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					Amathole Economic Development Agency




                         Annual Report
                         2006/7
Amathole Economic Development   Vision
Agency (Pty) Ltd                AEDA is a pioneer in the stimulation
10 Bell Road, Vincent,          of spatial economic development
East London, 5201
PO Box 500, East London, 5200   Values
                                • Passion for development
Tel: 043 721 2070               • Respect for: each other,
Fax: 043 721 2074                  communities, environment,
info@aeda.co.za                    diversity and culture
www.aeda.co.za                  • Integrity: capital stewardship,
                                   professionalism
Reg No. 2005/030812/07          • Ethical behaviour: no corruption,
                                   ethical decision-making
Auditors:                       • Accountability: inclusivity,
Office of the Auditor General      transparency
(Eastern Cape)
                                Principles
                                • Encourage innovation
                                    and learning as keys to
                                    competitiveness
                                • Beneficiation as an essential
                                    element to sustained community
                                    development
                                • Environmental sustainability is
                                    crucial

                                Culture
                                • Mutual respect
                                • Teamwork
                                • Open and constructive
                                   communication to build trust
                                • Listening with insight before
                                   reacting
Amathole Economic Development Agency
2006/7 Annual Report




contents




4     Achievements and highlights

7     Operational environment

9     Mayor’s foreword

11    Chairperson’s report

13    Chief Executive Officer’s report

25    Performance report
25       Strategic projects
30       Business partnerships
32       Property development & management

35    Human resources & other organisational management

47    Audited statements & related financial information

49    Functional area service delivery report

100 Acronyms
Key milestones since 2003




                                                                     2006
                                                                   April
                                                                   Agreement with Amathole
                                                                   District Municipality for
                                                                   Amathole Economic
                                                                   Development Agency to
                                                                   undertake economic analysis
                                                                   and facilitate a long-term,

                                    2005                           holistic economic vision for
                                                                   the area of Amathole


                                   September                       September
                                   Amathole Economic               Amathole Economic
                                   Development Agency              Development Agency partners
                                   established as a Pty Ltd        with Amathole District
                                   company                         Municipality to undertake a

   2003                            September
                                                                   participatory process that will
                                                                   lead to AREDS
                                   First board meeting held
  September                                                        November
  Amathole District Municipality   December                        Amathole Economic
  resolves to initiate and         Amathole Economic               Development Agency requests
  support the formation of a       Development Agency officially   DPLG review on small towns
  development agency               launched                        development approach
                                  Amathole Economic Development Agency
                                  2006/7 Annual Report




                                  achievements and highlights



  2007                            Highlights 2006/7



March                                   Finalised institutional structure, policies and
District strategy participative         arrangements for the Amathole Economic Development
                                        Agency
process complete

                                      • Filled key positions with skilled people
May
ADM adopts AREDS                      • Achieved the recognition and adoption of small town
                                        regeneration onto the national public policy agenda

June                                    Received an unqualified audit opinion
Amathole Economic
Development Agency’s                    Project managed the development of the Amathole
                                        Regional Economic Development Strategy, the long-term
strategy, aligned with AREDS,
                                        economic vision and strategy for the Amathole region
adopted by the board
                                        Formulated a clear strategic plan, which is aligned to
June                                    the Amathole Regional Economic Development Strategy,
                                        and restructured the Amathole Economic Development
Work begins on reorganising
                                        Agency in line with this
Amathole Economic
Development Agency in line
with its new strategy




                                  5
The Amathole District




                         N2 Corridor
                         N6 Corridor
                        R63 Corridor
                        R72 Corridor




                                       N6
                                                  N2



               R63




                                            R72
                                       Amathole Economic Development Agency
                                       2006/7 Annual Report




                                       operational environment



                                       The Amathole district is made up of eight local municipalities, each of which has
                                       at least one urban service centre:
                                       1. Amahlathi (Stutterheim and Cathcart)
                                       2. Buffalo City (East London, King William’s Town, Bhisho)
                                       3. Great Kei (Komga)
                                       4. Mbashe (Dutywa)
                                       5. Mnquma (Butterworth)
                                       6. Ngqushwa (Peddie)
                                       7. Nkonkobe (Alice and Fort Beaufort)
                                       8. Nxuba (Adelaide and Bedford)




Population figures
Amahlathi          139,043
Buffalo City       702,890
Great Kei          44,462
Mbashe             253,380
Mnquma             287,772
Ngqushwa           84,234
Nkonkobe           128,655                                                         The Amathole district stretches along
Nxuba              24,824                                                          the coastline of the south-eastern
                                                                                   part of the Eastern Cape Province
                                                                                   including the former “homeland”
                                                                                   areas of Ciskei and Transkei as
                                                                                   well as former Cape Provincial
                                                                                   Administration areas.


Key sectors in the district                                                        The Amathole district is home to
municipality area include                                                          the capital city of the Eastern Cape,
community or public sector                                                         Bhisho. The port city of East London
service (33%), followed by                                                         is also situated in the Amathole
manufacturing (21%), trade (15%)                                                   district.
and agriculture (2.6%). Community
services contributed the most to
employment (35%,) followed by
manufacturing (18%) and then
agriculture (6.7%). Tourism is also
a significant contributor to the GDP
and employment in the district.




                                       7
“We, in
Amathole,
are serious
about national
development
targets:
Vision 2014
dictates to
us to reduce
unemployment
by half.

AEDA is
beginning to
facilitate the
programmes
that would begin
to meet those
targets”.
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




                                          mayor’s foreword



In the brief time it has been in          is good: it is free of the bureaucracy     but beneficiation that results in both
existence, the Amathole Economic          that entwines larger institutions          value add and community benefit.
Development Agency (AEDA) has             and is able to act with speed. The         Indeed, we can boldly say that AEDA
not just come up with concepts,           agency collaborates so well with the       has emerged as a mechanism for
but with practical solutions to our       ADM: although it is “our” entity, it       us, as the ADM, to be able to truly
challenges as a district municipality.    has freedom of operation, which, we        intervene in the economic arena.
It moved beyond general ideas on          believe, gives it the space to stabilise
economic development and built            on its own ground, finding the
both the strategies and the ability       governance mechanisms that respond
to implement. The Amathole District       appropriately to the organisation.
Municipality (ADM), with AEDA as its      We are very pleased that AEDA
development arm, has also moved           has captured the mode of working
beyond just thinking about this. As       region wide, and we note that local
a result of the Amathole Regional         municipalities, critical development       Cllr Sakhumzi Somyo
Economic Development Strategy             platforms, have welcomed the agency.       Executive Mayor
(AREDS), developed by AEDA, we have                                                  Amathole District Municipality
begun to appoint nodal managers and       We, in Amathole, are serious about
AEDA has begun the necessary trials       national development targets:
to test the strategy.                     Vision 2014 dictates to us to
                                          reduce unemployment by half.
The agency is, in effect, providing       AEDA is beginning to facilitate
a knowledge base for economic             the programmes that would begin
development in the region, as well        to meet those targets. We are
as indicating to us the areas in which    confident that, in AEDA, we have an
we need to act – those areas relevant     effective regional-based institutional
to rejuvenating our economy. Most         mechanism capable of following
exciting, this includes small towns.      through on national targets, and also
AEDA’s programme builds dynamic           on the results of the Regional Growth
links between the urban and rural         and Development Summit.
divide we feel so sharply in our
district. AEDA has been born at a time    We are proud that AEDA is
that the country is looking for ways      implementing the idea of
to grow the economy. With AEDA,           development with the people. The
the ADM does not have to build that       agency takes serious cognisance of
internal capacity, but can leverage the   community elements. It facilitates
skill and capacity of its development     community buy-in into strategic
agency. It is no understatement to        development initiatives; it becomes
describe AEDA as the ADM’s economic       the glue that binds us and other
think tank, generating the solutions      public sector organisations together
and the planning, and creating a base     with communities. Further, we trust
for linkages between institutions of      AEDA’s approach that insists that a
equals.                                   key of sustainable development is
AEDA is a small organisation, which       not simply employment opportunities,


                                          9
“Certainly, one of
the most exciting
areas of focus
for AEDA is small
towns. This is
ground that has
not yet been
covered by other
organisations.”
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




                                          chairperson’s report



This has been an exciting year for        organisation. The small complement         reduction and job creation. Economic
the Amathole Economic Development         that makes up the staff of AEDA has        development, and development in
Agency (AEDA): there have been            been allocated according to the tasks      general, are terrains full of tension
dramatic changes in its strategic         and objectives the organisation is         and contestation. An organisation
direction, with a clear identification    determined to achieve. The chief           involved in such a function has to
of its areas of focus for the mid and     executive officer has the energy, skills   make sure it has clear objectives and
long term.                                and knowledge that are essential           goals which have been consulted
                                          to lead this organisation. Moreover,       through with all of its stakeholders.
In many ways, AEDA has bucked the         she has the attitude and enthusiasm        Once there is full agreement on the
old rule-bound way that development       required to drive developmental            path to be traversed there is an
agencies have worked. Its corridor        organisations. In short, AEDA does not     immediate reduction of tensions
approach to development, which            need micro-management from us, the         and contestation. However, it is
builds on the advantages of broad         AEDA Board: we have high regard for        still important that as we move
spatial areas, is innovative and is       the calibre of the people who make         forward, we do not stop monitoring
seeing the forging of partnerships        up the organisation.                       and evaluating the organisation’s
with all stakeholders in the region.                                                 performance. That monitoring and
For instance, the Nkonkobe essential      It is with great satisfaction and          evaluation, done together with the
oils project, which is a new venture in   appreciation that we note that,            stakeholders, gives satisfaction to
the Eastern Cape, is coming to fruition   despite its young age, AEDA has            all that we have not deserted the
through collaboration with national       achieved its second unqualified audit      common trajectory agreed upon. The
government, the private sector,           report. This is a clear signal that the    board of AEDA is happy and satisfied
communities, the district, academics      organisation is being run well and         that the organisation continues that
at the University of Fort Hare and the    that the governance and management         interaction with its stakeholders.
local municipality.                       of the organisation is in good hands.
                                          We are put in charge of public funds       The board wishes to thank the
Certainly, one of the most exciting       and we have to account regularly as        management and shareholders of
areas of focus for AEDA is small          to how that money is spent.                AEDA for the cooperative manner in
towns. This is ground that has                                                       which we have worked this financial
not yet been covered by other             We enjoy a good relationship with          year.
organisations. As the agency develops     our shareholder, the Amathole District
its interventions to regenerate small     Municipality (ADM), which has been
towns – these important centres of        very supportive of AEDA. It is to the
rural areas – it is establishing models   ADM’s credit that it has given AEDA
that will be of value not just in the     the leeway to freely operate and
Amathole area, but far beyond the         achieve its targets within a framework.
district’s borders.
                                          Looking forward, we believe the            Dr Mvuyo Tom
It was a very courageous step to          trajectory of the organisation will        Chairperson of the AEDA Board
reposition the organisation within        ensure the ADM becomes a vibrant
a mere two years of inception.            hub of economic activity. We are
Management has played a sterling          confident that the organisation
role in ensuring the new strategy         will contribute greatly to realising
is implemented throughout the             the country’s vision of poverty


                                          11
“AEDA took
the concept
of small town
regeneration
from the
wilderness and
placed it firmly
on the public
policy agenda.”
                                            Amathole Economic Development Agency
                                            2006/7 Annual Report




                                            chief executive officer’s report



As the Amathole Economic                    and their social and economic              in order to come up with a long-
Development Agency (AEDA) comes             development”. Specifically, AEDA is        term and holistic economic vision
to the end of its first full year of        responsible for building one of the        for the area of Amathole. The ADM
operation, we look back with a              four pillars of the ADM’s economic         commissioned AEDA to facilitate
sense of satisfaction. It was a year        development framework: to grow the         the review of its economic strategy
in which we formulated a clear              economy of the region.                     against the backdrop of several new
strategy and a clear vision – to be a                                                  national and provincial development
pioneer in the stimulation of spatial       We intend to do that in a way that         initiatives, including the Provincial
economic development. We believe            integrates the diverse Amathole            Growth and Development Plan
that implementing this vision will          economy. This is no small task in          (PGDP), the Accelerated and Shared
result in a better quality of life for      a region that carries with it from         Growth Initiative of South Africa
all people in the Amathole area. And        apartheid days three economic              (ASGISA) and the Regional Industrial
this in a district that is still, by many   histories and sets of social conditions:   Development Strategy (RIDS), driven
measures, among South Africa’s most         it is made up of the former Transkei       by the Department of Trade and
impoverished and least developed.           and Ciskei “homeland” areas, which         Industry (DTI).
                                            are largely rural with deep-rooted
AEDA’s roots go back to an Amathole         poverty, as well as the former Cape        AEDA embarked on an intensive,
District Municipality (ADM) resolution      Provincial Administration areas that       multi-stakeholder process that
in September 2003 to initiate and           include the highly-urbanised centres       drew in government departments,
support the formation of a regional         of East London, King William’s Town        communities, municipalities and
economic development agency. The            and Mdantsane.                             business people, both big and small.
agency was established in September                                                    Based on the particular economic
2005 as a Pty Ltd company, wholly           With the initial team of key staff         opportunities of the district, a series
owned by the ADM. It was established        on board by May 2006, AEDA was             of workshops were held. The result
within the operational framework            ready to go about its business.            was the Amathole Regional Economic
of the Industrial Development               From the start, we formulated a            Development Strategy (AREDS), a
Corporation’s (IDC) Agency                  broad set of strategic interventions       20-year vision for the district that, for
Development and Support Unit, with          that, we believed, would deliver           the first time, transcends our political,
initial funding coming from the IDC         maximum impact. These would                municipal boundaries. It is informed
and from the ADM. There are now 21          be around: increasing household            by both global trends and the local
development agencies set up within          income; promoting entrepreneurship;        context.
the IDC framework: seven are in the         regenerating small towns; land
Eastern Cape, with AEDA being the           development; and advocacy.                 In March 2007, when the participative
only regional agency.                                                                  process was complete, AEDA took the
                                            HoliSTiC ECoNoMiC viSioN                   strategy back to the stakeholders.
The first board meeting was held on                                                    This formed part of the District Growth
19 September 2005, and the agency           AEDA’s initial year was focused on         and Development Summit (GDS), held
was officially launched on 2 December       finding clarity on the agency’s role       by the ADM on 8-9 March 2007. The
2005 with a mandate to assist the           and mandate. The breakthrough              ADM Council formally adopted AREDS
ADM to be “a leading, dynamic,              came in March 2006 when we                 in May 2007.
innovative, pioneering and focused          reached an agreement with the
district municipality dedicated to          district municipality to undertake         AREDS approaches strategy as “a
serving the needs of our communities        an economic analysis of the district       series of processes and evolving


                                            13
The AEDA project cycle   IDENTIFICATION
                         • Needs and capacity
                            assessment
                         • Pre-feasibility
 MONITORING
 & EVALUATION
 • Impact
    assessment
 • Post audit
                      Amathole Economic Development Agency
                      2006/7 Annual Report




                      interventions” that focus on               an income above the minimum living
                      achieving an overall objective or          level. Realising the AREDS vision is
                      vision. In Amathole, that vision           set out by increasing value added
                      is: “a competitive, adaptable and          in sectors that can support the
                      transformed district economy that          creation of sustainable and quality
                      enables citizens to sustain themselves     employment initiatives through key
                      through quality employment and             interventions that include: high-impact
                      equitable ownership of economic            investment; improved governance;
                      assets”. AREDS is the basis from           knowledge, skills and human capital
                      which to guide economic development        development; and communication,
DESIGN                planning for all role players in           interaction and partnerships between
• Feasibility study   Amathole, as well as resource              stakeholders.
• Risk assessment     allocation, implementation, and
• Log frame           institutional requirements.                Throughout the AREDS participatory
• Action planning                                                process, AEDA was gaining an
                      AREDS aims to turn the advantages
                      of the region into opportunities           invaluable perspective of its own role.
                      while developing competitive               The process was highlighting the need
                      advantages in new sectors. At the          and potential for AEDA to position
                      same time, it sees disadvantages           itself as a niche public-private sector
                      as guiding identification of sectors       enterprise that is able to facilitate
                      that require public sector action and      interaction and coordination between
                      investment through, for instance,          public sector stakeholders and private
                      better education, reduced red tape,        businesses. AEDA’s response to AREDS
                      better functioning of institutions, and    was to position itself to:
                      support to socio-economic adaptation.      • Concentrate economic activities
IMPLEMENTATION        AREDS identifies opportunities in:             along the region’s primary
& OPERATIONS          • Eco-based adventure and                      logistics corridors to elevate their
                           experiential tourism                      significance and potential as
                      • Development of the district’s                investment areas
                           people                                • Cluster in public infrastructure to
                      • Natural resource-based industries,           unlock high-potential opportunities
                           such as biofuels, high-value crops,       for economic value adding and
                           forestry and wood, cotton, wool,          vertical integration
                           leather and hemp                      • Mobilise stakeholders and
                      • Sectors built on skilled and                 establish corridor associations
                           talented human resources, such            to improve communication,
                           as niche products, arts and high-         prioritising of resources and
                           technology sectors                        leveraging of resources
                      • The development of an export
                           economy                               Full AligNMENT
                      Targets include 60% of Amathole
                                                                 We saw the AREDS process as an
                      households earning an income by
                                                                 opportunity to propel the organisation
                      2014, and 50% of households having
                                                                 forward. Applying the lessons and the

