value to stakeholders Enhanced quality of products, services and innovation; Building upon our strong network with stakeholders and developing new ones; Being a one-stop-shop for skills development in the sector; Providing available and dependable service and expertise; Ensuring that we have a creative and entrepreneurially alert management team; By growing FoodBev s reputation and image in the sector Building FoodBev as a reputable and reliable brandname; Growing stakeholder-base and stakeholder loyalty; Creating above-average market visibility. The year ahead Many things may be have been said about the skills development environment, but it can never be accused of being boring. There is now more certainty about the Seta landscape after 2010, which had been the subject of much speculation in both the skills fraternity and the media. 6 FoodBev Annual Report 2008

9 As the approach to the future becomes clearer, the following factors will come into play: Nedlac research; Seta performance; stakeholder needs; the government s industrial strategy, and continuity of skills development initiatives. The underpinning principle is that there must be little or no interruption of skills initiatives. Other developments that will influence our approach in the years to come include the new Quality Council for Trades and Occupations (QCTO), which, with the organisational framework for occupations (OFO), is legislated in the Amended Skills Development Bill that was released for public comment early in The OFO is a skills-based, coded system that captures all jobs in the economy and will fill the gaps left by the existing classification system. It will help the Department of Labour and Setas to refine and improve data on scarce and critical skills and it will be a requirement when completing workplace skills plans (WSPs) to qualify for mandatory grants. FoodBev is among the handful of Setas at the forefront of the QCTO development process, as it serves on the working group. We will await the unfolding of the QCTO and align our functioning to it. Emphasis will continue on the development of scarce and critical skills, particularly technical skills, since they are essential to the growth of most economic sectors. Accordingly, our focus into 2008/9 will remain on the three ships at the helm of the skills armada apprenticeships, learnerships and internships. We are also looking at broadening alliances further, this time internationally. Discussions are underway with Edexcel, the UK s largest qualifications awarding body, whose services include curriculum and qualification development, and training and support for teachers and examiners. The intention is that Edexcel will endorse FoodBev learnership qualifications, giving FoodBev graduates and our qualifications international recognition. Another valuable undertaking is our annual labour market analysis. The Seta has in recent years compiled skills data from company forecasts supplied by the human resources departments and through WSPs, but this information needs to be more accurate to obtain a worthwhile picture of the sector. Consequently, we have contracted a consultancy to develop a skills forecasting tool that companies can use to assist in better identifying their skills needs before submission to FoodBev Seta. Appreciation We are privileged at FoodBev to have retained the skills of most of the founder members of our management team and staff. This has ensured continuity and has helped us to provide stakeholders with a consistently high-quality service. We have in our offices a team of bright, young men and women who believe they can contribute greatly to skills development, while enjoying a satisfying professional development environment. I m honoured to be a member of this team. To employers and training providers, whom we regard as valued partners in skills development, your unwavering support and hard work to raise the levels of training in the sector are always appreciated. Finally, my heartfelt thanks go to each and every member of our council and chamber committees, who receive no remuneration for their contributions but who have given so selflessly over the years. To our new order, comprising council and employer and organised labour forums, you have sizeable shoes to fill, but we assure you of the complete support of the FoodBev team at all times. Ravin Deonarain Chief executive officer FoodBev Annual Report

10 Governance and structure COUNCIL MEMBERS AND MEETING ATTENDANCE Member Capacity Organisation Chamber Race and Meeting 1 Meeting 2 Meeting 3 Meeting 4 representing gender 21 June 29 Aug 31 Jan 15 Mar Andile Non- Fedcraw Processed Black A A Nkosibomvu executive male Averal Non- Pioneer Foods Beverages Coloured Alt R Fortuin executive male Boaz Non- Nufwbsaw Beverages Black Mashele executive male Dale Non- Pioneer Foods BCCS White Alt Fobian executive male Daniel Non- Safatu BCCS Black Tshivenga executive male De Wet Non- Education, BCCS White Alt Coetzee executive Training and male Development Garnet Non- Tiger Brands Foodprep Black Lushozi executive male Geoff Non- Safatu Beverages Coloured Ryding executive male (chair) Gerhard Non- Sampro Dairy White Venter executive male Hennie Non- Sampo Processed White Korff executive male Kaamilah Non- St Helena Bay Processed Indian R R Finch executive Fishing female Peter Non- Safatu Foodprep Black R Xhali executive male Puseletso Non- Nufwbsaw Foodprep Black Mpitso executive female Rob Non- SAB Beverages White R * * van der executive male Schyff* Robert Non- Safatu Dairy Black A Hlungwane executive male Space Non- Safatu Dairy Black R Matlala executive male Sylvia Non- Diva Nutritional Foodprep White R R Hammond executive Foods female (vice chair) Tommy Non- Unilever Foods Foodprep White van der Walt executive male Willie Non- Sampro Dairy White Prinsloo executive male Attended Alt Alternate R Resigned Apology noted A Absent * Tanya Hulse replaced Rob van der Schyff % black 60% % female 20% FoodBev council members receive no remuneration. 8 FoodBev Annual Report 2008

11 EXCO MEMBERS AND MEETING ATTENDANCE Member Capacity Race and Meeting 1 Meeting 2 Meeting 3 gender 26 April 24 October 19 March Boaz Mashele Non-executive Black male Geoff Ryding Non-executive: Coloured chairperson (council) male Hennie Korff Non-executive (council) White male Sylvia Hammond Non-executive: vice- White R chairperson (council) female Willie Prinsloo Non-executive (council) White male REMUNERATION COMMITTEE MEMBERS AND MEETING ATTENDANCE Member Capacity Race and gender Meeting 1 Meeting 2 25 May Aug 2007 Andrew Phiri Independent non-executive Black male Geoff Ryding Non-executive (council) Coloured male Hennie Korff Non-executive: chairperson White male Liezl Gerryts Executive White female Ravin Deonarain Executive Indian male Sebina Hlapolisa Independent non-executive Black female SJ de Klerk Independent non-executive White male Attended R Resigned Was not a member Apology noted EMPLOYMENT EQUITY Occupational groups Africans Coloureds Indians Whites Total M F M F M F M F M F Top management 1 1 Senior management Professionally qualified and experienced specialists Skilled technical and academically qualified workers, junior managers, supervisors, foremen Semi-skilled and discretionary decision-making Unskilled and defined decision-making 2 2 Sub-total Temporary employees TOTAL FoodBev Annual Report

12 Skills planning In testimony to the thoroughness of research and the accuracy of information attained initially, the FoodBev scarce skills guide produced in the previous year required no update during 2007/8. Distribution of the guide was ongoing, to continued positive response from employers and providers alike. Generous discretionary grant incentives helped to keep learner enrolment rates at similar levels across most learning programmes, with a slight dip in the enrolment of unemployed persons on learnerships balanced by increased apprenticeship uptake. Adult basic education and training (Abet) activity increased, particularly at lower levels. FoodBev s second NSF project targeted at developing scarce and critical skills completed its first of two years in a largely favourable position, as follows: Intervention Target Achievement Work experience Apprenticeships Learnerships Fewer apprentices than targeted were enrolled by year-end mainly because of delays in submission of documents, but the additional candidates were scheduled to start their programmes by August The number of work experience and learnership programme candidates was on target for the period, with the balance to meet the overall project objective ready for enrolment just after year-end. Looking ahead, the planned labour market analysis project will produce comprehensive and relevant statistics for internal company use and for application by FoodBev to skills planning initiatives and discretionary grant funding, which will add impetus to scarce skills development. Grants for work experience, apprenticeships, learnerships for both employed and unemployed persons, skills programmes, bursaries and SMEs have been renewed for 2008/9. CORPORATE SERVICES PROJECTS Company compliance with mandatory grant requirements remained virtually unchanged from 2006/7, with targets exceeded for both large and medium firms. Particular focus fell on the development of SMEs with fewer than 50 employees, both levy-paying and nonlevy-paying. During 2007/8, almost 350 companies, from baby food manufacturers to wine processors, took advantage of the R offer towards training of any type, regardless of whether it was NQF-aligned or food and beverage related. Consultants were contracted to facilitate the training much of which centred on health and safety and administer funding claims. SKILLS DEVELOPMENT PROJECTS Skills development support grew during 2007/8 for small black economic empowerment (BEE) firms, with 21 companies benefitting against five the previous year, and for NGOs and community-based organisations (CBOs), with 12 organisations supported, and a further 67 non-levy paying SMEs. Targets were exceeded, too, in the areas of work experience and new venture creation (NVC). In response to the scarcity identified in the area of general management, some 38 young people with management potential were selected for the FoodBev leadership and management development programme (LMDP) and started their studies, 13 in Gauteng and the balance in the Western Cape. The candidates, from 19 companies, will complete their studies early in 2008/9. The way was paved for a full-scale project aimed at upskilling people with disabilities (PWD). Following the development in the previous year of a detailed support strategy for employers, a pilot programme involving 50 candidates was announced. The learners will complete programmes in office administration, confectionery baking, and fitting and machining. By year-end, 16 learners with dyslexia had started fitting and machining studies, with additional host employers being sought for other programmes. 10 FoodBev Annual Report 2008