                      15
framework of the district’s strategy, as   The corridor-management approach         •   The R72 corridor from East London
well as that of the GDS, the agency        is central to AEDA’s strategy. The           to Port Alfred. Arts and tourism is
developed its own strategy for 2007        approach aims to build the economic          the focus in this corridor.
to 2014, which was approved by the         potential of four identified corridors   Small towns are the natural and
AEDA Board in June 2007. We made           that follow the primary road routes      logical nodal points for each corridor.
a fundamental shift from focusing on       within the Amathole district.            Hamburg, for instance, is an anchor
individual projects to taking a spatial                                             for the R72 corridor, Alice for the
approach to development. Projects,         The spill-over impact is the             R63 corridor, Butterworth for the N2
without a framework, exist in a vacuum.    regeneration of small-town economies     corridor and Stutterheim for the N6
                                           that reach deep into rural areas,        corridor. In each case, we ask: what
AEDA, we believe, exists to assist         which translates into improving the      opportunities and advantages does
in bridging the gap between what           quality of people’s lives. Strategic     this corridor already have? We are
the district is now and what the           interventions are focused on key         building profiles of small towns and
stakeholders want it to be. It             bankable opportunities in these          businesses to feed into planning. In
would be pompous and unrealistic           corridors, each of which has a           many cases, this research did not
for our small agency to claim to           different economic character. The        exist before.
be able to offer everything to all         corridors stretch across the district,
people. However, we are available          and all converge on East London, the     Our approach to identifying,
to coordinate the district’s economic      economic hub of the region. They are:    stimulating and facilitating economic
strategy: we are clear on how we can       • The N6 corridor from East London       value-adding opportunities along the
contribute.                                    to Cathcart. Forestry and timber     corridors is four pronged. It involves:
                                               production hold great potential      • Improving social cohesion and
AEDA’s strategy is fully aligned with          here.                                    mobilising the private and
attaining the district’s economic          • The N2 corridor from East London           public sectors to collaborate and
vision articulated through AREDS.              to Elliotdale. AEDA’s role here          leverage resources for the benefit
Our existing projects, our budget and          involves facilitating the spatial        of the corridors
our partners feed into our strategy            reconfiguration of Butterworth to    • Applying innovative tools and
– indeed, the entire structure of the          renew the use of existing, vacant        methodologies to continuously
organisation follows the strategy.             factory space. Stretches of the          improve the corridors’ investment
Towards the end of 2006/7, we                  pristine Wild Coast, which holds         climate and drive down
restructured ourselves with the                huge potential for tourism, fall         transaction costs
support of the AEDA Board, drawing             within this corridor. It contains    • Identifying and supporting sub-
on the expertise and skills that we            other natural wealth, such as            sectors with niche competitive
had already attracted to the agency            granite deposits. It also has a          advantages, and wherever
to establish new positions that                large rural population with a            possible, prioritising the interests
drive the strategy. Instead of carving         need for sustainable livelihood          of previously-disadvantaged
the organisation along the lines of            approaches.                              people and communities
sector specialists, AEDA established       • The R63 corridor from East London      • Identifying, packaging,
corridors managers who take a spatial          via Hogsback to Bedford. Heritage        implementing, and where
approach to development along the              promotion, particularly at Alice,        appropriate, taking an interest in,
district’s major transport routes. We          anchors this corridor. There is          catalytic projects that unlock value
see our corridor managers as the face          also great potential for adventure       and business opportunities
of the organisation.                           tourism and forestry.
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




We see the yardsticks of our success
as jobs created, economic value
added, partnerships facilitated,
investment leveraged, and businesses
created or retained.

AEDA’s adoption of its new strategy            Quick Statistics
had an immediate effect on thinking
within local government. A case in             •   25.9% of the Eastern Cape’s people live in the Amathole district.
point was a meeting around the                     Women make up 53.6% of the district’s population.
strategy with the three municipalities
within the N2 corridor: for the                •   42% of Amathole’s 1.7-million people live in Buffalo City, which
first time, the three mayors, three                also accounts for 83% of economic output and 72% of formal
local economic development (LED)                   employment.
managers and three municipal
                                               •   The district is the most economically diverse in the Eastern Cape:
managers were talking together                     two-thirds of it was once part of the former Transkei and Ciskei.
about an economy that transcends
their municipal lines, tackling a lack         •   The Amathole economy is the province’s second largest, making up
of coordination and collaboration in               27% of provincial value added.
interventions, as well as availability
and allocation of resources.                   •   Government and community spending make up around 33% of the
                                                   economy, and the public service provides around 35% of formal jobs
                                                   (75 000 jobs).
SMAll TowNS
                                               •   Manufacturing, mostly centred in Buffalo City and dominated by the
Development policies and                           automotive sector, accounts for 21% of the economy.
interventions have tended to be
urban-centric and top-down, often              •   Agriculture, fishing and forestry together account for just 2.6% of
inappropriate to the local context.                district value added and 6.7% of employment, pointing to potential
Small towns have simply been                       for huge growth. The region includes vast rural areas and a long
                                                   coastline.
omitted in the past; they have been
the “misfits” in development.                  •   Tourism has grown a great deal over the past decade, now making up
                                                   an estimated 10% of district value added and providing some 20 000
Crucially, in AEDA’s approach, small               jobs and incomes.
towns become anchors for corridor
development. The Amathole District             •   Amathole, like other parts of the Eastern Cape, has serious backlogs
has 25 small towns, which, when                    in social and economic infrastructure, particularly in rural areas. In the
                                                   current medium term expenditure cycle, the provincial government is
the agency was started in late 2005,
                                                   directing some R2.5-billion towards infrastructure development in the
had become dilapidated and run                     Amathole district.
down. These towns are centres of
markets and support for hundreds of            Sources: AEDA, ECSECC

rural villages: Peddie, for example, is
linked to 61 villages, Centane to 44
and Alice to 56. Literally, the towns


                                          17
                                          KEy PERFoRMANCE iNDiCAToRS
are the doors to rural communities.
Yet in the past, official interventions
have largely taken the form of
support to rural farmers, bypassing
the small towns that can help these            People
farmers to grow. Regenerating small
towns, AEDA argues, will turn these            New jobs created
“no-hope areas” into important
production centres and economic
hubs of essential materials and
services.

Our projects, with small towns at the
core, have allowed us to begin to
create models of demonstration with            Places
a wide range of partners that include
municipalities, and also the private           Small towns regenerated
business sector and communities. We            Economic value added
can use Peddie and Hamburg in the              (EVA)
R72 corridor as examples.

The Hamburg spatial development
plan is informed by three essential
elements: the existence of
ecologically sensitive areas (it
includes an estuary) and natural
environmental wealth that could                Partnerships
be threatened by encroachment
                                               Investment leveraged
from unregulated residential
and commercial development; a
community divided into affluent
people and the less affording,
who nevertheless share the same
challenge of the area’s economic
decline; and its rural nature. The
key project is focused on the arts,
but from that, the impact will be felt         Businesses
in tourism and secondary activities
along the corridor. The intervention           New business created &
includes preparing local people                existing business retained
for jobs and income opportunities
through a skills programme.
                                                       Amathole Economic Development Agency
                                                       2006/7 Annual Report




                                                       The AEDA strategy map overview
                                                                                        vAluES, PRiNCiPlES
STRATEgiC oBjECTivES                                  STRATEgiC iNTENT                                                     viSioN
                                                                                        & CulTuRE

                                                                                             values
     good organisational governance                         Economically regenerated         • Passion for
     • Alignment to AREDS and ADM IDP                       small towns                          development
     • Prudent equity in public good facilities and         Play a leading role in           • Respect
        shared services to earn revenue                     stimulating functional               – for each other,
     • Identify and leverage public sector assets           corridors leading to                   communities,
     • Pro-actively address the constraints posed           continuously increasing                environment,
        by the economic legislative environment             EVA and vibrant small                  diversity & culture
     • Coordinated response to identifying and              towns                            • Integrity
        mobilising resources                                                                     – capital stewardship
     • Effective and prudent deployment of                                                       – professionalism
        resources                                                                            • Ethical behaviour
                                                                                                 – no corruption
                                                                                                 – ethical decision-
                                                            increased capital
                                                                                                   making
                                                            investment
                                                                                             • Accountability
     Stakeholder mobilisation                               Applying innovative tools
                                                                                                 – inclusivity
     • Facilitate and support corridor associations         and methodologies to
                                                                                                 – transparency




                                                                                                                              Amathole Economic Development Agency is a pioneer in
     • Become an expert resource for economic               continuously improving
         policy                                             investor and business




                                                                                                                                the stimulation of spatial economic development
     • Become a conduit for financial resources             climate
     • Develop and maintain a regional economic
         communications platform
     • Convene and facilitate a regional growth
         coalition of business leaders and economic                                          Principles
         stakeholders                                       Higher value jobs & BEE          • Encourage innovation
     • Align skills development to regional                 opportunities                        and learning
         economic priorities                                Being a catalyst to                  as the keys to
                                                            building globally                    competitiveness
                                                            competitive sub-sectors          • Beneficiation as an
                                                            that possess niche                   essential element to
                                                            competitive advantage                sustained community
                                                            and/or distinctive                   development
                                                            competency                       • Environmental
     Resources harnessed                                                                         stainability is crucial
     • Sub-sector specific investment in plant,
         machinery and eqiupment to improve EVA
     • Develop and disseminate regional socio-
         economic development
                                                            improved social cohesion
     • Improve economic capability of public
                                                            and mobilised private
         sector assets
                                                            sector
                                                            Become the acknowledged
                                                            and trusted advisor to
                                                            ADM, local municipalities
                                                            and other stakeholders on
                                                            regional economic matters        Culture
                                                                                             • Mutual respect
     Human capital development                                                               • Teamwork
     • Recruit, retain and invest in the                                                     • Open and constructive
        development of the best people                                                           communication to
     • Create a learning environment by devolution                                               build trust
        of responsibility and authority                     Financially secure agency        • Listening with insight
     • Provide regular and structured opportunities         Reduce dependency                    before reacting
        for shared learning, innovation and                 on grant funding by
        improved indigenous knowledge                       leveraging investments
     • Develop and deploy innovative tools and              and service provision
        processes




                                                       19
                                                                                 As this corridor links Port Elizabeth
The demonstration effect                                                         and East London, the Eastern Cape’s
                                                                                 two major economic centres, the road
PROJECT 1: ALICE RENEWAL PROJECT                                                 itself is an issue, and as investments
Through the Alice renewal project, AEDA, playing a facilitation role, hopes to   are made on upgrading the road,
develop a model for small town development. Our project, concentrated on         various industries, from agriculture
the main road through the town, aims to stimulate business activity, promote     to private sector enterprises, will be
traffic flow, and link the town’s centre with the University of Fort Hare.       boosted.
However, experience is teaching us that small town renewal will not result
from a single intervention, but rather a blend of interventions and tools.       Peddie, meanwhile, is the seat of the
                                                                                 local municipality, but could also be
PROJECT 2: THE HAMBURG ARTS COLONY PROJECT                                       positioned as a retail destination for
The Hamburg Arts Colony project involves building a 50-bungalow facility to      people who stream to Grahamstown,
develop the arts, as well as position Hamburg as a tourism and investment        King William’s Town or East London
destination. The intention is that this will become an anchor project to         to buy basic goods and even to
regenerate the economy of the small town. Presentations have been made           watch a movie. A feasibility study
to a potential investor, as well as relevant departments for buy-in and          done by a retail group has shown
endorsement.                                                                     that the Peddie economy generates
                                                                                 around R80-million a year, mostly
PROJECT 3: ESSENTIAL OILS PROJECT                                                from government, but it cannot trap
The essential oil project in the R63 corridor is aimed at building enough        even R5-million of that amount within
throughputs to support development of an agro-processing hub. The Eastern        the town. The area is kept poor.
Cape Development Corporation (ECDC) has funded a pilot project. AEDA, with       The municipality has the land to
ECDC, is funding a second pilot.                                                 develop infrastructure for business,
                                                                                 and the town has the market to
PROJECT 4: MANAGALAM ALLOYS                                                      support business: those significant
Testing demanding foreign direct investment waters, AEDA is assisting            regeneration factors already exist.
Managalam Alloys, a steel manufacturer in India, which has expressed             By understanding these realities,
interest in opening a factory in the Dimbaza area to produce steel products      we are piloting ways – that we are
from scrap. Suitable premises have been identified with the assistance of        taking to government – to rebuild
ECDC, but finalisation is still to be reached on important aspects such as       small towns, these economic hubs,
resources for refurbishment and financial forecasts.                             through applying a new model and
                                                                                 new thinking that is both rational and
                                                                                 ambitious.

                                                                                 iNSTiTuTioNAl ARRANgEMENTS

                                                                                 In 2006/7, AEDA took the concept
                                                                                 of small town regeneration from
                                                                                 the wilderness and placed it firmly
                                                                                 on the public policy agenda. When
                                                                                 the Department of Provincial and
                                                                                 Local Government (DPLG) launched
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




its LED Framework in August 2006,         Significantly, the department said
we commented on institutional             it would, based on its experience
arrangements and the need to address      of working with AEDA, consider
LED formations. With the DTI’s RIDS,      drafting guidelines for municipalities
we talked about small towns as            wishing to establish local economic
hubs for rural communities and what       development agencies. Further, the
industry means within that context.       DPLG said it would devote the first
We submitted a small town case to         LED National Forum in 2007 to the
National Treasury’s township fund.        issue of development agencies – and
Our point was that city townships         would enlist AEDA’s support in that
interventions are not appropriate to      process.
our district, where townships, seen as
political centres, were not encouraged    This is one way that we are
in the old homeland areas. In all         influencing policy and the modelling
cases, we received sympathetic            of institutional relationships. This is
hearings.                                 important – development agencies
We believe we are making ourselves        still tend to operate in vacuums. The
heard. Indeed, we have become a           agencies are a mixed bag, operating
driving force behind the small town       separately with different agendas and
regeneration concept that is now          approaches, seldom communicating
being taken up by both the private        and coordinating their activities. We
and public sectors.                       would like to see that change.

We are making ourselves heard in          THE DEMoNSTRATioN EFFECT
other ways, too. In November 2006,
when AEDA had been in existence           Essentially we are positioning
for little over a year, we asked the      ourselves as a trusted advisor,
DPLG, as the custodians of LED, to        stimulator and partner, with our
review the agency and evaluate our        interventions ultimately raising more
institutional development, our delivery   income for the municipalities’ coffers
mechanism and our alignment with          and increasing the livelihoods of
national and provincial policies. The     the people of the district. Projects
department commented positively:          initiated in 2006/7 are intended
AEDA, it said, had assembled a team       to both test AEDA’s strategy and
that was “well led, experienced,          demonstrate a process that can be
skilled and committed” and that had       used. These include:
“developed a positive programme
portfolio that it is underwriting         •    Alice renewal project
with a process of data gathering          •    The Hamburg arts colony
and analysis”. The agency was well        •    Essential oil project
aligned with national and provincial      •    Managalam alloys
programmes, it said.                      •    Dwese/Cwebe reserve
                                          •    Marshstrand lifestyle estate


                                          21
PROJECT 5: THE DWESA/CWEBE PROJECT                                               •   The Butterworth factory utilisation
The Dwesa/Cwebe project, located in a nature reserve in the former                   initiative
Transkei, includes upgrading the reserve, and constructing new bungalows,        •   The Woodhouse project
a hotel, a conference centre, an upmarket tented camp and community
centres. Unemployment in the area is more than 80%. AEDA’s role is to            AEDA’s core activity, however, is not
facilitate and assist in ensuring holistic development takes place, aimed at     to run projects. We see projects as
increasing economic activity, uplifting the community, and linking the area to   business opportunities for business
surrounding economic activities.                                                 people, and the agency’s role as
                                                                                 creating an environment, within a
PROJECT 6: MARSHSTRAND LIFESTYLE ESTATE PROJECT                                  framework, where these opportunities
The longer-term aims of the Marshstrand Lifestyle Estate project on              are identified and promoted.
ADM-owned land close to Haga Haga is to attract income to the local
municipalities, create jobs for a large informal community, support expansion    THE wAy FoRwARD
of Wild Coast tourism, and importantly, link to regeneration of Haga Haga.
                                                                                 While we, at AEDA, look back with
PROJECT 7: THE BUTTERWORTH FACTORY UTILISATION INITIATIVE                        satisfaction, we look forward with
The Butterworth Factory Utilisation Initiative aims to find uses for existing    confidence and a sense of excitement.
factory space in the former Transkei town that saw an exodus of factory          We have laid strong foundations for
operators and large-scale job losses when subsidies for homeland-based           full-steam implementation. We have
production were withdrawn with the end of the apartheid system in 1994.          aligned, and even established, the
                                                                                 frameworks.
PROJECT 8: THE WOODHOUSE PROJECT
The Woodhouse project, with ECDC, involves the establishment of an               We are aware that to master economic
industrial park at Stutterheim, including a training and entrepreneurship        development at a local level, we
centre, to assist communities to take advantage of downstream opportunities      need strong political buy-in from all
in the timber industry. Land has been identified and the Amahlathi Local         levels of government, partnerships
Municipality has passed a resolution adopting the project.                       with stakeholders around clear
                                                                                 programmes, and decisive technical
                                                                                 knowledge. We have made great
                                                                                 strides on all of these factors, and will
                                                                                 continue to build them.