13 ETQA The integrity of FoodBev s quality assurance systems and procedures was reinforced during a stringent South African Qualifications Authority (SAQA) audit in December 2007, which examined all aspects of accreditation, assessment, moderation and certification. The Seta s three-phase moderation system introduced in 2006/7 was rated as an example of best practice. During the year, 49 providers were accredited or granted extensions of accreditation, bringing the total database to 112 providers. By year-end, the number of registered assessors had grown to 1 065, with 181 new registrations and 40 re-registrations during the year under review. Registered moderators numbered 241 by year-end, 11 new moderators being registered during 2007/8. Countrywide assessor capacity building programmes are planned for the new financial year, which will be based on designing and development of instruments and evidence guides and development of assessment events based on the standards required in the sector. The provider monitoring and evaluation programme moved into its third year, with 55 providers evaluated during the year. Several issues were identified as needing attention, including lack of internal moderation on assessments, use of unregistered internal moderators and in certain cases, no assessments. Some 40 external moderations were conducted during the year. In future, exit moderations will be scheduled only for providers who submit regular assessments. Provider capacitation sessions countrywide highlighted these issues and showcased the new moderation toolkit, updated to accommodate the three-phase moderation system pioneered by FoodBev. During the year, the qualifications review process was advanced by the food and beverage standards generating body (SGB), whose mandate is to align programmes to the needs identified in the sector skills plan (SSP). Complementing the 19 revised qualifications of the previous year, five new qualifications were developed in 2007/8, in meat, fish and fast-moving consumer goods processing. The previous nine dairy qualifications have been rationalised into one base qualification with various specialisations. A further 10 qualifications were being reviewed at year-end, a process that will be completed in 2008/9. The pace of learner certification continued, with graduates receiving full qualifications and earning skills programme recognition. As mentioned in the chief executive officer s report, CGCSA and Saafost have been identified as future ISOEs, each receiving R support to satisfy the requirements for FoodBev Seta accreditation. The partnership between the Institute of Brewing UK and the University of Pretoria, the sector s first identified ISOE, is working steadily towards its accreditation as an institute of excellence. NVC remains in the spotlight, with three providers accredited to deliver this business startup learnership, namely: Learn to Earn, Thusanang, and Makgalaka Business Development Services. During the year, the ETQA team added its weight to the apprenticeship implementation programme, liaising with employers to resolve problem areas such as document completion and recruitment of candidates. A FoodBev representative served on the selection panel convened by a further education and training (FET) institution to select suitable learners for the programme. A memorandum of understanding (MoU) was signed with the manufacturing and engineering Seta, Merseta, through which FoodBev apprentices will use Merseta trade centres and be certificated by that Seta, whilst FoodBev will handle the administration of its apprentices. FoodBev Annual Report

14 FoodBev Seta performance against 2007/8 NSDS targets MANDATORY GRANTS Success Reporting information Seta MoU Seta % Reason for over-/ indicator required target for achievements achieved underachievement 2007/8 2.1 By March 2010, at least 80% of large firms and 60% of medium firms employment equity targets are supported by skills development. Impact on overall equity profile assessed No of large firms received % WSP/annual training report (ATR) grants No of medium firms % received WSP/ATR grants Grants for an additional 40 large and 27 medium organisations were approved but not yet paid by 31 March 2.2 By March 2010, at least 40% of small levy paying firms supported and the impact of support measured No of small levy-paying % supported 2.3 By March 2010 at least 80% of government departments spend at least 1% of personnel budget on training and impact of training on service delivery measured and reported Not applicable Support to an additional 106 SMEs was approved but not yet paid by 31 March GRANT DISBURSEMENT RATE , % /1 2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8 Financial year 12 FoodBev Annual Report 2008

15 DISCRETIONARY GRANTS Success Reporting information Seta MoU Seta % Reason for over-/ indicator required target for achievements achieved underachievement 2007/8 1.1 Skills development supports national and sectoral growth, development and equity priorities SSP submitted as per DoL % guidelines and accepted by DoL 1.2 Information on critical skills is widely available to learners. Impact of information dissemination researched, measured and communicated in terms of rising entry, completion and placement of learners Target number of skills % Need for training development facilitators exceeded targeted (SDFs) or skills specialists number to be trained in the use of the guide 2.4 By March 2010, at least 500 enterprises achieve a national standard of good practice in skills development approved by the Minister of Labour Not applicable a standard has not been approved by the Minister of Labour ACHIEVEMENT PER ABET LEVEL 133% achieved % achieved Abet level 1 116% achieved Abet level 2 20% achieved Abet level 3 97% achieved Abet level Total Target Achievement FoodBev Annual Report

16 FoodBev Seta performance against 2007/8 NSDS targets DISCRETIONARY GRANTS continued Success Reporting information Seta MoU Seta % Reason for over-/ indicator required target for achievements achieved underachievement 2007/8 2.5 Annually increasing number of small BEE firms and cooperatives supported by skills development. Progress measured through an annual survey within the sector from the second year onwards No of small BEE firms % supported 2.7 Setas use discretionary funds and may with the agreement of their boards include the provision of Abet as a criterion for the release of WSP grants. Total sum of all Seta targets to be at least workers No of workers who have % No target set originally achieved Abet level 1 for individual levels. Higher participation No of workers who have % rate than expected achieved Abet level 2 at certain levels No of workers who have % achieved Abet level 3 No of workers who have % achieved Abet level 4 Total % EQUITY PROFILE OF PEOPLE WHO ACHIEVED ABET LEVELS % achieved % achieved No target 366 Target Achievement Black employees Female employees 10% achieved 40 4 Disabled employees 0 Young people (below 35) 14 FoodBev Annual Report 2008

17 DISCRETIONARY GRANTS continued Success Reporting information Seta MoU Seta % Reason for over-/ indicator required target for achievements achieved underachievement 2007/8 2.8 By March 2010, at least workers assisted to enter and at least 50% successfully complete programmes, including learnerships and apprenticeships, leading to basic entry, intermediate and high level scarce skills. Impact of assistance measured No of learners entered % Need in the sector learning programmes higher than anticipated No of learners completed % Completions were learning programmes accelerated EQUITY PROFILE OF EMPLOYEES WHO ENTERED LEARNING PROGRAMMES % achieved % achieved % achieved 20 0 Black Female Disabled No target Young employees (below 35) Target Achievement EQUITY PROFILE OF EMPLOYEES WHO COMPLETED LEARNING PROGRAMMES % achieved % achieved % achieved 10 1 Black Female Disabled No target Young employees (below 35) Target Achievement FoodBev Annual Report

18 FoodBev Seta performance against 2007/8 NSDS targets DISCRETIONARY GRANTS continued Success Reporting information Seta MoU Seta % Reason for over-/ indicator required target for achievements achieved underachievement 2007/8 3.2 By March 2010, at least non-levy-paying enterprises, NGOs, CBOs and community-based cooperatives supported by skills development. Impact of support on sustainability measured, with a targeted 75% success rate No of organisations % Need in the sector supported higher than anticipated. Additional funding available through SME support grants 4.1 By March 2010, at least unemployed people assisted to enter and at least 50% successfully complete programmes, including learnerships and apprenticeships, leading to basic entry, intermediate and high level scarce skills. Impact of assistance measured No of unemployed people % Need in the sector entered learning higher than programmes anticipated No of unemployed learners % Completions were completed learning accelerated programmes EQUITY PROFILE OF UNEMPLOYED PEOPLE WHO ENTERED LEARNING PROGRAMMES % achieved % achieved % achieved No target Black Female Disabled Young people (below 35) Target Achievement 16 FoodBev Annual Report 2008

19 DISCRETIONARY GRANTS continued Success Reporting information Seta MoU Seta % Reason for over-/ indicator required target for achievements achieved underachievement 2007/ % of learners in critical skills programmes covered by sector agreements from FET and higher education and training (HET) institutions assisted to gain work experience, of whom at least 70% find placement in employment or self-employment No of learners assisted to % Greater advocacy gain work experience and focus on scarce skills increased the demand for work experience grants 4.3 By March 2010, at least young people trained and mentored to form sustainable new ventures and at least 70% of new ventures in operation 12 months after completion of the programme No of young people who % Mid-term budget have entered NVC review provided programmes additional funds to expand the NVC project No of new ventures in % operation 12 months after completion of the programme EQUITY PROFILE OF UNEMPLOYED PEOPLE WHO COMPLETED LEARNING PROGRAMMES % achieved % achieved No target 608 Target Achievement % achieved Black Female Disabled Young people (below 35) FoodBev Annual Report

20 FoodBev Seta performance against 2007/8 NSDS targets QUALITY ASSURANCE Success Reporting information Seta MoU Seta % Reason for over-/ indicator required target for achievements achieved underachievement 2007/8 5.1 By March 2010, each Seta recognises and supports at least five ISOEs within public institutions and through public private partnerships (PPPs) % Identified additional organisations with potential to develop into ISOEs in view of five-year target 5.2 By March 2010, each province has at least two provider institutions accredited to manage the delivery of the NVC qualification % Efforts to ensure that provincial spread is achieved, and extensive marketing 5.3 By March 2010, there are measurable improvements in the quality of the services delivered by skills development institutions and those institutions responsible for the implementation of the NQF in support of the NSDS Positive SAQA Seta to Positive SAQA 100% audit report meet audit report SAQA audit and SAQA National Learners Record Database (NLRD) upload requirements 5.4 By March 2010, there is a National Skills Authority (NSA) constituency based assessment of an improvement in stakeholder capacity and commitment to the NSDS No target for 2007/ EQUITY PROFILE OF LEARNERS ON NEW VENTURE CREATION PROGRAMMES No target % achieved % achieved Target Achievement FoodBev 0 Annual Report % achieved 3 0 Black Female Disabled Young people (below 35) 0