                                                                                 Success also involves empowering
                                                                                 local municipalities to implement
                                                                                 anchor projects. We have developed a
                                                                                 curriculum and project plan to assist
                                                                                 municipalities to build the capacity
                                                                                 that will respond to what is needed in
                                                                                 their areas.

                                                                                 To entrench AEDA’s position as
                                                                                 a trusted advisor, stimulator and
                                                                                 partner in the regional economic
                                            Amathole Economic Development Agency
                                            2006/7 Annual Report




environment, we will continue to build      if it exists at all. We will continue
competencies in specific areas, such        to update and grow our research
as the understanding of and alignment       and databases: these will provide
to the legislative and national policy      investors with information, and also
environment; and coordinating the           provide development planners with
identification and mobilisation of          the economic, rather than only social,
resources to support high-potential         information they require.
economic opportunities. We believe
we have the expertise within our            The success of AEDA’s strategic
organisation to do this.                    approach rests, ultimately, on
                                            devolution of responsibility and
It is essential that we are able to         authority, heavily underscored by
improve the economic enabling               continuous learning, team interaction
environment and ability of                  and knowledge sharing. We are
entrepreneurs to start new businesses,      working hard to create a learning
to expand existing businesses, or to        environment, to continue to recruit and
choose to remain in a locality that         develop people with strong technical
may not be seen to have the best            and interpersonal skills, to provide
advantages. To do this, we have to          strong monitoring and evaluation
listen to the concerns of business by       feedback loops, and to build capacity
establishing and supporting corridor        for identification and deployment of
stakeholder associations, providing         innovative tools and processes.
expert guidance to business on
economic policy, bringing decision          We intend to be sustainable. We
makers together to inform regional          intend to make an impact. We believe
policy, and facilitating skills alignment   our approach is appropriate. We have
for economic growth.                        motivated people. We have bankable
                                            ventures. And we are focused.
Building public good investment
methodologies is a key to improving
competitiveness and creating
opportunities for more and better
jobs. Among AEDA’s interventions
are collaborating with businesses to
identify catalytic projects; building a     Ms Phila Xuza
database of business information; and       Chief Executive Officer
identifying and leveraging underused        Amathole Economic Development
public sector assets.                       Agency

Although AEDA has carried out fresh
research on districts and small
towns, information at the local level
tends to be outdated and sketchy,


                                            23
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




                                          performance report



Many of our initial projects were informed by gaps in              An example is the Bizcafe which the Small Enterprise
the municipality’s local economic development (LED)                Development Agency (SEDA) is now leading. Each project
strategy. Some projects – the Amathole Regional                    contributed to providing a clearer vision and focus towards
Economic Development Strategy (AREDS) and small town               the end of 2006/7. Our revised strategy positions ourselves
regeneration, particularly – were important catalysts for          as a trusted advisor, stimulator and partner in the regional
the repositioning of AEDA. Others were developed to an             economic environment.
extent that partners in the region could take them forward.




 Strategic projects 2006/7

 1    Project Name                         Alice renewal project
      Budget                               R75 500
      Percentage complete                  25%

                                           The Alice renewal project is aimed at stimulating business activity and
                                           promoting flow of traffic flow, while linking the town centre with the University
                                           of Fort Hare (UFH). It is done by bridging the gap between the UFH and the
                                           rest of the town and will serve as a catalyst to strengthen the local economy.

                                           Our role is as facilitator, and concentrating on planning issues for Main
                                           Street. We will also work closely with strategic partners. However, the project
                                           was negatively affected by the non-release of IDC funding. AEDA therefore
                                           concentrated on facilitation activities, as well as community participation.
                                           Towards the end of the financial year, the IDC contract was signed and AEDA
                                           commenced with implementation of the project. Extra activities are dependent
                                           on IDC funding.

                                           Achievements include: facilitating community participation (Alice Residents’
                                           Association, youth, traditional leadership, and local business); holding various
                                           meetings with UFH, municipality and community members; establishing a
                                           working group to consider renewal of the area; and launching the project
                                           concept and awareness campaign on 23 March 2007.




                                          25
2   Project Name          Small town renewal
    Budget                R267 500
    Percentage complete   20%

                          The small town renewal project aims to stimulate ideas for small town
                          economic regeneration, maintain a network and support guide, and identify
                          one pilot project in each sub-area in the district. Our role therefore involves
                          managing role players, as well as facilitating one or more pilot projects.

                          Achievements include: obtaining an in-principle decision from DTI that RIDS
                          will include small town regeneration; participating in and presenting a paper
                          at the National LED Conference on the 14-15 August 2006 to promote the small
                          towns regeneration concept; holding a small towns workshop with government
                          departments (DTI and DPLG) and academics (Rhodes University) in September
                          2006; mobilising local municipalities (Ngqushwa, Mnquma, Mbhashe, Nxuba
                          and Nkonkobe) to adopt a regeneration project in their next IDPs; and
                          conducting research into the economies of Hamburg and Stutterheim.

                          The AEDA budget for this project was to be supplemented by funds sourced
                          elsewhere. As this additional budget was not secured, it was not possible to
                          undertake the necessary research, appoint a consultant, or commence work on
                          a pilot. Much of the effort in the year was therefore focused on advocacy of the
                          small towns approach. The approach has now been adopted by the IDC, DTI
                          and ADM. Furthermore, the development of AREDS did provide clarity on the
                          role and function of small towns and on the need for a combined locality and
                          sector development approach.

                          Small town renewal is now seen as an outcome of a more complex set of
                          interventions rather than as an intervention on its own. As a result, small
                          towns are to be considered for development in the next five years, rather than
                          a single pilot. AEDA identified eight pilot projects for implementation in the
                          next five years as part of small town renewal. Small town renewal/regeneration
                          has also been adopted as a measure of the success of the agency’s work.
                          Amathole Economic Development Agency
                          2006/7 Annual Report




3   Project Name          Micro-economic data
    Budget                R365 400
    Percentage complete   80%

                          The micro-economic data project aims to position AEDA as a depository of
                          investor information. Examples of information to be extracted are: leading and
                          declining sectors; number of jobs; and nodal investment areas.

                          Papers have been prepared on: tourism; manufacturing; agriculture; traditional
                          agriculture; human capital; government investment in human capital; policy
                          analysis including the MIDP, ASGISA, GEAR, PGDP, IDPs, NSDP, RIDS and the
                          DPLG’s LED strategy; an SMME study; income and expenditure study; studies
                          on the economies of Hamburg and Stutterheim; studies on Bedford and Alice;
                          extensive collection of GIS information; and studies on the value chain of
                          clothing and textiles in Amathole and issues around the sector.

                          Due to uncertainty regarding IDC funding, the budget for this project was
                          mostly unspent. The agency therefore resolved to perform information
                          gathering and analysis in-house. An intern was appointed to assist with the
                          compilation of many of the papers. The 20% uncompleted refers to the final
                          editing and review of the papers for Internet publication.


4   Project Name          Transport access and linkages
    Budget                R840 700
    Percentage complete   15%

                          The intentions of the transport access and linkages project are to: understand
                          the transport economy in the district, its relationship to access to services and
                          markets, and its impact on economic activity; assess economic aspects of plans
                          for transport, linkages and access infrastructure; and understand opportunities
                          in new access technologies.

                          Achievements include: gathering of information on transport linkages,
                          condition, operational status and issues; and discussion carried out with role
                          players on transport issues in the district. The expected total expenditure of
                          R840 700 could not be incurred due to the delay in securing the IDC funding.
                          All activities and work performed was done using internal resources.




                          27
5   Project Name          Amathole Regional Economic Development Strategy (AREDS)
    Budget                R1 314 510
    Percentage complete   100%

                          The objective of the Amathole Regional Economic Development Strategy
                          (AREDS) project is to develop a strategy/framework that will guide actions
                          by economic stakeholders, especially local government, in order to ensure
                          that increased number of households can earn an income, and that there
                          is increased income per household. It includes identification of actions to
                          be taken to create a more competitive environment for investment and
                          enterprises. The strategy was completed and included as a sector plan in the
                          IDP, approved in May 2007. The budget for the project was retained within
                          ADM, but managed by AEDA. The budget was increased to R2.6-million, but
                          none under the direct account of AEDA. AEDA, however, undertook much of the
                          management, research and strategy development internally, supported by a
                          GTZ-funded strategist. Because of delays, AEDA spent considerably more time
                          than was budgeted on the project. The delays concerned: resolving contract
                          issues with the ADM; lack of suitable skills; excessive contractor charges; and
                          scope creep.

                          The project was completed and adopted by the ADM Council as its LED 20-
                          year strategy during the May 2007 council meeting. The outcome has been
                          well-received and has enabled AEDA to re-align its own work to a clear and
                          comprehensive ADM economic development strategy. The success of the project
                          has led to further requirements by project partners. DEDEA has requested
                          AEDA/ADM to perform a business survey during the 2007/8 financial year.


6   Project Name          Information clearing house
    Budget                R178 000
    Percentage complete   30%

                          The information clearing house project is intended to provide a single source
                          of economic and government planning information to investors, business and
                          service providers. It builds on the information gathering needed for AREDS
                          and AEDA’s own projects, and links with the Bizcafe project. Partnerships
                          are envisaged with ECDC, ECSECC, government, and so on. A wide range of
                          government documents, policies, the PGDP, IDPs, GIS and other information
                          was collected. ECDC agreed to co-fund the project in principle, but AEDA was
                          unable to find a researcher with suitable skills. The advisability of this project
                          was also thrown into doubt by the alignment of AEDA’s work with AREDS. The
                          project should now continue, in modified form, as part of AREDS.
                          Amathole Economic Development Agency
                          2006/7 Annual Report




7   Project Name          Capacity building for local municipalities
    Budget                R229 000
    Percentage complete   10%

                          The capacity building for local municipalities project develops specific capacity
                          that will ensure sound economic development projects in local municipalities.
                          Partnering with the ADM and GTZ/inWent is envisaged. A curriculum and project
                          plan were developed. Co-funding was not found.

                          This project sought support from the GTZ/inWent partnership and from the EU’s
                          LED programme. The former were not able to support the project with funding,
                          but only with technical support. The application to the latter, submitted
                          through the district representative, was not delivered in time and thus failed
                          to secure funding. In line with AEDA’s revised strategy, capacity building now
                          reverts fully to the ADM. The application will be re-submitted.


8   Project Name          Branding and marketing plan
    Budget                R521 0000
    Percentage complete    N/A

                          The branding and marketing plan project involves developing a strategy to
                          highlight the products and people of the district and attract investment to the
                          district. The project aims at instilling pride within the residents and businesses
                          of the area. No work was undertaken. The decision was taken to await the
                          outcomes of AREDS before undertaking the branding of the district. In line with
                          the new AEDA strategy, which aligns with the AREDS, district branding reverts
                          to the ADM.




                          29
Business Partnerships 2006/7

9    Project Name          Hamburg redevelopment plan
     Budget                R330 250
     Percentage complete   75%

                           The Hamburg redevelopment plan aims to position Hamburg as a tourism
                           destination. The objective is to establish an arts colony as an anchor project to
                           regenerate the economy of Hamburg. However, the cost has been reduced by
                           cooperation with other role players and the direct involvement of the private
                           sector in the development of various plans. The concept of the anchor initiative
                           has been completed. A presentation to the Nqgushwa Local Municipality has
                           been made and a council resolution passed. A community participation process
                           has been undertaken (in-house). Roadshow discussions have taken place
                           with the arts fraternity. A market feasibility study on tourism was completed
                           (in-house). A basic EIA has been completed (in-house). A financial forecast has
                           been done (in-house).

                           A Spatial Development Plan process is in place (consultants). Delays in issuing
                           tenders for the Spatial Development Plan due to the council’s non-approval
                           of the amended operational plan prolonged the final draft bankable business
                           plan. It is envisaged the final draft plan will be ready in September 2007.


10   Project Name          The Wood house
     Budget                R247 700
     Percentage complete   40%

                           The Wood house initiative aims to establish a technical and entrepreneurship
                           skills development facility in Stutterheim to downstream timber production.
                           Again, the project will be done in cooperation with ECDC (a 50:50 partnership).
                           Our emphasis for the 2007/8 year will be on compiling the business plan.

                           Achievements include: completing a concept; the Amahlathi Local Municipality
                           Council passing a resolution; identifying land; and beginning a market
                           feasibility study (in-house). The delay in implementation is due to the non-
                           appointment of critical staff during the year under review. This resulted in
                           delays in signing a partnership agreement with ECDC and compilation of a
                           feasibility study. A dedicated staff member has now been appointed and the
                           project is progressing well.
                           Amathole Economic Development Agency
                           2006/7 Annual Report




11   Project Name          Designers Emporium
     Budget                R215 500
     Percentage complete   40%

                           The Designers Emporium initiative aims to establish a technical and
                           entrepreneurship skills development facility for design across the artistic
                           spectrum. The objective is to create a central production, marketing and retail
                           point for designed products. Cooperation with ECDC reduces costs and AEDA is
                           no longer responsible for the premises cost.

                           Achievements include: developing a concept; the ADM Council passing a
                           resolution; the LED Unit currently compiling a business plan to establish
                           an emporium in East London; considering a proposed initiative around the
                           emporium as part of the Hamburg redevelopment initiative; and almost
                           finalising a bankable business plan. Delays in the Spatial Development Plan
                           process, specifically the EIA process, adversely affected finalisation of a
                           business plan for the emporium.


12   Project Name          The Bizcafe
     2006/07 Budget        R68 000
     Percentage complete   NA

                           The Bizcafe project, in which AEDA will play a facilitation role, involves the
                           establishment of a facility to integrate business support services in the
                           Amathole region. Primarily, the decentralisation of DTI products and services is
                           key to the initiative.

                           A feasibility study has been undertaken to determine the nature of small
                           business in the Amathole region, and a full draft report has been delivered
                           to the SEDA national office. The study forms part of the Amathole SMME
                           Development Strategy to be undertaken by the National Small Industries
                           Corporation of India. Subsequent to the initial planning process, it was
                           resolved that the Bizcafe concept was a core function of SEDA: in other words,
                           the planned activity would be a duplication of SEDA’s mandate. The project
                           was therefore implemented in partnership with SEDA. The study was performed
                           under AEDA’s project management and the results of the study assisted in
                           the establishment of a more focused small business support programme for
                           SEDA. The project is now the core function of SEDA, and AEDA has no further
                           involvement.




                           31
Property Development & Management 2006/7

13   Project Name          Land development
     Budget                R556 000
     Percentage complete   15%

                           The three-to five-year land development project aims to facilitate opportunities
                           for small black developers beyond construction sectors. This project requires
                           substantial capital injection. Initial delays were experienced regarding the
                           availability of ADM properties for development purposes.

                           ADM performed an audit of all properties and in March 2007, we obtained
                           access to ADM’s property database for development purposes. AEDA identified
                           four areas for development. After meetings with ADM, it was resolved that AEDA
                           would concentrate on Marshstrand and use it as a test base.

                           The initial “Life-Style” concept document was submitted in May/June 2007.
                           Access was obtained to Ngqushwa municipal-owned properties through
                           agreement to management on the municipality’s behalf. There was an initial
                           delay in completion of the ADM property database. To date, all expenditure was
                           incurred in-house. As it was resolved to use Marshstrand as a test basis, the
                           budget was realigned for the 2007/8 year to Marshstrand activities; the budget
                           is now R468 000. During years two and three, the Marshstrand test will be
                           completed and the principles replicated to other properties.
                           Amathole Economic Development Agency
                           2006/7 Annual Report




14   Project Name          Cotton gin
     Budget                R114 500
     Percentage complete   75%

                           The cotton gin project aims to ensure economic upliftment of the Nxuba area
                           through promotion of cotton farming. Planned employment is of 252 people.
                           AEDA’s role is to facilitate the project in partnership with ECDC and Da Gama.

                           A farm and community in the Nxuba area have been identified. Meetings have
                           been held with role players to develop the area as a cotton farm. Buy-in has
                           been obtained from the community, ECDC, Da Gama and the DoA. Soil and
                           rainfall analysis has been performed by the DoA and Da Gama. Quotations have
                           been obtained regarding infrastructure and planting. An off-take agreement has
                           been established with Da Gama. A business plan has been drawn up and a
                           feasibility study has been performed in-house.

                           Funding has been sourced from ADM and a second-phase funding application
                           has been submitted to the IDC, and approved. The budget deviation is due
                           to analysis and research performed by DoA and Da Gama at no cost to AEDA.
                           Furthermore, AEDA performed the business plan and feasibility study in-house,
                           reducing external costs.