21 Report of the audit committee REPORT OF THE AUDIT COMMITTEE REQUIRED BY TREASURY REGULATIONS AND (b) AND (c) ISSUED IN TERMS OF THE PUBLIC FINANCE MANAGEMENT ACT 1 OF 1999, AS AMENDED BY ACT 29 OF 1999 We are pleased to present our report for the financial year ended 31 March Audit committee members and attendance The audit committee consists of the members listed hereunder. During the period the committee met on four occasions and appropriate feedback was provided to the council on matters that fell within the mandate of the committee. Members Designation Constituency Qualification Date 28 May 26 July 17 Aug 12 Feb started Lorraine Executive Independent B Com 25 Nov R Nakene general manager CA (SA) 2004 (chair) Barbara Learning and SAB B Com 25 Nov Jones development employer 2004 (vice chair) consultant (finance) Mzomtsha Fawu national Fawu B Com 3 Aug Jonase treasury organised 2004 labour Jeff Independent Independent B Compt 8 Nov Rapoo consultant (hons) 2006 Carl Independent Independent B Com 12 Feb Komape consultant (hons) 2008 Attended Apology noted Was not a member R Resigned Audit committee responsibility The audit committee reports that it has adopted appropriate formal terms of reference as its audit committee charter, and has regulated its affairs in compliance with this charter and has discharged all its responsibilities as contained therein. Internal control and risk management The system of controls is designed to provide cost effective assurance that assets are safeguarded and that liabilities and working capital are efficiently managed. In line with the Public Finance Management Act, No 1 of 1999 (PFMA) and the King II Report on Corporate Governance requirements, internal audit provides the audit committee and management with assurance that the internal controls are adequate and effective to mitigate the risks applicable to FoodBev Seta. This is achieved by means of the risk management process, as well as the identification of corrective actions and suggested enhancements to the controls and processes. In the conduct of its duties, the audit committee has, among other things, reviewed the following: The effectiveness of internal control systems. The effectiveness of the internal audit function. The risk areas of the entity s operations covered in the scope of internal and external audits. The adequacy, reliability and accuracy of financial information provided by management for users of such information. Accounting and auditing concerns identified as a result of internal and external audits. FoodBev Annual Report

22 Report of the audit committee The entity s compliance with legal and regulatory provisions. The activities of the internal audit function, including its annual work programme, coordination with the external auditors, and the reports and the responses of management to specific recommendations. The independence and objectivity of both the internal and external auditors. The audit committee is of the opinion, based on the information and explanations given by management and the internal auditors and discussions with the independent external auditors on the results of their audits, that the internal accounting controls are operating to ensure that the financial records may be relied upon for preparing the annual financial statements, and accountability for assets and liabilities is maintained. For the period under review, the audit committee is satisfied that it has carried out the mandate in accordance with its charter, good governance principles and the requirements of the PFMA. We can report that the key systems of internal controls for the period under review were adequate and in areas where they were partially effective, management has taken corrective steps to address problems identified or is in the process of taking corrective action. Having carried out this review, we are satisfied that the above areas have been adequately addressed. Evaluation of annual financial statements Following our review of the annual financial statements for the year ended 31 March 2008, we are of the opinion that they comply in all material respects with the relevant provisions of the PFMA, as amended, South African Statements of Generally Recognised Accounting Practice (GRAP) and the South African Statements of Generally Accepted Accounting Practice (GAAP), including any interpretations of such statements where no GRAP standard exists, and that they fairly present the results of operations, cash flow and the financial position of the FoodBev Seta. We therefore recommend that the financial statements submitted be approved. The audit committee concurs with members of the council that the adoption of the going concern assertion in the preparation of the annual financial statements is appropriate. Jeff Rapoo Chairperson 17 July FoodBev Annual Report 2008

23 Report of the auditor-general REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION OF THE FOOD AND BEVERAGES MANUFACTURING INDUSTRY SECTOR EDUCATION AND TRAINING AUTHORITY FOR THE YEAR ENDED 31 MARCH 2008 REPORT ON THE FINANCIAL STATEMENTS Introduction 1. I have audited the accompanying financial statements of the Food and Beverages Manufacturing Industry Sector Education and Training Authority, which comprise the statement of financial position as at 31 March 2008, statement of financial performance, statement of changes in net assets and cash flow statement for the year then ended, and a summary of significant accounting policies as set out on pages 24 to 59. Responsibility of the accounting authority for the financial statements 2. The accounting authority is responsible for the preparation and fair presentation of these financial statements in accordance with the basis of accounting determined by the National Treasury, as set out in note 1 to the financial statements and in a manner required by the Public Finance Management Act, 1999 (Act 1 of 1999) (PFMA). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error selecting and applying appropriate accounting policies making accounting estimates that are reasonable in the circumstances. Responsibility of the Auditor-General 3. As required by section 188 of the Constitution of the Republic of South Africa, 1996, read with section 4 and 20 of the Public Audit Act, 2004 (Act No. 25 of 2004) and section 14(6)(a) of the Skills Development Act, 1998 (Act No. 97 of 1998), my responsibility is to express an opinion on these financial statements based on my audit. 4. I conducted my audit in accordance with the International Standards on Auditing and General Notice 616 of 2008, issued in Government Gazette No of 15 May Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance on whether the financial statements are free from material misstatement. 5. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. 6. An audit also includes evaluating the: appropriateness of accounting policies used reasonableness of accounting estimates made by management overall presentation of the financial statements. 7. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Basis of accounting 8. The public entity s policy is to prepare financial statements on basis of accounting determined by the National Treasury, as set out in note 1 to the financial statements. FoodBev Annual Report

24 Report of the auditor-general Opinion 9. In my opinion the financial statements present fairly, in all material respects, the financial position of the Food and Beverages Manufacturing Industry Sector Education and Training Authority as at 31 March 2008 and its financial performance and cash flows for the year then ended, in accordance with the basis of accounting determined by the National Treasury, as set out in note 1 to the financial statements, and in the manner required by the PFMA. Emphasis of matter Without qualifying my audit opinion, I draw attention to the following matter: Highlighting critically important matters presented or disclosed in the financial statements Restatement of corresponding figures 10. As disclosed in note 27 and note 1 to the annual financial statements the accounting policy for the recognition and measurement of skills development levy income has been amended by the National Treasury and the Department of Labour on the basis of a revised interpretation of the Skills Development Act, Act No. 97 of 1998, and the Skills Development Levies Act, Act No. 9 of Revenue and related receivables and mandatory grant expenditure and related payables have been adjusted accordingly. The corresponding figures for 31 March 2007 have been restated as a result of revised interpretation. OTHER MATTERS Without qualifying my audit opinion, I draw attention to the following matters that relate to my responsibilities in the audit of the financial statements: Matters of governance 11.The PFMA tasks the accounting authority with a number of responsibilities concerning financial and risk management and internal control. Fundamental to achieving this is the implementation of certain key governance responsibilities, which I have assessed as follows: Matter of governance Yes No Audit committee The public entity had an audit committee in operation throughout the financial year. The audit committee operates in accordance with approved, written terms of reference. The audit committee substantially fulfilled its responsibilities for the year, as set out in section 77 of the PFMA and Treasury Regulation / Internal audit The public entity had an internal audit function in operation throughout the financial year. The internal audit function operates in terms of an approved internal audit plan. The internal audit function substantially fulfilled its responsibilities for the year, as set out in Treasury Regulation 3.2/27.2. Other matters of governance The annual financial statements were submitted for audit as per the legislated deadlines, (section 55 of the PFMA). The financial statements submitted for audit were not subject to any material amendments resulting from the audit. No significant difficulties were experienced during the audit concerning delays or the unavailability of expected information and/or the unavailability of senior management. The prior year's external audit recommendations have been substantially implemented. 22 FoodBev Annual Report 2008

25 OTHER REPORTING RESPONSIBILITIES Report on performance information 12. I have reviewed the performance information as set out on pages 12 to 18. Responsibility of the accounting authority for the performance information 13. The accounting authority has additional responsibilities as required by section 55(2)(a) of the PFMA to ensure that the annual report and audited financial statements fairly present the performance against predetermined objectives of the public entity. Responsibility of the Auditor-General 14. I conducted my engagement in accordance with section 13 of the PAA read with General Notice 616 of 2008, issued in Government Gazette No of 15 May In terms of the foregoing my engagement included performing procedures of an audit nature to obtain sufficient appropriate evidence about the performance information and related systems, processes and procedures. The procedures selected depend on the auditor s judgement. Audit findings (performance information) 16. I believe that the evidence I have obtained is sufficient and appropriate to report that no significant findings have been identified as a result of my review. APPRECIATION 17. The assistance rendered by the staff of the Food and Beverages Manufacturing Industry Sector Education and Training Authority during the audit is sincerely appreciated. Pretoria 31 July 2008 FoodBev Annual Report