                           Although the project was well advanced and sufficient funding, mentoring and
                           monitoring support secured, DoA was uncertain about rainfall for the next 24
                           months and indicated that it should be postponed until the 2009 calendar year.
                           The project is therefore complete, but is postponed until the DoA indicates
                           such clearance on adequate rainfall projections.




                           33
                                             Amathole Economic Development Agency
                                             2006/7 Annual Report




                                             human resources and other
                                             organisational management

From the start, AEDA established             assessment, but also took its                 Our good relationships with the
a clean, flat structure, as opposed          recommendations seriously. An                 international agencies, Volunteer
to a hierarchy, that allows and              important point, raised by the DPLG,          Service Abroad and the German
encourages full participation by staff.      was that our organisation lacked entry        Development Service, have led
Our restructuring towards the end            points that would allow development           to the appointment of two staff
of the financial year entrenched this        of young workers. We have attended            members who are helping to build
structure: we are organised around           to this, largely through the creation         the organisation and are bringing
functions, rather than job positions.        of a post for a project officer and a         international experience and outlook
In our small organisation, the               programme coordinator, exposing               to AEDA. AEDA follows a rigorous
professional expertise of each of our        them to the spatial thinking that             performance management policy that
people is deeply valued.                     we apply to development. This is a            includes the reviewing of performance
                                             human resources issue, but it is also         targets every quarter and performance
During 2006/7, AEDA requested                a strategic issue that, we believe,           reviews against these targets and the
evaluation by the DPLG. We were              impacts on the LED profession.                goals of the organisation every six
heartened by the department’s                                                              months.


Number of positions filled and vacancies as at 30 June 2007
 Function                             Current staff                       Current vacancies
 Chief executive officer              Ms P Xuza                           None
 Chief financial officer              Mr J Cerff                          None
 Personal assistant to CEO            Ms P Matyila                        None
 4 Corridor managers                  Ms J du Pisani, Mr N Ndebele        2 vacancies
 Marketing and communications         Ms C Jordan                         None
 Programme coordinator                Mr N Nongwe                         None
 Project officer                      Ms S Qayi                           None
 Project administrator                None                                Vacant
 Receptionist                         Mrs N Nombanda                      None
 Office assistant                     Mrs Z Siphondo                      None

Employment equity demographics status as at 30 June 2007
                                             African = 70%         Coloured = Nil %     indian = Nil %   white = 30%
 levels                                      Male         Female   Male   Female        Male    Female   Male       Female
 Executive                                                     1
 Senior management                                                                                              1
 Specialist                                           1                                                                      1
 Middle management                                                                                                           1
 Coordination/administration                          1        4
 ToTAl                                              2          5                                                1        2
 % of Total                                       20%       50%                                             10%        20%


                                             35
  Chief
financial
  officer
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




                                           AEDA organogram

                                           Marketing & communications
                                           The role of the marketing and communications manager is to manage all of
                                           AEDA’s corporate communications and advise on marketing requirements
                                           and implications with respect to the implementation of anchor projects. The
                                           manager works to promote AEDA’s image and reputation to the public, inform
                                           staff and stakeholders about what is happening in the agency, and highlight the
                                           marketing needs of anchor projects to ensure their success.




                                                                                      Corridor management
                                                                                      These managers develop,
                                                                                      manage and contribute to the
                                                                                      implementation of sustainable
                                                                                      corridors, focusing on locality
                                                                                      development and sectors with
                                                                                      comparative and competitive
Office of the chief executive officer                                                 advantages. They manage anchor
The CEO provides strategic leadership, and attends to                                 projects that contribute to the
organisational development, shareholder interaction, mobilisation                     agency achieving its objective of
of finances and funding, and positions AEDA on the national                           the regeneration of small-town
policy agenda.                                                                        economies.




Finance and administration
The role of this team is to establish
and maintain an effective and well-
operating financial, budgetary and
treasury management system. The
aim is to ensure compliance with
treasury regulations, legislation and
the agency’s systems, policies and
procedures.




                                          37
Trends on total personnel expenditure as at 30 June 2007
                                                              30 june 2006                     30 june 2007
 levels                                                       Required       Budgeted Actual   Required       Budgeted   Actual
 Executive                                                               1          1      1              1          1        1
 Senior management                                                       1          1      1              1          1        1
 Specialist                                                              2          2      2           4             3        2
 Middle management                                                       2          2      1              1          1        1
 Coordination / administration                                           3          3      3           6             6        5
 ToTAl                                                                   9          9      8          13            12       10


EMPloyEE BENEFiTS

Remuneration Policy                                               The policy encompasses the following key principles:
The agency employs staff on a cost-to-company basis and           • Remuneration is offered on a cost-to-company basis.
does not provide medical or pension benefits. It is our           • The fixed element of remuneration is set at levels com-
policy to employ suitably multi-skilled staff. This enables           petitive within the relevant market in addition to being
AEDA to reduce the number of staff as well as correspond-             based on the individual’s level of skill, experience and
ing overhead costs. This results in a high number of staff            expertise.
(more than 70%) in possession of tertiary qualifications.         • The total incentive-based element of remuneration is
                                                                      linked to the individual staff member’s scale of respon-
AEDA’s remuneration policy aims to attract and retain top-            sibility, as well as his/her performance against share-
calibre staff and to incentivise them to develop and imple-           holder-aligned goals.
ment business strategies to achieve long-term stakeholder         The salaries and employment benefits of the chief execu-
wealth.                                                           tive officer and senior managers for the period under review
                                                                  were as follows:


                                                                2007            2006
 CHiEF EXECuTivE oFFiCER                                           R               R
 Salaries                                                 583 512             255 910
 Allowances                                               133 068              63 356
 Bonus                                                        84 575           26 472
                                                           801 155            345 738


 CHiEF FiNANCiAl oFFiCER
 Salaries                                                 478 056             150 756
 Allowances                                               127 932              42 644
 Bonus                                                        70 066           22 440
                                                          676 054             215 840
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




Remuneration disclosure for the period 1 July 2006 to 30 June 2007
                                                Senior                         Middle    Coordination/
 Description              Executive        management        Specialist    management   administration   ToTAl
                              R’000               R’000          R’000          R’000           R’000    R’000
 Salaries and wages
 Normal                         584                 478              680           0*             583    2 325
 Overtime                         0                    0              0             0               0       0


 Contributions
 Pensions                         0                    0              0             0               0       0
 Medical aid                      0                    0              0             0               0       0
 Other                           12                   10              14           25              12      73


 Allowances
 Travel and vehicle             116                  111             197            0              64     488
 Cell phone                      17                   17             29             0               7      70
 Subsistence


 Housing benefit and              0                    0              0             0               0       0
 allowances


 loans and advances               0                    0              0             0               0       0


 other benefits and
 allowances
 Bonus and annual                85                  70              106            0              25     286


 Total remuneration             814                 686          1 026             25             691    3 242

* Position is occupied by a staff member from Volunteer Services Abroad.




                                          39
                                        Amathole Economic Development Agency
                                        2006/7 Annual Report




                                        AEDA governance structure
                                        Operations and administration
                                        This function consists of AEDA’s core team of personnel who manage and
                                        implement our strategy, liaise with our partners, and maintain systems and
                                        procedures, including day-to-day administration, supply chain management and
                                        information technology systems.




                                                                                  Executive management
                                                                                  Executive management liaises
                                                                                  between the staff and the board,
                                         Finance & Audit Committee
                                         and Human Resources and                  and between the board and
                                         Administration Committee                 shareholders. It also manages
                                         Audit Committee                          policies, including risk management,
                                         The Audit Committee is responsible       and the resources of the company.
                                         for overseeing and reporting to the
                                         board on the quality and integrity
                                         of the agency’s financial statements;
                                         compliance with legal, regulatory
                                         and tax requirements; financing and
Board                                    IT policies; overall risk management
The Board provides strategic             profile; independent auditor’s
direction for the Agency. All matters    qualifications and independence;
required in accordance with the          and performance of the internal
Companies Act as well as the             audit function and independent
Municipal Finance Management             auditors.
Act are referred to the Board for
decision by management.                  Human Resources Committee
                                         The Human Resources Committee
The Board activities are supported       is responsible for overseeing
by the Audit and Finance Committee       and reporting to the board on:
and the Human Resources and              AEDA’s human resources policies
Administration Committee.                and procedures, including the
                                         performance management system;
                                         reviewing staff objectives and
                                         performance evaluations; and
                                         overall compensation policies and
                                         their application to staff.
                                        41
BoARD oF DiRECToRS
                                         The board is responsible for
The board subscribes to the values       the adaptation of strategic
of good corporate governance and         plans, monitoring of operational
recognises the need to conduct           performance and management,
the agency with integrity and in         determination of policy and
accordance with generally accepted       processes to ensure the integrity of
corporate practices. The members         the agency’s risk management and
of the board consider that in the        internal controls, communication
period under review, the Amathole        policy and director selection,
Economic Development Agency has          orientation and evaluation.
substantially complied with the
relevant aspects of best practice of     The board has approved a board
corporate governance. The agency         charter that provides guidance to the
subscribes to the principles of the      directors in discharging their duties
King II report. Furthermore, the         and responsibilities.
agency is governed and complies
with the following acts:                 The role of the chairperson of
• Municipal Finance Management           the board is responsibility, in
    Act (MFMA)                           conjunction with the board, for
• Municipal Systems Act                  the agency’s strategic direction
• Occupational Health and Safety         and necessary policies. The role
    Act                                  of the chief executive officer is
• Companies Act                          to assume responsibility for the
The unitary board of directors           effective management of AEDA and
comprises a majority of non-             the implementation of the strategy,
executive directors and meets at         policy and board directives.
least quarterly. The chairman is
elected for a three-year basis from      iNDuCTioN
among the non-executive directors.
The term of office of all directors      All new directors appointed to
comprising the first board is three      the board are taken through an
years.                                   induction program. A continuous
                                         education and training programme is
RolE AND FuNCTioN                        also provided for all board members
                                         in order to improve and maintain the
The board of directors of AEDA           effectiveness of the board.
provide strategic direction and is
the accounting authority in terms of     EvAluATioN AND PERFoRMANCE
the Companies Act. In terms of the
MFMA, the chief executive officer,       Although the individual board
who is also an ex-officio director, is   members are appointed for a
the accounting officer.                  period of five consecutive years,
                                            Amathole Economic Development Agency
                                            2006/7 Annual Report




performance evaluations of the board as a whole and of individual directors
are reviewed on an annual basis. The chairman of the board appraises the
performance of the chief executive officer on an annual basis.

REMuNERATioN PHiloSoPHy

The remuneration of the non-executive directors is determined by the parent
municipality in consultation with the board. No performance rewards are paid or
awarded to non-executive directors.

BoARD MEMBERS’ PRoFilES

There are six members of the board of directors, including the chief executive
as ex-officio member. The curriculum vitae of all directors to be re-elected at the
annual general meeting are set out below:


 Board member         Executive/non-executive          Race        Gender     Board committee membership
 Mvuyo Tom            Non-executive                    Black       Male       Full board chairperson
 Vuyiswa Kakana       Non-executive                    Black       Female     Full board and human resource and
                                                                              administration committee
 Phila Xuza           Executive                        Black       Female     Member of all meetings in ex-officio capacity
 Yoli Balfour         Non-executive                    Black       Female     Full board and finance and audit committee
 Portia Loyilane      Non-executive                    Black       Female     Full board and human resource and
                                                                              administration committee
 Simphiwe Kondlo      Non-executive                    Black       Male       Full board and finance and audit committee

BoARD MEMBERS REMuNERATioN

                                                   Board meetings         HR committee Audit committee         Directors’ Fees
                                                         attended             meetings        meetings
 Board member          Designation                                            attended        attended
 Mvuyo Tom             Chairperson of board                        5                                                   12 500
 Vuyiswa Kakana        Deputy chair of board                       7                  3                                23 492
 Phila Xuza            Chief executive officer                     7                  3                  2                    NIL
 Yoli Balfour          Board member                                6                                     2             15 635
 Portia Loyilane       Board member                                5                  3                                16 237
 Simphiwe Kondlo       Board member                                5                                     2              14 192
 TOTAL                                                                                                                 82 056




                                            43
1.                 2.                                                          3.


     1. Dr Mvuyo Tom
     MB ChB, Masters in Family Medicine, MSc in Public Policy and Management
     Dr Tom is an accomplished strategist with seven years’ experience as director-general
     of the Eastern Cape Government. He is currently the deputy vice-chancellor at the
     University of Fort Hare. Dr Tom is also a recipient of the Nelson Mandela Award for
     Health and Human Rights and serves on various boards, including the Eastern Cape
     Socio-economic Consultative Council.

     2. Ms Phila Xuza
     Masters Economic Geography
     Ms Xuza has 12 years’ work experience in local economic development planning
     and implementation, and is actively involved in the development of LED thinking in
     South Africa. She is leading research and debates on small town economies in South
     Africa. Ms Xuza is also a Clinton Democracy Fellow, a Boston advocacy initiative for
     youth/community development, democracy and governance.

     3. Mr Simphiwe Kondlo
     Masters Engineering Management, BSc Agricultural Engineering, NDip Civil Engineering and
     Project Management
     Mr Kondlo is the chief executive officer of the East London Industrial Development
     Zone. Mr Kondlo has co-authored and presented a number of papers on the
     planning and delivery of water schemes in South Africa. He is also a member of the
     Engineering Council of South Africa.
     Amathole Economic Development Agency
     2006/7 Annual Report




4.                    5.


     4. Mrs Yoli Balfour
     BA Admin, NDip Education, NDip Public Relations
     Mrs Balfour is the founder and chief executive of Lithemba Investments (Pty) Ltd,
     a women’s holding company that owns shares in Caltex Oil South Africa. She has
     certificates in Business Leadership from Rhodes University and Management of
     Petroleum, Policy and Economics from Meeti Institution. Mrs Balfour also serves
     on the boards of: Oli Trading Company, Mesa-Energy, Caltex Oil South Africa, and
     the Business Women’s Association in East London.

     5. Ms Portia Loyilane
     BCom Economics & Business Economics, NDip Education
     Ms Loyilane is a determined activist, fighting for the rights and representation
     of people with disabilities. She is currently a deputy director in the Office on the
     Status of Disabled Persons in the Office of the Premier in the Eastern Cape. She
     is also a member of the Council of Disabled People South Africa (DPSA) in the
     Eastern Cape.

     6. Mrs Vuyiswa Kakana
     NDip Marketing Management, BA Communications
     Mrs Kakanya is a businesswoman and a social entrepreneur with a keen interest
     in community development. She serves on a number of directorships including:
     Thunga-Thunga Tourism (Pty) Ltd and the Eastern Cape Provincial Arts Council.
     Mrs Kakana is also a successful farmer in the small town area of Stutterhe im.
                                                            (not available at time of photograph)


     45
                                      Amathole Economic Development Agency
                                      2006/7 Annual Report




                                      annual financial statements
                                      for the year ended 30 June 2007
                                      registration number: 2005/030812/07




CONTENTS                                                                                                PAGE


Statement of Responsibility                                                                             48
Report of the Independent Auditors                                                                      49
Report of the Audit Committee                                                                           52
Directors’ report                                                                                       53
Statement of financial position                                                                         55
Statement of financial performance                                                                      56
Statement of changes in net assets                                                                      57
Cash flow statement                                                                                     58
Notes to the annual financial statements                                                                59
General Information                                                                                     75




APPRovAl


The financial statements which appear on pages 55 to 75 were approved by the accounting officer on 31
August 2007 and signed as follows:




Ms P Xuza                                                      Mr J Cerff
Chief Executive Officer                                        Chief Financial Officer

                                      47
statement of reponsibility
for the year ended 30 June 2007




The Municipal Finance Management           policies, supported by reasonable and     to correct deficiencies as they are
Act requires the directors to ensure       prudent judgments and estimates. The      identified. Even an effective system
that The Amathole Economic                 directors have reviewed the company’s     of internal control, no matter
Development Agency (Proprietary)           budgets and cash flow forecasts for       how well designed, has inherent
Limited keeps full and proper records      the period up to 24 August 2007.          limitations, including the possibility
of its financial affairs. The annual                                                 of circumvention or the overriding
financial statements should fairly         On the basis of this review, and in the   of controls. An effective system of
present the state of affairs of The        light of the current financial position   internal control, therefore, aims to
Amathole Economic Development              and existing borrowing facilities,        provide reasonable assurance with
Agency (Proprietary) Limited, its          the directors have every reason to        respect to the reliability of financial
financial results, and its financial       believe, and the auditors concur, that    information and, in particular, financial
position at the end of the year in         the company will be a going concern       statement presentation. Further,
terms of South African Statements          in the year ahead and have continued      because of changes in conditions,
of Generally Accepted Accounting           to adopt the going concern basis in       the effectiveness of internal financial
Practice, including any interpretations    preparing the financial statements.       controls may vary over time. The
of such statements issued by the                                                     directors are of the opinion that the
Accounting Practices Board with the        To enable the directors to meet the       entity’s systems of internal control
prescribed Standards of Generally          above responsibilities, the board         and risk management did function as
Recognised Accounting Practices            of directors sets standards and           intended for the year under review.
(GRAP) replacing the equivalent GRAP       implements systems of internal
Statement.                                 control and risk management that          In the opinion of the directors, based
                                           are designed to provide reasonable,       on the information available to date,
The annual financial statements are        but not absolute assurance against        the annual financial statements fairly
the responsibility of the directors. The   material misstatements and losses.        present the financial position of The
external auditors are responsible for                                                Amathole Economic Development
independently auditing and reporting       The entity maintains internal financial   Agency (Proprietary) Limited at 30
on the financial statements.               controls to provide assurance             June 2007 and the results of its
                                           regarding:                                operations and cash flow information
Our external auditors have audited the     • The safeguarding of assets against      for the year and the Code of
annual financial statements and their         unauthorised use or disposition,       Corporate Practices and Conduct has
audit report appears on pages 55 to           and                                    been adhered to.
75. The annual financial statements        • The maintenance of proper
have been prepared in accordance              accounting records and the             The annual financial statements for
with South African Statements of              reliability of financial information   the year ended 30 June 2007, set out
Generally Accepted Accounting                 used within the business or for        on pages 55 to 75, were approved by
Practice and the Companies Act.               publication.                           the Accounting Officer and the Board
These annual financial statements          The controls contain self-monitoring      of Directors on 30 October 2007, and
are based on appropriate accounting        mechanisms, and actions are taken         are signed on its behalf by:




ME Tom - Chairperson                                                     PHL Xuza – Chief Executive Officer
East London, 30 October 2007                                             East London, 30 October 2007
                                           Amathole Economic Development Agency
                                           2006/7 Annual Report




                                           report of the independent auditors



Report of the Auditor-General to Eastern Cape Provincial Legislature on the financial statements and
performance information of Amathole Economic Development Agency (Proprietary) Limited for the
year ended 30 June 2007

REPoRT oN THE FiNANCiAl STATEMENTS
introduction
1. I have audited the accompanying financial statements of the Amathole Economic Development Agency (Proprietary)
   Limited which comprise the statement of financial position as at 30 June 2007, 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 and other explanatory notes, and the directors’ report, as set out on pages 55 to 75.

Responsibility of the accounting officer for the financial statements
2. The accounting officer 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 accounting policy note 1.1 to
   the financial statements. 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 of the Public
   Audit Act, 2004 (Act No. 25 of 2004), 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. Those standards require that I
   comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 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. Paragraph 11 et seq. of the Statement of Generally Recognised Accounting Practice, GRAP 1 Presentation of Financial
   Statements requires that financial reporting by entities shall provide information on whether resources were obtained
   and used in accordance with the legally adopted budget. As the budget reporting standard is still in the process of
   being developed, I have determined that my audit of any disclosures made by the Amathole Economic Development
   Agency (Proprietary) Limited in this respect will be limited to reporting on non-compliance with this disclosure
   requirement.

                                           49
8. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Basis of accounting
9. The municipal entity’s policy is to prepare financial statements on the basis of accounting determined by the National
   Treasury, as set out in accounting policy note 1.1 to the financial statements.

opinion
10. In my opinion the financial statements present fairly, in all material respects, the financial position of Amathole
    Economic Development Agency (Proprietary) Limited as at 30 June 2007 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
    accounting policy note 1.1 to the financial statements and in the manner required by the Municipal Finance Management
    Act, 2003 (Act No. 56 of 2003) and the Companies Act, 1973 (Act No. 61 of 1973).

oTHER MATTERS

I draw attention to the following matters that are ancillary to my responsibilities in the audit of the financial statements:

11. Non-compliance with applicable legislation
   Amathole District Municipality (the parent municipality) did not determine the upper limits of the salary, allowances and
   other benefits of the chief executive officer and senior managers of the entity as required by section 89 of the Municipal
   Finance Management Act, 2003. This matter was reported in the prior year and has still not been resolved.
   This has been disclosed in note 21 to the annual financial statements.

12. Matters of governance
(a) The audit committee did not comply with section 166(4)(b) of the Municipal Finance Management Act, 2003 as only
    one meeting was held during the year. At the meeting held, the interim audit committee resolved to appoint three
    independent parties to the audit committee. This recommendation was ratified by the board during the year under
    review. The newly constituted audit committee sat for its first meeting on 29 October 2007. An approved copy of the
    audit committee’s terms of reference could not be provided.
(b) The internal audit unit (which is also the internal audit unit of the parent municipality) was not effective in the
    performance of its duties. The board decided to appoint an external service provider to perform the internal audit
    function. This appointment has not yet been finalised.
(c) The agency did not develop and implement a fraud prevention plan or risk management policy. A risk management
    policy should be developed and implemented in consultation with internal audit.
    The above non-compliance with the Municipal Finance Management Act, 2003 concerning internal audit has been
    disclosed in note 21 to the annual financial statements.

oTHER REPoRTiNg RESPoNSiBiliTiES

Reporting on performance information
13. I have audited the performance information as set out on pages 25 to 33.
                                           Amathole Economic Development Agency
                                           2006/7 Annual Report




Responsibility of the accounting officer for the performance information
14. In terms of section 121(4)(d) of the MFMA, the annual report of a municipal entity must include an assessment by the
    entity’s accounting officer of the entity’s performance against any measurable performance objectives set in terms of the
    service delivery agreement or other agreement between the entity and its parent municipality.

Responsibility of the Auditor-general
15. I conducted my engagement in accordance with section 13 of the PAA read with General Notice 646 of 2007, issued in
    Government Gazette No. 646 of 25 May 2007.
16. 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.
17. I believe that the evidence I have obtained is sufficient and appropriate to provide a basis for the audit findings
    reported below.

Audit findings (Performance information)

18. Non-compliance with regulatory requirements
   The annual report of the Amathole Economic Development Agency (Proprietary) Limited did not include an assessment
   by the entity’s accounting officer of the entity’s performance against any measurable performance objectives set in
   terms of the service delivery agreement or other agreement between the entity and its parent municipality, as required
   by section 121(4)(d) of the Municipal Finance Management Act, 2003. The annual report provided for audit purposes
   included the stage of completion of the agency’s approved projects and explanations for any deviations.

19. objectives reported in the annual report, but not predetermined as per the strategic plan
    The strategic plan of the agency did not always include predetermined objectives for projects and measurement was
    therefore a very subjective process.

APPRECiATioN
20. The assistance rendered by the staff of the Amathole Economic Development Agency (Proprietary) Limited during the
    audit is sincerely appreciated.




East London
30 November 2007




                                           51
report of the audit committee



The Audit Committee has adopted              concerns identified as a result of         internal audit department;
appropriate formal terms of reference,       the internal or external audits;       •   Approving the internal audit work
which have been confirmed by the         •   the entity’s compliance with legal         plan;
board. The committee recognises              and regulatory provisions;             •   Setting the principles and scope
the need to conduct the affairs of       •   the activities of the internal audit       for the external audit.
the Agency with integrity and in             function, including its annual work
accordance with generally accepted           programme, coordination with           The Audit Committee has evaluated
corporate practices and is committed         the external auditors, the reports     the annual financial statements of
to upholding the governance                  of significant investigations and      The Amathole Economic Development
principles incorporated in the Code of       the responses of management to         Agency (Proprietary) Limited for
Corporate Practices and Conduct, as          specific recommendations; and          the year ended 30 June 2007
set out in the King II Report.           •   the independence and objectivity       and concluded that they comply,
                                             of the external auditors;              in all material respects, with the
In performing its responsibilities the                                              requirements of the Companies
Audit Committee has reviewed the         The Audit Committee is also                Act (Act 61 of 1973, as amended),
following:                               responsible for:                           the Municipal Finance Management
• the effectiveness of the internal       • Confirmation of the internal audit      Act and South African Statements
    control systems;                         department’s charter;                  of Generally Accepted Accounting
• the effectiveness of internal          • Maintaining objectivity between          Practice. The Audit Committee agrees
    audit; the risk areas of the             management and the external            that the adoption of the going
    entity’s operations to be covered        auditors;                              concern premise is appropriate
    in the scope of the internal and     • Recommending the appointment             in preparing the annual financial
    external audits; the adequacy,           and removal of the external            statements. The Audit Committee has
    reliability and accuracy of              auditors;                              therefore recommended the adoption
    financial information provided to    • Conducting investigations within         of the annual financial statements by
    management and other users of            its terms of reference;                the Board of Directors at their meeting
    such information;                    • Concurring with the appointment          held on 29 October 2007.
• any accounting or auditing                 and dismissal of the head of the




SN Kondlo
29 October 2007

Audit Committee members:
SN Kondlo (chairperson)
YP Balfour
J Buchner
P Ncede
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




                                          director’s report
                                          for the year ended 30 June 2007




The Board of Directors present their second Annual Report.

1. CoNSTiTuTioN
   Amathole Economic Development Agency (Proprietary) Limited is a municipal entity constituted by the Amathole District
   Municipality and became operational with effect from 1 September 2005.

2. oBjECTivES AND PRiNCiPAl ACTiviTiES
   The main objectives of the Agency are to stimulate economic growth in the Amathole district through promotion of
   entrepreneurial activity, leveraging of business development support and facilitation of investment into strategic
   economic sectors and spatial nodes.

3. PRoPERTy, PlANT AND EQuiPMENT
   During the course of the year, the Agency acquired plant and equipment at a cost price of R 61 750 (2006 – R 305 995).
   During the year under review, the Agency disposed of plant and equipment with a net book value of R 24 368 (2006 – R
   nil). A profit of R 1 671 (2006 – R nil) was made on such disposal.

4. CoRPoRATE govERNANCE
   The Board subscribes to the values of good corporate governance and recognises the need to conduct the enterprise
   with integrity and in accordance with accepted corporate practices. The members of the Board are of the opinion
   that during the year under review, the Agency has substantially complied with the relevant aspects of good corporate
   governance.

5. oRDiNARy SHARE CAPiTAl
   No ordinary shares were issued during the year under review (2006 - 1 000 ordinary shares of R 1 each).

6. FiNANCiAl RESulTS
   The results of the Agency and the Group are disclosed in the annual financial statements.

7. PoliCy DiRECTivES
   No policy directives were received from the Member of the Executive Council for Local Government and Housing during
   the year.

8. DiviDENDS
   No dividends are payable to the Agency’s ordinary shareholder. Retained income attributable to the ordinary
   shareholder is re-invested in projects to promote development.

9. iNTEREST-BEARiNg BoRRowiNgS
   No new borrowings were incurred during the year.

10. iNSuRANCE
   The Agency protects itself against catastrophic financial and fraudulent losses by means of a normal external insurance
   policy through Indwe Insurance Brokers.




                                          53
director’s report (continued)
for the year ended 30 June 2007




11. CoNTRACTS
  No contracts in which directors and officers of the company had an interest were entered into during the year.

12. CoMPliANCE wiTH MFMA
  This constitutes the second year of operations (and first full year). After its incorporation on 1 September 2005,
  the Agency commenced with the employment of staff, capacitating of the Agency and formulation of policies and
  procedures. This process was completed during the current year. The aforementioned, as well as the loss of information
  caused by two thefts during January and March 2007, resulted in the Agency not complying in full with all the
  requirements as specified in the Municipal Finance Management Act (MFMA). However, during the course of the year
  as well as subsequent to the aforementioned thefts, the Board commenced with a concerted effort to introduce such
  systems, procedures and controls to ensure that the Agency operates and acts at all times in accordance with the MFMA.

13. AuDiT CoMMiTTEE AND iNTERNAl AuDiT
  As mentioned above, the Agency only commenced with operations from 1 September 2005 and was not institutionalised
  for the larger portion of the year under review. An interim audit sub-committee of the Board was established during the
  latter half of 2006 with the full committee being formalised, staffed and its members approved by the Council of the
  Amathole District Municipality in accordance with section 166 of the MFMA in May 2007. The Board is confident that the
  challenges affecting the internal audit and audit committee functions have now been addressed.

14. SuBSiDiARiES AND ASSoCiATES
  The Amathole Economic Development Agency (Proprietary) Limited has no subsidiaries or associated companies.

15. EvENTS SuBSEQuENT To yEAR END
  The directors are not aware of any matters or circumstances arising since the end of the financial year, not otherwise
  dealt with in the financial statements, which may significantly affect the financial position of the company or the results
  of its operations.

16. NuMBER oF EMPloyEES
  During the year under review the average number of employees was 9 (2006 – 7).

17. DiRECToRS AND SECRETARy
  The directors of the company during the year under review and up to the date of this report were as follows:
  Dr ME Tom          Chairperson                Appointed 1 September 2005
  Mrs CV Kakana Deputy chairperson              Appointed 1 September 2005
  Ms NEP Loyilane                               Appointed 1 September 2005
  Mr SN Kondlo                                  Appointed 1 September 2005
  Mrs YP Balfour                                Appointed 1 September 2005
  Ms P Xuza          Chief executive officer    Appointed 1 September 2005

  The company does not currently have a company secretary.
                                        Amathole Economic Development Agency
                                        2006/7 Annual Report




                                        statement of financial position
                                        at 30 June 2007




                                                   Notes
                                                                   2007          2006
                                                                      R             R
ASSETS


NON-CURRENT ASSETS                                               231 514       265 775
Plant and equipment                                    2         231 514       265 775




CURRENT ASSETS                                                 4 637 680   3 578 389
Accounts receivable                                    3        967 769      212 062
Cash and cash equivalents                              4       3 669 911   3 366 327




ToTAl ASSETS                                                   4 869 194   3 844 164


NET ASSETS AND liABiliTiES


NET ASSETS AND RESERVES                                         223 567        161 961
Contributions from owner                               5          1 000          1 000
Accumulated Surplus                                             222 567        160 961


NON-CURRENT LIABILITIES
Deferred Lease Payments                                6          18 073        14 670




CURRENT LIABILITIES                                            4 627 554   3 667 533
Accounts payable                                       7        377 807        501 893
Deferred income                                        8       3 593 269   3 094 353
Short term portion of deferred lease payments          6            349          5 543
VAT payable                                                      565 221             -
Taxation                                              12         90 908         65 744



ToTAl NET ASSETS AND liABiliTiES                               4 869 194   3 844 164



                                        55
statement of financial performance
for the year end 30 June 2007




                                               Notes
                                                           2007        2006
                                                              R           R


                REvENuE
                Interest income                   9      85 099     226 705


                Profit on disposal of assets               1 671           -


                Grant income realised             8    4 546 084   2 567 361


                ToTAl REvENuE / iNCoME                 4 632 854   2 794 066


                lESS: EXPENDiTuRE
                - Employee related cost                3 255 434   1 458 774
                - Directors’ fees                        82 806      80 683
                - Depreciation                            71 642     40 220
                - Project expenditure                   382 424      391 400
                - Repairs and maintenance                 11 823      6 325
                - General expenses - other               741 954    589 959




                ToTAl EXPENDiTuRE                 11   4 546 084   2 567 361


                SuRPluS BEFoRE TAXATioN                  86 770     226 705


                Taxation                          12      25 164     65 744


                SuRPluS FoR THE yEAR                      61 606     160 961
                              Amathole Economic Development Agency
                              2006/7 Annual Report




                              statement of changes in
                              net assets
                              for the year ended 30 June 2007



                              Notes     Contributions    Accumulated
                                          from owner         Surplus     Total
                                                     R            R         R


2007
Balance at 1 July 2006                         1 000         160 961   161 961
Share capital issued                                 -             -         -
Net profit for the year                              -        61 606    61 606




Balance at 30 June 2007                        1 000        222 567    223 567




2006
Balance at 1 September 2005                          -             -         -
Share capital issued                           1 000               -     1 000
Net profit for the period                            -       160 961   160 961




Balance at 30 June 2006                        1 000         160 961   161 961




                              57
cash flow statement
for the year ended 30 June 2007




                                                                    Note
                                                                                 2007         2006
                                                                                    R             R


           CASH FlowS FRoM oPERATiNg ACTiviTiES
           Cash receipts from grant funders and other
           - Grant income received                                          5 045 000    5 661 714
           - Interest received                                                 85 099      226 705
           Cash paid to suppliers and employees
           - Employees                                                     - 3 047 539   - 1 311 931
           - Suppliers                                                     - 1 743 265    - 905 166




           Net cash flows from operating activities                   17      339 295    3 671 322




           NET CASH ouTFlow FRoM iNvESTiNg ACTiviTiES
           Proceed on disposal of plant and equipment                          26 039              -
           Purchase of plant and equipment to maintain operations             - 61 750             -
           Purchase of plant and equipment to enhance operations                     -   - 305 995


                                                                              - 35 711   - 305 995




           NET CASH iNFlow FRoM FiNANCiNg ACTiviTiES
           Proceeds from issue of ordinary shares                                    -        1 000




           Net increase in cash and cash equivalents                          303 584    3 366 327


           Cash and cash equivalents at beginning of the year               3 366 327              -


           Cash and cash equivalents at the end of the year                 3 669 911    3 366 327
                                           Amathole Economic Development Agency
                                           2006/7 Annual Report




                                           notes to the annual financial
                                           statements
                                           for the year ended 30 June 2007



1. ACCouNTiNg PoliCiES

   The principal accounting policies of the Agency which are set out below.