26 FoodBev Seta annual financial statements Report of the accounting authority STATEMENT OF RESPONSIBILITY BY THE FOODBEV SETA COUNCIL The FoodBev Seta council, as the accounting authority under the Public Finance Management Act (PFMA), is responsible for ensuring that the annual financial statements fairly present FoodBev Seta s financial position at 31 March 2008 and the financial transactions it has conducted during the period under review. The council has implemented policies and procedures to guide FoodBev Seta management in the execution of its duties and has ensured the monitoring thereof through regular internal audits. The council believes that financial management of FoodBev Seta has been conducted in accordance with FoodBev Seta s financial policies and procedures, which comply with Generally Accepted Accounting Practice (GAAP), Generally Recognised Accounting Practice (GRAP) and the PFMA. GENERAL REVIEW OF THE STATE OF AFFAIRS LEVY INCOME Following the groundwork done in the previous period, the year was characterised by full implementation of the second National Skills Development Strategy. Skills levy income FoodBev Seta saw levy income increase by 13% over the 2006/7 financial year, which was higher than budget forecasts based on average industry wage increases. The increase can be attributed to organic growth in industry payroll figures on which the skills levy is based. Interest and penalties Revenue from interest and penalties remained largely unchanged over the previous financial year, showing that levy collection by SARS has stabilised and that companies have begun to regard the skills levies as regular payment together with their employees PAYE. National Skills Funds (NSF) income Income for NSF-funded projects decreased due to much of the planning and preparatory work having been done before full implementation of the project. This included the conclusion of agreements with Coega Development Corporation, Agriseta and the Southern African Stainless Steel Development Association to undertake artisan development. The implementation phase of these agreements started towards the end of the financial year. It is expected that drawings and disbursements from the NSF will increase dramatically in the 2008/9 financial year. Investment income Funds invested yielded higher returns due to a change in FoodBev Seta s grant payment approach. Disbursement of funds to companies is linked to the progress and completion rate of employees and unemployed persons on learnerships and skills programmes. Due to low progress rates more funds were on hand for a period during the financial year. These were invested, the investment income being ploughed back into discretionary grants. Prior period error revenue During the current year, Setas and their respective legislative stakeholders as a collective realised that they misinterpreted various pieces of legislation governing revenue flowing from skills development levies. This resulted in an error to prior year financial statements as defined in GRAP 3, changes in accounting estimates and errors. During prior years the Seta recognised revenue when employers submitted the EMP 201 to SARS, while it should have been recognised when there was an allocation from the Department of Labour or when the funds were received, whichever occurred first. Comparative financial information has been restated to correct this error. 24 FoodBev Annual Report 2008

27 MAJOR EXPENDITURE AREAS Employer grant and project expenditure increased by 32% over the previous year to R109,0 million. Learnerships, skills programmes and Abet remained priority interventions and other areas such as internships, small and medium enterprise (SME) assistance, new venture creation and training provider capacity development projects were implemented. Significant expenditure was earmarked for apprenticeship training as some 200 unemployed persons are currently placed on apprenticeships in skills identified as scarce. Additionally, the costs of the training of apprenticeships was underestimated in the previous financial year and the FoodBev Seta council had to approve an almost 100% increase in the grant offered to sector employers. FoodBev Seta ended the financial year with close to unemployed persons and employed persons on learnerships and skills programmes. Since the establishment of Setas in 2000, FoodBev Seta has recorded around learnerships for employed people and for unemployed people, a total of people. SERVICES AND CAPACITY A customer satisfaction survey is carried out each year. Indications in this report show constant high levels of service to the industry with an observed 80% satisfaction with service delivery as per the survey. DISCONTINUED ACTIVITY AREAS AND PROPOSED NEW ACTIVITY AREAS In the 2008/9 financial year, FoodBev Seta will continue a strong focus on scarce and critical skills, which will see the rolling out of the NSF-funded project in this area. Special emphasis will be on artisan, sales and marketing and food technology skills. Also identified in the sector are scarce skills in general management, which will be alleviated to some extent through a leadership and management development implemented in the sector. CORPORATE GOVERNANCE Council and committee structures of FoodBev Seta were under review together with the Seta constitution. This review was intended to ensure that the constitution is more closely aligned with King II and the PFMA. A new constitution has been drafted, which was approved by the FoodBev Seta council for submission to the Minister of Labour on 6 May RISK MANAGEMENT FoodBev Seta is accountable for risk management and for the system of internal control, which is regularly reviewed for effectiveness, and for establishing appropriate risk and control policies that are communicated throughout the entity. The process is ongoing for identifying, evaluating and managing the significant risks faced by the entity, An adequate system of internal controls is in place to mitigate to an acceptable level the significant risks faced by FoodBev Seta. The system is designed to manage rather than eliminate risk and maximise the opportunities to achieve business objectives. This system can provide reasonable, but not absolute, assurance. FoodBev Seta has a documented and tested process that will allow it to continue its critical business processes in the event of a disastrous incident impacting its activities. A disaster recovery plan is in place for critical information. FoodBev Annual Report

28 FoodBev Seta annual financial statements Report of the accounting authority CODE OF ETHICS All staff members are required to sign and abide by an ethics pledge, and to the knowledge of the FoodBev Seta council these standards have been maintained. The FoodBev Seta constitution contains a code of ethics and a process to deal with transgressions. OCCUPATIONAL HEALTH, SAFETY AND ENVIRONMENT FoodBev Seta has adopted an occupational health and safety (OHS) policy in which management and staff recognise and accept their legislative responsibilities and are committed to establishing and maintaining an environment in which employees continuously improve safety and health. The organisation is committed to ensuring that the requirements of the Occupational Health and Safety Act No. 85 of 1993 and its regulations are fully met. The following structures have been established in terms of the OHS policy: health and safety officer health and safety representative health and safety committee The Seta has adopted an HIV/Aids policy intended to promote awareness among employees and prevent discrimination of those infected and/or affected by HIV/Aids. Due consideration is given to the environment in all decision-making. HUMAN CAPITAL DEVELOPMENT FoodBev Seta s training and development policy provides for: investment of about 3 5% of payroll annually a consultative employee forum, the training and employment equity committee (TEEC), which promotes equal opportunity in training and adherence to the Employment Equity Act (EEA) the employment equity plan and report is submitted to the Department of Labour annually. management development of senior staff is undertaken to provide for succession planning. BROAD-BASED BLACK ECONOMIC EMPOWERMENT (BBBEE) All procurement policies and procedures comply with the government s preferential procurement framework. REMUNERATION Accounting authority members The members of the accounting authority (FoodBev Seta council) do not receive remuneration. FoodBev Seta pays for all subsistence and travel expenses. Chief executive officer and chief financial officer The annual total cost-to-company remuneration appears on the following page: 26 FoodBev Annual Report 2008

29 APRIL 2007 MARCH 2008 Position Basic Travel Entertainment Cellphone Performance Provident Medical Total Total (incl annual allowance allowance allowance bonus fund aid salary salary bonus and 2007/8 2006/7 backpay) Chief executive officer Chief financial officer Total EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE No significant events occurred after the statement of financial position date. AUDIT COMMITTEE The audit committee reviewed the annual financial statements and has approved them for submission to the various legislative stakeholders. APPROVAL OF ANNUAL FINANCIAL STATEMENTS The annual financial statements for the year ended 31 March 2008 have been prepared on the going concern basis and have been approved by the accounting authority in terms of section 51(1)(f) of the PFMA, on 26 May Ravin Deonarain CEO Willie Prinsloo Chairperson FoodBev Annual Report

30 FoodBev Seta annual financial statements Statement of financial performance for the year ended 31 March / /07 Note R'000 R'000 Restated REVENUE Non-exchange revenue Skills development levy: income Skills development levy: penalties and interest Government grants and other donor funding: revenue Exchange revenue Investment income Other income 6 13 Total revenue EXPENSES Employer grant and project expenses 7 ( ) (82 695) Administration expenses 8 (13 703) (13 003) Finance costs 9 (51) (62) Government grants and other donor funding: expenditure 19 (653) (4 980) Total expenses ( ) ( ) NET SURPLUS/(DEFICIT) FOR THE YEAR FoodBev Annual Report 2008

31 Statement of financial position as at 31 March / /07 Note R'000 R'000 Restated ASSETS Current assets Prepayments and advances Trade and other receivables from non-exchange transactions Trade and other receivables from exchange transactions Inventory Cash and cash equivalents Non-current assets Property, plant and equipment Intangible assets Total assets LIABILITIES Current liabilities Trade and other payables from non-exchange transactions Trade and other payables from exchange transactions National Skills Fund received in advance Current portion of finance lease obligations Provisions Non-current liabilities Finance lease obligations Total liabilities Net assets NET ASSETS Administration reserve Employer grant reserve Discretionary reserve Total net assets FoodBev Annual Report

32 FoodBev Seta annual financial statements Statement of changes in net assets for the year ended 31 March 2008 Administration reserve Employer grant reserve Discretionary grant reserve Accumulated surplus Note R'000 R'000 R'000 R'000 R'000 Balance at 1 April Prior year error 27 (122) 122 Error 27 (7 980) (7 980) Restated balance Net surplus/(deficit) per statement of financial performance allocated Allocation of unappropriated surplus (22 368) Excess reserves transferred to discretionary reserve (936) (14 641) Balance at 31 March Net surplus/(deficit) per statement of financial performance allocated Allocation of unappropriated surplus (14 656) Excess reserves transferred to discretionary reserve (2 044) (11 278) Balance at 31 March Total The transfer between reserves is as per the stipulation in the Skills Development Act, which requires surplus funds from administration reserves and any unclaimed mandatory grants to be transferred to the discretionary grant reserve and is done on the accrual basis of accounting. 30 FoodBev Annual Report 2008

33 Cash flow statement for the year ended 31 March 2008 CASH FLOW FROM OPERATING ACTIVITIES 2007/ /07 Note R'000 R'000 Restated Operating activities Cash receipts from stakeholders Levies, interest and penalties received Other cash receipts from stakeholders Cash paid to stakeholders, suppliers and employees ( ) (94 661) Grants and project payments (94 153) (78 387) Special projects (653) (4 980) Compensation of employees (8 255) (6 809) Payments to suppliers and other 54 (5 160) Interest accrued Vat irrecoverable/paid 12 Cash generated utilised in operations Interest received Interest paid 9 (51) (62) Net cash outflow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of property, plant and equipment 10 (563) (342) Purchase of intangible assets 11 (109) (151) Net cash (outflow) from investing activities (672) (493) CASH FLOW FROM FINANCING ACTIVITIES Grants, transfers and funds received Finance lease obligations obtained 97 Finance lease obligations repaid (42) (40) Net cash inflow from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year FoodBev Annual Report

34 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March ACCOUNTING POLICIES The annual financial statements have been prepared in accordance with South African Statements of Generally Accepted Accounting Practices (GAAP) including any interpretations of such Statements issued by the Accounting Practices Board, with the effective standards of Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting Standards Board replacing the equivalent GAAP statement as follows: Standard of GRAP GRAP 1: Presentation of financial statements GRAP 2: Cash flow statements GRAP 3: Accounting policies, changes in accounting estimates and errors. Replaced statement of GAAP AC 101: Presentation of financial statements AC 118: Cash flow statements AC 103: Accounting policies, changes in accounting estimates and errors. Currently the recognition and measurement principles in the above GRAP and GAAP statements do not differ or result in material differences in items presented and disclosed in the financial statements. The implementation of GRAP 1, 2 and 3 has resulted in the following changes in the presentation of the financial statements: 1. Terminology differences Standard of GRAP Statement of financial performance Statement of financial position Statement in changes in net assets Net assets Surplus/deficit for the period Accumulated surplus/deficit Contribution from owners Distribution to owners Replaced statement of GAAP Income statement Balance sheet Statement of changes in equity Equity Profit/loss for the period Retained earnings Share capital Dividends 2. The cash flow statement can be prepared only in accordance with the direct method. 3. Specific information has been presented separately on the statement of financial position such as: (a) receivables from non-exchange transactions, including taxes and transfers; (b) taxes and transfers payable; (c) trade and other payables from non-exchange transactions. 4. The amount and nature of any restrictions on cash balances are required. Paragraphs of GRAP 1 have not been implemented due to the fact that the local and international budget reporting standard is not effective for this financial year. Although the inclusion of budget information would enhance the usefulness of the financial statements, non-disclosure will not affect the objective of the financial statements. The principal accounting policies adopted in the preparation of these financial statements are set out below and are, in all material respects, consistent with those of the previous year, except as otherwise stated. 1.1 Basis of preparation The financial statements have been prepared on the historical cost basis except where adjusted for present/fair values as required by the respective accounting standards. 1.2 Currency These financial statements are presented in South African rands since that is the currency in which the majority of the entity transactions are denominated. 32 FoodBev Annual Report 2008

35 1.3 Revenue recognition Revenue is recognised when it is probable that future economic benefits will flow to the enterprise and these benefits can be measured reliably. 1.4 Levy income In terms of section 3(1) and 3(4) of the Skills Development Levies Act, 1999 (Act No. 9 of 1999), registered member companies of FoodBev Seta pay a skills development levy of 1% of the total payroll cost to the South African Revenue Service (SARS). Eighty percent (80%) of skills development levies are paid over to FoodBev Seta (net of the 20% contribution to the National Skills Fund). Skills development levy (SDL) transfers are recognised when it is probable that future economic benefits will flow to the Seta and these benefits can be measured reliably. This occurs when DoL either makes an allocation or payment, whichever occurs first, to the Seta, as required by Section 8 of the Skills Development Levies Act, 1999 (Act No. 9 of 1999). The SDL transfer is measured at the fair value of the consideration receivable or received. FoodBev Seta refunds amounts to employers in the form of grants, based on information from SARS. Where SARS retrospectively amends the information on levies collected, it may result in grants that have been paid to certain employers that are in excess of the amount FoodBev Seta is permitted to have granted to employers. A receivable relating to the overpayment to the employer in earlier periods is raised at the amount of such grant overpayment, net of bad debts and provision for irrecoverable amounts. Revenue is adjusted for interseta transfers due to employers changing Setas. Such adjustments are separately disclosed as interseta transfers. The amount of the interseta adjustment is calculated according to the standard operating procedure issued by DoL in June When a new employer is transferred to FoodBev Seta, the levies transferred by the former Seta are recognised as revenue and allocated to the respective category to maintain its original identity. 1.5 Interest and penalties Interest and penalties on the skills development levy are recognised when they accrue based on the amount received. 1.6 Government grants Funds transferred by the government are accounted for in the financial statements of FoodBev Seta as a liability until the related eligible expenses are incurred, when the liability is extinguished and revenue recognised. Property, plant and equipment obtained with government grants and other donor funding are capitalised when materially the risk and rewards have been transferred and are depreciated in accordance with the property, plant and equipment policy over the useful life of the assets. The assets are derecognised on disposal or when the assets are transferred in accordance with the respective agreement. 1.7 Investment income Interest income is accrued on a time proportion basis, taking into account the principal outstanding and the effective interest rate over the period to maturity. 1.8 Grants and project expenditure A registered company may recover a maximum of 70% (mandatory grant 50% and discretionary grant 20%) of its total levy payment by complying with the grant criteria in accordance with the skills development regulations issued in terms of the Skills Development Act 1999 (Act No. 9 of 1999). FoodBev Annual Report

36 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March 2008 Mandatory grants The grant payable and the related expenditure are recognised when the employer has submitted an application for a grant in the prescribed form within the agreed upon cut-off period and the application has been approved, as the payment then becomes probable. The grant is equivalent to 50% (prior period: 50%) of the total levies paid by the employer during the corresponding financial period. Discretionary grants and project expenditure A Seta may out of any surplus monies determine and allocate discretionary grants to employers, education and training providers and workers of the employers who have submitted an application for a discretionary grant in the prescribed form within the agreed upon cut-off period. The grant payable and the related expenditure are recognised when the application has been approved, training has taken place and conditions have been met. Project expenditure comprises: costs that relate directly to the specific contract; costs that are attributable to contract activity in general and can be allocated to the project, and such other costs as are specifically chargeable to FoodBev Seta under the terms of the contract. Such costs are allocated using methods that are systematic and rational and are applied consistently to all costs having similar characteristics. Discretionary grants and project costs are recognised as expenses in the period in which they are incurred. A receivable is recognised net of a provision for irrecoverable amounts for incentive and other payments made to the extent of expenses not yet incurred in terms of the contract Provisions for grants Grant payments A provision is recognised for grant payments once the specific criteria set out in the regulations to the Skills Development Act, 97 of 1998 have been complied with by member companies and it is probable that FoodBev Seta will make the relevant payments. The measurement of the obligation is based on the levies received. Projects No provision is made for projects approved at year-end, unless the service in terms of the contract has been delivered or the contract is of an onerous nature. Where a contract has been approved, but has not been accrued for or provided for, it is disclosed as commitments in the notes to the financial statements. 1.9 Irregular, and fruitless and wasteful expenditure Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of any applicable legislation, including: the PFMA, the Skills Development Act, the materiality and significance framework approved by the FoodBev Seta council. Fruitless and wasteful expenditure means expenditure that was made in vain and would have been avoided had reasonable care been exercised. All irregular, and fruitless and wasteful expenditure is recognised against the respective class of expense and disclosed in a note in the financial statements when it has been identified Property, plant and equipment Property, plant and equipment are stated at cost less any subsequent accumulated depreciation 34 FoodBev Annual Report 2008

37 and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Seta and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in surplus or deficit as incurred. Depreciation Depreciation is recognised in surplus or deficit on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful life unless it is reasonably certain that the Seta will obtain ownership by the end of the lease term. The estimated useful lives for the current and comparative periods are as follows: Computer equipment 20% Intangible assets (computer software) 20% Office furniture and fittings 12,5% Office equipment 12,5% 20% The depreciation method, useful lives and residual values of items of property, plant and equipment are reviewed annually and altered if circumstances or expectations have changed significantly. The estimated useful life of the assets is limited to the remaining period of the licence issued to FoodBev Seta by the Minister of Labour. For the current year the remaining period is two years (2007: three years). Gains and losses on disposal of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised in surplus or deficit. Intangible assets Intangible assets are stated at cost less any subsequent accumulated amortisation and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Amortisation Amortisation is recognised in surplus or deficit on a straight-line method over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful life for the current and comparative periods is as follows: Intangible assets (computer software) 20% The amortisation method and useful lives of items of intangible assets are reviewed annually and altered if circumstances or expectations have changed significantly. The estimated useful life of the assets is limited to the remaining period of the licence issued to FoodBev Seta by the Minister of Labour. For the current year the remaining period is two years (2007: three years). FoodBev Annual Report

38 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March 2008 Gains and losses on disposal of intangible assets are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised in surplus or deficit Leasing Leases in terms of which the Seta assumes substantially all the risks and rewards of ownership are classified as finance leases. Other leases are operating leases and the leased assets are not recognised on the Seta's statement of financial position. Foodbev Seta as a lessee Assets held under finance leases and the corresponding liability are initially recognised at their present value of the minimum lease payments at the date of acquisition. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the estimated present value of the assets acquired, are charged to the statement of financial position over the term of the relevant lease so as to produce a constant periodic rate of interest on the remaining balance of the obligations for each accounting period. Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the statement of financial performance on a straight-line basis over the period of the lease. Lease incentives received are recognised as an integral part of the total expense over the term of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which the termination takes place. Impairment of non-financial assets The carrying amounts of the Seta's non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit). An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in surplus or deficit. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Impairment of financial assets A financial asset is assessed at each reporting date to determine whether there is any objective 36 FoodBev Annual Report 2008