1.1 Basis of preparation
    The financial statements have been prepared in accordance with the South African Statements of Generally Accepted
    Accounting Practices (GAAP) including any interpretations of such Statements issued by the Accounting Practices Board,
    with the prescribed Standards of Generally Recognised Accounting Practices (GRAP) issued by the Accounting Standards
    Board replacing the equivalent GAAP Statement as follows:


    Standard of gRAP                                        Replaced Statement of gAAP
    GRAP 1: Presentation of financial statements            AC101: Presentation of financial statements
    GRAP 2: Cash flow statements                            AC118: Cash flow statements
    GRAP 3: Accounting policies, changes in accounting      AC103: Accounting policies, changes in accounting
            estimates and errors                                  estimates and errors

   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 & 3 has
   resulted in the following significant changes in the presentation of the financial statements:

   1.1.1 Terminology differences:


    Standard of gRAP                                        Replaced Statement of gAAP
    Statement of financial performance                      Income statement
    Statement of financial position                         Balance sheet
    Statement of changes in net assets                      Statement of changes in equity
    Net assets                                              Equity
    Surplus/deficit for the year                            Profit/loss for the year
    Accumulated surplus/deficit                             Retained earnings
    Contributions from owners                               Share capital
    Distributions to owners                                 Dividends
    Reporting date                                          Balance sheet date

   1.1.2. The cash flow statement can only be prepared in accordance with the direct method.

   1.1.3. Specific information 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;
          must be presented separately on the statement of financial position


                                          59
   1.1.4. The amount and nature of any restrictions on cash balances is required to be disclosed.
          Paragraph 11 – 15 of GRAP 1 has not been implemented as the budget reporting standard is in the process of
          being developed by the international and local standard setters. Although the inclusion of budget information
          would enhance the usefulness of the financial statements, non-disclosure will not affect fair presentation.

1.2 Financial instruments

   Investments in financial assets are initially recognised at cost. Subsequently, financial assets are stated in accordance
   with the separate accounting policies recorded below in respect of each major category of financial asset. Financial
   liabilities are recognised at the original debt less principal repayments.

1.3 investments

   All investments are initially recognised at cost. After initial recognition investments are measured at their fair values,
   without any deduction for transaction costs that may be incurred on sale or disposal. Unlisted investments are stated at
   cost, less amounts written off to give recognition to a permanent decline in value, and profits and losses are recognised
   on realisation. The classification as investment is determined by the intention to keep the overall portfolio on a long
   term basis.

1.4 Capitalisation of borrowing costs

   Borrowing costs, incurred in respect of construction or installation of assets, are capitalised up to the date that the
   assets are brought into use or sold.

1.5 inventory

   Inventory is valued at the lower of cost and net realisable value on a first-in-first-out basis.

1.6 Property, plant and equipment and depreciation

   Property, plant and equipment are initially recorded at cost and depreciated on a straight line basis at rates that will
   reduce the historical costs to estimated residual values over the expected useful lives of the assets.

   Property, plant and equipment acquired under finance lease arrangements are capitalised. Such assets are depreciated
   on a straight line basis at rates considered appropriate to reduce capitalised cost to estimated residual value over the
   expected useful lives of the assets. Lease finance charges are amortised over the duration of the finance leases using
   the effective interest rate method.

   The   expected useful lives of the assets are as follows:
   •      Infrastructure and buildings          50 years
   •      Furniture and equipment               6 years
   •      Computer equipment                    3 years
   •      Vehicles                              4 years
                                           Amathole Economic Development Agency
                                           2006/7 Annual Report




                                           notes to the annual financial
                                           statements (continued)
                                           for the year ended 30 June 2007



   Land is not depreciated as it is deemed to have an infinite life. Buildings include all direct building costs, allocated
   overhead costs and capitalised borrowing costs. Where the carrying amount of an asset is greater than its estimated
   market value, it is written down to its market value.

1.7 Provisions

   Provisions are recognised when the Agency has a present legal or constructive obligation as a result of past events, it
   is probable that an outflow of resources embodying economics benefits will be required to settle the obligation, and a
   reliable estimate of the amount of the obligation can be made.

   Employee entitlements to annual leave and annual bonuses are recognised when they accrue to employees. A provision
   is made for the estimated liability for annual leave and annual bonuses as a result of services rendered by employees
   up to the Statement of financial position date.

1.8 operating leases

   Assets leased by the Agency 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.

1.9 Cash and cash equivalents

   For the purposes of the cash flow statements, cash and cash equivalents comprise cash on hand, deposits held at call
   with banks, and investments in money market instruments, net of bank overdrafts.

1.10 government grants

   Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received
   and all attached conditions will be complied with. Government grants are recorded as deferred income when they
   become receivable and are then recognised as income on a systematic basis over the periods necessary to match the
   grants with the related costs which they are intended to compensate. Where the grant relates to an asset, the fair value
   is credited to a deferred income account and is released to the Statement of financial performance over the expected
   useful life of the relevant asset in equal annual instalments.




                                           61
                                         2007      2006
                                            R         R
2.    PlANT AND EQuiPMENT


2.1   Summary of plant and equipment


      owned assets at cost             333 446   305 995
      Computer equipment               142 786   129 914
      Office equipment                  26 659    28 424
      Furniture and fittings           164 001   147 657


      Accumulated depreciation         101 932    40 220
      Computer equipment                62 108    24 422
      Office equipment                   6 749     3 031
      Furniture and fittings            33 075    12 767




      Net carrying amount              231 514   265 775
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




                                          notes to the annual financial
                                          statements (continued)
                                          for the year ended 30 June 2007



2.2   Movement in plant and equipment
                                                          Computer        Office   Furniture &
                                                         Equipment    Equipment        Fittings         Total
      2007                                                        R           R              R             R
      Net book value at beginning of the year              105 492       25 393       134 890         265 775
      Additions                                              31 202       6 603        23 945          61 750
      Depreciation for the year                             -44 770      -5 429        -21 443        -71 642
      Disposals                                             -11 246      -6 657         -6 466        -24 368
      Revaluation                                                 -            -              -             -


      Net book value at 30 june 2007                        80 678       19 910       130 926         231 514


      2006
      Net book value at beginning of the period                   -            -              -             -
      Additions                                             129 914      28 424       147 657         305 995
      Depreciation for the period                           24 422        3 031        12 767          40 220
      Disposals                                                   -            -              -             -
      Revaluation                                                 -            -              -             -


      Net book value at 30 june 2006                       105 492       25 393       134 890         265 775



                                                                           2007             2006
                                                                              R                   R
3.    ACCouNTS RECEivABlE


      VAT refund receivable                                                    -         151 442
      Sundry debtor and deposit receivable                               23 000            2 260
      Pre-payments                                                       96 895            11 830
      Related party receivable – Amathole District Municipality         847 874
      Irregular expenditure receivable                                         -          19 649
      Fruitless and wasteful expenditure receivable                            -          26 881


                                                                        967 769          212 062
      The 2006 VAT refund receivable relates to a VAT claim due
      by the South African Revenue Services.


                                          63
                                                             2007        2006
                                                                R           R
4.    CASH AND CASH EQuivAlENTS


      Bank balances and cash                             3 669 050   3 365 215
      Cash on hand                                            861        1 112


                                                         3 669 911   3 366 327


      The bank balance is held with MEEG Bank of
      South Africa and is held in a current account.
      No restrictions are in force with regards to the
      bank account.


5     CoNTRiBuTioNS FRoM owNER


5.1   Authorised
      1 000 ordinary shares of R 1 each                      1 000       1 000


5.2   issued
      1 000 ordinary shares of R 1 each                      1 000       1 000


5.3   Share Capital Reconciliation
      Balance at beginning of the year                       1 000           -
      Issued this year                                           -       1 000


      Balance at end of the year                             1 000       1 000


6.    oPERATiNg lEASE liABiliTy


      Operating lease liability deferred                    18 422      20 213
      Less: Short term portion                                -349     - 5 543


                                                            18 097      14 670
      The borrowing relates to the smoothing of the
      operating lease payments in accordance with the
      requirements of IAS 17. Please refer to note 14.
                                         Amathole Economic Development Agency
                                         2006/7 Annual Report




                                         notes to the annual financial
                                         statements (continued)
                                         for the year ended 30 June 2007



                                                                    2007         2006
                                                                       R            R
7.   ACCouNTS PAyABlE


     Sundry payables                                               13 506      64 105
     PAYE, UIF and SDL                                             21 499      38 815
     Staff bonuses accrual                                        116 466      41 929
     Leave pay accrual                                           226 336       66 097


                                                                 377 807      501 893


8.   DEFERRED iNCoME


     Amathole District Municipality grants:
     Grant income deferred at beginning of year                 2 987 094            -
     Grants received                                            5 000 000   5 000 000
     Released to income                                     -4 396 084      -2 012 906


     Balance at end of year                                     3 591 010   2 987 094


     Small Enterprises Development Agency
     Grant income deferred at beginning of year                   105 000            -
     Grants received                                              45 000      105 000
     Released to income                                          -150 000            -


     Balance at end of year                                             -     105 000


     industrial Development Corporation grants:
     Grant income deferred at beginning of year                    2 259             -
     Grants received                                                    -     556 714
     Released to income                                                 -    -554 455


     Balance at end of year                                        2 259        2 259


     Grant income carried forward to following year             3 593 269   3 094 353



                                        65
                                                                   2007               2006
                                                                      R                  R
9.    iNTEREST


      interest income
      MEEG Bank account                                 85 099             226 706


10.   TAXES PAiD


      The Agency paid the following amounts to the
      South African Revenue Services during the year:


      Value Added Tax                                            700 000                  -
      Pay- As-You-Earn                                           761 672         266 607
      Skills Development Levies                                   27 541             10 562
      Unemployment Insurance Fund                                 17 384             6 808


                                                            1 506 597            283 977


      As the Agency’s grant income was deemed to
      be zero-rated, no amount was paid for
      Value-Added-Tax (VAT) during 2006.
                                            Amathole Economic Development Agency
                                            2006/7 Annual Report




                                            notes to the annual financial
                                            statements (continued)
                                            for the year ended 30 June 2007



                                                                     2007       2006
                                                                        R          R
11.   oPERATiNg EXPENDiTuRE


      Operating expenditure is stated after taking into
      account the following items:


      Depreciation
      - Plant and equipment                                         71 642     40 220


      lease rentals
      - Premises                                                   279 208    284 119
      - Equipment                                                   30 159     13 169


      Directors’ emoluments
      Executive – Chief Executive Officer
      - Salaries                                                   583 512    255 910
      - Allowances                                                 133 068     63 356
      - Bonus                                                       84 575     26 472
                                                                   801 155    345 738
      Non-Executive
      ME. Tom                                                       12 500     20 677
      S. Kondlo                                                     14 192     14 050
      CV. Kakana                                                    23 492     17 625
      YP. Balfour                                                   15 635     12 000
      NEP. Loyilane                                                 16 237     16 331
                                                                    82 056     80 683


      Senior Managers’ remuneration
      Chief Financial Officer
      - Salaries                                                   478 056    150 756
      - Allowances                                                 127 932     42 644
      - Bonus                                                       70 066     22 440
                                                                   676 054    215 840
      The chief financial officer was employed from
      1 March 2006 onwards


                                            67
                                                                     2007                2006
                                                                         R                   R
11.    oPERATiNg EXPENDiTuRE (CoNT.)


       Travel and subsistence                                      29 364               81 795


       Personnel costs                                          3 255 434           1 458 774


12.    TAXATioN


12.1   South African normal tax
       - Current tax                                               25 164              65 744


       South African effective and nominal tax rate                   29%                 29%


12.2   Taxation liability
       - Amount payable at beginning of year                       65 744                        -
       - Current tax                                               25 164              65 744


                                                                   90 908              65 744


       The Agency is of the opinion that its income should be exempt in terms of Section 10(1)
       (cA) (i) and (ii) of the Income Tax Act. As this matter has not yet been finalised with
       SARS, a provision for normal income tax at 29% has been made in accordance with the
       prudence principle.
                                           Amathole Economic Development Agency
                                           2006/7 Annual Report




                                           notes to the annual financial
                                           statements (continued)
                                           for the year ended 30 June 2007



                                                                    2007       2006
                                                                       R          R


13.    oPERATiNg lEASES


13.1   office Premises
       The future minimum office lease payments, which
       escalate at 10% per annum on the anniversary of
       the lease, are as follows:
       - Not later than one year                                  291 456    285 660
       - Greater than one year, less than five                    424 043    229 922


                                                                  715 499    515 582
       The current office lease agreement provides for an
       option for the lease to be renewed on 1 November
       2009 at renegotiated market related terms


13.2   office Decorations
       The future minimum office decoration payments,
       which escalates at 8% per annum on the
       anniversary of the lease, are as follows:
       - Not later than one year                                   12 361     11 518
       - Greater than one year, less than five                      7 585     20 029


                                                                   19 946     31 547


13.3   office Equipment
       The future minimum office equipment lease
       payments, which has no escalation clause,
       are as follows:
       - Not later than one year                                   28 194     11 509
       - Greater than one year, less than five                     44 444     14 250


                                                                   72 638     25 759




                                                                  808 173    572 888


                                           69
14.   FiNANCiAl RiSK MANAgEMENT


      The company’s financial instruments consist primarily of cash deposits with MEEG Bank,
      pre-payments, VAT receivable and accounts payable and provisions. The book value of
      financial instruments approximates fair value.


15.   CREDiT AND liQuiDiTy RiSK


      In the normal course of operations, the company is exposed to limited credit and
      liquidity risks since its main debtors and funders are the Amathole District Municipality,
      provincial and national departments and public entities.
                                                                       2007                 2006
                                                                           R                       R
16.   RElATED PARTy TRANSACTioNS


      Amathole District Municipality
      - Percentage shareholding                                       100%                  100%
      - Grants received                                          5 000 000             5 000 000
      - Amount owed by / (to) related party                        847 874             - 290 944
                                              Amathole Economic Development Agency
                                              2006/7 Annual Report




                                              notes to the annual financial
                                              statements (continued)
                                              for the year ended 30 June 2007



                                                                         2007            2006
                                                                            R                R
17.    NoTES To CASH Flow STATEMENT


       Cash generated by operations
       Net income before taxation                                      86 770         226 705
       Adjustment for non-cash items:
       - Depreciation                                                  71 642          40 220
       - Deferred lease payments recognised                           - 20 213                   -
       - Deferred lease payments                                       18 422           20 213
       - Profit on disposal of asset                                    -1 671                   -
       Deferred income increase                                       498 916       3 094 353


       operating surplus before working capital changes               653 866        3 381 491
       Increase in accounts payable                                   441 136         501 893
       Increase in accounts receivable                               - 755 707       - 212 062


                                                                      339 295       3 671 322


18.    iRREgulAR, FRuiTlESS AND wASTEFul
       EXPENDiTuRE


18.1   irregular Expenditure
       Opening Balance                                                 19 649                    -
       Irregular expenditure – current year                                  -        251 440
       Approved by Board or condoned                                   -19 649       - 231 791


       Irregular expenditure awaiting authorisation                          -          19 649


       The above amount consists of 8 transactions and relates to non-compliance with the
       Supply Chain management policy of the Agency. 7 of the transactions amounting to
       R 157 447 relates to not obtaining 3 quotes whilst 1 transaction amounting to R 93 993
       relates to not advertising on the website and notice board as well as not retaining the
       required documents.




                                              71
18.2   Fruitless and wasteful                                        26 881
       Opening Balance                                                                          -
       Fruitless & wasteful expenditure – current year                     -              26 881
       Approved by Board or condoned                                -26 881                     -


       Fruitless and wasteful expenditure awaiting
       authorisation                                                       -              26 881


       The above amount relates to interest of R 5 261 and penalties of R 21 620 levied by
       SARS on late payment of PAYE, UIF and SDL. This amount was incurred during the
       establishment phase of the Agency. The Agency is confident that it will be able to
       negotiate to have the penalty waived.


19.    CoMPARATivE FiguRES


       The Agency was incorporated on 1 September 2005 and the comparative (2006) financial
       results represent the transactions and activities of the Agency for the 10 months ending
       30 June 2006.


20.    NoN-CoMPliANCE wiTH MuNiCiPAl
       FiNANCE MANAgEMENT ACT


       The Agency did not report on the state of the Agency’s budget to the parent municipality
       within 7 working days of month end as required by section 87 (11).


       The parent municipality did not determine the upper levels of the Chief Executive Officer,
       senior managers’ and directors’ salaries and benefits, as required by section 89 (1).


       The internal audit department did not function as prescribed in section 165.


       Due to the theft of computers and information back ups during January and March 2007,
       the agency was unable to perform all functions and reconciliations as required by the
       MFMA by the set due dates. The lost information were subsequently recompiled and
       all required functions and reconciliations performed. The agency has also introduced
       comprehensive measurements and controls to prevent similar situations.
                                             Amathole Economic Development Agency
                                             2006/7 Annual Report




                                             notes to the annual financial
                                             statements (continued)
                                             for the year ended 30 June 2007



21.      CuRRENCy


         The amounts are South African Rands rounded off
         to the nearest R 1.