39 evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in surplus or deficit. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in surplus or deficit Provisions Provisions are recognised when FoodBev Seta has a present legal or constructive obligation as a result of a past event and it is probable that this will result in an outflow of economic benefits that can be estimated reliably. Long-term provisions are discounted to net present value Provision for employee entitlements The cost of employee benefits is recognised during the period in which the employee renders the related service. Employee entitlements are recognised when they accrue to employees. A provision is made for the estimated liability as a result of services rendered by employees up to the statement of financial position date. Provisions included in the statement of financial position are provisions for leave (based on the current salary rates) and bonuses Short-term employee benefits The cost of short-term employee benefits is recognised during the period in which the employee renders the related service. Employee entitlements to annual leave and longservice leave are recognised when they accrue to the employee. A provision is made for the estimated liability for annual leave and long-service leave as a result of services rendered by employees up to the statement of financial position date. The provision has been calculated at undiscounted amounts based on current salary rates Termination benefits Termination benefits are recognised and expensed only when payment is made Post-employment benefit costs No provision has been made for retirement benefits as FoodBev Seta does not provide for retirement benefits of its employees Medical benefits FoodBev Seta provides medical benefits for all its employees through defined contribution plans. Payments to the fund are charged as an expense as they fall due Provident fund benefits FoodBev Seta provides for a provident fund for all its employees through a defined contribution plan. Payments to the fund are charged as an expense as they fall due Financial instruments Recognition Financial assets and financial liabilities are recognised on FoodBev Seta s statement of financial position when FoodBev Seta becomes a party to the contractual provisions of the instrument. FoodBev Annual Report

40 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March 2008 All regular way purchases and sales of financial assets are initially recognised using trade date accounting. Measurement Financial instruments are initially measured at fair value plus transaction costs directly attributable to the acquisition or issue of the financial asset/liability. Subsequent to initial recognition these instruments are measured as set out below. Financial assets FoodBev Seta s principal financial assets are accounts and other receivables and cash and cash equivalents. Accounts and other receivables Accounts and other receivables are measured at amortised cost using the effective interest rate method. Impairment losses are recognised in an allowance account where the carrying value exceeds the present value of estimated future cash flows discounted against the original effective interest rate. Cash and cash equivalents Cash and cash equivalents are measured at fair value. Financial liabilities FoodBev Seta's principal financial liabilities are accounts and other payables. All financial liabilities are measured at amortised cost, comprising original debts less principal payments and amortisations. Derecognition A financial asset or a portion thereof is derecognised when FoodBev Seta realises the contractual rights to the benefits specified in the contract, the rights expire, or FoodBev Seta surrenders those rights or otherwise loses control of the contractual rights that comprise the financial asset. On derecognition, the difference between the carrying amount of the financial asset and the sum of the proceeds receivable and any prior adjustment to reflect the fair value of the asset that had been reported in equity is included in net surplus or deficit for the period. A financial liability or a part thereof is derecognised when the obligation specified in the contract is discharged, cancelled or expires. On derecognition, the difference between the carrying amount of the financial liability, including related unamortised costs, and the amount paid for it is included in net surplus or deficit for the period. Fair value considerations The fair values at which financial instruments are carried at the statement of financial position date have been determined using available market values. Where market values are not available, fair values have been calculated by discounting expected future cash flows at prevailing interest rates. The fair values have been estimated using available market information and appropriate valuation methodologies, but are not necessarily indicative of the amounts that FoodBev Seta could realise in the normal course of business. The carrying amount of financial assets and financial liabilities with a maturity of less than one year is based on cost as fair value due to the short-term trading cycle of these items. Offsetting Financial assets and financial liabilities are offset if there is any intention to realise the asset and settle the liability simultaneously and a legally enforceable right to set off exists. 38 FoodBev Annual Report 2008

41 1.14 Net assets Equity is sub-classified in the statement of financial position into the following reserves: Administration reserve Employer grant reserve Discretionary grant reserve Accumulated surplus This sub-classification is made based on the restrictions placed on the distribution of monies received in accordance with the regulations issued in terms of the Skills Development Act, 1998 (Act No. 97 of 1998). Member employer company levy payments are set aside in terms of the Skills Development Act and the regulations issued in terms of the Act, for the purpose of: 2007/ /07 % % Administration costs of the Seta Employer grant fund levy Discretionary grants and projects In addition, contributions received from public service employers in the national or provincial spheres of government may be used to pay for administration costs. Interest and penalties received from SARS as well as interest received on investments are utilised for discretionary grants and projects. The net surplus/deficit is allocated to the administration reserve, the mandatory grant reserve and the discretionary fund reserve. The transfer between reserves is as per the stipulation in the Skills Development Act, which requires surplus funds from administration reserves and any unclaimed mandatory grants to be transferred to the discretionary grant reserve, and is done on the accrual basis of accounting Inventory Inventory is stated at the lower of cost or net realisable value. Cost is determined on a first-in-firstout basis Related party transactions Related party transactions comprise the members of the council and senior management. Transactions with related parties are in the normal course of business and are on arm s length basis Contingencies In terms of the PFMA, all surplus funds as at year-end may be forfeited to National Treasury, should an application for retention of surplus funds be denied. A submission to retain surplus funds has been made to DoL Comparative figures Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year. FoodBev Annual Report

42 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March ALLOCATION OF NET SURPLUS FOR THE YEAR TO RESERVES: 2008 Total per statement of financial performance Administration reserve Total revenue Skills development levy: income Administration levy income (10%) Grant levy income (70%) Skills development levy: penalties and interest 694 National Skills Fund income 653 Investment income Other income Total expenses Administration expenses Finance costs National Skills Fund expenses 653 Employer grants and project expenses Net surplus/(deficit) per statement of financial performance allocated Total per statement of financial performance Administration reserve Total revenue Skills development levy: income Administration levy income (10%) Grant levy income (70%) Skills development levy: penalties and interest 549 National Skills Fund income Government grants and other donor funding Investment income Other income Total expenses Administration expenses Finance costs Government grants and other donor funding Employer grants and project expenses Net surplus/(deficit) per statement of financial performance allocated FoodBev Annual Report 2008

43 Employer grants reserve Discretionary reserve Mandatory skills planning grant Discretionary grants Special projects government grants Total discretionary Employer grants reserve Discretionary reserve Mandatory skills planning grant Discretionary grants Special projects government grants Total discretionary FoodBev Annual Report

44 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March SKILLS DEVELOPMENT LEVY INCOME The total levy income per the statement of financial performance is as follows: 2007/ /07 R'000 R'000 Restated Levy income: administration Levies received Levies received from SARS InterSeta transfers in InterSeta transfers out (26) Levies accrued (69) 78 Levy income: employer grants Levies received Levies received from SARS InterSeta transfers in InterSeta transfers out (130) Levies accrued (343) 391 Levy income: discretionary grants Levies received Levies received from SARS InterSeta transfers in InterSeta transfers out (52) Levies accrued (135) INTEREST AND PENALTIES Interest Penalties Penalties are levied by SARS at a rate of 10% of the amount due, on employers who pay their skills development levy after the due date as legislated. Interest rate accrues at the prescribed rate of 10,5% per annum. 5 INVESTMENT INCOME Interest income OTHER INCOME Proceeds from insurance FoodBev Annual Report 2008

45 Note 2007/ /07 R'000 R'000 Restated 7 EMPLOYER GRANT AND PROJECT EXPENSES Mandatory grants Disbursed Movement in provisions and accruals Discretionary grants Disbursed Movement in provisions and accruals Project expenditure Disbursed Movement in provisions and accruals Project expenditure consists of: Direct salaries and wages Direct project administration expenses SSP research Scarce skills guide Training provider capacity Advertising, promotions and publicity material Catering and event hosting Consulting fees External moderation Travel and accommodation Consultants fees/project management Other administration expenses FoodBev Annual Report

46 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March 2008 Note 2007/ /07 R'000 R'000 Restated 8 ADMINISTRATION EXPENSES Depreciation Amortisation Loss on disposal of property, plant and equipment Operating lease rentals Buildings Maintenance, repairs and running costs Advertising, marketing and promotions, communication Entertainment expenses Consultancy and service provider fees Legal fees Cost of employment Travel and subsistence Staff training and development Remuneration to members of the audit committee External auditor's remuneration Audit fees Other IT expenses Internal audit fees Research 138 Postage and courier Recruitment costs Stationery and printing Conference/strategic planning/venue hire Seta functional costs Less: amounts allocated to project expenditure (2 111) (418) FoodBev Annual Report 2008

47 Note 2007/ /07 R'000 R'000 Restated 8.1 Cost of employment Salaries and wages Basic salaries Social contributions Medical aid contributions Pension contributions: defined contribution plans Allocation of cost of employment Administration expenses Project expenses Average number of employees Refer to the report by the accounting authority for disclosure concerning the emoluments of members of the accounting authority, the chief executive officer and the chief financial officer. 9 FINANCE COSTS Interest expense: Obligations under finance leases FoodBev Annual Report

48 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March PROPERTY, PLANT AND EQUIPMENT Accumulated Closing depreciation/ carrying Cost impairment amount R 000 R 000 R 000 Year ended 31 March 2008 Computer equipment (502) 593 Office furniture and fittings 746 (387) 359 Office equipment 769 (340) 429 Balance at end of period (1 229) Made up as follows: Owned assets (1 073) Lease assets 393 (156) 237 Year ended 31 March 2007 Computer equipment 857 (418) 439 Office furniture and fittings 643 (301) 342 Office equipment 615 (236) 379 Balance at end of period (955) Made up as follows: Owned assets (955) Lease assets Movement summary 2008 Carrying Accumulated Carrying amount Depreciation depreciation amount 2007 Additions Disposals charge on disposals 2008 R 000 R 000 R 000 R 000 R 000 R 000 Computer equipment (66) (138) Office furniture and fittings (2) (87) Office equipment (104) 429 Balance at end of period (68) (330) Movement summary 2007 Carrying Accumulated Carrying amount Depreciation depreciation amount 2006 Additions Disposals charge on disposals 2007 R 000 R 000 R 000 R 000 R 000 R 000 Computer equipment (84) (127) Office furniture and fittings (76) 342 Office equipment (98) 379 Balance at end of period (84) (301) FoodBev Annual Report 2008