22.      CAPiTAl DiSCloSuRES


         The Company’s objectives when managing capital
         are:


      • to safeguard the entity’s ability to continue as a going concern, so that it can continue
        to provide returns for shareholders and benefits for other stakeholders, and
      • to provide an adequate return to shareholders by pricing products and services
        commensurately with the level of risk.


         The company sets the amount of capital in proportion to risk. The Company manages
         the capital structure and makes adjustments to it in the light of changes in economic
         conditions and the risk characteristics of the underlying assets and its mandate
         from its parent municipality. In order to maintain or adjust the capital structure, the
         Company may adjust the amount of dividends paid to shareholders, return capital to
         shareholders, issue new shares, or sell assets to reduce debt.


         The company monitors capital on the basis of the debt-to-adjusted capital ratio. This
         ratio is calculated as net debt to adjusted capital. Net debt is calculated as total debt
         (as shown in the balance sheet) less cash and cash equivalents. Adjusted capital
         comprises all components of equity (i.e. share capital, share premium, minority interest,
         retained earnings, and revaluation reserve) other than amounts recognised in equity
         relating to cash flow hedges, and includes some forms of subordinated debt.


         During 2007, the company’s strategy, which was unchanged from 2006, was to not
         exceed a ratio of 6:1 in order to secure access to finance at a reasonable cost. The
         debt-to-adjusted capital ratios at 30 June 2007 and 30 June 2006 were as follows:




                                            73
                                        2007          2006
                                           R             R
Tota l Debt                       4 645 627      3 682 203
Less: Cash and cash equivalents   - 3 669 911   - 3 366 327


NET DEBT                             975 716       315 876




TOTAL EQUITY / ADJUSTED CAPITAL     223 567         161 961


Debt to adjusted capital ratio           4.3            1.9
                                       Amathole Economic Development Agency
                                       2006/7 Annual Report




                                       general information
                                       for the year ended 30 June 2007




REgiSTERED NAME:
Amathole Economic Development Agency (Proprietary) Limited

REgiSTRATioN NuMBER:
2005 / 030812 / 07

AuDiToRS:
Office of the Auditor-General, Eastern Cape

BANKERS:
MEEG Bank Limited – East London

PHySiCAl ADDRESS:
10 Bell Road, Vincent, East London

PoSTAl ADDRESS:
PO Box 500, East London

lEgiSlATioN:
The Agency is governed by and complies with the Municipal Finance Management Act 56 of
2003 as well as the Companies Act of 1973, as amended.




                                       75
                                     Amathole Economic Development Agency
                                     2006/7 Annual Report




                                     functional area
                                     service delivery report

CONTENTS                                                                    PAGE


Board of Directors and sub-committees of the Board                          78


Finance and administration:
Finance                                                                     80
Human Resources                                                             84
Other Administration (Procurement)                                          85


Planning and Development:
Economic Development — Strategic projects                                   87
Eonomic Development — Business partners                                     91
Property Development — Property development and management                  95




                                     77
FuNCTioN          BoARD oF DiRECToRS AND SuB-CoMMiTTEES oF THE BoARD
SuB FuNCTioN      N/A
Reporting level   Detail
overview          Includes all activities relating to the board of directors and board sub-committees of the municipal
                  entity including costs associated with services rendered in the capacity as director of the entity and
                  governance.


Description of    The function of the board and its sub-committees within the municipal entity is administered as
the activity      follows and includes:
                  The board provides strategic direction for the agency. All matters required in accordance with the
                  Companies Act as well as the Municipal Finance Management Act are referred to the board for
                  decision by management. The board activities are supported by the Audit and Finance Sub-committee
                  and the Human Resource and Administration sub-committee.


                  Audit and Finance Sub-committee
                  The Audit Sub-committee is responsible for overseeing and reporting to the full board on the quality
                  and integrity of the agency’s financial statements and records; compliance with relevant legislation,
                  regulatory and tax requirements; financing and IT policies; overall risk management; independent
                  auditors’ qualifications and independence; and performance of the internal audit function.


                  Human Resource and Administration Sub-committee
                  The HR Sub-committee is responsible for overseeing and reporting to the full board on the agency’s
                  human resource policies and procedures, including the performance management system; reviewing
                  staff objectives and performance evaluations and overall compensation policies and their application
                  to staff.


                  The strategic objectives of this function are to:
                  •   To facilitate the decision-making process and provide strategic direction to the agency and its
                      staff


                  The key issues for 2006/7 are:
                  •   To finalise the introduction and approval of Audit and Finance Sub-committee members
                  •   To strengthen the interaction between the board and parent municipality approval and decision-
                      making structures
                  •   To improve the quality and approval process of board minutes
                                          Amathole Economic Development Agency
                                          2006/7 Annual Report




Analysis of the      Statistical information                                                           Total   R’000
function
                  1 Board members’ detail:
                     Total number of board members                                                        6


                  2 ward detail:
                     Total number of wards                                                              N/A
                     Number of ward meetings                                                            N/A


                  3 Number and type of board and sub-committee meetings:
                     Full board                                                                           7
                     Audit and Finance Sub-committee                                                      2
                     Human Resource and Administration Sub-committee                                      3


Key performance      Performance during the year, performance targets against actual achieved and    Current   Target
area                 plans to improve performance
                     •   To finalise the introduction and approval of Audit and Finance Sub-          100%     100%
                         committee member: members from public appointed by board in March
                         2007 and council approved such appointment in May 2007


                     •   To strengthen the interaction between the board and parent municipality       50%     100%
                         approval and decision making structures: meetings held between AEDA
                         management, AEDA board members and members of the parent municipality
                         executive management. Approval and reporting lines clarified


                     •   To improve the quality and approval process of board minutes: new             80%     100%
                         procedures introduced has improved quality of minutes and articulation of
                         resolutions passed




                                          79
FuNCTioN          FiNANCE AND ADMiNiSTRATioN
SuB FuNCTioN      FiNANCE
Reporting level   Detail
overview          Includes all activities relating to the finance function of the municipal entity. Note: grants information
                  should appear in chapter 4 on financial statements and related financial information.


Description of    The function of finance within the municipal entity is administered as follows and includes:
the activity      Strategic financial management and reporting (internally and externally) for all stakeholders. These
                  services extend to include accounting for all funds received, allocated and expensed.

                  The municipal entity has a mandate to:
                  • Promote economic development in the Amathole district

                  The strategic objectives of this function are to:
                  • Assist in the identification and securing of alternative revenue sources
                  • Ensure all allocated grant funding is received by the due date
                  • Assist other units in the application for funding process
                  • Report on movement of received funding
                  • Manage the entire revenue process and report accordingly
                  • Compile and manage the approved annual and outer year budget in accordance with relevant
                     legislation
                  • Ensure all expenditure is in accordance with the approved SCM regulations and processes
                  • Adherence to relevant legislative requirements
                  • Provide monthly cash flow and management account reporting to relevant stakeholders
                  • Prepare financial statements within 2 months of year end
                  • Facilitate the external audit annually
                  • Assist with the compilation of consolidated annual financial statements before 30 September

                  The key issues for 2006/7 are:
                  • The compliance with the adopted SCM policy
                  • Strengthening of the working relationship with ADM budget and treasury unit
                  • Strengthening of internal controls and compliance with relevant legislation
                  • Provision of management account and project expenditure analysis information to other units
                  • Finalisation of the IDC establishment grant funding application
                                       Amathole Economic Development Agency
                                       2006/7 Annual Report




Analysis of the   Statistical information                                                          Total   R’000
function
                  1   Debtor billings: number and value of monthly billings:
                  •   The agency currently generates its income from grant funding received from
                      the ADM and SEDA. Billing is raised once a year
                  •   Number and amount billed each month across debtors by function:
                       - grant funding                                                                2    5 045


                  2   Debtor collections: value of amount received and interest:
                  •   The agency currently generates its income from grant funding received from
                      the ADM and SEDA. Billing is raised once a year
                  •   Value received from monthly billings each month and interest from the
                      previous month across debtors by function:
                       - grant funding                                                                2    4 197


                  3   Debtor analysis: amount outstanding over 30, 60, 90 and 120 plus days:
                  •   Grant funding - ADM: 0 - 30 days                                                      847


                  4   write off of debts: number and value of debts written off:
                  •   Total debts written off each month across debtors by function (e.g. water,
                      electricity etc)                                                               Nil     Nil


                  5   Property rates (residential):
                  •   Number and value of properties rated                                          N/A      N/A
                  •   Number and value of properties not rated                                      N/A      N/A
                  •   Number and value of rate exemptions                                           N/A      N/A
                  •   Rates collectible for the current year                                                 N/A


                  6   Property rates (commercial):
                  •   Number and value of properties rated                                          N/A      N/A
                  •   Number and value of properties not rate                                       N/A      N/A
                  •   Number and value of rate exemptions                                           N/A      N/A
                  •   Rates collectible for the current year                                                 N/A


                  7   Regional Service Council (RSC) levies:
                  •   Number and value of returns                                                   N/A      N/A
                  •   Total establishment levy                                                               N/A
                  •   Total services levy                                                                    N/A
                  •   Levies collected for the current year                                                  N/A




                                       81
Analysis of the   Statistical information                                                     Total   R’000
function (cont)
                  8 Property valuation:
                  • Year of last valuation                                                     N/A
                  • Regularity of valuation                                                    N/A


                  9 indigent policy:
                  • Quantity (number of households affected)                                   N/A
                  • Quantum (total value across municipal entity)                              N/A


                  10 Creditor payments:
                  • No trade payables outstanding at 30 June 2007                                0       0
                  • Accruals and provisions                                                    378       4


                  11 Credit rating:
                  • The agency does not currently have a credit rating and has no immediate
                     plans to apply for any external loan funding


                  12 External loans:
                  • Total loans received and paid during the year                              N/A      N/A


                  13 Delayed and default payments:
                  • The agency has no delayed payments on any loans, statutory payments or     N/A      N/A
                     any other default of a material value or nature
                                           Amathole Economic Development Agency
                                           2006/7 Annual Report




Key performance    Performance during the year, performance targets against actual achieved and      Current     Target
area               plans to improve performance
Financial reporting To   report annually and periodically as required by relevant legislation:
                    •     Budget                                                                           1         1
                    •     Annual financial statements                                                      1         1
                    •     Other periodic financial reports                                                12        12
                    •     Project and fund reports as and when required                                    4         4


Financial          To develop and adhere to strategies that will ensure or enhance sustainability
sustainability     of the agency:
                   • Monitoring of cash flows and budget forecasts                                        12        12
                   • Secure extra funding of R 100 000                                               R80,000   R100,000
                   • Ensure IDC grant funding received by set deadline                                  80%       100%
                   • Cost reduction and internal control measures introduced and monitored             100%       100%


Legislative        •      To ensure compliance with relevant legislative and corporate governance         2          3
compliance               requirement. Monitored by method of unqualified audit opinion as well as
and corporate            introduction of action plan to address any emphasis of matters raised by
governance               Office of the Auditor-General
                   •     To support the agency's board in the design and monitoring of internal        100%       100%
                         controls
                   •     To achieve an unqualified audit report                                        100%       100%


Sound financial    •     Ensure effective internal controls in the finance unit by the number of          8         12
controls                 significant findings by the external auditors
                   •     Ensure the adequate functioning of the Audit and Finance Sub-committee as     60%        100%
                         well as the internal audit department




                                           83
FuNCTioN          FiNANCE AND ADMiNiSTRATioN
SuB FuNCTioN      HuMAN RESouRCES
Reporting level   Detail
overview          Includes all activities relating to the human resource management function of the municipal entity
                  including recruitment, selection and induction - also performance management systems, code of
                  conduct detail and decision-making systems. This report should be read in conjunction with chapter 3
                  on human resource management.


Description of    The function of human resource management within the municipal entity is administered as follows and
the activity      includes:
                  The human resources and industrial relations functionalities are administrated by the chief executive
                  officer under the strategic direction of the Human Resources Sub-committee of the board of
                  directors. The sub-committee convenes as and when required but at least once a quarter. The payroll
                  functionality is administrated by the Finance Unit.

                  The strategic objectives of this function are:
                  • To provide human resources in line with relevant legislation and accepted best practice
                  • To manage human resource and employee benefit policies and procedures

                  The key issues for 2006/7 are:
                  • To review performance management system and strengthen performance measurement controls
                  • Review and amend the organogram to be in line with the new strategy
                  • Fill vacancies on approved organogram


Analysis of the   Statistical information                                                              Total     R’000
function
                  Please note that all AEDA staff are appointed on a fixed-term contract

                  1   Number and cost to employer of all municipal staff employed:
                  •   Professional (managerial/specialist)                                                4      2 526
                  •   Field (supervisory/foremen)                                                         2        225
                  •   Office (clerical/administrative)                                                    4        461
                  •   Non-professional (blue collar, outside workforce)                                   0        N/A
                  •   Temporary staff                                                                     0        N/A
                  •   Contract staff                                                                      0        N/A

                  Note: total number to be calculated on full-time equivalent (FTE) basis, providing
                  detail of race and gender according to the breakdown described above. Total cost
                  to include total salary package.
                                        Amathole Economic Development Agency
                                        2006/7 Annual Report




FuNCTioN          FiNANCE AND ADMiNiSTRATioN
SuB FuNCTioN      oTHER ADMiNiSTRATioN (PRoCuREMENT)
Reporting level   Detail
overview          Includes all activities relating to overall procurement functions of the municipal entity including costs
                  associated with orders, tenders, contract management.


Description of    The function of procurement within the municipal entity is administered as follows and includes:
the activity      Due to the nature and size of the municipal entity, the board and parent municipality resolved to
                  utilise the supply chain management (SCM) functionality of the parent municipality (ADM).

                  The SCM is situated within the administration department of the Amathole District Municipality and
                  deals with all the activities related to procuring goods and services on behalf of the agency. The
                  agency adopted its own supply chain management policy in April 2006. This policy specifies the
                  utilisation of the ADM policy and supply chain back office functionality. A targeted SCM policy with
                  relevant empowerment goals to support HDIs has been introduced. A database has been established
                  for general service providers, contractors and professional service providers.

                  These services extend to include:
                  As mentioned above, the agency utilises the supply chain management functionality located within
                  the ADM’s administration department. Compliance with SCM is monitored by the agency’s chief
                  financial officer as well as the accounting officer, while the back office monitoring is provided by the
                  ADM’s Assistant Director: supply chain management.

                  The ADM’s Supply Chain Management Unit provides support to tenderers through its help desk and
                  ensures that HDIs are favoured through scoring allocation. Contracts greater than R 200 000 are
                  adjudicated through the Bid Committee and CEO in instances of tenders greater than R 10-million. For
                  procurement of goods and services less than R 200 000, a minimum of three quotes are obtained from
                  service providers listed in the ADM’s suppliers database.

                  The strategic objectives of this function are:
                  • To provide support to HDI service providers
                  • To ensure compliance with relevant SCM policies
                  • To advantage HDI suppliers when awarding contracts/tenders
                  • To identify and report deviations/irregularities when procuring goods and
                     services
                  • To report quarterly on achievements of empowerment targets


                  The key issues for 2006/7 are:
                  • To review the supply chain management policy and ensure applicableness
                     and relevancy of policies.
                  • To strengthen the interaction and relation with the ADM’s Supply Chain Management Unit



                                       85
Analysis of the     Statistical information                                                             Total     R’000
function
                    As mentioned, the agency utilises the Bid Specification, Bid Evaluation and Bid
                    Adjudication committees of its parent municipality. The agency therefore has no
                    committees of its own. Furthermore, during the year under review, no expense
                    in excess of R 200 000 was procured.

                    1   Details of tender/procurement activities:
                    •   Total number of times that tender committee met during year                       N/A
                    •   Total number of tenders considered                                                N/A
                    •   Total number of tenders approved                                                  N/A
                    •   Average time taken from tender advertisement to award of tender                   N/A

                    Note: Figures should be aggregated over year across all municipal functions.

                    2   Details of tender committee:
                        The committees are under the control of the head of departments of the
                        parent municipality. No agency staff member is a voting member of any of
                        the committees.


Key performance     Performance during the year, performance targets against actual achieved and      Current     Target
area                plans to improve performance
Policies and        Review for suitability and applicableness of current supply chain management      31 April   31 April
procedures          policy.                                                                             2007       2007


Compliance with     All transactions compliant with relevant SCM policies. There will be measured       100%       100%
relevant policies   based on external audit findings.
                                        Amathole Economic Development Agency
                                        2006/7 Annual Report




FuNCTioN          PlANNiNg AND DEvEloPMENT
SuB FuNCTioN      ECoNoMiC DEvEloPMENT - STRATEgiC PRojECTS
Reporting level   Detail
overview          Includes all activities associated with economic development initiatives.


Description of    The function of economic planning/development within the municipality is administered as follows and
the activity      includes:
                  Economic planning/development includes research, problem analysis, strategy development and
                  planning of interventions. It also includes stakeholder participation, promotion of the strategy among
                  stakeholders and advocating for strategic interventions that lie within the mandate of other role
                  players. This function also includes supporting the development of capacity of stakeholders to identify,
                  undertake and implement strategic interventions.