49 11 INTANGIBLE ASSETS Closing Accumulated carrying Cost amortisation amount R 000 R 000 R 000 Year ended 31 March 2008 Intangible assets (1 187) 380 Balance at end of period (1 187) 380 Made up as follows: Owned assets (1 187) 380 Lease assets Year ended 31 March 2007 Intangible assets (939) 519 Balance at end of period (939) 519 Made up as follows: Owned assets (939) 519 Movement summary 2008 Carrying Carrying amount Amortisation amount 2007 Additions Disposals charge 2008 R 000 R 000 R 000 R 000 R 000 Intangible assets (248) 380 Balance at end of period (248) 380 Movement summary 2007 Carrying Carrying amount Amortisation amount 2006 Additions Disposals charge 2007 R 000 R 000 R 000 R 000 R 000 Intangible assets (221) 519 Balance at end of period (221) 519 Made up as follows: Owned assets 589 FoodBev Annual Report

50 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March / /07 R'000 R'000 Restated 12 PREPAYMENTS AND ADVANCES Discretionary grants prepaid Deposits 6 6 Closing balance ACCOUNTS RECEIVABLE Non-exchange transactions InterSeta debtors Admin grant levy debtors Employer grant levy debtors Discretionary grant levy debtors Exchange transactions Other receivables from employers Advance for generator 115 Investment interest receivable VAT FoodBev Seta is no longer a Vat vendor with effect from 1 April INVENTORY Consumable stores CASH AND CASH EQUIVALENTS Cash at bank and in hand Cash at bank Cash on hand 1 1 Short-term investments/instruments Cash and cash equivalents at end of year As required in Treasury Regulation 31.2, National Treasury approved the banks where the bank accounts are held. The weighted average interest rate on short-term bank deposits was 9% (2007: 7%). Included in the above balance is an amount of R5,495m that is reserved for NSF-approved projects. 48 FoodBev Annual Report 2008

51 2007/ /07 R'000 R'000 Restated 17 FINANCE LEASE OBLIGATIONS Analysed for financial reporting purposes: Non-current finance lease liability (recoverable after 12 months) Current finance lease liability (recoverable within 12 months) Finance lease liability Reconciliation between the total of the minimum lease payments and the present value: Up to one year Future minimum lease payments Finance cost (51) (49) Present value One to five years Future minimum lease payments Finance cost (33) (60) Present value Finance lease repayments for the year The finance lease liability is for three copiers and two printers that are leased from Gestetner. Interest is paid at an average of 26% per annum. The lease agreement for two copiers and two printers expires on 31 August 2010 and for the other copier on 31 January FoodBev Annual Report

52 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March 2008 Note 2007/ /07 R'000 R'000 Restated 18 ACCOUNTS PAYABLE Non-exchange transactions Skills development grants payable mandatory Income received in advance SMMEs InterSeta payables Exchange transactions Service provider fees outstanding Sundry payables: accrued expenses Accrued expenses Skills development levy payable Skills development grants payable mandatory Opening balance Utilised (8 599) (4 667) Change in estimate Closing balance Income received in advance SMMEs Opening balance Utilised administration (18) (30) Utilised employer grant (89) (150) Utilised discretionary grant (35) (60) Change in estimate administration Change in estimate employer grant Change in estimate discretionary grant Closing balance GOVERNMENT GRANTS AND DONOR FUNDING: SPECIAL PROJECTS Opening balance Received during the year NSF Employment and skills development agency (Esda) project NSF Scarce skills project Interest received Utilised and recognised as revenue conditions met: (653) (4 980) NSF Esda project (4 916) NSF Scarce skills project (653) (64) Closing balance During the current year R0 was received from the government for the purposes of special projects. R was recognised as revenue as R of eligible expenses was incurred. 50 FoodBev Annual Report 2008

53 20 PROVISIONS Employee Employee leave bonus 2007/ /07 provision provision R 000 R 000 Open carrying amount Amounts utilised Change in estimate Closing carrying amount Non-current Current Total Employee leave provision is calculated on the number of leave days outstanding as at 31 March 2008 and based on the total cost to company. Employee bonus is calculated for those employees who choose to have a 13th cheque and for performance bonus. Note 2007/ /07 R 000 R'000 Restated 21RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO NET SURPLUS/(DEFICIT) Net surplus/(deficit) as per statement of financial performance Adjusted for non-cash items: Depreciation Amortisation Loss/(profit) on disposal of property, plant and equipment Increase/(decrease) in provisions Special project income recognised (653) (4 980) Adjusted for items separately disclosed Investment income 5 (9 040) (5 307) Finance costs Adjusted for working capital changes: Decrease/(increase) in prepayments Decrease/(increase) in inventory (11) (14) Decrease/(increase) in receivables non-exchange transactions (11) (1 395) Decrease/(increase) in receivables exchange transactions (666) (2 646) (Decrease)/increase in payables non-exchange transactions (Decrease)/increase in payables exchange transactions (Decrease)/increase in finance lease obligations (12) 5 Movement in Vat receivable/payable 12 Proceeds from insurance claim Cash generated utilised in operations FoodBev Annual Report

54 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March CONTINGENCIES In terms of the PFMA, all surplus funds as at year-end can be forfeited to National Treasury if no application is made to roll over surplus funds to the next year. Formal approval to roll over funds was obtained in July COMMITMENTS 23.1 Employer grant reserve A balance of R is available to pay new employers who have paid skills development levies to SARS and registered after September The Skills Development Act requires the Seta to pay a mandatory grant to employers who submit their workplace skills plans should they join within this period Discretionary grant reserve Of the balance of R97,0m available in the discretionary grant reserve at the end of March 2008, R87,7m is committed for the various projects listed below. A request for the accumulation of these funds was submitted to National Treasury and approval was received during July Description Opening Approved by Opening Approved by of grant balance accounting balance accounting 2006/07 authority Utilised 2007/08 authority Utilised Total R 000 R 000 R 000 R 000 R 000 R 000 R 000 Scarce skills guide SMME support (4 367) BEE support (88) Abet Learnerships Non-levy-paying companies support New venture creation Apprenticeships NVC providers Training provider capacity (510) 936 Project Life grants TOTAL FoodBev Annual Report 2008

55 24 OPERATING LEASES 2007/ /07 R'000 R'000 Restated Total of future minimum rental payments under non-cancellable rental agreement: Not later than one year Later than one year and not later than five years Later than five years The rental relates to the office building leased from Investec entered into on 1 November 2005 for a fiveyear period ending on 31 October The lease payments escalate at 9% per annum on 1 November of each year. No provision has been made to renew the lease on expiry. 25 MATERIAL LOSSES THROUGH CRIMINAL CONDUCT, IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE To the best of our knowledge, no material losses through criminal conduct were incurred during the year ended 31 March Irregular expenditure To the best of our knowledge, no irregular expenditure was incurred during the year ended 31 March FINANCIAL INSTRUMENTS In the course of FoodBev Seta operations it is exposed to interest rate, credit, liquidity and market risk. FoodBev Seta has developed a comprehensive risk strategy in terms of TR28.1 in order to monitor and control these risks. The risk management process relating to each of these risks is discussed under the headings below. Interest rate risk FoodBev Seta manages its interest rate risk by investing in the financial institutions approved by National Treasury. FoodBev Seta's exposure to interest rate risk and the effective interest rates on financial instruments at statement of financial position date are as follows: FoodBev Annual Report

56 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March 2008 Floating rate Fixed rate Noninterest bearing Weighted average Effective effective Amount interest Amount interest Amount Total R 000 rate R 000 rate % R 000 R 000 Year ended 31 March 2008 Assets Cash % Loans and accounts receivable Total financial assets % Liabilities Loans and accounts payable (7 896) (7 896) Total financial liabilities (7 896) (7 896) Year ended 31 March 2007 Total financial assets % Total financial liabilities (1 529) (1 529) Credit risk Financial assets, which potentially subject FoodBev Seta to the risk of non-performance by counterparties and thereby subject it to concentrations of credit risk, consist mainly of cash and cash equivalents, investments and accounts receivable. The ageing of trade and other receivable from non-exchange transactions: F2007/8 F2006/7 Gross Impairment Gross Impairment Not past due Past due 0-30 days Past due days More than one year 6 6 Cash and cash equivalents: Not past due Past due 0-30 days Past due days More than one year 54 FoodBev Annual Report 2008