                  These services extend to include development of sector plans for integrated development plans,
                  informing provincial economic, infrastructure and skills planning, but do not take account of macro-
                  economic management and business development, which resides within the jurisdiction of national
                  government. The municipality has a mandate to:

                  “structure and manage its administration, and budgeting and planning processes to ... promote the ...
                  economic development of the community” as defined in clause 153 of section 7 of the Constitution of the
                  Republic of South Africa, Act 108 of 1996.” In term of this mandate, AEDA has been mandated to grow
                  the economy of the district.

                  The strategic objectives of this function are to:
                  • Grow the economy of the district
                  • Increase employment

                  The key issues for 2006/7 are:
                  • Research into the district economy and development of an economic
                     development strategy for the district; formulation of a growth and
                     development agreement between stakeholders of the district
                  • Revision of the strategy for the agency




                                        87
Analysis of the   Statistical information                                                               Total   R’000
function
                  1     Number and cost to employer of all economic development personnel:
                  •     Professional (directors/managers)                                                  1     555
                  •     Non-professional (clerical/administrative)                                         0       0
                  •     Field (supervisory/foremen)                                                        1     200
                  •     Temporary                                                                          0       0
                  •     Contract                                                                           0       0

                  Note: total number to be calculated on full-time equivalent (FTE) basis, total cost
                  to include total salary package.

                  2     Detail and cost of incentives for business investment:
                        None                                                                                      N/A

                  3     Detail and cost of other urban renewal strategies:
                        The Amathole Regional Economic Development Strategy (AREDS)                                0
                        addresses both urban and rural economies in the district. The Growth
                        and Development Summit agreement, supported by AEDA, includes a
                        section termed: “urban industrial development”, which addresses urban
                        development. The cost of participation in development of the GDS is
                        covered under operational activities and the AREDS project.

                  4     Detail and cost of other rural development strategies:
                        The Amathole Regional Economic Development Strategy (AREDS) addresses                      0
                        both urban and rural economies in the district. The AREDS operational
                        approach focuses on four logistics corridors and small towns, which are
                        predominantly rural in nature. The Growth and Development Summit
                        agreement, supported by AEDA, includes a section termed: “rural economic
                        development”, which addresses rural development. The cost of the AREDS
                        was R 2.1-million, excluding AEDA manpower time costs. The R 2.1-million
                        comes from the budget of the ADM.                                                          0

                  5     Number of people employed through job creation schemes:
                  •     Short-term employment                                                              0
                  •     Long-term employment                                                               0

                  6.1   Number and cost to employer of all building inspectors employed:
                  •     Number of building inspectors                                                    N/A
                  •     Temporary
                  •     Contract
                                        Amathole Economic Development Agency
                                        2006/7 Annual Report




Analysis of the   Statistical information                                                               Total   R’000
function (cont)
                  6.2 Details of building plans:
                  • Number of building plans approved                                                    N/A
                  • Value of building plans approved                                                     N/A

                  7    Type and number of grants and subsidies received:
                       Agency receives a non-specific annual grant of R5-million from its parent           0      N/A
                      municipality, ADM. No specific or conditional grants were received during the
                      year under review.


Key performance   Performance during the year, performance targets against actual achieved and        Current   Target
area              plans to improve performance
Alice renewal     Community participation (Alice Resident Association, youth, traditional               25%      50%
project           leadership and local business). Various meetings held with the University of
                  Fort Hare, municipality and community members. Working group established
                  to consider renewal of area. Launch of the project concept and awareness
                  campaign on 23 March 2007.

                  The project was negatively affected by the non-release of the IDC funding.
                  AEDA therefore concentrated on facilitation activities as well as community
                  participation. Towards the end of the financial year, IDC contract signed and the
                  agency commenced with implementation of project.


Small town        Feedback on DTI’s Regional Industrial Development Strategy (RIDS) to                  20%      50%
renewal           include small towns; participation and presenting a paper in the National
                  LED Conference on 14-15 August to promote the small towns regeneration
                  concept; small towns workshops with government departments (DTI & DPLG)
                  and academics (Rhodes) in September 2006; mobilising local municipalities
                  (Ngqushwa, Mnquma, Mbhashe, Nxuba, Nkonkobe) to adopt regeneration
                  project in their next IDPs; research into economies of Hamburg and Stutterheim.

                  The AEDA budget for this project was to be supplemented by budget sourced
                  elsewhere. As this additional budget was not found, it was not possible to
                  undertake necessary research, appoint a consultant or commence work on a
                  pilot.




                                       89
Key performance      Performance during the year, performance targets against actual achieved and      Current   Target
area (cont)          plans to improve performance
Micro-economic       Papers have been prepared on: tourism, manufacturing, agriculture, traditional      80%     100%
data                 agriculture, human capital, government investment in human capital, policy
                     analysis including the MIDP, ASGISA, GEAR, PGDP, IDPs, NSDP, RIDS, and
                     DPLG’s LED strategy, an SMME study, income and expenditure study, studies
                     on the economies of Hamburg and Stutterheim, studies on Bedford and Alice,
                     gathering of extensive GIS information, value chain of clothing and textiles in
                     Amathole and issues around the sector.


Transport access     Information on transport linkages, condition, operational status and issues was      15%    100%
and linkages         gathered. Discussion with role players on transport issues in the district.


Amathole Regional The strategy was completed and included as a sector plan in the IDP, approved         100%     100%
Economic          in May 2007.
Development
Strategy


Information          A wide range of government documents, policies, PGDP, IDPs, GIS and other           30%      70%
clearing house       information was collected.


Capacity             Curriculum and project plan developed. Co-funding not found.                         10%     50%
building for local
municipalities


Branding and         No work undertaken.                                                                  0%     100%
marketing plan
                                       Amathole Economic Development Agency
                                       2006/7 Annual Report




FuNCTioN          PlANNiNg AND DEvEloPMENT
SuB FuNCTioN      ECoNoMiC DEvEloPMENT - BuSiNESS PARTNERS
Reporting level   Detail
overview          Includes all activities associated with economic development initiatives.


Description of    The function of economic planning/development within the municipality is administered as follows and
the activity      includes:
                  Conceptualising initiatives with strong business cases as well as sustainable economic value for
                  anchoring economic development along an economic corridor.

                  From conceptualisation to implementation, the process include undertaking feasibility, determining
                  the status quo report, preparing a bankable business plan, soliciting and leveraging funding for
                  implementation. The process includes identifying linkages and partnerships that define the value chain
                  as well as the institutional arrangement of the initiative. This institutional arrangement range from
                  various models, including public to public partnerships, to public to donor funding partnerships, to
                  public private partnerships, or a combination of various partnerships informed by the initiative.

                  These services extend to include:
                  • The whole of the Amathole geographical area including all of the local municipalities. The service
                     rendered includes the establishment and maintenance of partnerships with other organs of state
                     as well as private sector to facilitate economic development in the area.

                  The strategic objectives of this function are to:
                  • Mobilise stakeholders, resources, and partnerships to promote economic development in the
                     Amathole area

                  The key issues for 2006/7 are:
                  The development of AREDS, the development of the AEDA strategy, the development of the spatial
                  development plan for the Hamburg renewal as well as to apply for funding for the anchor initiative for
                  the latter.




                                       91
Analysis of the   Statistical information                                                            Total   R’000
function
                  1     Number and cost to employer of all economic development personnel:
                  •     Professional (directors/managers)                                               1     468
                  •     Non-professional (clerical/administrative)                                      0       0
                  •     Temporary                                                                       0       0
                  •     Contract                                                                        0       0

                  2     Detail and cost of incentives for business investment:
                        None                                                                                    0

                  3     Detail and cost of other urban renewal strategies:
                        The Amathole Regional Economic Development Strategy (AREDS)                             0
                        addresses both urban and rural economies in the district. The Growth
                        and Development Summit agreement, supported by AEDA, includes a
                        section termed: “urban industrial development”, which addresses urban
                        development. The cost of participation in development of the GDS is
                        covered under operational activities and the AREDS project.

                  4     Detail and cost of other rural development strategies:
                        The Amathole Regional Economic Development Strategy (AREDS) addresses                   0
                        both urban and rural economies in the district. The AREDS operational
                        approach focuses on four logistics corridors and small towns, which are
                        predominantly rural in nature. The Growth and Development Summit
                        agreement, supported by AEDA, includes a section termed: “rural economic
                        development”, which addresses rural development. The cost of the AREDS
                        was R 2.1-million, excluding AEDA manpower time costs. The R 2.1-million
                        comes from the budget of the ADM.

                  5     Number of people employed through job creation schemes:
                  •     Short-term employment
                  •     Long-term employment                                                            0
                                                                                                        0
                  6.1   Number and cost to employer of all building inspectors employed:
                  •     Number of building inspectors                                                 N/A       0
                  •     Temporary
                  •     Contract

                  Note: total number to be calculated on a full-time equivalent (FTE) basis, total
                  cost to include total salary package.
                                           Amathole Economic Development Agency
                                           2006/7 Annual Report




Analysis of the      Statistical information                                                                   Total   R’000
function (cont)
                     6.2 Details of building plans:
                     • Number of building plans approved                                                        N/A      N/A
                     • Value of building plans approved                                                         N/A      N/A

                     7   Type and number of grants and subsidies received:
                         Agency receives a non-specific annual grant of R5-million from its parent                0      N/A
                         municipality, ADM. No specific or conditional grants were received during the
                         year under review

                     Note: total value of specific planning and development grants actually received
                     during year to be recorded over the five quarters — Apr to Jun last year, Jul to Sep,
                     Oct to Dec, Jan to Mar, Apr to Jun this year.


Key performance      Performance during the year, performance targets against actual achieved and            Current   Total
area                 plans to improve performance
To position          The concept of the anchor initiative has been completed                                   75%
Hamburg as           • A presentation to the Nqgushwa Local Municipality has been made and a
a tourism               council resolution passed
destination          • A community participation has been undertaken (in-house)
                     • Road show discussions with the arts fraternity
                     • A market feasibility on tourism is completed (in-house)
                     • A basic EIA has been completed (in-house)
                     • Financial forecast has been done (in-house)
                     • Spatial development plan process in place


To establish a       A concept has been completed                                                              40%
technical and        • Amahlathi Local Municipality Council passed a resolution
entrepreneurship     • Land has been identified
skills development   • Market feasibility in process (in-house)
facility in
Stutterheim to
downstream
timber production




                                           93
Key performance       Performance during the year, performance targets against actual achieved and     Current   Total
area (cont)           plans to improve performance
To establish a        A concept has been developed                                                       40%
technical and         • The ADM Council passed resolution
entrepreneurship      • The LED Unit is currently compiling a business plan to establish one in
skills development       East London
facility for design   • A proposed initiative around the emporium as part of the Hamburg
across the artistic      redevelopment initiative is being considered
spectrum              • A bankable business plan nearly finalised


The establishment     •  A feasibility has been undertaken to determine the nature of small business      N/A
of a facility to         in the Amathole region
integrate business    • A full draft report has been delivered to the SEDA national office
support services      • The study forms part of the Amathole SMME Development Strategy to be
in the Amathole          undertaken by the National Small Industries Corporation of India
region                • Due to the establishment of a BizCafe by SEDA, this project has been
                        stopped and no further action required
                                        Amathole Economic Development Agency
                                        2006/7 Annual Report




FuNCTioN          PlANNiNg AND DEvEloPMENT
SuB FuNCTioN      PRoPERTy DEvEloPMENT - PRoPERTy DEvEloPMENT & MANAgEMENT
Reporting level   Detail
overview          Includes all activities associated with property development initiatives to promote economic
                  development within the Amathole district.


Description of    The function of economic planning/development within the municipal entity is administered as follows
the activity      and includes:
                  Property development entails the identification of under-utilised properties and ensuring such
                  properties are utilised to stimulate economic development in the area. It also includes stakeholder
                  participation, promotion of the strategy of using dormant properties for economic development among
                  stakeholders and advocating for strategic interventions that lie within the mandate of other role
                  players.

                  These services extend to include:
                  All the municipalities falling within the ADM demarcated area as well as assisting other stakeholders
                  (eg public entities, provincial government) that operate within the Amathole area with property
                  development activities.

                  The strategic objectives of this function are to:
                  • Grow the economy of the district
                  • Increase employment

                  The key issues for 2006/7 are:
                  • Strategising property development for economic development purposes
                  • Identification of dormant properties and providing such information to potential developers as well
                     as other stakeholders
                  • Determining holistic development approach for identified geographical areas, utilising properties as
                     a catalytic mechanism to facilitate such development
                  • Promote HDI participation in construction and property development activities




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Analysis of the   Statistical information                                                            Total   R’000
function
                  1     Number and cost to employer of all economic development personnel:
                  •     Professional (directors/managers)                                               1     686
                  •     Non-professional (clerical/administrative)                                      0     N/A
                  •     Temporary                                                                       0     N/A
                  •     Contract                                                                        0     N/A


                  2     Detail and cost of incentives for business investment:
                  •     No incentives provided. Not part of agency mandate                                     N/A

                  3     Detail and cost of other urban renewal strategies:
                  •     Not part of agency mandate                                                             N/A

                  4     Detail and cost of other rural development strategies:
                  •     Not part of agency mandate                                                             N/A

                  5     Number of people employed through job creation schemes:
                  •     Short-term employment                                                           0       0
                  •     Long-term employment                                                            0       0

                  6.1   Number and cost to employer of all building inspectors employed:
                  •     Number of building inspectors                                                   0      N/A
                  •     Temporary                                                                       0      N/A
                  •     Contract                                                                        0      N/A

                  6.2 Details of building plans:
                  • Number of building plans approved                                                   0
                  • Value of building plans approved                                                  N/A

                  7     Type and number of grants and subsidies received:
                        Agency receives a non-specific annual grant of R 5-million from its parent      0      N/A
                        municipality, ADM. No specific or conditional grants were received during
                        the year under review.
                                                   Amathole Economic Development Agency
                                                   2006/7 Annual Report




Key performance       Performance during the year, performance targets against actual achieved and      Current   Target
area                  plans to improve performance
Facilitating          •   Initial delays experienced regarding the availability of ADM properties for       15%    25%
opportunities              development purposes (ADM performed audit of all properties)
for small black       •   In March 2007 obtained access to ADM property database for development
developers                 purposes
beyond the            •   Identified four areas for development
construction          •   After meetings with ADM, it was resolved that AEDA will only concentrate on
sectors. (This is a       Marsh Strand and use as a test base
three to five year    •   Initial “Lifestyle” concept document submitted in May/June 2007
project)              •   Access obtained to Ngqushwa municipal owned properties through
                          agreement to management such on municipality’s behalf


Economic              •   Identified land for the promotion of cotton farming with a potential 300          75%   100%
upliftment of             jobs
Nxuba area            •   Meetings held with all role players to develop area as cotton farm
                      •   Buy in obtained from community, ECDC, Da Gama and Department of
                          Agriculture (DoA)
                      •   Soil and rainfall analysis performed by DoA and Da Gama
                      •   Quotation obtained regarding infrastructure and planting
                      •   Off take agreement established with Da Gama
                      •   Business plan and feasibility study performed in-house
                      •   Planned employment of 252 individuals
                      •   Funding sourced from ADM and second phase funding application submitted
                          to IDC
                      •   Due to expected low rainfall for next 24 months, final project
                          implementation has been postponed until expected rainfall improves, i.e.
                          awaiting clearance from DoA




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ACRoNyMS
ADM      Amathole District Municipality
AEDA     Amathole Economic Development Agency
AREDS    Amathole Regional Economic Development Strategy
ASGISA   Accelerated and Shared Growth Initiative of South Africa
DPLG     Department of Provincial and Local Government
DEDEA    Department of Economic Development and Environmental Affairs
DoA      Department of Agriculture
DTI      Department of Trade and Industry
ECDC     Eastern Cape Development Corporation
ECSECC   Eastern Cape Socio-Economic Consultative Council
EIA      Environmental Impact Assessment
EU       European Union
GEAR     Growth, Employment and Redistribution Strategy
GDS      Growth and Development Summit
GIS      Geographical Information Systems
GTZ      German Agency for Technical Cooperation
HDI      Historically Disadvantaged Individual
IDC      Industrial Development Corporation
IDP      Integrated Development Plan
LED      Local Economic Development
MIDP     Motor Industry Development Programme
MFMA     Municipal Finance Management Act
NSDP     National Spatial Development Perspective
PGDP     Provincial Growth and Development Plan
RIDS     Regional Industrial Development Strategy
SCM      Supply Chain Management
SEDA     Small Enterprise Development Agency
SMME     Small, Medium and Micro Enterprise
UFH      University of Fort Hare
N2 Corridor: Butterworth




Amathole Economic Development Agency (Pty) Ltd
10 Bell Road, Vincent,
East London, 5201
PO Box 500, East London, 5200

Tel: 043 721 2070 • Fax: 043 721 2074
info@aeda.co.za • www.aeda.co.za

				
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