57 FoodBev Seta manages its treasury counterparty exposure by dealing only with well-established financial institutions approved by National Treasury through the approval of their investment policy in terms of Treasury Regulations. FoodBev Seta's exposure is continuously monitored by the executive committee. Liquidity risk FoodBev Seta manages liquidity risk through proper management of working capital and capital expenditure. Adequate reserves and liquid resources are also maintained. F2007/8 Carrying Contractual 6 months 6-12 months 1-2 years More than amount cash flows or less average 2 years Trade and other payables from exchange transactions (7 896) (7 896) (7 896) F2006/7 Trade and other payables from exchange transactions (1 529) (1 529) (1 529) Fair values FoodBev Seta's financial instruments consist mainly of cash and cash equivalents, account and other receivables, and account and other payables. No financial asset was carried at an amount in excess of its fair value and fair values could be reliably measured for all financial instruments. The following methods and assumptions are used to determine the fair value of each class of financial instrument: Cash and cash equivalents The carrying amount of cash and cash equivalents approximates fair value due to the relatively short-term maturity of these financial assets. Accounts receivable The carrying amount of accounts receivable, net of allowance for bad debt, approximates fair value due to the relatively short-term maturity of these financial assets. Interest is levied at the prescribed rate as determined by the Act, should employers pay the skills development levy late. This interest is then transferred to FoodBev Seta via DoL. Accounts payable The carrying amount of account and other payables approximates fair value due to the relatively short-term maturity of these financial liabilities. FoodBev Annual Report

58 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March ERRORS 27.1 During the current year, Setas and their respective legislative stakeholders, as a collective, realised that they misinterpreted various legislations governing revenue flowing from skills development levies. This results in an error to prior year financial statements as defined in GRAP 3 Accounting policies, changes in accounting estimates and errors. During prior years the Seta recognised revenue when the employers submitted the EMP201 to SARS, whilst it should have been recognised when there was an allocation from DoL or when the funds were received, whichever occurred first. Comparative financial information has been restated to correct this error. The effect of the restatement on those financial statements is summarised below: 27.2 The administration reserve balance at year-end was adjusted to the net carrying value of assets on hand at year-end due to a change in funding regulations. F2006/7 Prior year error Allocation of (surplus)/deficit to discretionary grant reserve (6 803) Allocation of administration surplus to discretionary grant reserve (681) (588) (7 484) Decrease in levy income (1 052) (17 582) Decrease in interest and penalties (10) (33) Decrease in employer grant reserve Decrease in administration reserve Decrease in discretionary grant reserve (7 694) 56 FoodBev Annual Report 2008

59 28 RELATED PARTY TRANSACTIONS DoL is the executive authority of FoodBev Seta. For the year FoodBev Seta has received an amount of R126,7m from DoL for skills development levies, interest and penalties collected by SARS on behalf of DoL. Transactions with other Setas in R'000s InterSeta transactions and balances arise due to the movement of employers from one Seta to another. During the current year FoodBev received R from other Setas. At year end there is an amount of R payable to the various Setas as listed below and an amount of R1,395m receivable from the various Setas listed below. F2007/8 F2007/8 F2006/7 F2006/7 Transfers Transfers Receiv- Payables Transfers Transfers Receiv- Payables in out ables in out ables ETDP 10 Services Seta Sasseta (3) Fasset 23 W&RSeta (152) 87 (152) 86 (152) HWSeta Theta 22 (35) 22 (221) 22 (35) Agriseta (23) 67 (42) 22 (23) Chieta Fieta Mappp Teta (2) (2) (2) Total transfers in (212) (420) (212) Transactions with employers of the members of council in R'000s The transactions below arise due to the nature of the council members employment and the fact that the employers contribute skills development levy to FoodBev Seta. The transactions listed below are for the payment of mandatory and discretionary grants. Council member Employer Mandatory Discretionary Total grant Levies grant received D Fobian Pioneer Foods T Hulse SAB H Korff Tiger Brands K Finch Oceana W Prinsloo Nestlé T van der Walt UBR S Hammond Diva Nutritional Products TOTAL Transactions with other national public entities in R'000s Name of entity Amount spent Nature of expenditure Eskom 87 Electricity supply Telkom 152 Telephone and internet lines SAA 269 Air travel FoodBev Annual Report

60 FoodBev Seta annual financial statements Notes to the annual financial statements for the year ended 31 March NEW ACCOUNTING PRONOUNCEMENTS At the date of authorisation of these financial statements, there are standards and interpretations in issue but not yet effective. Effective date GRAP 9 Revenue from exchange transactions 1 April 2009 GRAP 12 Inventories 1 April 2009 GRAP 13 Leases 1 April 2009 GRAP 17 Property, plant and equipment 1 April 2009 GRAP 100 Non-current assets held for sale and discontinued operations 1 April 2009 GRAP 102 Intangible assets 1 April 2009 An entity shall apply Standards of GRAP for annual financial statements covering periods beginning on or after a date to be determined by the Minister of Finance in a regulation to be published in accordance with section 91(1)(b) of the PFMA. GRAP 9 GRAP 9 Revenue from exchange transactions. The standard provides additional South African public sector specific examples of revenue transactions; however it does not significantly differ from IAS 29 (AC 111) Revenue. It is not expected that this standard will significantly impact future disclosure due to the limited nature and volume of exchange transactions for which a Seta is expected to account. GRAP 12 GRAP 12 Inventories. The standard provides additional guidance on the recognition and the initial measurement of inventories, including recognising inventories acquired at no cost, or for nominal consideration, at fair value as at the date of acquisition. It is not expected that this standard will significantly impact future disclosure due to the limited nature and volume of inventory for which a Seta is expected to account. GRAP 13 GRAP 13 Leases. The standard clarifies that the leases standard should still be applied even where legislation may prohibit an entity from entering into certain types of lease agreements. It further adds an additional requirement to disclose the depreciation and finance charge relating to the leased asset underaccounted for as a finance lease by the lessee. GRAP 17 GRAP 17 Property, plant and equipment. On initial application the standard requires that assets that were acquired at no cost, or for a nominal cost, are accounted for at their fair value as at the date of acquisition. This treatment is different to the current treatment, which accounts for such assets at cost. We do not expect this to significantly impact the carrying value of the property, plant and equipment. GRAP 100 GRAP 100 Non-current assets held for sale and discontinued operations. The standard provides public sector specific examples and refers to non-cash-generating assets that are relevant to the public sector; however it does not significantly differ from IFRS 5 Non-current assets held for sale and discontinued operations. It is not expected that this standard will significantly impact future disclosure due to the limited nature and volume of such transactions for which a Seta is expected to account. GRAP 102 GRAP 102 Intangible assets. This standard is drawn primarily from the International Accounting Standard on intangible assets (IAS 38). The standard does provide additional public sector specific 58 FoodBev Annual Report 2008

61 examples and it also expands the identifiable criterion in the definition of an intangible asset to include contractual rights arising from binding arrangements, and to exclude rights granted by statute. The standard will also require where an intangible asset is acquired at no cost or for a nominal consideration, that its cost is recorded as its fair value as at the date it is required. 29 TAXATION No provision has been made for taxation as FoodBev Seta is exempt from income tax in terms of Section 10 of the Income Tax Act. 30 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Seta s accounting policies, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Useful lives of property, plant and equipment The Seta reviews the estimated useful lives of property, plant and equipment at the end of each annual reporting period (refer to note 10 for the carrying values of property, plant and equipment). The Seta is currently established until 31 March 2010 and in terms of the Act, read with Government Notice No. R1082 of 7 September 1999, a Seta is required to apply to the Minister for a renewal of its certification by 1 April In light of the requirement to apply for a renewal of a Seta s certificate of establishment, management was required to consider how it impacts the period over which assets are expected to be available for use by the Seta. Management determined that the estimated useful lives of the assets are limited to the remaining period of the licence issued to FoodBev Seta. FoodBev Annual Report

62 acronyms Abet Agriseta Asgisa ATR BBBEE BEE CBO CGCSA CEO DoL EE EEA Esda ETQA Fawu FET FoodBev Seta GAAP GRAP HET ISOE Jipsa LMDP MoU NGO NLPE NQF NSDS NSF Nufwbsaw NVC OFO OHS PAA PAYE PFMA QCTO QMS Saafost SAB Safatu Sampro SAQA SARS Sassda SDA SDF SDL Seta SGB SLA SME SMME TEEC TR WE WSP Adult basic education and training Agricultural Sector Education and Training Authority Accelerated Shared Growth Initiative of SA Annual training report Broad-based black economic empowerment Black economic empowerment Community-based organisation Consumer Goods Council of South Africa Chief executive officer Department of Labour Employment equity Employment Equity Act Employment and skills development agency Education and training quality assurance body Food and Allied Workers Union Further education and training Food and Beverages Manufacturing Sector Education and Training Authority Generally Accepted Accounting Practice Generally Recognised Accounting Practice Higher education and training Institute of sectoral or occupational excellence Joint Initiative on Priority Skills Acquisition Leadership and management development programme Memorandum of understanding Non-governmental organisation Non-levy-paying employers National Qualifications Framework National Skills Development Strategy National Skills Fund National Union of Food, Wine, Beverages, Spirits and Allied Workers New venture creation Organisational framework for occupations Occupational health and safety Public Audit Act Pay as you earn Public Finance Management Act Quality Council for Trades and Occupations Quality management system South African Association for Food Science and Technology South African Breweries South African Food and Allied Trade Union SA Milk Producers Organisation South African Qualifications Authority South African Revenue Service Southern African Stainless Steel Development Association Skills Development Act Skills development facilitator Skills development levy Sector education and training authority Standards generating body Service level agreement Small and medium enterprise Small, medium and micro enterprise Training and employment equity committee Treasury regulation Work experience Workplace skills plan 60 FoodBev Annual Report 2008

63 2008/9 some priorities and targets 600 unemployed learners to enter and 300 to successfully complete learnerships, apprenticeships, internships and bursary programmes. 800 employees to enter and 500 to complete learning programmes. 800 learners to enter and 600 to achieve Abet levels. Five young persons trained and mentored to form new ventures, and 90 new ventures sustainable and in operation 12 months after programme completion. 30 non-levy-paying employers and 10 NGOs supported in skills development. One further ISOE supported.